HC Deb 27 July 1981 vol 9 cc940-56

12.5 am

The Under-Secretary of State for Energy (Mr. John Moore)

I beg to move, That the draft Coal Industry (Limit on Grants) Order 1981, which was laid before this House on 2nd July, be approved.

Mr Deputy Speaker (Mr. Ernest Armstrong)

I understand that it is for the convenience of the House to take at the same time the draft Coal Industry (Borrowing Powers) Order 1981.

Mr. Moore

I hope that it will be helpful to the House if I first take this opportunity to speak briefly about the Government's attitude to the coal industry and about the industry's present prospects, and then deal with the need for each order in turn.

I am sure that we all want to see the coal industry play a vital role in the economic and industrial life of the nation. As the world and domestic energy scenes change and new market opportunities emerge, the coal industry has an opportunity to win for itself a good and prosperous future and to make a contribution to the United Kingdom's future energy needs.

We must none the less recognise that the potentially prosperous future for the industry will hinge very much on whether it can produce the coal that the nation needs efficiently and at competitive prices. To this end the Government are committed to ensuring that the National Coal Board progresses towards a sound and viable financial footing.

The markets that could open up for coal in the future are plentiful and profitable. Coal could chalk up great successes in the industrial market, the export market, the feedstock market, the substitute natural gas market, and, in the longer term, the market for liquid fuels. These markets have one important thing in common. It is that coal's potential customers will all make their purchasing decisions on the basis of commercial judgments. So the only way in which coal can succeed in these markets is by offering secure supplies at prices that are attractive to the customers.

A successful and competitive British coal industry could form a foundation for success in industry across the board, so the public have a vested interest in coal's success. A successful and competitive British coal industry could also spell long-term job security for mine workers.

There is no doubt that at present the coal industry faces real and fundamental problems. The National Coal Board is producing more coal than the market wants to take and at prices that are too high, and price discounting is necessary to secure sales, especially in very competitive export markets. Coal stocks have risen considerably. The NCB's stocks are now just over 22 million tonnes—nearly 9 million tonnes above the level this time last year—and this is expensive. Furthermore, the industry has a substantial "tail" of uneconomic pits, where costs are high and productivity is low. These represent a real burden on the successful and profitable parts of the industry and on the taxpayer. The NCB's 10 million tonnes of least economic capacity lost about £190 million in 1979–80, and this figure is rising. Productivity has not come up to the expectations of "Plan for Coal", which looked forward to an average annual increase of around 4 per cent. Despite an improved performance in the past couple of years, productivity has still only recently returned to levels that were being achieved six years ago, and it is considerably below the levels envisaged in "Plan for Coal".

These problems need to be overcome, so that the industry can move forward and realise its long-term potential of secure prosperity. The prospects for such prosperity are real and the reasons are well known. Broadly, they are as follows. First, insecurity and long-term scarcity of oil supplies have transformed coal's world-wide prospects and strengthened its price position relative to oil. Secondly, the threat from imported coal can be exaggerated. Even last year, NCB coal was competitive with imports at all but a few power stations either close to ports or remote from coal mines. Thirdly, there is undoubted scope for investment in modernisation and new capacity which will cut costs. For example, the estimated production cost at Selby is £17 per tonne, compared with an average deepmined production cost of £35 per tonne in 1980–81. Finally, there is clearly scope for cost reduction by the elimination of uneconomic capacity, which would mean lower losses, lower Government grants, or lower coal prices and thus lower electricity prices for industry and commerce.

The way forward must, therefore, be to balance the need to plan for the future against current economic and financial constraints. The Government's part in trying to help the board achieve the dual goals of financial viability and competitiveness will be one of continuing to provide a measure of support for the industry but at the same time to set firm financial guidelines within which the industry must work.

For the board, the way forward must be to renew the industry by investing in low-cost, highly productive capacity, while at the same time closing uneconomic and exhausted pits.

That was the general approach of the original "Plan for Coal" and the review of that plan in 1977. It was always envisaged that productivity would improve steadily year by year and that investment in low-cost capacity should proceed in step with the closing of old, uneconomic capacity. The financial strategy that we set in 1979 also adopted this approach.

In 1980–81 the National Coal Board was hard hit by recession, and sales fell to 117.7 million tonnes, from 125.3 million tonnes in 1979–80. However, other important factors contributed to the industry's difficulties. In particular, output exceeded planned levels at a time when the board could not sufficiently reduce uneconomic capacity. Total production accelerated to 126.6 million tonnes, with opencast production alone exceeding the board's planned level by over 2 million tonnes. Coal face productivity improved encouragingly in 1980–81, but because of problems in deploying men effectively elsewhere below ground, overall productivity improved by only a small amount.

