COAL PRICES (SCOTLAND) (Hansard, 4 June 1962)

§ Mr. George Lawson (Motherwell)
I think it best to open this Adjournment debate by referring to a statement made by the Minister of Power on 7th May, which was reported in the OFFICIAL REPORT for that day, at column 10. The right hon. Gentleman said: The Chairman of the Coal Board was well aware of the particular difficulties which selective increase in places like Scotland would impose, but he still felt that it was right—and I agree that it was right—that they should take place."—[OFFICIAL REPORT, 7th May, 1962; Vol. 659, c. 10.] That was a very definite statement. I think that the Minister will agree that that statement in one form or another has been made by him on a number of occasions. I should be surprised if he withdrew from that statement. It suggests that he and Lord Robens have given this question of the effect of selective coal prices in Scotland very careful consideration and that on the basis of very weighty considerations they reached the conclusions to which they came. It must be borne in mind that price increases are being imposed on certain parts of the country—on three divisions—increases which are calculated to work out at something like £25 million this year taking household coal and industrial coal prices together. Those increases are to be imposed, not on the whole country, but on three districts. The lion's share of the price increases will be borne by Scotland. It is notable that they will fall heavily on pants of Great Britain where it would be agreed that the economic or industrial difficulties are greatest. The policy which is being followed—we are told, after very careful consideration—is one which imposes added difficulties and burdens of fuel cost on those parts of the country operating under the biggest handicap. I repeat that this applies notably to Scotland. Scotland is carrying the lion's share of this £25 million extra money to be raised this year by the coal industry.
The Minister was asked by a number of hon. Members, particularly some on this side of the House, during Question Time on 7th May about the effects of this proposal. The answer which he gave to 165 my hon. Friend the Member for Kilmarnock (Mr. Ross) and my hon. Friend the Member for Dunbartonshire, West (Mr. Steele) brought out the fact that because of these increases the electricity industry in Scotland will be paying something like £1½million more than it is paying now and the gas industry in Scotland will be paying something like £1million more. What is true of those industries is true to a lesser degree in other industries—to a lesser degree because those other industries are smaller. My hon. Friend the Member for Edinburgh, East (Mr. Willis) assured me that one paper mill in his constituency will require to spend £12,500 more on fuel because of these selective price increases.
This is true of the whole of Scotland. It is an added cost burden spread over the whole country which must be a handicap making it so much more difficult for the efforts which Scottish industrialists have been making, assisted by the Government and by the Minister to bring Scotland industrially into line with other parts of Great Britain. We are all aware that the rate of industrial growth in Scotland has been only half as great as the average over Great Britain and much less than half as great as the rate of growth in London and the Midland areas. Evidence of that is to be found in many forms. It will be familiar to hon. Members and I will not waste time by repeating it.
I reiterate that the selective charging of these additional prices, notably in Scotland, but also in Wales and the North-West, will have an adverse effect on industry as a whole. But I am particularly concerned with the effect on the steel industry and the consequent effect on the rest of our economy. Recently Sir Andrew McCance, the Chairman of Colvilles—which is not entirely the whole Scottish industry but is very largely so—said that this selective price increase would add about 15s. a ton to the cost of finished steel. I have checked this with the Iron and, Steel Board and have been assured that the increase in the cost could certainly be 11s. a ton and might be more, so that it would appear that the increase in the price of a ton of finished steel would be somewhere between 11s. and 15s.
It may be that the Minister will say that 11s. to 15s. on the price of a ton 166 of finished steel is not much. I understand that the price is about £55 or £56 a ton. But what is important to keep in mind is that because of the pricing system which operates in the country, which the right hon. Gentleman knows very well, the maximum price for the country is set by the Iron and Steel Board. Therefore, Colvilles would probably not be permitted to pass on the increase to the consumer or the buyer of steel.
It may be argued that ways may be found to get round this, and that in certain circumstances Colvilles might be permitted to pass it on. But if that were permitted, it would certainly make Colvilles uncompetitive in relation to the rest of the steel producers and it must be borne in mind that Colvilles, and Scottish steel generally, is carrying this increase and not the other steelmakers. This means that in this very competitive world into which we are moving Colvilles will be placed at a disadvantage compared with other steelmakers in Great Britain.
We must bear in mind—the Minister knows it very well—how much Scotland depends on steel development. There is the strip mill plant which is being erected and will soon be in operation at Ravenscraig in my constituency and there are other forms of steel production, because Scotland has a diversified capacity for producing different types of steel. The hopes or prospects we may have of getting out of the rut in which this country has been for so long are centred on steel production. I do not think that my hon. Friends would disagree with that. Steel may be regarded as the centre-piece of the hopes for Scotland's redevelopment both at present and in the future. Yet a policy is being pursued that looks as if it were putting Scotland, or the steel industry, in a position of quite considerable disadvantage compared with the steel industry in other parts of the country.
Again, to come back to the point that it might be said by the Minister that 15s. is not so very much on a ton of steel costing £55 or £56, if the 15s. cannot be passed on—and I take it that it cannot and will not be—this must be a reduction in the profitability of Colvilles. I understand from the statement of the chairman of Colvilles that 167 it means at present something like £900,000 per annum. I am sure that the Minister will agree that this is a very substantial slice to be taken out of the profitability of a concern such as Colvilles, and a very substantial slice to come out of the Scottish steel industry as a whole. It means that their capacity to keep the industry in line with developments elsewhere will be very greatly reduced.
Therefore, we see here a threat to the steel industry of Scotland, and because of this threat I suggest that we must see it as a threat to the entire prospects of Scottish industry recovering, putting itself on a par with those south of the Border and in a position in which, should we go into the Common Market, it could have reasonable prospects of competing effectively with the steelmakers and industries of other countries.
