§ 3.46 a.m.
§ Mr. Peter Hordern (Horsham)
In my view there should have been a debate on the Government's White Paper on Fuel Policy several months ago, and, furthermore, it should have taken place on a Government Motion. However, I consider myself very fortunate in being able to raise this topic, even at this late hour, for it is of cardinal importance both for the economic and the social future of this country.
I do not for a moment quarrel with the way in which the Government's calculations in the White Paper are presented, but I quarrel with their conclusions. The reason I do so lies not so much in the findings of the White Paper, but in the seeming failure of the Government to co-ordinate the activities of different Ministries. In short, the calculations in the White Paper are based primarily on the number of men the Government think can be retrained and redeployed from the coal industry.
The calculations that are supplied are that there will be room for 17,000 trained men in Government retraining centres by the end of this year, and that this capacity will be extended to 20,500 men by the early 'seventies. I regard this figure as simply ludicrous. In France the figure will be 74,500 by the same date, and I recently visited the Ministry of Social Affairs in France to study at first hand the operation of the National Employment Fund, and in particular to inquire whether there was any good reason why our retraining centres should not be expanded to retrain 70,000 men in 1970, or roughly three and a half times the number at present proposed. There is none. What is more, there is no reason why the number being retrained should not be 100,000 in the early 'seventies. It is vital that there should be this capacity in Government retraining centres, otherwise it will not be possible to allow the coal industry to be run down faster than the rate envisaged in the White Paper. This capacity both can, and should, be created now.
There are many hon. Members whose aim it is to improve the lives of miners. I hope that they will forgive me, though I doubt whether they will, if I say that 1399 the best way that this can be accomplished is to make it possible for more men to leave the mining industry. For many years the miners have lived and worked in conditions that are dangerous both to health and to life itself, and now, at last, through the discovery of North Sea gas, and through the development of nuclear energy, it is possible to reduce the number of men affected by these conditions. The folly of the White Paper is that it is a shabby compromise which fails to make the most of a cheap energy policy, and it fails to deal with the security and retraining of miners.
The Government claim that national considerations need to be taken into account, including the security of supply, the fullest use of resources, the balance of payments, and the economic, social and human consequences of changes in the supply pattern. But there is another major consideration. Power is a primary factor in the cost of production. Its price lies largely in the Government's control and it is essential therefore that power should be provided to industry at least as cheaply as it is to our competitors abroad, but this is not being done. The cost of electricity is markedly cheaper for our industrial competitors in the United States and Canada and the wholesale price of our coal rose by 20 per cent. between 1959 and 1965, by 10 per cent. in West Germany, and actually fell, by about 4 per cent., in the United States.
The increase in the price of coal is a continuous trend and we know that increases in some prices of other fuels are to come. It should be the Government's duty to provide energy to industry at a cheaper rate than it is available to our competitors, but this criterion has not been seriously considered.
Further, if one considers the relative size of the coal industries of France and West Germany with our own, one finds that the internal level of demand for coal was 116 million tons in West Germany in 1966, and only 84 million tons in France, the Netherlands and Belgium combined, and this compares with 177 million tons for the United Kingdom in the same year.
The Government's fuel policy is such that, even by 1975, internal demand for coal, at 118 million tons, will still be larger than West German demand now 1400 and much larger than that for France, Holland and Belgium combined. If, as seems likely, there will be even greater advantages in cost for fuels other than coal by the mid-seventies, it is imperative that we should be able to benefit from them. What is more, the huge capital investment in nuclear energy by the Conservative Government in the 1950s, which put Britain first in the field, is too vital to be whittled away, because the coal industry needs special protection.
The present plans for nuclear energy are to provide 8,000 megawatts between 1970 and 1975 as the second nuclear programme. The first programme will provide 5,000 megawatts when completed by 1969, making 13,000 megawatts in all by 1975. In the United States, installed nuclear capacity will be 12,900 megawatts by 1970, but is expected to grow to 72,000 mekawatts by 1975. Nuclear plants with a capacity of 12,500 megawatts were ordered in the first six months of 1967, yet coal in the United States costs less than half the pithead price in the United Kingdom.
We shall never be able to match this sort of progression in nuclear power, but it would be madness not to proceed with our own fast breeder programme, where we have a clear lead, as rapidly as possible.
Alcan has caused something of a stir by ordering a coal-fired power station at Invergordon for its new aluminium smelter. No details of price have been given, but it must be cheaper than anything offered to the C.E.G.B. In any case, as the White Paper pointed out:Even if extra coal could be supplied to the C.E.G.B. at or below the break-even price, this cheaper coal should be considered to be available to dispense with a corresponding quantity of the coal being burned in existing stations, for which higher prices were being paid. It is thus the higher price coal that must be considered as being displaced by nuclear power.As for the future of nuclear power, the White Paper considers it a reasonable assumption that, by about 1980, A.G.R. generating costs should be down to a level of at least 20 per cent. below those of the A.G.R. stations now under construction.
There are firm grounds for thinking that our energy is not being provided at competitive levels, compared with some of our overseas competitors, and that this 1401 relative position is likely to deteriorate because of the large sector of the energy market which is now provided by coal.
I turn now to the advantages given to our coal industry. The N.C.B. had £415 million written off its capital debt in 1965, yet, despite an increase in the price of coal in the spring of 1966, the Board was unable to afford to meet the difference between depreciation of assets at historic and replacement cost, for which its target is £10 million a year. It finished the year with a small surplus of £300,000. No coal is imported, yet our competitors in the E.E.C. import both American and East European coal. The Government's projections not only allow no coal to be imported until 1975, but will not even allow coal-fired power stations to be converted to oil. Coal is further protected by the tax of 2.2d. a gallon on fuel oil.
As for natural gas, the Government were surely right to authorise the construction of a nation-wide transmission system for natural gas by 1970. It was unfortunate that the Gas Council did not fix the rate with the producers before devaluation, as it is now certain to be more expensive. However, it is impossible to justify a policy of keeping one-quarter of the available supply of natural gas under the sea in 1970 so that the coal industry may be allowed to sell more coal to the C.E.G.B. Nevertheless, this is the Government's policy. The Parliamentary Secretary will see this set out in chapter and verse in the White Paper.
