§ Not amended (in Standing Committee), considered.
§ 7 pm
§ The Under-Secretary of State for Energy (Mr. Giles Shaw)
I beg to move, That the Bill be now read the Third time.
Assuming that I may have the privilege of catching your eye, Mr. Deputy Speaker, I should like to reply in the usual way.
§ 7.1 pm
§ Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)
During our discussions in Committee no one denied or failed to acknowledge that the coal industry is going through a period of considerable financial difficulty. The Bill reflects those difficulties with an increase in the large borrowing powers limits, deficit grants and redundancy payments.
I wish that the problems of the coal industry could be debated in the media as well and seriously as they have been in Committee. It is a tragedy that this great industry is treated so badly and trivially by the media. The media talk about bogy men, scapegoats and the like instead of appreciating the considerable problems that the industry has faced during the past three or four years. During the Committee's five sittings, the Opposition said that we must study the coal industry and its financial problems in the context of a recession and in part as a victim of the Government's economic management. That applies to many of our great industries. We argued that the coal industry could not be divorced from the general economic climate and the circumstances in which it has to operate.
Steel production has been cut drastically during the past three or four years. As a result, there has been a drop of at least 30 per cent. in the sale of electricity to the steel industry. Every time there is a cut in the steel industry, or in electricity consumption, there is a cut in the coal industry. That is the context in which we have attempted to place the financial problems of the industry.
This country's primary energy needs have fallen by 13 per cent. during the past three years. I wish that we could argue that that was the result of imaginative conservation measures. Economic suffocation, not conservation, has led to a dramatic fall in energy consumption. That has been reflected in the power stations. In 1983, 18 million tonnes less coal was consumed than in 1978. Power stations consumed 10 tonnes less coal last year than in 1979. It is in that context that we should consider the coal industry's financial problems.
In addition, as we revealed in Committee, the past year has seen the largest increase in nuclear-generated electricity for 20 years. That is before the three new nuclear power stations come on stream within the next two years. That represents 9.5 million tonnes of coal—the total output of the south Wales deep-mine and open-cast coalfields.
There is little wonder that anxiety has been felt in the coalfields about the general state of the market and extra nuclear-generated capacity. Strong evidence has been given to the Select Committee on Energy and by witnesses 725 at Sizewell to demonstrate that we should not go ahead with duplicating the power station capacity, as Governments in the past have proposed.
The fall in demand and the increase—the threat as it is seen by the mining industry—in nuclear development are reflected in huge and growing coal stocks. There are well over 50 million tonnes of coal on the ground. The coal board has been incurring large debts and it has to pay huge interest on those debts. The National Coal Board has had to pay £1.1 billion in interest charges over the past three years. That is equivalent to the board's external financing limit for one year.
There is little wonder also that there is a growing fear of an accelerated pit closure programme. That fear existed even before the publication of the Monopolies and Mergers Commission's report in the summer. The report fuelled those fears, and they have not been allayed by the increasing number of pit closures about which we read almost daily. Twenty pits have been closed this year. The loss of another 700 jobs has been announced this week at the Herrington pit in Durham. Many of my hon. Friends expressed the fear in Committee that during the Bill's lifetime we shall see mandatory redundancies in the coal industry. What is more important, within a week or so after the Bill completed its passage in Committee, we have already seen those fears come true. The coal board's statement about the Durham pit closure gave no guarantee that everyone would be redeployed and that there would be no mandatory redundancies. For the first time for many years we shall see mandatory redundancies in the coal industry.
My hon. Friends said many times in Committee that the coal industry, the miners and the communities which form the industry are willing to change. They are used to change. They have had to change more than once. We emphasised strongly that the changes and problems of pit closures must be set against different economic, social and employment factors than in the past. I described vividly —and I was supported by my hon. Friends — the changing attitudes in mining communities such as mine. Once — perhaps because there was a growth in the economy and firms were offering alternative employment —there was a more relaxed attitude towards pit closures. That is no longer the case. That attitude has changed drastically during the past two years, chiefly because, as the Monopolies and Mergers Commission report shows, the number of jobs has been dropping drastically during the past two or three years.
In Committee, I quoted the figures for Wales. It is worth reminding the House of them. In 1979, there were 30,000 to 40,000 more jobs in the Welsh economy than during 1974–75. Those jobs have been lost to the Welsh economy since 1979. There has been a drastic decline in employment and in the number of jobs available. That was recognised in the Monopolies and Mergers Commission report, which we analysed critically. That report is no friend of the mining industry, but on the social and economic consequences of pit closures it said:What can be stated with certainty is that in the absence of increased employment opportunities in continuing collieries or in other industries in coal-mining districts, accelerated closures would cause unemployment levels to rise in parts of the country already suffering unemployment levels far above the national average; in addition there would almost certainly be some direct effect on employment in other sectors, eg railways and various other service industries whose operations depend on NCB business.726 Those hon. Members who represent mining constituencies can testify to the truth of that statement and to the knock-on effect associated with the destruction of jobs in the mining industry.
We have been and remain willing to change and to accept closures, but we have rightly warned that we cannot accept an accelerated pit closure programme such as was mooted in the Monopolies and Mergers Commission report. Nor, I am glad to say, could the Government in February 1981. They were under considerable pressure from the industry and mining communities, and they rightly concluded that an accelerated pit closure programme was socially unacceptable. They withdrew the programme and adjusted the financial targets and borrowing limits of the NCB to accommodate the change. There should be some common ground between the Opposition and right hon. and hon. Members who formed the Government in February 1981. We cannot accept the type of accelerated pit closure programme which, if not advocated, was mooted by the Monopolies and Mergers Commission report.
In Committee, we emphasised the industry's financial difficulties. We also want to emphasise the tremendous potential of the industry and the coal resource. The Minister underlined that point and the success of the British coal industry when, in a written answer giving the operating costs per tonne of the coal industry in Britain compared with our European competitors, he said that Belgian coal cost £61 per tonne to produce, French coal £45 per tonne, German coal £47 per tonne and British coal £41 per tonne. More interesting than the figures was his explanation of them. He said:The lower figure for United Kingdom production costs reflects the relatively high level of capital investment in the United Kingdom coal industry "—[Official Report, 18 March 1983; Vol. 39, c. 616.]The Opposition accept that we can reduce costs and have a profitable coalfield through investment. We know from experience that if money is put into the industry, productivity will improve. In my constituency, 100-yearold pits that have had the benefit of investment have broken production records month after month. We accept the combination of investment and change. We also welcome the development of great new pits at Selby and soon, we hope, at Belvoir.
In Committee, we also argued the need to invest in the special coals with which Britain is endowed. I refer to the anthracite fields of south-west Wales. We are now importing 340,000 tonnes of anthracite a year because we do not have the capacity to develop our own industry. That industry needs new investment. We have also argued the case for investment in premium coking coal fields, such as Margam in south Wales and elsewhere.
We want investment in new pits but we should not ignore the renewal of our old pits. We do not want the balance of investment to be tilted drastically in favour of new pits, so that old pits, such as those in my constituency, are denied the chance to he profitable and successful. Investment in the older pits could produce great dividends in terms of untapped reserves. Those who represent traditional coalfields read with anxiety the Monopolies and Mergers Commission's suggestion that the NCB's investment plans for 1990 would result in adecline from approximately 32 per cent. of total capital investment in 1981–82 to 12 per cent. by the end of this decade.If there were such an imbalance, the result would be the decline of the older pits through higher costs. The 727 Opposition will watch future investment with great care. We hope that there will not be an imbalance in favour of new mines to the detriment of the old pits.
Although there was some agreement about the need for the financial structure proposed in the Bill, there were major differences of opinion in Committee. One arose in regard to privatisation of the NCB's assets. I do not want to rehearse our interesting debate in Committee about the ideological fantasies of the Minister's predecessor, who is now the Financial Secretary to the Treasury. When he went tramping round the coalfields, he did not mention privatisation of coal production. He merely endeavoured to be everyone's best friend. Nevertheless, we need not spend too much time on him. We know his record as a privatiser — he master-minded the sale of Amersham shares when in the Department of Energy. We all know what happened to them. They doubled in price, and more than half of them changed hands overnight. That was supposed to be an example of remarkably skilful financial handling.
§ Mr. David Hunt (Lords Commissioner to the Treasury)
That is irrelevant.
§ Mr. Rowlands
That matter is as relevant now as it ever was as the then Minister has returned to the stage in the guise of a Treasury Minister advocating more such failures.
It emerged in Committee that the NCB has been instructed by the Government to set a £10 million target for next year and, presumably, for successive years in preparation for privatisation. During the fifth sitting, we asked the Minister to give us some assurances. I hope that my hon. Friends will confirm this. The Minister gave us an assurance that there was no likelihood or prospect of privatising either deep mines or open-cast production in the lifetime of the Government. No other interpretation can be placed on the Minister's words.
§ Mr. Rowlands
I am glad to see the Minister nodding his head, confirming the nature of his assurance.
In Committee, the Minister was not willing to give us assurances about the privatisation of some of the ancillaries. What is worse, he failed to give us an assurance about National Smokeless Fuels Ltd. We said much about that in Committee, and there was a vote on our new clause on that matter. There is no operational or commercial case for trying to privatise any part of the NCB, particularly of National Smokeless Fuels Ltd., the operation of which is integrated into the production and development of the coalfields. I hope that this time the Minister will say that he will not approve any such act of privatisation.
I hope that there is agreement on both sides of the House about the strategic and vital character of this tremendous industry, which is developing a basic indigenous resource which was revalued after the 1973 crisis and should now remain one of the fundamental parts of our energy policy. The Opposition have asked throughout the debates that, when there is a recession and when economic demand is so low, we do not take a shortsighted attitude towards the development of the coal industry or take irrevocable decisions that would limit its 728 potential and future development. There is a tremendous potential for markets. We discussed them in Committee. There is liquefaction, coal to gas and the development of coal for industry. We bade the Minister repeatedly to say that he would renew the boiler conversion scheme and give grants so that a series of projects that apparently are ready to go can be given the go-ahead. There is great potential and there are future alternative markets for our coal industry. Therefore, it is vital that no irrevocable decisions are taken now that would limit development of the industry's full potential.
Inasmuch as the Bill provides a financial structure at a time of considerable difficulty and recession, we welcome it. Given that it does not yet close any options and is not based on a restricted and short-sighted view of the industry, we have given and will continue tonight to give it our support.
§ Mr. Michael Fallon (Darlington)
I have attended the debate under a misapprehension, because I had assumed that Third Reading was a time for reflection on a Bill rather than for repetition of points that had been made earlier. I have not yet heard anything that I did not hear on Second Reading and in Committee.
No one who served on the Committee will pretend that, although our discussions ranged far and wide, the Bill is anything but a holding Bill. It is the third such Bill that the Conservative Government have presented since 1979 and is almost identical to its two predecessors. It raises the external financing limits for the fifth and sixth times respectively. Although the Committee's discussions ranged over many issues that affect the coal industry, it still seems to me that the Bill does not go to the heart of some of the problems facing the industry.