On the demand side, the background to coal's current problems is the change that has occurred in overall levels of energy demand since 1974, with the quadrupling of oil prices and successive increases in the prices of fuel.

Luckily, coal's share of total energy demand was less badly hit last year than oil's share. Indeed, in April of this year, for the first time in that month for 10 years, coal was the United Kingdom's main source of primary energy. However, it is essential that the coal industry responds to supply/demand changes by balancing new, low-cost output coming in with the disappearance of old, high-cost capacity. That is the way to secure prosperity for the miners, their customers and the nation.

On 16 June my right hon. Friend the Secretary of State announced the outcome of his review of the board's financial position. After taking account of all the National Coal Board's needs, including both his two specific commitments and the financial needs imposed by its wider economic difficulties, he announced that the board's external financing limit for 1981–82, of £886 million, would be raised to £1,117 million. He also told the House that he would be bringing before Parliament an order under the Coal Industry Act 1980 to increase the limit under section 4 of that Act of grants payable to the board from £525 million to £590 million and that, in addition, he would bring before Parliament, under the same Act, an order to increase the board's borrowing limit from £3,400 million to £4,200 million.

Within the revised external financing limit, operating and deficit grants paid to the board this year will amount to some £450 million, with social grants totaling about another £100 million. Support of this size cannot be accommodated under the existing statutory framework, and the Government have announced their intention to introduce new legislation this autumn to increase the existing statutory limit on the board's borrowing and to allow continuing grant support for its operation and revenues.

That brings me to the order to increase the borrowing limit. Section 1(1) of the Coal Industry Act 1980 raised the limits in section 1(3) of the Coal Industry Act 1965, as amended, to provide that the limit on the borrowings of the National Coal Board and its wholly owned subsidiaries, could be raised from an initial £3,400 million to £4,200 million. It is now necessary to raise the borrowing limit, and the Draft Coal Industry (Borrowing Powers) Order 1981 is designed to do this.

On 10 July 1981 aggregate borrowings amounted to £2,933.9 million. They are expected to rise to over £3,100 million by early August, and the limit of £3,400 million is likely to be reached in September. It is thus necessary for the order to increase the limit to be approved before the House adjourns for the Summer Recess. On present forecasts the proposed borrowing limit of £4,200 million is not likely to be reached until mid-1983.

The new borrowings are required to finance the board's capital investment programme over this period, an increase in the value of coal stocks, and to cover other working capital needs.

I turn to the draft order to increase the limit in section 4 of the Coal Industry Act 1980, the Draft Coal Industry (Limit on Grants) Order 1981.

Section 4(3) of the Coal Industry Act 1980 imposes a limit of £525 million on the aggregate amount of the grants that may be made by the Secretary of State, with the approval of the Treasury, over the financial years ending March 1980 to March 1983 inclusive. The first is to the National Coal Board under section 3 of the 1980 Act—grants to eliminate or reduce group deficit. The second is to the National Coal Board and other producers of coal under section 2 of the Coal Industry Act 1977—grants for promoting the sale of coal to Electricity Boards. The third is to the National Coal Board and other producers of coal or coke under section 3 of the 1977 Act—grants in connection with stocks of coal or coke. The fourth is to the National Coal Board and other producers of coking coal under section 8 of the Coal Industry Act 1973, grants in respect of coking coal.

Under section 4(4) of the 1980 Act the Secretary of State has power to increase the limit by order made with the approval of Treasury subject to a maximum of £590 million.

The total amount of grants paid to the NCB at the end of March 1981 was about £347 million composed of aid for stocks of coal, of £26 million; coking coal aid, of £9 million; aid in respect of sales of coal to electricity boards of £19 million and deficit grant of £293 million. This leaves a margin of £178 million available under the present limit of £525 million, and the order would create the maximum headroom of £243 million. The first 1981–82 payments have just been made, and the whole of the increased margin will be needed this financial year, enabling us to meet our commitment to support the industry in this difficult period with operating and deficit grants of some £450 million this year.

I expect that the present limits of £525 million will be reached in late summer or early autumn, so it is appropriate to seek approval to increase that statutory limit now to enable the NCB to receive grant payments without undue delay. Grant payments within the raised limit of £590 million would be advanced to the board under the arrangements indicated in the Estimates.

In asking the House to give favourable consideration to an increase in the limit under section 4 of the Coal Industry Act 1980 to the maximum of £590 million, I can give an assurance that the Government will continue to monitor closely the board's progress towards real improvements in its financial performance. The revised level of grants, which we intend to make this year, towards the payment of which this order would assist, is based on a careful assessment of the board's overall financial needs and will put the industry in a position where it has a real chance of offsetting its losses.