Thus, coal is being protected at great cost to our economy and to our competitive position. By 1970 the level of coal production will be held to 155 million tons, which includes 3 million tons of exports. Even with a continuance of the 2.2d. a gallon fuel tax and the present intention to use coal in power stations, inland demand should not be above 146 million tons in that year.
As it is, the C.E.G.B. and the Gas Council will have to use an extra 6 million tons of coal per annum up to 1970, which will cost the taxpayer about £45 million. Now the C.E.G.B.'s requirement of coal for power stations is expected to be 70 million tons in 1970, against 15 million tons coal equivalent of oil. As it takes five years to get a power station on stream, it is of cardinal importance to decide now what the level 1402 of coal protection, and of production, should be if we really mean to get a cheap fuel policy in the 1970s.
The Government have decided that the fuel tax of 2.2d a gallon should remain until 1975. I believe this to be an indefensible decision. It is based on the social problem of having to deal with a planned outflow of 35,000 men a year, caused primarily by improved productivity. Yet this should not be a problem. It should be regarded as an opportunity to get our miners out of the dark, dangerous and degrading circumstances in which they have laboured for generations.
I suggest that the fuel tax of 2.2d. a gallon should be removed altogether in 1971. The consequences would appear to be these. First, costs would be drastically reduced. Of all coal produced in 1966–67, only about 100 million tons was competitive with oil in price ex-refinery and pithead. Of this total, about 60 million tons was required for coke making, gas carbonisation and domestic use, and this amount can be expected to run down more slowly as price is not the most important factor. But run down it will. Only about 50 million tons of our coal production appears to be really competitive on a straight comparison of costs with oil before special uses and existing circumstance are taken into account.
If we then assume that coal production were to be 100 million tons in 1975—instead of 120 million tons—could the oil industry fill the gap? There seems no doubt that it could. In 1967 oil demand was 120 m.t.c.e., so that a growth rate of 4 per cent. would be required to reach 165 m.t.c.e., much lower than past rates. Refining capacity is already being increased from 86 million tons of oil to 135 million tons by 1972, and should be sufficient to cover any reasonable increase in demand by 1975.
What of the effect on the balance of payments? Before devaluation, the net delivered cost of oil was about £300 million to our balance of payments. That was in 1965. Even if it were £500 million to £600 million in the 1970s, one should offset the considerable price advantage given to our exports which are largely fuel-intensive. One should also take into account the use of oil as a chemical feedstock which can often be substituted 1403 for more expensive natural imports such as textiles and rubber.
Then there are the strategic risks, but at present United Kingdom oil demand is less than 5 per cent. of the world total. Massive stocks can be built up. Whatever their political differences, there is a strong mutual interest between suppliers and users, besides the oil companies' flexibility, which was well demonstrated last year.
The Coal Board's problems are plain enough not to have to resort to speculation. There are 28 million tons stockpiled, and the industry has been run down for many years, and so it should be. On average, 30,000 men a year have left during the last decade. During the last three years the run-down has been 28,000, 41,000 and 26,500, but the level of unemployment has not risen by more than 1.3 per cent. within the industry. During the same period inland demand for coal has fallen from 188 million tons to 165 million tons last year.
The average cost of coal rose by 4.6 per cent. between 1964–65 and 1965–66 and by 6.4 per cent. between 1965–66 and 1966–67, despite increases in productivity of 3.4 per cent. and 1.4 per cent. in those years. We are told that, without any further fall in the level of coal demand, the expected improvement of productivity will lead to a reduction of about 105,000 in the number of miners by 1970–71—about 26,000 a year. Let us accept that figure. With the number of places available in Government retraining centres—17,000 at the end of 1967—it is impracticable to consider the run-down of coal production below 5 million tons this year and next. The N.C.B. is working on the assumption that 35,000 men will be released this year.
If however, a really substantial effort were made to build retraining centres so that 70,000 men in 1970 could be retrained compared with the proposed 20,500, it should be possible in that year to release 50,000 men and thus to resume the normal rate of run-down of some 10 million tons a year and more thereafter. The level of coal production in 1970, therefore, should be 145 million tons, which matches the Government's own expectation of inland demand of 146 million tons. After 1970 it should 1404 be possible to increase the number of retraining centres to about 100,000 men a year. In that event, and if 2.2d. a gallon fuel tax were removed, the maximum level of coal demand would be 100 million tons in 1975 against the Government's plan for 118 million tons. With industry absorbing 25,000 men a year, and the retraining centres a further 25,000 at least, the figure that so shocked Lord Robens of coal production at 80 million tons and a labour force of 64,500 men by 1980 should be manageable by 1975 if resolute action were taken now. It is impossible to say with any certainty what the level of coal demand will be in 1975, but I am convinced that it should be allowed to find its own economic level, and that level cannot be above 100 million tons by that date.
Is it desirable that the coal industry should be run down so rapidly? In terms of cheap fuel, certainly. In human terms, which is by far the most important factor, abundantly so. I am sorry that the White Paper has not seized this opportunity.
§ Mr. Speaker
Order. I would remind hon. Members that this is the seventh of 26 debates which will take place during the night, during which time most hon. Members who are here now will not be present.
§ 4.5 a.m.
§ Mr. Michael McGuire (Ince)
I note your warning, Mr. Speaker, about this debate and the number of subjects still to come. I do not think that hon. Members interested in the present discussion can be held responsible for our being only at the seventh subject. This is a most important subject, and I am grateful to the hon. Member for Horsham (Mr. Hordern) for raising it, although I disagree with a lot he said and I intend to show that some of his arguments are false.
Because of devaluation, the Fuel Policy White Paper is out of date. It was largely based on assumptions about the future price of oil, and the hon. Gentleman did not pay enough attention to the rise in the cost of oil as a result of devaluation, which will have growing repercussions for some time to come. The forecasts in the White Paper about the price of oil were 1405 rash enough in 1967. In paragraph 72 it set out the assumptions on which the Government's policy is based, one of them being thatOil will continue to be available at a price competitive with coal".That was a bold forecast. For the first time now, the Organisation of Petroleum Exporting Countries, which represents the Governments of those countries which we used to call under-developed—but which we now euphemistically call developing countries, because we must not hurt their feelings—is undertaking concerted action to raise the price of crude oil. This development, together with the continuing problem of the closure of the Suez Canal, brings into question the wisdom of the Government's attitude to oil. Devaluation has dealt a severe blow to their forecasts as well. The costs of oil-fired power stations have risen by about 9 per cent. So much for price stability.