I refer first to the industry's scope and size. We heard much from Opposition Members about recent discussion of privatisation. It seems to me that the hon. Member for Merthyr Tydfil and Rhymney (Mr.Rowlands) did not read correctly the great speech by the Financial Secretary on privatisation. Far from recommending privatisation of coal production and sale, he drew attention to the fact that coal production and sale were not in any true sense natural monopolies but were artificial monopolies, and that it was by no means self-evident that such monopolies were necessary or beneficial.
My hon. Friend the Under-Secretary of State ruled out privatisation and said that he had no current plans for it in the open cast sector for a reason that I found understandable. The reason was not that he was opposed to privatisation in principle — indeed, he strongly defended it—but that the financial objectives that were to be set for the board had an overriding importance and that the rearrangements that would have to be undertaken to enable the National Coal Board to compete efficiently should have predominance over more radical measures with regard to its scope and size.
Secondly, there is the NCB's efficiency and the need for it to compete more effectively with other fuels. In that context, the base document for the Committee was the report of the Monopolies and Mergers Commission. I was a little disappointed that we did not hear from my hon. Friend the Minister about a clearer timetable for how the recommendations of such an excellent report are to be put into effect.
729 The report was commissioned in March 1982. Initially the commission was asked to report six months after that, which would have been September 1982, but the deadline was extended to December 1982. The commission duly reported on 2 December. However, it was not until June that the report was published. We now understand from my hon. Friend that there is a full 12 months — until next July—for the NCB and the Government to respond to its recommendations and for the Government to consider their response to the NCB consideration. The report has nearly 50 recommendations. I hoped that we might have a better idea of how much progress we can expect on them.
Finally, the Bill does not tackle the long-term objectives of the NCB. I accept that there is a balance to be struck and that the Minister is not supposed to be managing the industry or interfering with the board's activities, but this nationalised industry is different from some of the others in that, as the Monopolies and Mergers Commission report said, it is almost wholly dependent on public finance and, more than that, it is wholly dependent on public finance in the short-to-medium term.
Therefore, the Government have a responsibility, beyond recruiting the best possible chairman for the NCB and providing it with more money by raising the limits time and again, to set the NCB firm targets to ensure that Parliament and the public get the best value for their money. In Committee those targets were officially publicised by my hon. Friend for the first time.
It might be for the convenience of the House if I reminded it of those four targets. The first was that the NCB should make a satisfactory return on its assets in real terms. However, the nature of the word "satisfactory" remained, as my hon. Friend put it,to be quantified in due course.I hope that "in due course" means "reasonably soon".
Secondly, in a marvellous example of Civil Service prose, my hon. Friend said that the second objective was that the NCB shouldmaximise its long-term profitability by securing those sales which are profitable on a continuing basis, in competition with other fuels." —[Official Report, Standing Committee H, 22 November 1983; c. 38.]It is not clear to me what those words mean. When the NCB is instructed to plan its marketing, production and capital investment "accordingly", in accordance with that sentence, I am at a loss to know exactly how that planning is to be guided. Thirdly, the coal board is instructed that its objective is to reduce its operating costs in real terms for deep mines and open-cast production separately. Again, the phrase "in real terms" and the extent of the reduction remain to be quantified "in due course".
§ Mr. Dennis Skinner (Bolsover)
I listened carefully to what the hon. Member said about the management of finances, but I have checked up on his past. He was an adviser to Lord Carrington, who got us into a mess in the Falklands. The folly of neglecting the Falklands is costing us £3 billion now. He was also an adviser on the Common Market, and last year during the audit it was found that £700 million was missing. I wonder whether he discovered where that money went when he was a European adviser. Some of it finished up in the Mafia's pocket in the olive oil ramp. Why does he not tell the House about that, instead of about miners, who go down pits to dig coal? He has never had to do that in his life, but has had his bread buttered by the taxpayer and the Common Market.
§ Mr. Fallon
I welcome the attempt of the hon. Gentleman to do a little research, but the danger is that a little research is not sufficient. Had he researched sufficiently, he would know that I assisted Lord Carrington before he was Foreign Secretary and, secondly, that no one has been more critical of wasteful expenditure in the EC than myself. Had he read my pamphlet, "The Rise of the Euro-Quango," he would have seen that I drew attention precisely to those abuses of expenditure that he criticised, criticism of which I share.
Neither the Bill nor our deliberations on the Bill have answered the most important questions. How do we reduce the uneconomic capacity in the coal mining industry, which, as the chairman of the board continues to point out, is dragging the industry down and making more difficult his task of finding markets for coal and of making the industry more efficient and competitive? Until it is answered, the coal board and those in the industry will continue to trade on the good will of Parliament and on the tolerance of those people and companies in my constituency who must pay the resultant high costs for fuel and who, as taxpayers, must contribute to the external financing limits of the industry.
§ Mr. Alexander Eadie (Midlothian)
Third Reading provides an opportunity for hon. Members who have not had the pleasure of serving in Committee to gain more information than the Government were apparently able to provide in Committee.
The Minister visited the Seafield colliery in Fife, which is about five miles from my home. I have worked most of the coal measures there myself. The hon. Gentleman would probably be impressed because of the difficulties of working in deep-seam pits.
I have worked those deep-seam pits, sometimes using gravity haulage. Did it occur to the Minister while he is talking to the miners that if his diktat that economic pits must close had applied to Seafield colliery, it would have had to close? He is bound to have learnt that Seafield colliery is about to become profitable. It is not a clapped-out old pit, but has introduced all the modern technology. There is enough coal in that area for about 100 years, and an entirely new coalfield has been discovered underneath the firth of Forth.
It is a bit much for Mr. MacGregor to come to Scotland —I do not know who advised him or wrote his speech—and to suggest that all the best coal in Scotland is worked out. The hon. Member for Darlington said that we should try to help the new chairman. I said on Second Reading what I thought of the new chairman. There is no doubt that he is yesterday's man. He cannot say that all the best coal in Scotland is worked out. A new coalfield has been found underneath the firth of Forth and at Happendon there are 40 ft thick coal seams. Mr. Cowan, the deputy chairman of the coal board, knows that, because it was he who showed me the plans of the 40 ft thick seams. We do not know how far the Longannet seam stretches. The Canonbie coalfielcl in Dumfries probably stretches to Cumberland. There is ample coal in Scotland, and Mr. MacGregor owes it to the Scottish miners to be better briefed and not to suggest to the public at large that Scotland is a clapped-out coalfield with no reserves. I bitterly resent that.
In Committee several hon. Members mentioned the rate of interest, but it would appear that the Minister has never studied the matter. One would think from his remarks that 731 every penny given to the National Coal Board was a subsidy, but that is not true. The coal board must pay interest on that money, and in Committee we discovered that last year it had paid £366 million. I remember challenging the Prime Minister about what I described as "Thatcher's law". Since the Government came to power, Thatcher's law has been that if an industry borrows money, even if it pays interest on it, it must be called a subsidy. If that dictum were applied generally, one could say that every section of private industry receives a subsidy. Industries would bitterly resent that, because they must pay the going rate of interest. Some of them receive subsidies—
§ Mr. Eadie
My views on the Common Market are well known. That must be discussed some other time, but my right hon. Friend is on the ball.
I have often said that the miners' backs are broad, but their backs will be broken by the rate of interest. The loans should be regarded as a good investment for the long-term future of the nation. I have worked out the figures; each pit—before a blow is struck—must pay £2 million in interest. Translated, that means that each miner is paying £35 a week in interest. Who is doing well out of this? What is the sense of Thatcher's law when a publicly owned industry borrows money to invest it in the industry, which is to the benefit of the nation? How can that be described as a subsidy?
When the Under-Secretary replies, I hope that he will say something about the developments at Polmaise. He is bound to have had some briefing. Only this weekend I learned that we were exploring a vast new coal resource in that area but that it may be stopped. That may be just newspaper talk, but the Minister should say what is happening at Polmaise. Will exploration of this vast new coal reserve and the developments associated with it be continued? I believe that at present 200 men are engaged in these development. Those developments mean much to that area of Scotland, particularly for employment, but they will mean just as much to other areas.
Much was said about coal burn during our debate on Report, particularly with regard to the CEGB, but at that time we were not aware of what was happening in Scotland. The South of Scotland Electricity Board announced that it would reduce coal burn from 6.2 million tonnes to 3.8 million tonnes, although the NCB says that it could be 4.8 million tonnes.
Like my right hon. and hon. Friends, I am grateful for the research facilities at our disposal. According to the figures that I have received, a coal burn reduction of 2.4 million tonnes would mean the closure of five Scottish pits and the loss of 4,800 jobs, yet we heard nothing of that from the Minister on Second Reading, even though the Government must have known about the future of coal burn in Scotland.
The argument may well be that Scottish industry has suffered a tremendous recession. Scotland has certainly had more than its fair share of unemployment. We have experienced the Invergordons and the collapse of Singer and Linwood, not just because of lack of demand but because of the policy of recession pursued by the 732 Government. We are not talking about the retirement of people over 50, butabout people who will be forced to retire or be made redundant in the prime of their lives.
Even if coal burn was reduced by, say, 1.7 million tonnes, that would still result in the loss of 3,000 jobs —they would certainly be endangered. I am suggesting that the Scottish economy would not stand that. A contraction of jobs on that scale will have an enormous knock-on effect among other Scottish industries such as steel, the railways and light engineering. The Chancellor recently said that he was optismistic about next year. There cannot be much optimism for Scotland if what I have described takes place.
Some Government spokesmen have suggested that there is a possibility that when the condensates at Peterhead are used up and we begin large-scale refining, the coal burn will again be 6.2 million tonnes. That is not what the coal industry wants. If pits are closed, they are closed for all time. One cannot mothball a pit in the same way as one mothballs a factory. I therefore hope that the Under-Secretary will comment on this serious situation.
It has been hinted that the Secretary of State for Scotland would be prepared to meet Scottish Members of Parliament with mining interests along with area officials of the NUM as advisers. The Department of Energy also has a responsibility in this regard, and I hope that Ministers from that Department will also attend. Something must be worked out, because Scotland cannot take any more unemployment. The Government have a responsibility to ensure that something is done.
On Report, the Minister said that he was puzzled about liquefaction. So am I. I read that there would be a 2.5 tonne scheme at Point of Ayr. I read elsewhere that it might be a 1.5 tonne scheme. The only thing of which I am sure is that this will be a laboratory scheme on site, because what was envisaged for liquefaction bears no relation to what I hope will happen at this late stage. The Under-Secretary should spell out exactly what has happened. How will liquefaction be funded, and what contribution will the Government make?
There is more confusion in the House about liquefaction and how it works than anything else. From the comments of some hon. Members, one would think that we were talking about a virgin technology. Not at all. Indeed, we have been working refineries for probably 80 or 90 years. The technique and technology of oil refining is nothing new. We are really talking about the introduction of a new product.