The Government are by no means offering the NCB a blank cheque. The financial disciplines are still very tight and the industry will need to respond to these disciplines by making a very real contribution through increased sales margins and revenues and reduced costs and higher efficiency. I know that I can rely on all who are concerned in the industry to do this. I commend the order to the House.

12.19 am
Mr. Alex Eadie (Midlothian)

The Opposition listened carefully while the Minister outlined the orders. It is appropriate that both orders should be debated together because, to some extent, they marry into each other. We are not surprised that the orders have been presented. As the Minister said, not only were we aware of the tripartite discussions between the National Coal Board, the trade unions and the Government, but the Secretary of State for Energy announced to the House on 16 June that he would present the orders for parliamentary approval.

My right hon. Friend the Member for Leeds, South (Mr. Rees) established from that statement that the cash limit had been increased by £231 million. The Secretary of State confirmed that. My right hon. Friend said that he thought the figure was too low to implement the "Plan for Coal."

The Secretary of State replied: That view was not expressed by the unions and the board when I met them this morning."—[Official Report, 16 June 1981; Vol. 6, c. 868.] I have checked that statement with the trade unions. The feedback was different from the Secretary of State's interpretation. The unions expressed their view in three different ways. They said that it was a sign of movement, that it did not meet the overall problem and that they reserved the right to return to the issue.

It is unfortunate that the debate is so short. It is appropriate that the unions' view should be put on the record. It is not surprising to hear that opinion when, in reality, the orders are a first-aid job. It may be a good first-aid job for the financial year, but it is a first-aid job nevertheless when the magnitude of the problems in the mining industry are fully considered. The Minister, in his opening remarks, confirmed that serious problems face the industry. I am not carping, but simply underlining what the Minister said.

Longer-term legislation is contemplated. We hope that it will deal with the discredited Coal Industry Act 1980. Many people other than hon. Members would say that the implementation of that legislation would bankrupt the NCB and the mining industry, whether or not it was designed to do so. It is appropriate to ask the Minister whether the Government are contemplating new legislation to put the matter right this time. What tripartite discussions does he intend to have with the unions and the NCB? The Minister paid tribute to the previous discussions. Indeed, the Secretary of State has paid his tribute. Do the Government intend to achieve the right balance this time? What consultation do they intend to have with the tripartite group on legislation?

I hope that we shall not return to the 1980 approach. Someone outside the House said that when the Government are dealing with the problems of the mining industry they tend to shoot first and ask questions afterwards. We all make mistakes, but I hope that the Government have learnt by theirs. I hope that there will not be a repeat of the events of February. If Britain had been gripped in an energy crisis as a result of industrial action, the Government would have had to act. The Government quickly introduced discussions and meetings to avert what would have been a serious energy crisis.

In dealing with the union's reservations, I ask the Minister about the boiler conversion scheme to coal and the £50 million that will be made available for the purpose. We are informed that there have been 800 inquiries. Will the Minister translate that response into financial assistance? The scheme had Budget implications and it was announced in March. That is my recollection. It was certainly introduced to the tripartite group in March. I am not sure when it was announced to Parliament.

The House should measure the orders by taking its mind back to March and the start of the confrontation between the miners and the Government. I do not seek to analyse those events. I think that the House must have a major debate to ascertain what provoked the crisis and to deal thoroughly with the coal industry and energy. If the orders are to be seen in the proper perspective, we must consider the proposition that the mining unions and the National Coal Board put to the Government.

It will be sufficient if I put on record the general strategy of the unions and the NCB, which was discussed prior to tripartite meetings. They wanted the Government's full support for "Plan for Coal". That meant support for the new capacity. The Secretary of State always talks about the industry wanting to be competitive. There is not a chance in hell of it being competitive unless new capacity is made available to it. When it is available we shall be able to stop talking about pit closures. That will be so under this Government or any other Government. If we have new capacity we can talk about new sinkings and a modern competitive industry that is able competitively to produce coal. The unions and the NCB agreed that there must be a commitment to "Plan for Coal", which means Government support for a new capacity.

The second point that was decided was the whole question of imports. I shall not go into detail, as the Minister has referred to that. It would be easier to state the problem than to solve it. It was so big a problem that in the mining union's strategy with the National Coal Board, they deemed that it had to go on the agenda for such a meeting of the tripartite group.