Speaking on television on the day the White Paper was published, my right hon. Friend the Minister of Power said that demand for oil was what the economists describe as inelastic. I presume he meant by that that, if we import more and more crude oil to be refined here into petrol, aviation spirit and non-fuel products, we must find a market for the residual fuel oil. This always used to be so, but I understand that, with modern refining practice, it is possible to minimise the proportion of fuel oil produced. Indeed, I believe that there are refineries in the United States which make no fuel oil at all. They crack the crude down and there is no residual fuel oil such as we have at our refineries.
If my right hon. Friend based his remark on television on information given to him by his oil experts, I suggest that he looks at the advice which he was given in the preparation of the White Paper. Clearly, his advisers are well behind the times. If the growth in oil consumption envisaged in the Fuel Policy White Paper is based on the theory of inelasticity of demand, it should be reconsidered.
Paragraph 44 of the White Paper stresses the contribution which the United Kingdom oil industry makes to the economy, particularly to technologically progressive industries such as petrochemicals, by supplying a range of products 1406 for non-fuel uses—synthetic fibres, pesticides, fertilisers, lubricants and road-making bitumen. No reference is made in the White Paper to the specific contribution which non-fuel uses of coal and coal-based chemicals make to the technologically progressive industries. The value in 1966 is shown as £39,500,000. The value of intermediate and end products derived from these chemicals is much higher, but detailed information is not given. No account is taken of the value of gas produced from coal. During 1966 the value of exports of chemicals derived from coal was £3,750,000.
Devaluation increased the price of North Sea gas, so much so that the Minister of Power, when he announced in the House the negotiated figure of 2.87d., declined to answer my question. I asked what amount had devaluation put on the agreed price. I am not being unkind to him because we on these benches are used to non-answers. He gave the usual, "waffly", cotton wool-type of answer shrouded in a veil of secrecy. The answer was that as there were further negotiations with other companies he could not divulge the amount because it affected different companies in different ways. Of course it does. The more non-British capital in the company the greater the increase would be. I wanted to know what had been the amount included in the agreement with Phillips and I did not get an answer. I hope I will not be thought unkind if I suggest that if it had not been very much the answer would have come tumbling out. The Minister would not have been able to get up quick enough to give it.
It is to be hoped that the forecasts made about natural gas will come true. All hon. Members agree that hope is one of the commodities which has not yet been ruinously devalued. But we should probe the matter a little deeper and ask whether the gas industry will succeed in its aim to double the sales of gas in the next three years. This is a tremendous marketing problem and it will not be made any easier by the present proposals for big increase in the price of gas. The Minister has committed himself to saying that natural gas should be brought rapidly into use.
Will the Minister give an assurance that, if the market does not take as much gas as he hopes, he will not seek to achieve his forecasts by pushing gas 1407 under power station boilers at the expense of coal? Will he promise, if the need arises, to use gas instead of oil thus ensuring that the balance of payments benefits? The coal industry has already lost a big power station market because of the Magnox nuclear stations for which there was no economic justification.
§ Mr. Arthur Palmer (Bristol, Central)
Is my hon. Friend aware that it is likely to cost the country £400 million to convert domestic gas appliances to use natural gas?
§ Mr. McGuire
I am grateful to my hon. Friend for anticipating what I was going to say. The figure of £400 million is optimistic, based on the experiment of converting the appliances on Canvey Island. I doubt, too, whether we have the fitters. I do not want to be accused of being derogatory, but I do not think that it takes terribly skilled men to do the conversions, yet I doubt whether they will be available. That is one of the reasons why we should probe a little deeper into the rosy forecasts about natural gas. Before the price was agreed my right hon. Friend told the House in answer to a Question that in order to be competitive it would have to be delivered at power stations at 2½d. a therm. We now know that that landed price will be 2.87d., and therefore the rosy forecasts before devaluation must have had a bit of a knock.
I turn to the question of nuclear power. In the past some of my hon. Friends and I have expressed our doubts about carrying on with the planned programme for the second generation of nuclear power stations. We are often accused of being flat-earthers or Luddites, but my hon. Friends and I welcome nuclear power. We have said so here and elsewhere. We think that it is necessary for a nation as technologically advanced as Britain to keep in the forefront of this new development of energy generation. But we must remember that forecasts have been made in the past by people I call rosy-dawners, who always promised the rosy dawn with the new nuclear power, but whose forecasts have never come true. I know that forecasting in anything is very difficult, but if these people had to make their living tipping winners in the newspapers 1408 they would not be sacked but would be shot by the punters, because the results have been so outrageously outside what they said would happen.
We—the miners' M.P.s—questioned some of the figures based on experience. As a famous countryman of mine said, experience is the name we give to our past mistakes. In 1955 the rosy-dawners said, "Here is a new way of generating energy. Fossil fuels are out. This will produce electricity at 0.6d. per unit as against the best conventional method at between 0.6d. and 0.7d." Those forecasts have never come anywhere near being true. Therefore, should not we ask my hon. Friend to admit that it is necessary to recast the nuclear programme, not merely in view of devaluation but because of the very optimistic forecasts which week by week are being proved wrong?
The White Paper is being made more out of date every time a Parliamentary Question is asked about the cost per unit sent out from the A.G.R. stations. The White Paper could do nothing about Magnox. That is water under the bridge. The last of those will be in commission in 12 months, and we cannot do anything about it.
The Minister says to miners' representatives, "These stations are already built, lads. It costs £500 million more than a conventional power station would have done, but we have to use them. It would be the height of folly not to, and we did say that fuel costs would be much less."
We say, "If you carry on with five planned A.G.R. stations, it will be small consolation to the miners to be proved right in 1980 when we could have corrected it by 1968 or 1969."
When the Minister says that he is bolstering up the coal industry by the figure of 6 million tons, of coal burnt, more than would have been, we recognise it, but 20 million tons will have been displaced by the eight committed Magnox stations which are in production and which produce not one unit with coal. We are acknowledging the aid the Minister is giving to the industry in the interim period, but we ask, can he seriously justify this when, week after week, we get these figures knocked cockeyed by his own answers. Can he justify carrying on with the five planned stations?