Most refining technology has already been invented. Therefore, we cannot be accused of playing Walter Mitty when putting forward our ideas on refining. The Under-Secretary should try to clear up the confusion, be it in my mind, his mind or the mind of the House. That is important if we are to talk accurately about the future prospects of the coal industry in relation to the new technologies.
I have already referred to some of the exciting developments in coal gasification. From my sources I understand that there may have been a change of mind on the time scale. On Second Reading I said that it was absurd to suggest that coal gasification would not take place, bearing in mind the billions of pounds of investment in our gas-pipe network. Of course we shall capitalise on that investment, and of course the gasification of coal will always be on the agenda. Indeed, it must be on the agenda unless Mr. MacGregor does not believe his own words. Mr. MacGregor said that there was a possibility of being 733 able to produce 200 million tonnes. But there is not a chance in hell of the coal industry producing 200 million tonnes unless the new technologies of liquefaction and gasification are introduced.
I was at the most recent meeting of the national executive of the NUM, and at the joint meeting between the board and the NUM. We were told that coal from South Africa was being dumped at £12 a tonne. The Minister may talk about being competitive, but I hope that he is not suggesting that, even with the best technology in the world, we can produce coal for £12 a tonne. I remind hon. Members that Britain produces the cheapest coal in western Europe and that its coal may also be cheaper than that produced in other areas.
Another important matter, the vale of Belvoir, has already been mentioned. I was unable to attend the most recent question time involving the Department of Energy, but I was appalled when I read one of the answers that had been given. The chairman of the National Coal Board had intimated that the vale of Belvoir was to go ahead. However, I was shocked by the Minister's answer which was neither specific nor categoric. He said that there were matters of capital investment which the Government would have to examine. The Minister now has the opportunity to make it clear that the necessary capital investment has been released to allow the vale of Belvoir to go ahead.
I have been in touch with Jack Jones, who is the secretary of the Leicestershire miners. Incidentally, there are no better miners anywhere in Britain. That coalfield should have been started many years ago. Anyway, the coalfield is not in the vale of Belvoir. That is a myth that has been built up out of all proportion to the reality. The original idea was that there should be not one but three pits. However, as the coal board and the Leicestershire area miners have been forced to have only one pit, the whole project may start off at a disadvantage given the economics that Conservative Members apply, like desiccated calculating machines. However, it should not start off at a disadvantage, because the Leicestershire miners need those pits—and not just one pit—to ensure continuity of employment in Leicestershire, and to ensure that their skills and talents are still used. It is a pity that a positive attitude has not been adopted towards the start of that coalfield, despite Mr. MacGregor's announcement.
I have tried to raise issues of great moment as constructively as possible, and I make no apology for mentioning, in particular, Scotland. I hope that the Minister will at least endeavour to reply to my points. I assure him that many miners not only in Scotland but in Leicestershire and elsewhere are anxious to know his views.
§ Mr. T. H. H. Skeet (Bedfordshire, North)
The hon. Member for Midlothian (Mr.Eadie) always makes a good speech. However, he is inclined to overlook the fact that the liquefaction of coal is not, at present, a practical proposition. If the oil price rises to $50 a barrel and beyond, it would be commercially attractive, but it is not attractive at present. Consequently, in many parts of the world companies have backed away from that proposition. Thus, the Government were right to pull out their contribution to the NCB, or at least to minimise it.
§ Mr. Eadie
I am sorry to interrupt the hon. Gentleman, but he mentioned me by name and liquefaction is an 734 important issue. Surely the hon. Gentleman will not fall into the trap of trying to dismiss for ever, or for a long time, the whole question of liquefaction. He must be aware that Lebanon and the middle east are powder kegs. It is impossible to predict what the price of oil will be next year. The hon. Gentleman must also be av,, are that America has only eight years of indigenous oil supply left.
§ Mr. Skeet
It is all a question of timing. The hon. Gentleman fails to understand that the coal molecule is much more complex than the oil molecule. Oil is easy to refine. However, it is difficult to liquefy coal. More time is required. Many processes are available, such as Lurgi in West Germany, as well as the Sasol plant and project in South Africa. It is a practical proposition to liquefy coal if it is cheap, or if there are defence reasons for it. However, at current prices it is certainly not a practical proposition in the United Kingdom.
§ Mr. Roy Mason (Barnsley, Central)
The hon. Gentleman may well be misleading the House and if so, the Minister could clear up the matter. The hon. Gentleman said that the Government had pulled out of their contribution to liquefaction. Is that true?
§ Mr. Skeet
I said that the Government had greatly lessened their contribution. made clear what I meant. We are in a world of Alice in Wonderland economics, in which miners are inclined to keep their minds chained to the past. They will modernise their pits, but they will not modernise their approach to life. If production is 125 million tonnes per year and consumption is 110 million tonnes per year, there is at least 15 million tonnes surplus to requirements.
§ Mr. Skeet
I accept that stocks increase to 58 million or 59 million tonnes. But stocks have to be paid for at the rate of £6 to £7 per tonne, so the liability is increased. Elementary economics teaches us that it is not much good producing a colossal amount of coal if it cannot be disposed of on the open market, or externally. I have often made that point to the House and do so again now. I do not see why the coal industry should be insulated from the rest of the economy.
We have talked about closures and I have a sincere feeling for the miners involved. The steel, shipbuilding, petrochemical and refining industries have been reduced in size. Unemployment has been created because the companies recognise that if they have too much capacity for the market they must tailor it to suit the market. Today, we have learnt that the miner is to be insulated from all that. As I have said, it would be unwise to adopt that approach and I insist that I am correct in being a realist.
§ Mr. Skeet
Shipbuilding, steel and many other industries have also lost men. Lord Robens closed so many pits under a Labour Government that fewer pit closures may occur in future. We want to ensure that miners receive a fair deal and fair compensation if they are discharged.
West Germany, which has an agreed surplus capacity of 10 million tonnes, has had to cut back. I hope that the number of redundancies here will be much below the figure envisaged. If the 20 best pits in 1982–83 produce coal at an average of £28 a tonne that is excellent, and competitive anywhere. If the 20 worst pits produce coal 735 at an average cost of £89 a tonne, twice the norm, that is a wasted asset and it creates difficulties for the good pits in north Yorkshire and elsewhere.
We want a strong and tailored industry to meet the requirements both of today and the future. The way to secure that is by selective closures, which go on all the time. I read in The Sunday Timesonly yesterday of three further closures. I understand that between seven and 11 closures have occurred this year. Over the years, closures have been authorised by the accepted procedure. We ask for nothing more but a realistic interpretation.
The industry must be prepared for certain retrenchment in the interests of those good areas of the country. We look forward to the vale of Belvoir— and Selby when the latter overcomes its water difficulties—going ahead with increased production. They will be profitable pits. I understand that the Selby production rate is about £18 per tonne, which is competitive anywhere in the world.
The Bill, a little bit of paper, will cost the taxpayer billions of pounds. Do the miners realise that? It will cost billions and, in my judgment, it will be ineffective. The Coal Industry Act 1980 was intended to make the industry viable by 1983–84. By 1983–84 the subsidies poured into the industry were nobody's business. This Bill is intended to last for two years. In two years' time, we shall return to the House asking for further substantial subsidies.
What has happened in the United States, South Africa and Australia where no subsidies are paid? It is difficult to compete with them, but we do not import much coal, because that is virtually prohibited. When the CEGB attempts to import coal it is told that it must stock it on the continent and dispose of it there.
When we come back to the House in about two years' time we shall need a capital reconstruction. I appreciate the point about interest charges being considerable. I would not mind betting that £500 million will be written out of the NCB accounts. That is the contribution that the taxpayer is making. It is not the Government's contribution because they have no money. They do not print the money; it must come from the taxpayer's pocket.
In the last 10 years, capital investment and grants have totalled over £7 billion. Let us think how that money could be used in another context with more profitable results. The Opposition may be surprised to learn that the capital employed by the NCB is equivalent to £6–3 billion. The rate of return, excluding subsidies, is minus 5–9 per cent. The NCB would be virtually bankrupt but for the fact that the Government provide most of its cash.
Everyone says that the miners do an excellent job and want a strong industry. I have heard repeated speeches along those lines in Committee. The Opposition Benches contain a galaxy of talent and hon. Members will make their speeches later. Perphaps there may be some taxpayers' representatives to describe the reverse side of the coin. The motor car industry does not receive such taxpayers' money, nor do the steel and shipbuilding industries. It is all reserved for the the coal mining industry, where the workers are paid and earn on average £180 a week and receive concessionary coal and all the other advantages. I hope that some of my observations have sunk in at long last.
The right hon. Member for Methyr Tydfil and Rhymney (Mr.Rowlands) said that the nuclear power industry had taken jobs from the miners. I regret that that 736 is so. When the target of providing 22 per cent. of electricity is achieved, a number of jobs will go, but one must recognise that nuclear power, on base load, is much cheaper than using fossilised fuels. That is to the advantage of people who have to pay the bills and necessary for the success of the industries that provide our exports.
I support privatisation and look forward to when the number of people who can run a pit is lifted from 30 people to 100 people. I do not suggest that the pits overall should be privatised but I am justified in saying that a great number of NCB auxiliaries, for example, Staveley Chemicals, could be parcelled and sold to others. Many of them are not very profitable now but they may be in other hands. The key to the future lies in the innate ability of the miner to persist with his work, in the ability of the management teams—now the soundest for years—and the possibility that in about 15 years the prospects for coal will vastly improve.
§ 8.9 pm
§ Mr. Martin Redmond (Don Valley)
I thank you, Mr. Deputy Speaker, for calling me to speak early in the debate.
I agree with the hon. Member for Darlington (Mr.Fallon) about the contents of the Bill. It is a short-term Bill and does nothing whatsoever for the coal industry or, indeed, for this country. If there is to be a repitition, there is an old saying that "if at first you don't succeed, try, try, again." We hope to convince Conservative Members of the validity of our argument.
We have been told that the National Coal Board has a fine chairman. I would not like to think that he was looking after my housekeeping money because I would soon be bankrupt.
§ Mr. Redmond
Nevertheless, it is true.
The hon. Member for Bedfordshire, North (Mr.Skeet) keeps mentioning the word "profit". I firmly believe that the industry is not there to generate profit. Its prime task is to meet the energy demands of this country. If one started to introduce the profit motive one would soon be back to the days of exploitation, which would be detrimental to this country. I told the Minister in Committee that what the country needed was a plan for energy based on coal. At no time in Committee was that point answered.
The entire Bill is based on short-term thinking. A Conservative Government have been in office since 1979. We were told that the Conservative Government would bring forth power and drive and would give initiative to this country. One looked for that to be relayed to the coal industry. Unfortunately, that has not come about. I have not yet been to the Department of Energy's ivory tower —no doubt the Minister will be inviting us there before the Christmas recess. In a search for a plan for coal, will the Minister tell us the Department's thinking.
Reference has been made to the proposed grid system from France to this country. What energy flows will come from that grid system and at what time and under what circumstances will the grid system be used? What will be the coal equivalent of the energy flow from that system?