The Minister has paid tribute to the fact that exports have increased, much against the predictions that many people have made. Pit closures have also been mentioned. Although the Minister referred to pit closures he must agree that the Government and the National Coal Board agreed categorically that the list of pit closures had to be withdrawn. At the tripartite meeting all the Government Ministers were in attendance, including the Secretary of State for Employment. There was never a bigger array of Cabinet Ministers at a meeting, to try to get the problem resolved, after the problems of February. They agreed that the pit list should be withdrawn.

I could deal with interest charges in relation to the orders, as I noticed on the tape that Sir Derek Ezra has been making comments on interest charges. At that strategy meeting, the mining unions identified that interest charges were costing the National Coal Board and the mining industry £185 million. The questions of stocking aid, social grants and research and development were dealt with. The Minister referred to long-term liquefaction. He was at the conference in Jersey, as I was. There is bitter cynicism about the Government's commitment to the Point of Ayr project. The mining unions were under the impression that the Government would back the Point of Ayr scheme more strongly financially than they have backed it to date.

At the tripartite the Secretary of State said that any financial support would come out of the Department of Energy's budget. I believe that he was honest when he said that, but I do not think that he said how much would come out. To some extent, the Treasury has won in this argument. No Treasury money is going into the project. I know how difficult it is to work a Department of Energy budget. It is difficult, as different agencies want to draw on the budget. To some extent I sympathise with the Minister when I ask how we reallocate and what are our financial priorities in allocating the Department of Energy budget. We ask what we can afford and what we can spend in liquefaction.

There is cynicism and disappointment over the Point of Ayr project. The mining unions are disappointed that the Government, although they did not state the figure at the tripartite meeting, have not backed the scheme financially in the way they should. I know that the Minister believes that we must get ahead with the question of the liquefaction of coal. Time might not be on our side. We are not talking about some Walter Mitty project.

Regional grants were mentioned. Plant conversions, to which I have already referred, were mentioned. Price support to help to cut coal stocks were also mentioned. That was the shopping list, as it has been described, of the unions when they met the Government. The Government reached an understanding to examine all the problems that I mentioned and to help the industry. Those are not the precise words that the Secretary of State used, but it is a fair description of what he and his fellow Ministers said.

We are told that the orders are a forerunner of that. However, we come back to the £231 million increase in the cash limit. We should compare that with the £300 million for grant, which, as the Minister said, includes social grants. Why is there a disparity between the two figures? Bearing in mind what the hon. Gentleman said, the logic is that a cut will need to be made in capital expenditure. If that is so, how on earth will we get the new projects and new capacity? How also does that square with the promise made to the House and to the miners in "Plan for Coal"? The Secretary of State is fond of underlining the need for a competitive coal industry. We want a competitive coal industry, which is why we backed "Plan for Coal" and why we must look ahead for investment to get the new capacity. The industry has been starved of investment for a decade and a half. It annoys us that some people think that they can start coal mines and production simply by turning on a tap.

The hon. Gentleman gave a roll call of the record of production of coal. To some extent it was an indictment of how we have starved the coal industry of investment. To some extent he made a case for new investment. He told the House how new investment was paying off in increased production. The more new capacity that we introduce, the more that we shall get increased production and become more competitive with other coal industries, particularly in America and Australia. We do not need to worry about Europe. Our coal production is the best in Europe. Our industry and production is the most efficient.

The Minister may say that my judgment on the figures is wrong and that some of the points that I raise will be taken care of in the new legislation. However, we want to know what financial provision is being made, for example, for the Vale of Belvoir. It is unthinkable that the Department of Energy will allow the Department of the Environment to kill the project. One cannot at a stroke wipe out a coalfield and its miners. I know miners, and the miners there are among the best in the world. The Vale of Belvoir is not just a coalfield. It is a goldfield. It is a capital asset. It is wealth that we need to implement "Plan for Coal". Do the orders involve money to make a start this year if permission goes ahead for the Vale of Belvoir?

What about the Margam in South Wales? The new project is essential for employment in South Wales and is vital for an industry that is contracting, perhaps because of the exhaustion of reserves.

I turn to my area, Scotland. What about Musselburgh? According to the orders, will there be any money to get that started? Scotland needs a new sinking just as South Wales and the Vale of Belvoir do. My hon. Friend the Member for Edinburgh, East (Mr. Strang) and I need such measures in order to quell the hunger for jobs. If we went ahead with the Vale of Belvoir, Musselburgh and Margam they would be good investments for the nation. My hon. Friends and I attach great importance to the questions that I have posed the Minister. I hope that he will assist the House by giving some answers.