1409 The coal industry knows, if its main customers run away from it, that it should be planning beyond the mid-1970's, and not take it from the Minister that it will have what he once said would be a rosy future. When I mentioned that on 18th July, he said that it was merely a good future. But how can the industry have a future with the C.E.G.B. whose needs will give us nothing like the demand we need in the mid-1970's? The coal industry wants a shot of confidence—that, if the industry can match its competitiveness within the targets generally laid down between 3d. and 4d. a therm delivered to the C.E.G.B, it is in the market for new power stations. But I ask the Minister how there can be a future without a conventional station planned beyond 1971. Drax is the last conventionally planned coal-fired station.
Yet, when on 5th March I asked the Minister to set out which coal-fired power station he estimated would produce the cheapest electricity in the years 1968 to 1971, andwhat will be the cost per unit sent out; and if he will give similar information about the cheapest nuclear power in those years."—[OFFICIAL REPORT, 5th March, 1968; Vol. 760, c. 53.]my hon. Friend replied that Ratcliffe-onSoar, a coal-fired station now in commission, whose costs for coal purposes are anyway unlikely to increase, will be sending out electricity at a cost per unit of 0.54d. up to 1971. Even the much vaunted Dungerness B will not be doing anything like that. Its cost per unit will be 0.57d. per unit, which does not include a royalty of 0.014d. It will not be competitive and this is in the new generation of A.G.R.s, the second planned nuclear power programme.
Even up to 1972, despite forecasts to the contrary as recent as 1965, coal will still be the best fuel for power stations. It will still be competitive on a cost per unit basis. The nuclear-power station sites are still to go on stream and the way costs are increasing makes one doubt whether the forecast of 0.57d. will prove correct. I should not be surprised to see an increase.
§ Mr. Speaker
Order. I appeal to the hon. Gentleman. This is the seventh debate—I repeat, the seventh debate—tonight of 26 debates. Other hon. Mem- 1410 bers wish to speak in this debate. Even if this one lasted only an hour, it would mean that the whole debate on the Consolidated Fund Bill would last 26 hours. I hope that the hon. Gentleman will respond to the appeal that I am making.
§ Mr. McGuire
I will, Mr. Speaker. But, as I said when you referred to this before calling me, one may ask why we are only at the seventh debate. I may have been speaking for half an hour but some hon. Members earlier must have been making long speeches or middling speeches. I do not think that we can be accused of delaying the proceedings, although I take note of what you say and will wind up perhaps a little earlier than I should. But we are always on the night shift when debating the coal industry. I do not know why this is but our appetite for debating the Fuel Policy White Paper is not helped by the fact that we are always on the night turn, and one assumes that we are not delaying many hon. Members because, with 26 debates on the board. I doubt whether the optimism among hon. Members who have debates after No. 12 will be justified. I will wind up on this point.
In a debate on 18th July, again on the night shift, when we were discussing the coal industry and the forecast of its future, I recalled that Thomas Jefferson said that he did not like engaging in what he called the "morbid rage of debates", because he did not think any good came of it. He believed that people were more likely to be influenced in the quietness of their own homes by reading what had been said, presumably with some logic and sincerity. It is in this sense that I hope to influence my right hon. Friend.
I know that my hon. Friends for Bristol, Central (Mr. Palmer) and Midlothian (Mr. Eadie) will want to draw out further features of the White Paper. The nuclear power programme was planned in 1955, when there was a shortage of coal and the possibility that it would continue for some time. The second programme has been planned largely on the assumption that nuclear power will be more competitive than coal, because it assumed the stability of nuclear power forecasts and the instability of coal costs.
If the C.E.G.B. is the biggest customer then is this the rationale in deciding not to build, or not to go ahead and build 1411 conventional stations? I would point out that of the 60-odd million tons taken by the C.E.G.B., about one-third has not increased in price for the last seven years, one-third has increased once in that period, and it is the final third which causes the trouble. The Coal Board, on its own initiative, was taking steps to trim off this expensive one-third and concentrate competition in the better two-thirds. If the Board achieves cost competitiveness within the guide lines laid down where will the coal be burned in the future? I will end there and I hope, Mr. Speaker, that you will agree that I have not taken up too much time.
§ 4.32 a.m.
§ Mr. Alex Eadie (Midlothian)
I too always feel that I am on the night shift when we debate coal in this House. Nevertheless it is important that we try to draw out some important features of the White Paper. I am grateful to the hon. Member for Horsham (Mr. Hordern) for initiating the debate, although I will probably clash with him over it. I want to challenge some of the concepts of the White Paper. We do not accept that there will be the inevitable run-down in the mining industry, which is the sort of philosophy permeating the whole of the White Paper.
The industry is now 21 years of age this year, since nationalisation. Nationalisation is sometimes looked upon as a bogey which has adversely affected the industry, but no miner would accept this and the facts do not support it.
In 1947 output of deep-mined coal was 186.6 million tons and in 1966–67 it was 165.9 million tons. For opencast mining, the figures were, 1947, 10.2 million tons, 1966–67, 7.1 million tons. In 1947 there were 1,000 collieries—in 1966–67 there were 410. In 1947 we had 708,900 mineworkers. In December, 1967, there were 419,700. Output per man per year was 262 tons in 1947, but in 1966–67 it was 390.4 tons. The output per man-shift in 1947 was 21.5 cwt. and in 1966–67 it was 36.6 cwt. Indeed, the output per man-shift has increased since 1967.
Another point to consider when we analyse the White Paper is whether the miners have been Luddites or whether they have responded to the cause of scientific and technological advance. The 1412 figures in respect of mechanised mining are: in 1947 3 per cent., and in 1966–67 85.7 per cent. The annual turnover in 1947 was £371 million, and in 1966–67 it was £890.2 million. The most significant figures are those relating to productivity, output per man shift, and the whole question of mechanisation.
The miners have a genuine grouse about some of the implications in the White Paper. When the mines were taken over, one of the calculations made related to unforeseen profits. Many of the mines were closed because they were unprofitable. Yet the unforeseen profits were paid to the mineowners. We must remember that the unforeseen profits are at present borne on the backs of the miners. At Rothes colliery, in the area where I reside, when the sod was cut the Coal Board sank the mine according to the plans and never produced a penny profit. Millions of Pounds were spent there. Yet the Fife Coal Company received Payment based on the unforeseen profits.