Reference has also been made to the gas industry. When the gas runs out, a conservative estimate is that at 737 least 100 million tonnes of coal will be needed to provide the gas industry with its basic requirements. If that is the case and if the Department has no alternative plans, what immediate plans are there for the coal board to lay down more than one vale of Belvoir? Selby, the vale of Belvoir and indeed the other few pits that it intends to leave open will not produce 1 million tonnes. As reference has been made to South African coal at £12 per tonne, is it the Government's intention to import coal to meet the requirements of the gas industry? I hope that the Minister will tell us how the gas industry will meet its requirements when gas starts to run out.
§ Mr. Skeet
If the gas industry has a requirement, I do not think that it will be until the turn of the century or beyond. Why should we make provision in 1982–83 for requirements of the gas industry which are probably two decades away? Those requirements are not with us now, so surely we can economise a little before that time.
§ Mr. Redmond
I would have expected that type of comment from any Conservative Member except the hon. Member for Bedfordshire, North. He is as aware as any other hon. Member that the industry requires long-term planning. If it does not have long-term planning, it will not meet those requirements. Perhaps we could continue that point over a cup of tea.
A figure of 7 million tonnes of coal imports was mentioned in Committee. It is quite possible that that figure will not be reached. The Minister mentioned a figure of about 4 million tonnes, the same as last year. The figure, last year, was 4.5 million tonnes. That 4.5 million tonnes refers not just to steam coal but to total coal imports, whether coke or briquettes. It can all be produced by the British coal industry. Any imports will obviously reduce domestic demand.
At the end of August the figure for coal imports was 3.58 million tonnes. If that is the case it strikes me that the total figure will be well over 4.5 million tonnes. About 500,000 tonnes can keep a medium size pit open and provide jobs; and every 100,000 tonnes imported means jobs. I am sure that the Minister is a compassionate man and will seek to reduce imports. If I am correct and imports will be higher than the Minister's forecast of 4.5 million tonnes this year, I wonder what reliance can be placed on the other figures that the Department of Energy produces. If I am wrong, I will buy the Minister a pint, and if I am right, I hope that he will sack his advisers in the Department of Energy.
I am an anti-marketeer. I do not like the EC. I have yet to see its benefits for the British people. Perhaps the ardent marketeers on the Conservative Benches will tell us what has gone wrong with the European plan for coal. Leaving aside agriculture, steel and coal have declined and steel imports continue to flow. What discussions has the Minister had in Europe about an energy plan for the future?
A figure of 80 million tonnes has been mentioned time and again as the realistic production figure for the industry to meet current and foreseeable market demand—hence my question about gas. Selby can produce about 10 million tonnes with 4,000 men. Multiplied by eight, that gives a total of 32,000 men. Let us be generous and say that 40,000 men will be required to produce 80 million tonnes. Current manpower stands at 200,000, so that means a reduction of at least 160,000 men. If those figures are wrong, I hope that the Minister will tell us so.
738 On the Department of Energy's long-term calculations, the industry will need at least 150,000 men, if not the current level of 200,000 men, to meet future needs. I know that the Minister is an honest man, who would not lead the House astray. Will he forecast the manpower requirement during the next few years? It is a frightening possibility that within the next six or seven years 160,000 men may be shed from the industry. When we consider the future requirements for energy from coal, it is frightening to realise that we may not have the manpower or pits to produce it.
If the Department of Energy has alternative plans to meet those targets, be it from nuclear fuel, coal imports or whatever source, we should be informed of those plans now. I hope that the Minister will tell us about the current position in the industry and whether the Department has given guidelines to Mr. MacGregor. It is crucial that the House knows about any guidelines. If there are none, the Minister need only say so; but the House should be aware of the current instructions or advice given to Mr. MacGregor.
The Minister stated categorically that he does not intend to privatise any coal mine in the foreseeable future, which is good news. But reference has already been made to the report of the Monopolies and Mergers Commission. Do the Government intend to privatise everything but the coal mines? The industry has central workshops, which have been rationalised and centralised to meet the industry's demands. Does the National Coal Board intend, on the instructions of the Government, to sell those workshops? I question whether the private sector will want to dib in to any part of those ancillary industries, which are geared to the coal industry. If it does dib in, it could drop a clanger because little of the coal industry will remain intact.
The Bill is about finance, and I reiterate that the industry needs a different financial structure if it is to survive and meet the new demands for energy.
§ Mr. Hal Miller (Bromsgrove)
It is with some trepidation that I rise to make my maiden speech on the coal industry. I shall, therefore, be brief and, I hope, non-controversial.
I am glad to follow the hon. Member for Don Valley (Mr.Redmond) on his point about demand for coal products to meet future energy needs. I wish to concentrate on the demands of the foundry industry for foundry coking coal. The current assistance on that product will be lifted on 31 December, and I understand that the price will rise to about £122 per tonne. That product is currently available in France at about £80 per tonne, in Belgium at £93 and in Germany at £103. This is a serious matter—
§ Mr. Redmond
If the hon. Gentleman quotes those figures, he must compare like with like. Large amounts of subsidy are provided on the continent. I agree with his point about the cost of coking coal to the foundry industry. I have tried to make the point that the Department of Energy should come forward with a realistic plan. The Department should take account of the subsidies on imported coal. I regret that we are talking not about longterm future needs, but about short-term policy.
§ Mr. Miller
I am talking about the needs of my constituents who operate iron foundries that are dependent 739 on energy costs as part of their competitive structure. I admit that the west midlands and other areas of the United Kingdom have some way to go on productivity. Indeed, Britain ranks ninth out of 12 in the European league, having about two thirds of the level of productivity of the French and German industries. Our production per foundry is of a similar order and relation to the French and German firms.
There are real problems in the foundry industry. We must look for a reduction of capacity even larger than that which has already taken place, and an improved performance. Reduction in capacity has been considerable. In 1979 the industry employed about 72,700 people in about 630 firms. There are now 450 firms with 50,000 people.
The competitive position is important because the industry is faced with an increase of 50 per cent. in scrap prices and also tremendous competition from imports of castings from Spain and the far east. I am not sure whether my hon. Friend the Minister is aware of the difficulties being experienced by the motor industry at the hands of Spanish imports. As an illustration of the problem in the foundry industry, a casting made by a well-known component manufacturer left his works at 100 per cent. fob, went to Spain for use in a model being assembled there, was not required and came back to Britain as a spare part and, thanks to a subsidy, landed at 92 per cent. of the fob price. In face of such unfair competition, my hon. Friend will appreciate the seriousness of the price increase likely to take place if the arrangements with the NCB do not cover a continuance of assistance to the foundry industry on coke prices.
The prospects for the foundry industry are not good because of the technical substitution that is taking place at a rapid rate, with the development of alternative materials in the motor industry as manufacturers look for substitute and lighter materials. There is a long-term effect on the output of the castings industry. It is, therefore, through this transitional period of reduction in capacity and improved performance that assistance is needed.
As for product development to meet technological change, SG Castings in the United Kingdom is about only 20 per cent. of the iron foundry output, which is about half the French level, and we rank eighth out of 17 producers. In the steel foundries, in high alloys, only 6 per cent. of our production is in those advanced techniques. Therefore, the industry has a long way to go. It realises its responsibilities but will find great difficulty in facing a cost increase in the price of foundry coke of the amount I have indicated.
§ Mr. Peter Hardy (Wentworth)
Hon. Members and others reading the Official Report of the debate might question whether the hon. Member for Bromsgrove (Mr.Miller) was making a speech which had relevance to coal; but I recognise that he has maintained a consistent interest in energy prices, and we have frequently found ourselves on the same side when we have debated the enormous problems that high energy prices impose on British industry.
If the unfair competition that the hon. Member for Bromsgrove perceived as wiping out large areas of industry in the west midlands had not been allowed to 740 wreak havoc in Britain, the coal industry would be more viable today, our power stations would be operating nearer to capacity, electricity and other prices would be lower and the Government would not be facing the appalling problems, social and economic, that high unemployment is creating and will increasingly create.
The hon. Member for Darlington (Mr.Fallon), who has left the Chamber, suggested that hon. Members were not saying anything new. I shall not say much new, partly because I said much of what I have to say on the subject on Second Reading, at which stage the Minister, while recognising my interest and concern, did not respond in detail to the serious points that I made. As those points are now more serious than they were then, I invite him not merely to listen to them but to respond. If he does not do that tonight, I hope that he will take the trouble to respond eventually to the important points that I shall make.
The first issue that I wish to raise is that of acid rain. Last Friday I attended a meeting of the committee of the Council of Europe that is responsible for this and similar matters. I have attended every meeting concerned with acid rain in the last three or four years. The matter is of enormous consequence for Britain — for the energy industries and for British industry generally — and the position is astonishing. It is clear that the Scandinavians, Dutch and Germans will not let the problem rest. I met the German Minister of Agriculture in September. The Germans, Norwegians and Swedes are embarking on detailed studies, and I am not happy about the British response.
There are those in the Central Electricity Generating Board who seem delighted by acid rain. They dislike the coal industry so much that they think that they can pass the blame on to the coal-fired stations, when in fact the situation is rather more sophisticated than they might like the public to believe. I was looking on Friday at some detailed figures which I trust Conservative Members on that committee will one day present to their colleagues. The position is that we could make a necessary—it will become increasingly necessary — response to the Scandinavians who are worried about our industrial effluent. We could do that a great deal less expensively than some people in the CEGB seem to suggest. I saw figures showing that while there are people in Germany making a similar claim, in reality we could make an enormous contribution, for one quarter of the sum of which the Minister may have been advised.
Another aspect causes me great concern. We have heard much about Mr. MacGregor's wonderful salesmanship. Apparently he is a master at recognising and pursuing markets. I have not heard a cheep from the National Coal Board in recent months about a relevant development concerning acid rain. At Grimethorpe in Yorkshire, not far from the constituency of my right hon. Friend the Member for Barnsley, Central (Mr.Mason), the NCB has made enormous strides in establishing the modern and effective use of coal by fluidised bed combustion, which provides far less pollution by sulphur emission.
§ Mr. Hardy
I intend to pay tribute to my right hon. Friend for his efforts in the matter. Indeed, I am glad that my hon. Friend the Member for Midlothian (Mr.Eadie) is also in his place, as I shall mention him shortly.
The fluidised bed development represents a major step forward in fuel use. It would make a powerful contribution 741 to Britain's international standing because, if we develop the fluidised bed, our neighbours will see that we mean well and that we are complying with our international obligations. My hon. Friend the Member for Midlothian, when an energy Minister, watched, supervised and nursed that development. He and my right hon. Friend the Member for Barnsley, Central, who started it, are entitled to join me in asking the Minister to ensure that this splendid development is properly known and exposed and that our European neighbours are told about a splendid achievement by our nationalised coal industry. That, and the point made by my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr.Rowlands), should be properly developed. We must encourage the proper use of energy in Britain, and to that end, the Government must take the initial step by giving greater encouragement to promote coal burn through the conversion of boilers.