The Minister might say that he knows all this. In fact, he is almost obliged to say so, because he has already said that he has taken this into account. Yet he might say that, despite knowing all this, he had decided, or the Chairman of the National Coal Board had decided and the Minister had supported him in the decision, that Scotland should pay substantially more for its coal. If this is so, then the right hon. Gentleman has a duty to satisfy the people and the industrialists of Scotland that the responsibility for the difficulties in which the coal industry finds itself, and particularly the Scottish section of the industry, can properly be placed at the door of the Scottish people and Scottish industry as a whole, and that responsibility should not be placed elsewhere.
I rather think that the right hon. Gentleman will have some difficulty in proving this. In fact, I suggest, that when we look at the coal industry of Britain as a whole, we find that until the last two or three years it has been operating on the basis of policies which could hardly be described as emanating from it alone. We are bound to conclude that a very large part of the responsibility for the difficulties in which the coal industry as a whole now finds itself, and particularly the difficulties in the Scottish part of the industry, stems from the policies imposed upon that industry by the Government, or the policies 168 which the Government have encouraged that industry to follow, in the first place, with perhaps, something added in terms of faults lying within the industry itself. Let me look at those two points.
The industry in Scotland—I am confining myself to the Scottish coal fields in this respect—until quite recently was operating on the basis of a production target of 30 million tons a year. Even quite recently, in the 1956 plan, this was laid down, and Scotland was supposed to reach a target of 30 million tons by 1965. Scotland last year produced about 17¼ million tons, and therefore we see that the target set for the Scottish coal field was hopelessly unreal. I doubt if anyone will challenge that statement. Nevertheless the Scottish coal field was compelled to make efforts to reach that target.
Until recently the problem was one of obtaining coal almost irrespective of price. In almost any kind of report on the coal industry it was stated that the nation could not obtain nearly enough coal. As a result we had this drive to obtain more. The coal industry in Scotland was aiming at a target to be attained almost irrespective of cost, and when this was the general policy to which the industry was operating one could hardly expect it to have done other than what it has done, namely lose a great deal of money.
Pits were kept open which long since should have been seen to be unworkable. These were high-cost pits. Expensive equipment was installed, in many cases in conditions which gave the equipment no chance of working at a profit. Major developments were undertaken which since have been seen to have been grievously mistaken. The two outstanding examples are known to everyone—the Glenochil and Rothes mines. My hon. Friend the Member for Hamilton (Mr. T. Fraser) and two others of my hon. Friends visited the Coal Board a year or two ago about the closing down of the Douglas West pit on which huge sums had been spent.
The men employed there understood that the pit was to go on for many years but it was closed down. The case made to my hon. Friends was that when the plans were carried out it was thought that the coal would be needed, but it was no longer needed and therefore the 169 pit would be closed because it was better not to throw good money after bad. This has been characteristic of the Scottish industry. In the circumstances one could not but expect huge losses to be made and that these losses should have entered into the present composition of the high cost of running Scottish industry.
It will be asked who was responsible for all this and I say that the Government must have kept a very large part of the responsibility. The Minister may tell me that this effort to win coal was a policy for the whole of the British industry and that other coal fields in Britain did not lose money as the Scottish coal fields did. If the Minister tells me that, as I think he may, he must also tell us why Scotland lost so much more than did other parts of the country. What is the reason? Is there something permanently wrong in Scotland?
I make two suggestions. The first is that in thinking of Scotland we must take into account the fact that job opportunity there has been so much less than it has been in most parts of the country. When pits were closed and men had to find other work they were much less likely to find jobs outside the industry than in other pits, and they were sent to pits which could not profitably use them. Before they were sent there the pits might have been working economically but when they were drafted there the pits ceased to be an economic proposition. The Coal Board was carrying out an excellent social duty in ensuring that the men continued at work. but it should not follow that Scottish industry should suffer from that kind of policy as it seems to have suffered.
The other explanation must be that there is something different in the running of the industry itself if there are faults to be found in Scotland which are not found elsewhere. It would seem to me that the explanation or part of the explanation must be in management that has not been as competent as management elsewhere. I say this with moderation. But there is widespread feeling in Scotland that the management running the Scottish industry has not been as competent as it might have been. There might also be something to be said on the other side. Perhaps the leadership of the men has not been as good as it 170 might have been, because labour relations have been bad. I would dispute any contention that the ordinary Scottish miner is not as good as the miner elsewhere, but it may be that there were difficulties stemming from differences of leadership.
But on these two counts, even if management was not as competent as elsewhere and if leaders sometimes did not reach agreement as happily as they might have done, I repeat that one cannot place this at the door of Scottish industry as a whole. It is unjust that Scottish industry should be made to pay for faults or failings that are properly the faults or failings of the management of the coal industry, whether nationally or locally in Scotland.
In those circumstances, I submit that Scottish industry is not responsible for the fact that these huge losses have occurred in Scotland. The responsibility must lie with the Government and with the management of the industry itself. If the right hon. Gentleman is genuinely concerned to ensure that Scottish industry shall be put a little before the financial considerations of the National Coal Board, he ought to reverse this policy and see that Scotland gets its coal at no higher price than is paid elsewhere.