Therefore, one has to be fair when talking about costing. I do not want to keep the House up all night on this subject, though I could speak on it for hours. However, it is despicable that we should have a debate on costing in relation to the mining industry. Up to 1955 both parties in the House accepted the philosophy that the mining industry should be treated as a service industry and that the question of profitability did not matter. I was working at the coal face, and I remember the miners being told "Produce it as long as it is black. The nation needs it. Profitability does not matter." We were selling coal to industrialists at £2 below the cost of production, and no voices were raised on the question of profitability. We were a service industry. We have calculated that if we had then applied the dictum of fixing the price according to the market, there would be a sum of about £2,000 million on the balance sheet of the Coal Board at the present time. The question of the Coal Board being in the red or in the black would never have arisen.
Looking at other aspects of the balance sheet, hon. Members will remember that in about 1949 to 1955 we were importing American coal. We had the ridiculous situation that the Coal Board had to pay 1413 for the loss—about £80 million. Indeed, that is really what it cost the miners. Imagine what would have happened if the agriculture industry had been treated on the same basis, or if the car industry had been treated like this, with the Government deciding to bring in something. The milers had to pay and the Coal Board had to pay. The country has forgotten these facts and it is time that people were reminded of them.
What is the basic philosophy of the White Paper? Here I join with the hon. Member. The philosophy is not to do the miners a favour. My hon. and right hon. Friend have advanced the argument that mining coal is a dirty and dangerous job, and that miners should be given nice new jobs on the surface. But that is not what will happen, because the rate of run-down predicted means that it is not a question of the miners coming from below and going into nice new jobs; it is a question of thousands of miners being placed on the dole.
If the miners can be put into types of employment more civilised and more relevant to the mid-twentieth century the miners and I will accept it.
§ Mr. Hordern
That was the point that I was trying to make—that the Government's actions in reference to retraining centres and in providing further employment are entirely inadequate. I agree with the hon. Member.
§ Mr. Eadie
I wish that the hon. Member's party had done more in relation to retraining. If it had we might not have been confronted with this problem.
I want to put the matter into proper perspective. The argument is that coal is too dear. I do not accept that. I do not accept the philosophy behind the White Paper, which was withdrawn because of pressure from the miners' group. The argument was put forward in that document that because of devaluation certain changes would have to be made. But the White Paper is now a shambles, on the basis of costs. I do not know how my hon. Friend will defend it. What worries me is that my right hon. and hon. Friend can stump the country trying to defend it. There has been a call to debate the White Paper in the House, but I do not know what could be debated, because the White Paper requires to be 1414 scrapped. In a previous debate my hon. Friend and I said that the time had come to make a funeral pyre of the material in the White Paper.
I know that this is pretty strong language. It reminds me of the old Chinese proverb, "Do not remove the fly from your friend's forehead with a hatchet."
My hon. Friend and I have made no secret tonight that we want to attack the whole philosophy behind the White Paper. I do not like speaking in this way in this debate, but I cannot speak impersonally. I am speaking about people that I have worked with all my life—about people that I shall meet this weekend. Statistics about 105,000 men a year do not mean anything to me. I am talking about my friends at Michael Colliery. I have negotiated many times on their behalf. My own family work there. As for unemployment, my own brother-in-law is at present on the dole. Why is he on the dole? There is plenty of coal there. The miners there are some of the finest in the world. But the Coal Board, whether in conjunction with the Government or not, I do not know, says that the colliery is not a commercial proposition.
One of our arguments with the Government is that we believe the Government can influence market trends. We do not believe the commercial argument about coal. If they want to do it, the Government can reopen the Michael Colliery; they can do it with the Coal Board; and the Government can influence market trends. This is one of the pleas I make this evening.
The White Paper is an inconclusive document. It is full of guesses about oil, gas and coal. We have time after time advanced the argument that if this country relies too much on non-indigenous fuel, and allows it in in great abundance, then at a time of international crisis industry in this country can come to a standstill. We know the impact which the Suez crisis had in 1956. Although the impact of the last Middle East conflict was not so heavy on us, it is the sort of impact which could happen again. No one can predict with any certainty that oil supplies from the outside world will always reach this country safely. Therefore, the thinking behind the White Paper is all wrong, 1415 because the only thing it seems to be certain about is oil supplies.
Let us consider the penetration of oil into the United Kingdom's economy. In 1956 coal consumption amounted to 217½ million tons; in 1964, 197.2 tons. The coal equivalent of oil consumption in 1957 was 36.7 million tons, and equal to 15 per cent. of total fuel consumed. It rose to 111.4 million tons in 1966, or 37½ per cent. of total fuel consumption. 'That year 70 million tons of coal equivalent was from the Middle East, 17 million tons from Libya, 12 million tons from Nigeria, and 20½ million tons coal equivalent from the rest of the world.
I managed to get some figures of costs out in time for the debate. Between January, 1967, and January, 1968, the monthly cost of imported crude oil to Britain rose by £41.3 million to £47.5 million. The cost of importing residual fuel oil rose from £8 million in January, 1967, to £10.8 million in January, 1968. In October, 1967, a month before the White Paper, and before devaluation, residual fuel cost Britain £8.5 million. Yet the increase in the amount of residual fuel oil imported was only 186,000 tons. To get an extra 186,000 tons cost the country £2.3 million. The White Paper is a shambles, the costings are an absolute shambles.
Because my hon. Friend has already dealt with it, I shall skim over some of the aspects of nuclear power, but there is one point I want to make and which he did not make. I agree with everything my hon. Friend said. We do not want a Luddite approach to this, we do not want to be Luddites about nuclear power. Our quarrel with it is that it is too large and too chancy, and that we must not commit the error that we made in relation to the Magnox programme.
The argument is advanced that nuclear power is an indigenous fuel, but it is not. As I pointed out in the debate in November, taking the A.G.R. programme of 8,000 megawatts—which, incidentally, is about 20 million tons of coal equivalent—at that time it would have added about £10 million to our import charges because of the foreign exchange costs of uranium. That was the cost before devaluation, and there has been an increase since then.