§ Mr. Skeet
—but there are two difficulties. First, we do not have a commercial fluidised bed combustion power station yet, and we are not likely to have one for a number of years. I hope that it can be developed quickly, but meantime we do not have one. Secondly, assuming that one is built, that will be one new power station. What shall we do with all the other power stations that cannot be converted to fluidised bed combustion within 10 years?
§ Mr. Hardy
That was a more relevant intervention than we are accustomed to receiving from the hon. Gentleman. Nobody with sense would dream of saying that today's problem of acid rain will go away by 1984. I quoted some figures in Paris on Friday to show that western Europe could reduce SO 2 and nitrogen oxide emissions by 4 per cent. or 5 per cent. per year on average over seven, 10 or 15 years. If such progress were made, every country, including the Scandinavian countries which are sensitive about this matter, would be relieved. The hon. Member for Bedfordshire, North must not suggest that we are demanding that this be achieved overnight. However, certain things, including a generous development of the boiler grant scheme, can be done swiftly. That would mean more experience of using fluidised beds. Conservative Members and I know that we have been waiting a long time for the Minister to approve combined heat and power district heating schemes which, if based on fluidised bed combustion, would be a remarkably powerful demonstration of our sense of responsibility and assist the NCB to maintain coal burn.
No one in the coal industry or living in a mining community wants pollution to continue. The nationalised 742 coal industry, having established and developed new methods of modern combustion, should be encouraged by the Government. I am astonished that the wonderful salesman who is now chairman of the NCB has not been trailing up and down Britain and throughout the rest of the world selling the technology developed by his industry. because that technology promoted the use of coal. I hope that role was included in his terms of reference when he was appointed.
§ Mr. Mason
I hope that my hon. Friend will extract from the Minister when he replies the information that, contrary to what he said earlier about fluidised bed cumbustion techniques at Grimethorpe, that development is proceeding and is proving to be a success. There is a European interest in the project. We want the Government to give that project all possible encouragement.
§ Mr. Hardy
I agree with my right hon. Friend. That is a matter of urgency. I was stressing its importance by referring to the problem of acid rain, to which the Government must respond. This project provides a powerful avenue through which to respond. I am amazed that the NCB has not said more in relevant and firm terms about this matter. If anyone from the National Coal Board reads Hansard, I trust that he will ask Mr. MacGregor, if the Minister does not, to say a word or two in support of that project and to use this trump card to which he referred in his supposedly superb salesman's guise.
On Second Reading, I talked about the Atkins report and the need to develop a CHP district heating scheme. The hon. Member for Bedfordshire, North seems to believe that this will be many years away. The Minister will be aware that there is a proposal for such a scheme in the south Yorkshire area. It would be a useful development in that region. Although Sheffield and Rotherham may not have featured very highly in the Atkins ranking, I believe that the Minister will accept that the Atkins report suggested that Sheffield and the south Yorkshire area could be included in such developments.
Hon. Members who might be tempted to talk about pits losing money should pay heed to an important and significant point to which I referred on Second Reading. The hon. Member for Bromsgrove referred to the steel industry. I was disappointed that the Minister did not pursue that matter. I recognise that the debate on Second Reading ranged widely and that he could not comment on all aspects in one speech. I hope that the Minister will take up that point.
I believe that in 1973 — I do not want to be excessively foolish in attacking the Secretary of State for what happened 10 years ago—the present Secretary of State for Energy was the man who called for a massive growth in the steel industry. It was envisaged that we would produce 30 million tonnes of steel a year. The Minister may be as disappointed as I am that we did not reach that target. However, hundreds of millions of pounds were spent on pits, especially in the south Yorkshire area of the National Coal Board, to ensure that we produced coal of metallurgical quality to meet the steel requirements of the increased market that was envisaged.
I could take the Minister to pits in Yorkshire — he may already have seen some—where scores of millions of pounds were spent in an attempt to improve the quality of coal. Unfortunately, with Mr. MacGregor then chairman of the British Steel Corporation, in partnership 743 with the present Administration, the output of the steel industry collapsed. There was a drift towards the use of the electric arc furnace, which dropped to wretchedly low levels of perfomance, reducing the coal requirements for power generation. However, during the past decade, the NCB built up its capacity to serve a 30 million tonne-plus steel market, but then had to retreat from that aim. Vast sums of money were invested in all pits to meet the demand for steel, and then that money was wasted. However, it was not entirely wasted. It meant that coal from the south Yorkshire collieries is cleaner and has a lower sulphur content, and therefore is less of a pollutant when burnt in power stations. Pits do not receive the same amount per tonne from coal as utilised now as they would have done if the steel market had not contracted.
I do not want to see a single colliery in south Yorkshire —where vast investment occurred so that output could meet the needs of the planned steel market—threatened or closed because it cannot meet from its production the enormous burdens of investment that accrue when pits were designed to serve the envisaged steel market. That is a problem, and I should like the Minister, at the end of the debate or soon afterwards, to assure us that no colliery in the Yorkshire coalfield will be threatened or closed because it cannot pay from its current yield for the investment that has been killed by history and the combination of the policies of Mr. MacGregor and the Conservative party. The Secretary of State is partly responsible for those circumstances, and I do not believe that he should duck that responsibility. I hope that he will examine that matter with a reasonable amount of sympathy.
Conservative Members from Bedfordshire, North or the more salubrious areas of Britain — I know that the Minister is a Yorkshireman, which suggests that he might be more sympathetic to our view—seem to believe that pits ought to be closed with abandon. We are almost in a macho contest to see which Minister or hon. Member can urge the closure of the greatest number of pits in the shortest time. The hon. Member for Bedfordshire, North seems to be offering dissent. If he reads Hansard, he will see that only one Conservative Member showed a glimmering of sense.
§ Mr. Hardy
Hon. Members have referred to 20 pits. I do not know how many the hon. Gentleman wishes to see closed, but it will certainly be fewer than I do. The hon. Member for Bedfordshire, North, may be prepared to see the closure of a few more pits than some of his hon. Friends who have participated in the debate.
§ Mr. Francis Maude (Warwickshire, North)
From where does the hon. Member get the figure of 70,000—except that I know that it was passed on by one of his hon.
744 Friends? It is not a figure, as far as I know, which has any basis in fact. It is only in the hon. Gentleman's imagination.
§ Mr. Hardy
We have heard some Conservative Members of Parliament demanding an abrupt and immediate slaughter. There are probably some Conservative Members who think that a reduction to 70,000 would be excessively generous. Much depends on whether Conservative Members have any miners in their constituencies. Some of them may have in this Parliament, but I doubt whether they will have any, even if there is not a contraction of the industry, when the next Parliament is formed. If there are any miners within the constituency of the hon. Member for Warwickshire, North (Mr.Maude), they may have learnt some sense since June.
I represent a constituency which has been given a new name. However, there was a constituency known as Wentworth in 1945. I understand that that constituency was created in 1922. It is very different now because there are fewer pits in the area. There are five pits in my constituency, but there may have been 50 small pits in the 19th century. The pits are part of an old coalfield, but within my constituency there are some modern pits with long reserves.
I represent an area which is accustomed to pit closures. Pits have closed when they have become exhausted, and no one has objected. I can think of two collieries in my constituency which closed without objection from me because it was accepted by everyone, after proper consideration, that closure was appropriate because the pits were exhausted. However, it is foolish to propose that pits should close because they are currently losing money.
One of the pits in my constituency—one at which three generations of my family worked—lost quite a lot of money last year although it has substantial reserves. It now has two 300-yd faces. The hon. Member for Bedfordshire, North who knows a little about energy, might recognise that now that an especially long face is in production the pit could become profitable. As I have said, it lost money last year. That being so, Conservative Back Benchers would have closed it by now and deprived the public and the industry of any opportunity to mine coal successfully and effectively in an area in which unemployment, in a real sense, is 30 per cent. or more.
The hon. Member for Bedfordshire, North talked about pits being closed when a Labour Government were in office, and he referred to the 1960s when I was not a Member. The unemployment rate in many areas of south Yorkshire was 3 per cent. at that time, but it is now almost 30 per cent. If the Government's figures were not fiddled, I should say that there would be justification for suggesting that the rate is over 33 per cent. Only 15 per cent. of school leavers in the metropolitan borough of Rotherham secured normal employment this year. Against that background, I have nothing but anger and considerable contempt for Conservatives from comfortable areas of Sussex, Surrey and Kent who get a good deal more than we do from local authority rate disbursement.
I am extremely angry when those from comfortable areas in the south of England say that we should close pits and increase our unemployment from 30 per cent. to 40 per cent. If we did that, we would destroy hope. There would be very few apprenticeships and few opportunities for 16-year-olds leaving school in my constituency. There would be little opportunity for them if the National Coal 745 Board reduced its manning levels to those that now prevail in the British Steel Corporation. Unemployment in parts of the Yorkshire coalfield is now higher than in parts of Northern Ireland.
I have never advocated violence and I never will. I have never sought to stir up trouble in society, for it has troubles enough. However, if the Minister pursues the line that Conservative Back Benchers are urging him to take and shuts the pits rapidly when there is no economic alternative, the strains imposed on our coalfields, which have burdens enough already, will be intolerable. I trust that the Minister will ensure that the NCB is financed sufficiently to maintain its present capacity and will ensure also that communities are sustained within the areas where our coalfields are to be found. It is clear that Conservative Members have not thought of those communities during the debate.
The Minister probably accepts, even if Conservative Back Benchers do not, that the NCB is facing considerable difficulties because of the appalling recession with which Britain has been afflicted. He knows as well as I do that the pace of extraction of oil and gas is now so swift that our reliance upon coal will grow rapidly in the 1990s. It would be extremely foolish of the Minister to accept the advice of Conservative Back Benchers that we reduce our coal industry's capacity to an extent which would imperil Britain's future before we reach the 21st century.
§ Mr. Neil Hamilton (Tatton)
I am sure that certain parts of debates on the coal industry are an acquired taste. I hope that I shall grow eventually upon some Opposition Members who took exception to my previous attempt to introduce what I thought was some light into the proceedings. As my previous speech was so well received, I thought that I might at least finish it off this evening. I promise not to extend it as I did previously, but that rather depends on the number of times that I am interrupted by Labour Members. I am always happy to respond to their interventions.
The hon. Member for Wentworth (Mr.Hardy) talked about Conservative Members who come from comfortable seats in Sussex and other areas. I do not come from a comfortable seat in Sussex. My constituency forms part of Cheshire and there are areas within it where there are considerable industrial problems. There is a good deal of chemical production in my constituency and ICI has had its problems. I understand the problems of industrial decline, especially where an industry seems unable to survive in the world market on its own merits. I speak in this debate with no sense of glee at the state in which the coal industry finds itself. I am sure that all my right hon. and hon. Friends have the well-being of the coal industry at heart as a long-term industry.