§ The Minister of Power (Mr. Richard Wood)
I am glad that the hon. Member for Motherwell (Mr. Lawson) has given me the opportunity to say a few words about this very important subject.
I should first like to correct two misapprehensions under which I think he laboured. First, the £25 million extra which all the industrial and domestic coal price increases are going to raise covers the whole of Great Britain and not Scotland only.

§ Mr. Lawson
In three areas, it is not?

§ Mr. Wood
No, this is the total increase on industrial and house coals this year.

§ Mr. E G. Willis (Edinburgh, East)
How much in Scotland?

§ Mr. Wood
I do not know what proportion of that is for Scotland, but it is certainly a small proportion of the total increase on industrial and house coals throughout the country. The 171 planned output in the Scottish Division is not 30 million tons in the last two or three years, because in the Revised Plan for Coal which was published in October, 1959, the target was there stated as 18 million to 20 million tons. So for the last 2½ years it has been at that level.

§ Mr. Lawson
I referred to 1956.

§ Mr. Wood
Yes, it was very much higher before, but the target here has been reasonably realistic.
At the end of 1961 the Coal Board put forward these proposals for increased prices of industrial coal in Scotland. As I have said on other occasions, and as the hon. Gentleman was kind enough to remind the House tonight, I was well aware, and so was Lord Robens, that the increases would cause considerable difficulties. I think it is important not to exaggerate, because the proportionate increase in total industrial costs this increase caused for manufacturing industry in Scotland as a whole was only one half of 1 per cent. Admittedly for particular industries—I think the hon. Member for Edinburgh, East (Mr. Willis) was mentioned as being interested in the paper industry—that increase would naturally be greater than ½per cent. I think it was 3 or 4 per cent. But in the steel industry which the hon. Gentleman particularly mentioned—and I agree about its importance to Scotland, an importance which the Government recognised when they encouraged the Colvilles strip mill—the increase, both direct and indirect, taken together, is about 1½ per cent, or 2 per cent.
The present delivered prices for coking coal are not out of line with the prices being charged in some other areas. Nonetheless, I am ready to admit that these price increases were a serious matter for the industries concerned, and, as I have said on other occasions, I did not ignore them when I considered the Board's proposals.
The hon. Gentleman is well aware of the state of the Board's finances, and I conceive it to be my duty to do what I can to help the Board to improve them. Last November I introduced legislation 172 to help to finance the Board's deficit. As the House knows, at the end of 1961 the accumulated deficit was £93 million, and the Scottish Division's deficit was £128 million. Frankly, I feel it unprofitable to try to apportion blame and to look at the cause of that loss. What I think is essential in the months and years ahead is to redress this position whereby the total Scottish deficit is so much higher than the total national deficit of the National Coal Board. The Board has a statutory duty to pay its way, and the gap can be bridged only by increasing revenue or reducing costs.
The Board did what it could to reduce costs, but it realised that it must increase its revenue. The Chairman had two possible courses open to him. First, the easy course of making the same increases all over the country, which has the superficial appearance of justice and would certainly have caused him and myself less trouble. He chose the second course of making selective increases, about which the hon. Gentleman has been complaining. I am convinced that he was right to do so, because it cannot be in the best interests of the industry to put added burdens on what I have called the profitable heart of the industry. By delaying a hard and inevitable decision the Chairman would have put in jeopardy, not individual pits, but the financial viability of the industry. Even after the increases the Board does not expect the Scottish Division to be covering all its cost for many years to come.
The hon. Gentleman talked about the effect on various industries important to Scotland. He talked about the burdens placed on them and their struggle to pay their way in a competitive world. He is anxious that they should be given every opportunity to compete effectively with other industries in other parts of the world. The hon. Gentleman recognises that these industries have to pay their way. Coal is an industry with similar obligations. While these other industries have to earn their daily bread, it is impossible for coal to lead an independent existence and certainly neither nationalisation nor Socialist planning will be able to conjure these awkward obligations of the Board into thin air.
173 I am convinced that it would be wrong for the industry to ignore the facts of life. I do not think that it would be right for Scotland either. The important thing for Scotland is the policy which the Government are pursuing vigorously, of encouraging new industries which will be viable on their own without concealed subsidies from industries like the coal industry which itself is fighting hard to meet its own financial obligations.
174 These are not problems which will be solved quickly, or without painful readjustments, and the substitution of new industries for old is bound to be ——