1416 My hon. Friend spoke about the Magnox nuclear power station programme. He did not mention the figures involved, but they were £525 million more than the cost of the equivalent coal-fired power station. If one works it out, that blunder cost 28,000 miners their jobs. That is why I raise the question of costs, because it is argued in the White Paper that coal is too dear. Yet here is a nation in the middle of an economic crisis, spending money like a man with no arms. It has been argued that the Magnox programme was necessary if we were to hold our place in the technological world, but it was a failure and, to some extent, a misappropriation of public funds.
§ Mr. McGuire
Before my hon. Friend leaves his point about uranium costs, is he aware of the article in yesterday's Guardian expressing the concern being felt in America and other countries which have nuclear power programmes about the forecast shortage of uranium? Has he considered the fantastic lengths to which we shall have to go, with a tidal barrage to extract a certain amount of low-grade uranium from heavy sea water, at a very big cost? Is he aware of that?
§ Mr. Eadie
I am well aware of it, and I have done some study of what is happening to those who mine uranium. The incidence of lung cancer in those mines is tremendously high. I must agree with what my hon. Friend has said.
The nuclear energy programme is too big, and we cannot understand why my hon. Friend and his right hon. Friend the Minister should give such dusty Answers at times. Indeed, they give some of the worst Answers provided by Ministers in this House. We have called time and again for an independent investigation into fuel and power, and the Select Committee has asked for it. Yet, at a time when the White Paper is falling about my right hon. Friend's ears, for some reason he resists this.
The Minister and his hon. Friend have been stumping the country saying that if we have another nuclear power station, it will not come into operation until the mid-1970s. But in the Ministry of Power there is no cohesive plan of what is to happen in the 1970s, by which time it will be very important. This argument about not doing something for 1972–73 1417 is not good enough. They should try to address themselves to the problem.
I turn now to gas, about which the argument is well known. We hear so much about the bonanza of North Sea gas, but, if ever consumers were taken for a ride, they have been about gas. "Go o'er to gas", they are told. "Gas will be cheaper". But that is downright deceit, as many people who have converted to gas know only too well. They honestly believed that a bonanza had been struck and that North Sea gas was on the way. But we know that we are talking about 25 million tons of coal equivalent—a fleabite so far as the country is concerned. Yet consumers were enticed—directed to some extent—to go over to gas in the hope that it would be cheaper.
I have dug out some figures for this debate. My hon. Friend the Member for Ince spoke about this earlier. The Prices and Incomes Board recommended an increase in gas tariffs averaging 8.7 per cent. The report pointed out that the feedstock costs have been increased by just under a penny a therm because of the Middle East situation and devaluation.
The report added:We have considered whether the resulting new tariffs might prove to be to far out of line with the price of gas when natural gas is more fully used. While we cannot be sure until the price of North Sea gas is fully determined, we judge that this is not likely to be the case in the short term when account is taken of the increased costs of distribution and of the costs of changing equipment associated with the greater use of North Sea gas.It is not £400 million. I have a document from the Gas Consumer Council in which the estimated cost of conversion in new pipelines will be £2,000 million. Yet people have the audacity to talk about coal being out because it is too expensive.
I want to deal now with the important question of by-products. The House and the country should be aware of what we are doing. I have time and again raised questions about by-products and derivatives from coal. I have tried to produce information. I sent on information about new techniques in America relating to coal derivatives: for example, schemes for making oil and cheap petrol from coal. I even challenged the philo- 1418 sophy of the Wilson Report. Every time one asks questions one is told about the Wilson Report. We are told that a week or a fortnight in science or technology is a long time. The Wilson Report was produced 8 years ago. Yet there does not seem to be any indication that the Ministry intends to carry out an examination on the issue of derivatives from coal. I am sure that any fair minded man will agree that a report made eight years ago is surely the basis of a challenge.
Let us be clear what we are doing when we run down the coal industry. I have here a tree which gives all the byproducts that we can and are using from coal. This illustrates the problems which can beset us if we run down the coal industry. There is sulphuric acid in relation to batteries; galvanising; tar products; wool scouring; sulphate of ammonia; soap; detergents; explosives; aspirin; weed killer; adhesives; tanning; sheepdip; cresols; napthalene oil; plastics; road tar; rust preventative; roofing; briquettes; creosote oil; light oils; brake linings; perfume; aviation fuel; printing ink; timber preservative. All these things are by-products of coal and we intend to run down the coal industry.
My hon. Friend has said that the Wilson Report made a decision and therefore we cannot subject it to any re-examination.
I have been very critical of the Government. I intended to be critical, because their whole policy is a scandal in the light of the present situation of the nation. Sometimes the Government have been less than frank with the House. I hope that my hon. Friend will be frank with the House and confess that the cost recommendations in the fuel White Paper and the Government's whole philosophy are out of date.
We accept that, in the Coal Industry Bill, in conjunction with the White Paper, the Government's philosophy for dealing with the over-55s was very generous. They introduced a new concept, but when they decided to give the over-55s 90 per cent. of their wages for three years, plus £1 a week when they retired, that was a depressing philosophy indeed. I regard men of 55, and over that age, as wealth having a vital part to play in the economy of this country. The provision will assist 1419 to the extent that it will help to tide the coal industry over a difficult period, but it is a depressing philosophy.
I hope that my hon. Friend will consider some of the points which have been raised during the debate. Only two miners' Members are present, but we are echoing quite a lot of discontent among not only the miners' group of Members, but among the miners themselves, and unless my hon. Friend takes cognisance of some of the things that we have been trying to say, some of the consequences, even the political consequencies, will be very serious for the Government.
§ 5.1 a.m.
§ Mr. Arthur Palmer (Bristol, Central)
I want to respond to Mr. Speaker's appeal to keep speeches short, and as I am anxious to intervene in another debate which is shortly to take place, I have no wish to stand in my own light.
§ Mr. Deputy Speaker (Mr. Sydney Irving)
Order. For his guidance perhaps I might tell the hon. Member that he will have exhausted his right to speak when he has made his present speech.
§ Mr. Palmer
Then I must continue with my speech.