That is not to say that we take the view of many Labour Members that the coal industry can be preserved for ever at its present size and in its present state. Much depends upon the ability to sell coal at competitive prices. In future the industry may be able to sell more of its product than it can now. We are passing through a world recession, a fact that does not seem to have percolated through to the minds of Labour Members. They speak as though the industrial difficulties which the country faces, whether in steel or elsewhere, are isolated and that Britain is insulated from world events. That is not right and other countries face similar problems.
§ Mr. Hamilton
The hon. Member for Rother Valley (Mr.Barron)—the understudy of the hon. Member for Bolsover (Mr.Skinner)—talks about farmers. There are farmers in my constituency and I agree with the hon. Gentleman that the common agricultural policy is a scandal and that something must be done to reduce the waste that it brings about. I was one of 27 Conservative Members—I say this with some trepidation, as my hon. Friend the Member for Watford (Mr.Garel-Jones) is on the Government Front Bench—who did not vote with the Government against the Opposition's amendment to a motion to take note of several EC documents relating to the CAP. In this respect I am consistent. I oppose scandalous waste in agriculture and I oppose scandalous waste in the coal industry. I wish that the hon. Member for Rother Valley and his hon. Friends would be equally consistent.
Both Front Benches are in agreement that the Bill should be given a Third Reading. When both Front Benches are in agreement about anything, the alarm bells should start ringing and the taxpayer should be concerned about what will happen to his pocket. When we consider-the purposes behind the Bill and the history of it. which has been so well delineated by my hon. Friend the Member for Darlington (Mr. Fallon), who alas is no longer in his place—I am sure that he is enjoying a good dinner, as I look forward to doing in due course—are we prepared to agree to continue to pay huge subventions to the coal industry to maintain it in being at a size which is hopelessly uneconomic?
I freely admit that my personal practical experience does not lie in the coal industry. I have as much personal practical experience of it as the hon. Member for Merthyr Tydfil and Rhymney (Mr.Rowlands), who I understand has not worked in the industry. But that should not debar us from taking part in debates on the coal industry. I was surprised by the response to my previous speech on this subject. Opposition Members—the right hon. Member for Barnsley (Mr.Mason) was one of them—seemed to take objection to my quoting figures, sources and references from various documents. Having been brought up in the law, I have always thought that an argument ought to be supported by facts verified by independent sources, and reinforced by statistics. I do not therefore regard that as a demerit in my speech. The generalised assertion and emotional sentimentality in which some right hon. and hon. Gentlemen have indulged, on the other hand, will add nothing to our proceedings.
The hon. Member for Wentworth told us that Conservative Members wished to close down huge swathes of the industry. He talked about reducing the number of mine workers to 70,000, about hit lists of pits and so on. So far as I know, no one on these Benches wishes to see the industry reduced to such a level. However, the present state of the industry is not supportable. The costs that it imposes on the rest of British industry are at least as great as the social costs imposed on communities by the closure of uneconomic pits. Where uneconomic pits are closed, it is right and proper that there should be generous redundancy schemes — they are provided for in the Bill—and that the sums spent upon them should be increased. But we cannot oblige profitable industry to carry this millstone round its neck for ever.
747 There are no coal miners in my constituency, but there are 68,700 taxpayers. They are also electors, and they have a great interest in the proceedings of the House, especially when we pour hundreds of millions of pounds down the pits. The most important question has not been asked by many hon. Members: should we increase the borrowing powers of the Coal Board? Should we increase the subsidies, as is proposed in the Bill? I personally have grave doubts about the wisdom of doing so. There is a coal mountain in this country that is just as large as the butter mountain, the wine lake, the olive oil lake or any other stock of surplus products in the European Community. I take the same view of that surplus as of other surpluses.
The November edition of the Coal Board publication Coal News states:Present pithead stocks of £24 million cost more than £100 million to the Coal Board in interest payments alone. Every extra million tonnes costs another £7 million in stocking costs and interest charges on top of the £40 million it costs to produce the coal.The hon. Member for Midlothian (Mr. Eadie), who is unfortunately not here to hear my reply, maintains that interest payments do not count, but that argument is unsound.
§ Mr. Hamilton
I am sorry to speak while the hon. Gentleman is attempting to interrupt me. I hope that the House will bear with me.
§ Mr. Rowlands
The hon. Gentleman has referred to the absence of my hon. Friend the Member for Midlothian (Mr.Eadie). He has a nerve. He behaved in a gravely discourteous manner on Second Reading, when he made a speech and did not wait to listen to the reply to it. He is recognised throughout the House as being gravely discourteous by nature.
§ Mr. Hamilton
I am sorry if I offended the hon. Member for Merthyr Tydfil and Rhymney by responding to the request of the right hon. Member for Barnsley, Central who said that my speech was so disgraceful that I ought to withdraw from the precincts immediately.
§ Mr. Hamilton
I am always ready to learn a lesson.
Some of the industry's problems are caused by the mounting interest that it has to pay. Interest is a cost, just as manpower and capital equipment represent a cost. I am about to purchase a house in my constituency, the better to perform my functions in this House. If I ask the hon. Member for Midlothian to lend me the purchase price he will be gravely offended if I say, "You can write off that money now, because I do not intend to pay you either capital or interest." Taxpayers' money is being invested in the coal industry, and they expect to have a return on it, as they would if it were used in any other way. We could invest it in American Government stocks and receive a handsome return. I am not suggesting that we do that, but we could invest in other profitable ventures outside the coal industry.
Even during the present overtime ban, pithead stocks are increasing. There is a glut of coal in the world, and this country cannot insulate itself from that.
§ Mr. Geoffrey Lofthouse (Pontefract and Castle ford)
There is a coal glut and a coal mountain. It has been reported that stocks are increasing even during the overtime ban. Does the hon. Gentleman agree that it is a scandal to allow that fuel to stop at the pithead when thousands of old people will suffer from hypothermia, and that some of those stocks should be given to them?
§ Mr. Hamilton
I do not believe that the stocks should be given to them. It is equivalent to writing off investment in the way that I have mentioned before. It is a cost on the Budget, and we cannot take the view that there should be unlimited expenditure on the provision of social items, even though they may be desirable. Old people should not suffer from hypothermia in the winter, and the Government have provided grants to prevent that.
The problem of coal stocks is becoming worse. Production is 10 per cent. greater than consumption. The problem is becoming worse because investment is expanding the industry's productivity potential faster than it is being reduced by the closure of uneconomic pits. There will be 23 million tonnes of extra production by 1987. Since 1974 the closure rate has resulted in the loss of about 16 million tonnes a year, but new production has increased by the same amount. We have contributed to the problem since the publication of "Plan for Coal". The industry must sell more coal, and we are all in favour of that, whether it be in this country or abroad. To do that, coal must be competitively priced. The average cost of production of deep-mined coal in this country is about £38 per tonne whereas the world price of coal delivered in Europe is about £33 per tonne and falling.
A great deal has been said about subsidies for European coal producers. The hon. Member for Houghton and Washington (Mr.Boyes) asked about that in July. The answer in the Official Report shows that taking investment and operating subsidies together, the United Kingdom provides more financial support to its coal industry than any other country. We subsidise investment in the industry whereas elsewhere in the Community, foolishly I believe, they subsidise operating deficits.
In addition to increasing sales by better marketing, we can improve the demand for coal and, therefore, reduce the problem of uneconomic pits and provide more jobs for miners, by improving productivity. "Plan for Coal" envisaged that we should increase productivity by 4 per cent. per annum, but in 10 years we have only increased productivity by 4 per cent. overall. I do not blame that on the miners. I do not take the view that miners are lazy, far from it. My family has been involved in the industry for too long for me to take that view.
We need a sensible policy to close pits which are uncomfortable to work in, lose most money and hold back the industry's productivity record. We should expand in new mines such as Selby and other productive areas. There has been a great deal of emotion expressed about pit closures. It is nearly a year since the Select Committee on Energy produced its second report on pit closures, and it alluded to the various problems to which I have referred. The Committee reported:It is for the Board to manage the industry and plan for its future in the light of circumstances as they are in the real world —rather than as they were perceived in 1974 or as the Board…might wish them to be today.That self-evident truth is reality today. We must turn our minds to pit closures. The Committee also said: 749There can be no doubt that the very high costs of this marginal and, at least in the short term, surplus capacity unfavourably distorts the coal industry's financial position, and imposes a considerable drain upon public funds.It is in the industry's long-term interests that the worst loss-making pits be closed.
The worst 12 per cent. of output in terms of operating costs and losses costs us £275 million a year. In 1982–83, as my hon. Friend the Member for Bedfordshire, North (Mr.Skeet) said, the 20 most efficient pits produced coal at an average cost of £28 per tonne and the 20 least efficient produced coal at an avearge cost of £89 per tonne when the average selling price is £40 a tonne. For every tonne of coal produced in south Wales, £12 is lost. For every tonne of coal produced in Scotland, £4.50 is lost and for every tonne of coal produced in the north-east of England £3.50 is lost. That represents bloodletting in the industry. We cannot allow it to continue indefinitely. The industry will accumulate thousands of millions of pounds worth of debt. Until that debt of taxpayers' money is written off, the burden of interest payments will continue to mount—until the problem becomes utterly insoluble.
Although tonight I will not oppose the Bill's receiving a Third Reading, if, in two years' time there have not been significant improvements in the NCB's record—I hope that the new chairman will contribute to improvements and marketing—and if the board asks for yet more money to fund its deficits, there will be considerable opposition from many Conservative Members. If that is taken as a slight warning to the Government from a very junior Member, I am aware of my impertinence. Nevertheless, it is with great sincertity that I tell the Government on behalf of the taxpayers in my constituency that we cannot go on forever in this way, and we certainly will not.
§ Mr. Ray Ellis (Derbyshire, North-East)
The coal mining industry needs the Bill if it is to continue to operate. There are apparently some people who, in spite of the facts that have been presented, continue to insist on thinking that the industry is the recipient of taxpayers' largesse. That is just not true and the record must be put straight time and again.
Coal mines and coal miners have always been misused. When I started about 45 years ago, before the second world war, the pits had been run down during the capitalist trade cycle depression in the 1930s. The best coal was taken first, the poorer areas being disregarded so that it was more difficult to develop them later. Money that should have been ploughed into development was not forthcoming, yet everyone knew that the war was coming and that the capacity would be needed. When the war came the industry was much worse off. Not only were fewer miners called upon to produce more coal, they were short of the steel, iron and wood that was needed to support, maintain and develop the pits. By the end of the war, the industry was more or less flat on its back.
The inevitable fuel crisis that followed the war showed clearly that the years of neglect and incompetence on the part of mine owners were the reason for nationalisation. It was not a measure of Socialism. Indeed, after the 1945 general election, Winston Churchill is reputed to have said:The coal owners have for long been a millstone round the necks of the Conservative party, and now they have sunk us.In 1946, in the face of insatiable world demand, the NCB was forbidden to take the easy profits that were there 750 to be taken. Conservative Members should recognise that and get it through their skulls. The NCB was instructed. instead of taking the profits that were readily available in an insatiable international market, to work on a break-even basis.
§ Mr. Peter Lilley (St. Albans)
Will the hon. Gentleman explain to us whether that is why we had a coal shortage at the time?