The hon. Member for Horsham (Mr. Hordern) was right to draw attention to the importance of nuclear power to the economy of this country, and to the economy of any advanced industrial country, but I cannot follow the logic of his argument that for that reason the coal industry should fade almost into extinction. In the United States, where nuclear power has been strongly developed, 60 per cent. of the orders for new power stations are for nuclear-fired stations but the coal industry is still flourishing. There is no reason why a similar situation cannot exist here. To my mind there is no contradiction in advocating a strong nuclear programme, and at the same time recognising that there is room for a healthy and viable coal industry.
1420 I agree with my hon. Friends who have protested at what I regard as the somewhat devious—I hope that that is not too strong a word to use—approach of my right hon. Friend the Minister of Power to his own White Paper on Fuel Policy. We waited a long time for this document. Great hopes were held out that it would be the fuel White Paper to end all fuel White Papers. We were promised a debate, but that hope vanished amid the mists of our procedure in this place. When pressed, my right hon. Friend, who had brought it in with a great fanfare of trumpets, said after devaluation that he would withdraw it for the price figures to be reconsidered, which seemed sensible. Most of us expected it to come back revised, when it could be debated.
This is why I say that my right hon. Friend's approach has been curiously devious; without the new figures, or any regard to what he has previously said, he now speaks and behaves as if the original White Paper had not been touched. As a result the chairmen of the nationalised fuel industries, from Lord Robens downwards, are developing their own individual fuel policies. After experience of many fuel debates in this House, I have never known a time when the overall fuel and power situation was so confused and confounded.
I asked the Minister a fortnight ago whether the White Paper still represented the policy of the Government: he said that it did and seemed rather surprised at the question. This is not the way to treat the House. It is not taking seriously all the hopes which were once held out. I look forward to a whole day's debate on fuel policy, in the full light of day, on the "day shift". I hope that my hon. Friend when he replies will avoid the obscurantist tactics which have been hitherto practised by the Government Front Bench. I hope he will tell us that he is anxious for all aspects of fuel policy to be fully debated.
Those of us who, as Members of the Select Committee on Science and Technology, examined the methods of relative fuel costing in the Ministry were not satisfied that it has the staff or resources for accurate work. We therefore suggested—though I do not want to anticipate any debate on the Select Committee's 1421 Report—an independent assessment outside the Ministry of fuel costs right across the board. This is badly needed. Few of us are satisfied, on recent performance, that the Ministry can do it accurately or objectively.
An adequate energy policy is basic to the needs of the economy and I agree with the hon. Member for Horsham (Mr. Hordern) that the continuing need of this country is for an abundant supply of cheap energy.
§ Mr. McGuire
I hope that my hon. Friend will not fall too much in love with the remarks of the hon. Member for Horsham because our present energy arrangements are adding no more than 1¼ per cent. at the very most to our exports. Generally speaking, energy prices in this country are, for the majority of industries, low, representing only about 2 per cent. of total costs.
§ Mr. Palmer
That is true, but it is elually true that if British industry is to flourishing and competitive it must be based on abundant supplies of cheap energy. Given the right opportunities, I believe that it is possible to have a mixed fuel economy which is efficient and viable; although the main advance is bound to be towards nuclear energy, which is the fuel technology of the future. But there is still plenty of room for coal and oil on a proper competitive basis for a long time to come. But to achieve this we must have for the first time, a more accurate estimate of true costs.
§ 5.12 a.m.
The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Free-son)
By the leave of the House, I will comment on some of the matters that have been raised.
It is unfortunate that so much of the public discussion which followed the publication of the Fuel Policy White Paper was directed to the decline in coal, instead of to the techonologically exciting fuel economy of the 1970s and what this could mean for our industries and urban living conditions in the future. I stress—I do so not for the first time—that coal has an important part to play. These are not chosen words but what the Ministry and the Government believe to be the case.
1422 However, we should be looking at the positive side of a technologically advanced, highly mechanised industry, employing highly skilled technicians. The introduction of new and pioneering techniques of coal mining and of the reorganisation of the coal industry have led to a 50 per cent. rise in productivity in 10 years. The rise is still going on and there is considerable scope for further dramatic increases. Technologically, the British coal industry is among the most advanced in the world and we have plenty of visitors coming here, from East and West, to study our methods.
Increasing mechanisation in the coal industry means that fewer miners are required for any given level of coal production. Even if the present level were to be maintained in the years ahead there would be a major reduction in the industry's manpower. But in the two years preceding the White Paper, coal demand had fallen at more than 10 million tons a year. On the basis of the Government's policy as outlined in the White Paper the fall will now be only at 'an average of 5½ million tons a year between 1967, the year of the White Paper, and 1975.
Nor is the forecast average annual fall in mining manpower of 35,000 up to March, 1971, much in excess of the average of 30,000 a year in the past 10 years. Allowing for natural wastage and the movement from closing collieries to those with a future, the number of redundancies will, as in the past, be a small part of the total manpower reduction. This is a point to bear very much in mind when talking about retraining facilities and redeployment into other industries. Some of the figures and points made by the hon. Member for Horsham (Mr. Hordern) were irrelevant to the net situation which will arise.
§ Mr. Freeson
Saying "No" is no argument. The observation I am making is based on experience in the industry.
§ Mr. Freeson
I am afraid that my hon. Friend has misunderstood my point. I did not refer to redeployment into other collieries but into other industries and into retraining facilities. I wish to make this point clear. At one stage 50,000 was a number quoted as being in need of redeployment into other industries of which, it was suggested, 50 per cent. would be required to go into retraining facilities. The net figures would not require anywhere near that kind of provision.
§ Mr. Freeson
I do not intend to give way. The figures quoted by the hon. Member will be seen on reflection to be quite inaccurate and irrelevant. Some of the remarks of the hon. Member were quite absurd. He filled his speech at quick-fire length with a lot of unsupported clichés and unsupported statements.
§ Mr. Hordern
On a point of order, Mr. Deputy Speaker. I do not know whether it is permissible for an hon. Member opposite to make an attack like that and not to give way. Is it considered in order, or within the normal bounds of courtesy of this House?
§ Mr. Freeson
We had a series of foolish statements by the hon. Member in his opening speech. I do not believe that he reflected very closely on the White Paper. He made a number of statements—
§ Mr. Freeson
I return to the points I was about to make. I was saying that the number of net redundancies will be a small part of the total manpower reduction—this is not to be complacent, but a small part when we speak about 35,000 men on average having to leave the industry.
I make these comparisons simply to keep things in perspective and not by 1424 any means in a spirit of complacency. No one concerning himself with the industry can be complacent. Indeed, the measures taken by the Ministry of Power and more particularly by other Departments to help the older redundant miner, to help the industry itself with its social costs and to give special help to the areas specially hard hit by colliery closures, demonstrate our concern to reshape the industry in a civilised and economically sensible manner.
Oil as a fuel is cheap and convenient, but 40 per cent. of its use is for purposes such as transport for which there is no practical substitute at present. Yet in this country we are less dependent on it than Continental countries where it represents 50 per cent. of total energy use, or in Japan, where it represents 60 per cent.—and those countries are expecting oil's share in their total energy use to increase as compared with our predictions in the White Paper. Here, together with the advent of nuclear and natural gas, we expect oil to remain fairly stable. Our anxiety to keep down direct balance of payments costs and the security disadvantages of oil must not lead us into so adding to the costs of our energy that we jeopardise our competitive standing vis-à-vis other countries. There is also the generally important point that, in growing into a major source of energy, the oil industry has contributed greatly to technological progress and has become the basis of quite new and extremely important industries, for example, petrochemicals.
Natural gas will undoubtedly produce great resource savings for this country, particularly with the introduction of natural gas into the premium markets, those markets which the industry already supplies or into which it could readily expand over the years, and where its introduction will displace oil rather than coal. There will be some bulk sales to industrial users to assist rapid absorption of what is available from the North Sea and for load balancing.
The ultimate scale and pattern of use of natural gas cannot be settled until we have more knowledge of what the North Sea holds and more experience about how we can encroach into different markets.
§ Mr. McGuire
As much as a four-fold increase is forecast. There is a conflict 1425 in logic between what my hon. Friend is now saying and the three-fold increase, perhaps, four-fold increase, forecast in the White Paper.
§ Mr. Freeson
Not quite in those terms. It is over several years. We expect to see available to the country in the early 1970s 2,000 million cu. ft. a day, which is about double the total use of gas in this country today. Later on, this can build up, but how the trebling or quadrupling of absorption will follow through in years after the early 1970s will depend on how rapidly or how well the available gas can be absorbed into the economy. It is not something which will happen in the next three or four years. The estimates are of what will become available if it can be absorbed in the economy.
There is no doubt about the advantages which the low energy costs of this industry will have for the economy and the importance these will have for raising standards, both living standards and working standards in industry, in the years to come. Undoubtedly, as has been said, it will involve substantial capital expenditure, certainly £300 to £400 million on conversion, in the period of establishing the new national grid which is now under construction. But it will also bring cost savings in increased capacity of mains and storage because of the higher calorific value of the gas, and because new gas making plant will not be needed after conversion. The Gas Council estimates that over a period of 30 years the present values of savings from the conversion to natural gas will be no less than £1,400 million. This is not a figure to be set aside lightly.
Nuclear power presents another case where, on account of the major capital costs involved in nuclear stations, careful cost studies have been made to assess the likely balance of advantage or disadvantage entailed by the investment. It could not be otherwise with these huge expenditures. We are dealing here with stations which will come into commission from about 1974 onwards. There are bound to be uncertainties, looking so far ahead, as in other aspects of fuel policy; but, without undue optimism or undue caution, and remembering that the stations coming into service in the early 1970s are expected to produce cheaper 1426 electricity than even the most favourably sited conventional stations, there are grounds for confidence that the stations in the middle and later 1970s will have even lower costs. Cost estimates by the Ministry for that part of the second nuclear power programme which is still uncommitted suggest that the internal rate of return on extra investment involved will be about 13 per cent.; but these are not something done once and for all.
There is a constant watch kept on this because, inevitably, there are changes which come forward from time to time and will do so in the years ahead. The evidence available to us points towards greater economy with the introduction of power from this source. The Government envisage the completion of the second programme of 8,000 megawatts of nuclear plant coming into service between 1970 and 1975. This does not, however, prejudge the choice of fuel for individual power station projects coming forward as new capacity is required. Each will be considered on its merits. This applies to the C.E.G.B.'s proposal for a new nuclear station at Hartlepool which has again been referred to in the debate.
What the White Paper did was to settle the principles for making and dealing with new power station proposals such as this. It established first that the electricity generating boards should base their choice of fuel for power stations on an economic assessment of the method of generation which would enable them to supply electricity at the lowest system cost. It would, however, be for the Government, in deciding whether to give consent for new stations, to take into account wider economic considerations such as were set out in the White Paper and dealt with in questions and answers and debates since the White Paper was published.
Meanwhile, the electricity industry has many new coal-fired stations in existence or under construction. As the White Paper shows, no less than three-quarters of the capacity is coal fired and 25,000 megawatts out of a total of 35,000 megawatts of new capacity under construction is coal-fired. One has to get the right all-round balance on the basis of the soundest possible study of the industries in relation to each other and in relation 1427 to the prospective demand for energy. This the White Paper achieves.
§ Mr. Palmer
My hon. Friend is making an interesting speech, but a great deal of this we have heard before. It is available in every kind of publication. Does he propose to reply to the debate?
§ Mr. Freeson
I do not have to have rude questions like that put to me. A lot of what has been said in the debate has been raised before. I am dealing with the points raised and I have no doubt that we will have to deal with them again in the future.
We are dealing with market forces. The Coal Industry Act, passed last year, provides for over £130 million of extra help to coal, which is a sizeable sum by any standards and particularly at a time of general economic restraint. This is plain and sound economic sense and social justice. We are going to make the most, in terms of cheap, adequate and secure supplies of energy, of all the fuel resources available to us. This means that the newer fuels—natural gas and nuclear power—will take their proper places in addition to coal and oil.
Although I mention the last point briefly I consider it to be vitally important. We will continue inside the Department to develop the new study techniques in this field which were initiated during the 18 months' work leading up to the publication of the White Paper. This is as vital for sound economic planning as the White Paper itself. As is implicit in the White Paper, this will continue. The White Paper is not a once-and-for-all exercise. We will continue to study what changes can be considered from time to time.