§ Mr. Ellis
The hon. Member for Bedfordshire, North (Mr. Skeet) talked about simple economics. Perhaps the hon. Member for St. Albans (Mr. Lilley) should also have a lesson in simple supply, demand and price economics. If one intervenes in a capitalist market and makes imperfect competition by artificially reducing the price, it is inevitable that one creates insatiable demand. That is why the price mechanism is supposed to regulate supply and demand. Perhaps that message will get across one of these days. Perhaps my hon. Friend the Member for Don Valley (Mr. Redmond) will explain it to the hon. Gentleman over a cup of tea.
In the first 15 years of nationalisation, because the NCB could not charge realistic prices and was instructed to sell coal artificially cheaply to reconstruct British private enterprise, which had been deprived during the war, it has been reliably estimated, and not contradicted, that British coal was underpriced to the tune of £5,000 million. That calculation was made in 1960. Imagine what that amount of money would be in today's terms.
When the next capitalist depression came along, we had 20 million tonnes of coal in stock, fuel prices became depressed and — surprise, surprise — the rules were changed overnight. When the free market price was high, profits were forbidden. When it was low, we were told to behave like any other business, and henceforth any capital investment had to be provided through borrowing at extortionate interest rates.
The £5,000 million at 1960 prices that the NCB could have had in the bank, had it been allowed to behave like a business when prices were buoyant, would have enabled the industry to invest out of revenue. I am sure that Conservative Members will agree that that is good capitalist practice. Instead, the burden of borrowing requirements has put the industry firmly and completely into the hands of those usurers in the Treasury. Once that happens, there is no escape. The debt burden, which was totally unnecessary, has become so huge that the industry cannot afford to make the modest advances that will be needed for the civilised welfare of the work force in 1983. Conservative Members should dwell upon this fact. It is hard to believe that all the clean water that goes underground in 1983 has to be humped on the miners' backs. There is no civilised sanitation, no water closets and no means by which they can wash hands underground. The miners must eat their sandwiches with hands which become filthy. Yet in 1983, when we must spend millions of pounds pumping mucky water up, we cannot spend a few million pounds pumping clean water down.
A miner must work and walk on all fours, but that is no justification for him having to tolerate insanitary conditions which would be a disgrace to a 16th century cattle shed. We are told that conditions must be as they are because the NCB cannot afford to pay a few bob due to the interest burden that it has been pushed into by the recurrence of the capitalist trade cycle. No sooner is a pit 751 booming, than it is back in slump again because of capitalism and its mentors, who are a series of antagonistic Conservative Governments. We must tackle the roots of the problem, if we are to solve it. That means getting rid of Conservative Governments and abolishing the capitalist system.
§ Mr. James Wallace (Orkney and Shetland)
I shall not follow the hon. Member for Derbyshire, North-East (Mr. Ellis) down the path of the history of the coal industry, on which he is more expert than I shall ever be. Like the hon. Member for Tatton (Mr. Hamilton) I do not have a coal mine in my constituency. Nevertheless, that is where the similarity ends. I do not agree with him that the Bill will put taxpayers' money down the drain, or down the pit, as he described it, and that it would give the taxpayer no return. At the conclusion of his contribution he said that he spoke with sincerity. That is surprising, because he had already said that he would support the Bill. If he is sincere, and he believes that taxpayers' money will go down the drain, his duty as a legislator is to have the courage of his convictions and to oppose the Bill.
However, that is not the view of my right hon. and hon. Friends in the Liberal and Social Democratic parties. Although the Bill does not go as far as we would like it to do, we support it because we realise that it is essential for the coal industry to get the level of support proposed in it.
When the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) opened the debate he mentioned the difficulties facing the coal industry. Although those of us who sat in Committee did not always agree with the Under-Secretary's replies, we recognised his sensitivity to many of the problems that were raised during our debates. It contrasted with the rather jaunty way in which the Secretary of State for Energy opened the Second Reading debate, which, had one not been aware of the difficulties in the coal industry, might have led one to believe that it was in a buoyant state.
The coal industry is in difficulties because of the lack of demand caused by the recession and by the increasing replacement of coal-generated electricity with nuclear power. Sizewell has already been mentioned and I shall not discuss nuclear safety further. If nuclear power generation is cheaper than electricity generated through coal-fired power stations, it is only marginally so because at present we can buy uranium very cheaply. It is only about 10 years since the western economies had a collective cardiac arrest when oil prices quadrupled. We should be shortsighted if we depended on a fuel source that is cheap and appears to be secure, because that may not always be the case.
There must always be a major role for coal in meeting Britain's energy needs. In many of the debates in Committee and on Second Reading it was said that we have coal reserves for 300 years, but our coal will last for 300 years only if we have a sensible view on pit closures. As the hon. Member for Midlothian (Mr. Eadie) said, once a pit is closed it is difficult, and sometimes impossible, to reopen it. The pit is liable to flood, and unacceptably dangerous levels of gas build-up. If pits are closed for 752 purely economic reasons today—pits that may well be economically viable in future—we might bring forward the date when our coal reserves run out.
The hon. Member for Tatton said that it would be in the long-term interest of the industry to close 20 pits. But which 20 pits should we close? The 20 least viable pits this year are not necessarily the 20 least viable pits of last year, or those of next year. The long-term interest of the country would be served better if we proceeded with a policy of pit closures that will ensure that the maximum extractable reserves are made available to future generations.
Clause 2(3) relates to the withdrawal of grants to promote the sale of coal to the electricity boards and the hon. Member for Midlothian mentioned the crisis in Scotland. In Committee the Under-Secretary of State assured us that that grant would be subsumed in the overall deficit grant, and that negotiations were taking place between the National Coal Board and the South of Scotland Electricity Board about longer-term contracts for the take-up of coal from Scottish mines. The impression that I gained from the Minister's reply was that the present downturn was only temporary and was principally due to the use of gas condensates at Peterhead. Perhaps the Minister will comment tonight on the fears expressed in many quarters in Scotland that when Mossmorran comes on stream, the coal industry will not necessarily make up the ground that it lost because of Peterhead.
The Committee paid considerable attention to pit closures. It would appear from clauses 3 and 4, which deal with grants in connection with pit closures and payments to redundant workers, that some pits must close. It is generally accepted in the House that when pits become exhausted, or when they reach a stage where safety standards are no longer good enough, they must be closed. However, it is regrettable that the atmosphere pervading the coal industry at present is one of fear that a substantial number of pits must be closed. That fear could be dispelled by the Minister if the Government adopted a more encouraging and positive tone.
Although it is accepted that some pits must close, the announcements will not be met with so much fear if they go hand in hand with reassurances from the Government, backed by sufficient financial assistance, that old capacity will be replaced by new capacity, that there will be a programme of investment, and that new technology will be introduced to make mining safer and to make existing pits more efficient.
As this Bill goes some way towards that aim, I welcome it. However, it does not go far enough. Not only should we provide financial support to the coal industry, but we could provide even more support if there were a general turnround in the Government's economic policies, which have led to a great reduction in the demand for coal, and which have led the coal industry even deeper into financial troubles. Only with such a turnround in policy, and only when Britain's economy is growing again and there is more demand for coal, will the coal industry have a more assured future.
§ Mr. Kevin Barron (Rother Valley)
Although, like the hon. Member for Orkney and Shetland (Mr. Wallace), I support the Bill, I do not think that it goes far enough to help the coal industry keep its head above water or to bring on stream new capacity for future use.
753 Investment in new capacity over the last 10 years has not been sufficient. In 1974, "Plan for Coal" said that about £1,400 million was needed for investment in the coal industry. Three years later, in 1977, when "Plan for Coal" was updated, it was estimated that £3,150 million would be needed for that investment, because it was realised that investment costs would be higher than expected. At the present time, at 1977 prices, the figure should be in the region of £6,500 million.
Investment in the coal industry since 1979 shows that such sums have not been obtained. The only mine in which the Government said that they would invest money was the new Asfordby mine in the vale of Belvoir. Three years ago, the NCB talked about three pits in the vale of Belvoir which would employ 7,400 men, but in the last fortnight the chairman of the NCB gave the go-ahead for investment in only one pit employing just over 2,000 men. That demonstrates the lack of investment in the industry at present. Therefore, the borrowing powers in clause 1 ought to be increased.
At the time of the revision of "Plan for Coal", it was said that expenditure ought to be about £400 million a year at March 1976 prices. At January 1983 prices, that expenditure would now be about £883 million a year.
§ Mr. Barron
I shall comment on that later.
Although at January 1983 prices expenditure should be about £883 million, NCB expenditure was only £740 million in 1982–83. That again falls far short of the figures in the updated "Plan for Coal" in 1977, and even the increased borrowing capacity envisaged in the Bill will not enable the NCB to achieve the investment targets to which I have referred.
Any borrowing under clause 1 will inevitably mean higher interest repayments. Everyone seems to think that money pumped into the coal industry never comes back, but I remind the House that in 1982–83 the NCB repaid £366 million to its borrowers. About 95 per cent. of all NCB borrowing comes from the Government. Therefore, money on the scale that I have described will eventually be returned to the public purse.
My hon. Friend the Member for Midlothian (Mr.Eadie) talked of interest amounting to £2 million per pit or £35 per coal miner. Each Monday morning the miner must earn that £35 before his pit can become profitable.
Clause 2 takes away the Secretary of State's power to pay certain grants to the coking industry and to the CEGB. We can therefore expect deficit grants on a larger scale than at present. The subsidies received by western European countries are far higher than those in Britain. Deep-mined coal in Britain is subsidised by £4.20 per tonne. In Belgium the figure is £98.56 per tonne, in France £68.9, and in Germany £24.87 per tonne. If we had half those massive subsidies, our deep-mined coal, which is produced very cheaply, could be given away. Of course, no one sees the logic of that. We are selling the British coal industry short by limiting the grants that should be given to the coal industry.
Perhaps clauses 3 and 4 are the most important. We should consider the cost to public funds of putting an end 754 to the British coal mining industry. The Monopolies and Mergers Commission report took a narrow look at our mining industry and considered the profitability of pits and so on. It did not look at the broader issues of the national interest, or consider having a national energy plan. and it did not compare the financial structure of the industry with that in other western European countries.
The great weakness of the British coal industry lies in the fact that it does not receive the massive subsidies of its competitors in western Europe. The Monopolies and Mergers Commission report suggested closing between 10 and 12 per cent. of what are called "uneconomic pits". The NCB submitted evidence to the Monopolies and Mergers Commission suggesting that the figure should be about 95 pits, or between 70,000 and 100,000 jobs in eight or 10 years' time. It has been said that no one is talking about massive job losses in the industry, but in 1981–82, 12,000 jobs were lost and in 1982–83, 10,200 jobs were lost. Thus, more than 22,000 jobs have been lost in two years, so that just does not make sense. The Government should come clean. If they have been in collusion with the NCB through the Monopolies and Mergers Commission report, they should tell the House exactly how many jobs they envisage will be lost to make the industry economic.
Of course we know the cost of keeping uneconomic pits open. In the National Coal Board's submission to the Monopolies and Mergers Commission, it said that in 1981–82 it would cost the British taxpayer £221 million in one year to keep open the uneconomic pits. Thus the cost of the closure programme envisaged in that evidence would be about £2.2 billion over 10 years.
The cost of job losses in the industry has been considered before. As the hon. Member for Tatton (Mr. Hamilton) mentioned, the NUM submitted evidence to the Select Committee on Energy about the cost of those job losses. On 8 June 1982 a written answer from the Minister of State, Department of Employment, said:The average cost to public funds of each unemployed mineworker is now estimated to be £7,188 per worker during the first year of unemployment, and £ 6,326 during the second year of unemployment. The estimates are based on the assumption that each mineworker remains unemployed for the whole of the two-year period."—[Official Report, 8 June 1982; Vol. 2.5, c. 41.]The Monopolies and Mergers Commission report backs up the last sentence. It recognises that the mining areas are experiencing high unemployment. Indeed, my hon. Friend the Member for Wentworth (Mr. Hardy) mentioned the high unemployment in the Rotherham metropolitan area where my constituency is situated. Unemployment there is astronomical and higher that it has been since the war.
According to the NUM paper the figures took into account the calculated cost to public funds—the direct cost to the Government of making a mineworker redundant, from the loss of social security contributions by employer and employee, the loss of income tax, the loss of indirect tax revenue from consumption of goods and the payment of welfare and unemployment benefits, after adjusting for indirect taxes paid out of these benefits…These calculations did not include the cost of redundancy or transfer payments but the Union showed that in addition there would be further costs arising from the knock-on effect of redundancies in supplying industries.That is the case. There will be a knock-on effect. The National Coal Board calculation, based upon 70,000 jobs, is that it will cost not, as the Minister said in Committee, 755 between £30,000 and £35,000 but nearer £64,000, taking into account the loss to the Exchequer of the items that I have just mentioned.
We must appreciate what the rundown of the British coal industry costs public funds and the taxpayer. According to the NUM's calculations it will cost over £4 billion in 10 years compared with the NCB calculation that it will cost £2.2 billion to keep the pits open.
If Conservative Members want to look after the taxpayer and do not want to waste public money, they should go back to the Department of Energy and do the calculation again. They will find that they will waste more taxpayers' money than they will save if they increase the number of closures. The public interest will not be served if they do that.
In the last 20 years the coal mining industry has been run down by agreement and after consultation with the unions. That is happening now. I was concerned at what the director of the north-east coalfield said at the weekend. He said that when the Herrington colliery is closed in July next year some of the 700 employees there will not be offered alternative work. That is a great departure from what has happened in the last 20 years.
I am a Yorkshire miner who comes from a Durham miner's family. My father came from Yorkshire in the 1950s. Miners were always worried when a pit closed. I hope that the Minister can tell the House whether the practice of the last 20 years is at an end and whether mandatory redundancies are a fact.
In Committee the Minister described two main policy objectives. They were that the National Coal Board had to earn a satisfactory return on assets after payment for social grant and that it was up to the National Coal Board to maximise its long-term profitabilty by securing those profitable sales on a continuing basis in competition with other fuels.
If those are the Government and NCB criteria, they will rip up the "Plan for Coal" agreed by Government and the unions and the NCB in 1974. The Government said that the total deep-mined output in 1985 would be approximately 120 million tonnes. In 1982–83, it was 105 million tonnes—a shortfall of 15 million tonnes. It is obvious that we will not make up that 15 million tonnes in two years. It is not good enough for Conservative Members to say that the National Coal Board has not been running the coal industry down since 1974 by 3 million to 4 million tonnes a year because we are not meeting the overall targets that were set. Why should we get the blame for the loss of 8 million tonnes a year from the coking market after Ian MacGregor took over as chairman of the British Steel Corporation? Conservative Members appear to be suggesting that, because of the present high stocks of coal in this country, miners should take the blame for the loss of the coking market for steel. Conservative Members appear to suggest that the efficiency of members of the NUM is to blame. That is not on.
Conservative members are looking at the basis of the NCB since 1946 in a different light altogeher. The Coal Industry Nationalisation Act 1946 laid down specific guidelines for the National Coal Board to follow. It charged the NCB with making availablesupplies of coal…best calculated to further the public interest in all respectswith securing 756the safety, health and welfare of persons in their employmentand with utilisingthe benefit of the practical knowledge and experience of such persons in the organisation and conduct of the operations on which they are employed".Conservative Members are now saying that the 1946 Act should be changed. If that is the case and if the coal board is not to be looked upon in the way set out in 1946, it would be more honest for the Government to bring legislation before the House to change it, rather than by starving the coal board of funds and attacking it.
Conservative Members often say that there is a good deal of distrust in the industry. I should like to conclude by reading a quotation that has been brought to my attention by what were once called the "moles of Whitehall" and who are now accepted as the social conscience of Whitehall. The quotation is a leak from a Cabinet Committee on economic strategy of Tuesday 23 October 1979. I do not know whether the Under-Secretary of State for Energy was present at that meeting. The article is marked "Confidential" and the Prime Minister was present at the meeting. The article says:But a nuclear programme would have the advantage of removing a substantial portion of electricity production from the dangers of disruption by industrial action by coal miners or transport workers.Is it not a coincidence that the Government came to power early in 1979 and by October were presiding over meetings to take away the power of the National Union of Mineworkers? If the industry distrusts the Government, it has been given every cause. I hope that, after we pass the Bill, it will not be long before we come to the House again to get the help that the coal industry needs to meet the energy requirements of the nation.
§ Mr. Michael Welsh (Doncaster, North)
The Coal Industry Bill is important to my constituency and to the nation. Several right hon. and hon. Members have suggested that the £6 billion is a piece of window-dressing borrowed from the Coal Board to help it produce more efficiently in the coming years. That is correct. The most vital issue is the great lack of investment in the industry in previous years. Investment in the 1960s went only to coal face production. Shafts and pit bottoms did not receive investment. Obviously, a great deal of investment is necessary to get the coal up the shaft. The money is on loan to the NCB because of the inefficiencies of Governments over many years.
It is vital to remember that investment improves safety for those working underground. Investment in machinery on the coal face has, thank God, meant fewer fatal accidents. If such investment saves lives, that is good. My father was killed in a pit in 1934, so I fully understand why investment is so important to improve safety conditions. Investment is needed both underground and at the pit top.
I am sure that the Minister is aware of deferred payments which are important to the industry. For example, for such pits as the vale of Belvoir, the industry cannot borrow money now and pay it back from current coal production because that pit will not produce any coal for five, six, seven or more years. Will the Minister favourably consider deferred payments for the NCB so that it can pay back the money as the coal is spewed out of the vale of Belvoir at the expected rate?
Thorne colliery in my constituency is currently closed, even though it has good seams. I do not expect it to be 757 opened tomorrow, but I expect it to be opened some time in the future —I hope sooner rather than later. Millions of pounds of investment will be required to develop the colliery, which has 10 ft thick seams of coal of the best quality in Britain, if not in Europe. Deferred payments could be used there to ease the burden on the NCB.
The Bill obviously envisages the closure of some pits because it makes allowances for redundancies. I hope that the Government realise that, in effect, there is only one shaft in Britain—that is, all the shafts put together. If a shaft is closed, that much less coal can be produced overall because there is a limit to shaft capacity. If, by some stroke of luck, the economy should turn, it would be difficult to produce the coal required for industry.
Schumacher, the Rhodes scholar and great economist, said in the 1960s that by the end of this century Britain would need more than 200 million tonnes of coal because other fuels would be running out. Yet coal at the end of the century will not be coal as we know it—it will be coal oil or gas. Whatever it is, it will be needed to keep the economy moving.
When decisions are taken about pit closures we must remember not only the social costs involved, but that the closed capacity will never come to the surface again. In addition, because each tonne carries a certain unit cost —such as paying for the NCB headquarters in London —every time a pit is closed the unit costs on other collieries will rise because they have to carry a larger share of that burden. The burden on the industry becomes greater because the money must be paid back by fewer units and therefore unit costs increase.
The Government of the day, on behalf of the nation, will the means for the nationalised industries to have money to invest. As they will the means, so they will the way also, and it never ceases to amuse me when people say, "We are giving the industry millions of pounds," because the money is being borrowed and must be paid back. I recall a letter that was sent by the Chancellor to the EC when the Conservatives came to office in 1979. That letter stopped the NCB from borrowing from the EC. That is why the £6 billion that we are discussing is necessary — because the NCB cannot go anywhere except to the Government to borrow.
The Government will not allow the board to borrow on the open market. I am not suggesting that that should be the case, but if Conservative Members argue that the answer to so many of our problems is to be found on the open market, they should accept that the industry could borrow money more cheaply that way, and if it were allowed to go to the EC, it could borrow it even more cheaply. In other words, we are discussing this measure because the industry has no other choice; it is the way in which the NCB obtains money to invest to obtain coal for the nation. While that is the situation, we shall continue to need measures of this sort. In the way that, say, ICI borrows from industry, merchant banks and others, so, whether it likes it or not, the coal industry must borrow from the state.
I shall be brief because other hon. Members wish to speak and we do not want to keep the House all night discussing this subject, although it would not worry me, because of the importance of it, if we debated these issues until 10 o'clock tomorrow morning.
When the upturn in the economy comes, the nation will need all the coal that it can get. If pits are closed and production is cut to a minimum, we shall have to pay gold 758 for coal from other countries. Sterling is a convertible currency and we shall have to pay in gold for that coal. If the present Government have no plans to secure an upturn in the economy, the Labour party has plans for the economy to improve, and then we shall need all the energy available to us. If, as I say, we create a situation in which we do not have enough energy, particularly coal, for that upturn, we shall have to buy coal from abroad and our balance of payments problems will lead us into another slump.
It is vital to ensure that we have enough coal to supply the energy we need. To that end, we need measures of this kind so that the NCB can invest in the industry. We also need deferred payments so that we can go ahead with new developments and produce the coal that the nation needs. Then the industry will be in a position to pay back to the nation the money that it borrows to invest so as to obtain the coal that the nation needs.
§ Mr. Geoffrey Lofthouse (Pontefract and Castleford)
I do not want to cover ground that has already been covered. I was privileged to be a member of the Standing Committee and to have an opportunity to speak on Second Reading. Many of the points that I would have raised have been mentioned, so I shall refer the House to the social costs involved in what we are debating, for throughout our discussion of the Bill that aspect has been neglected.
Many, especially new, Conservative Members, lack experience of industry, even if they can understand a balance sheet and adduce a persuasive argument about the economics of the issue. There is more to this problem than economics. We must agree on short-term prospects. Apparently, there is an overcapacity in coal production. About 50 million or 60 million tonnes of coal is piling up. The Government have taken panic measures because of market fluctuations. They are not attempting to look at—
§ It being Ten o'clock, the debate stood adjourned.