12.42 am
Mr. T. H. H. Skeet (Bedford)

This is only a short debate, yet it is apparent from the years in which I have listened to debates on coal that a torrent of money has flowed into the industry. Between 27 June 1981 and September 1981 £600 million will flow into the industry. Economics have been thrown out of the window in contemplation of the future and in the hope that something will happen.

To bring the House back to reality, I shall mention some figures. In the past year, output was up 3.3 million tonnes, to 126.6 million tonnes. Sales were down 7.4 million tonnes, to 117.7 million tonnes. Output increased, but sales fell. Therefore, a lot of coal is being stocked. In May the stocks had reached 40 million tonnes. It gives us no satisfaction to know that coal is being sold abroad, because all foreign sales make a loss.

I listened carefully to the hon. Member for Midlothian (Mr. Eadie). I am inclined to agree that the cost per tonne at Selby, at £17 per tonne, is far preferable to the current average of £35 per tonne. That means that we would have to establish new capacity and retire much of the old capacity. I read in this morning's paper that 20 pits may be closed. If the Vale of Belvoir is required, will the miners agree—as they agreed in 1974—to a realistic closure programme?

As for the market, 78 per cent. of our electricity is produced from coal. As far as I know there is no suggestion that the CEGB will be made a subsidiary of the NCB. The citizen pays for his coal thrice. He pays for the coal itself. In addition, through taxation he pays for the subscription of investment capital to the NCB. He also has to meet the increased cost of electricity. I wonder whether the Minister will be good enough to tell the House what the industry has subscribed in the past 10 years from its internal accounts.

I have gone into the figures carefully. It would appear that virtually nothing has come from internal resources over the 10 years that we are dealing with. Therefore, it is difficult to ask the taxpayer, the citizen, the consumer, to continue to provide more and more funds for the coal industry when it appears that the market is not yet there.

I agree that we would like to make demand equal production, but demand will not rise, since we are in a recession and the National Coal Board has got its timetable wrong. I agree that the fuel oil conversion programme is too small to make much of an impact. I also agree that fluidised bed combustion is premature for the aid of the industrial market. I have already indicated that exports are unprofitable and that maintaining stocks is expensive.

The principal market for coal remains with electricity. In recent years the Central Electricity Generating Board has taken 75 million tonnes a year from the NCB, but it anticipates that with the restriction in supply and reduced demand for electricity, coal consumption could fall to between 75 million and 80 million tonnes, if not lower in later years.

I warn the House that these are new figures for the generating costs of all power stations. The AGR will produce current at 1.45p per kilowatt hour as opposed to the coal-fired station at 1.85p per kilowatt hour and the oil-fired station at 2.62 per kilowatt hour. If those figures are correct, can we anticipate any further coal-fired power stations being built? If we build them, they will have to be heavily subsidised or they will produce expensive electricity. Should not the CEGB and the area boards consider their consumers?

The market for coal seems to be falling at the same time as production is expanding. We should look at the investment programme to find out whether it is reasonable in the circumstances.

The Minister referred to productivity. Output per manshift in May 1981 was 2.47 tonnes, compared with 2.15 tonnes in 1974 at the time of "Plan for Coal". This vast investment of £3 billion has meant an increase in output per manshift from 2.15 tonnes to 2.47 tonnes. I know that the miners are doing their best in difficult circumstances, but I would not say that that was a substantial leap forward. Output per man-year in 1973–74 was 392 tonnes. In 1974–75 it went up to 475 tonnes. It dropped to 470 tonnes in 1979–80.

That represents one clear point, and people can see it. Productivity is not expanding very much per year in relation to the immense investment that is going into the industry. That investment comes not from the NCB—it has not got the money—but from the taxpayer. If the taxpayer is to get such a low return, might he not suggest that the money could be better invested in other ways for a fuller return?

I fully recognise that coal will have a glorious long-term future, but it is important to get the timing right. The right timing will not be tomorrow or the day after that; it may be years ahead.

The hon. Member for Midlothian talked about gasification. It will not be required in the United Kingdom until approximately the late 1990s or the turn of the century. Although it may be useful to experiment with it now, any investment moneys that go into it will be of little avail in the United Kingdom. But I say to the hon. Member and to the Minister that, if we are to reduce costs, the Selbys of this world will be vital. It may be necessary also to develop at some stage the Vale of Belvoir. I see that my hon. Friend the Member for Melton (Mr. Latham) is here. It is in his territory. But I should have thought that the Vale of Belvoir would have to await the market and to await the turn of events. There would have to be a concession by the miners that to the effect they are prepared to face reasonable pit closures to enable development of that type to go ahead.

In all the years that I have been in this House we have been talking about first aid for the coal mining industry. It has been fantastic. Almost every year we have a Coal Industry Bill. I have stressed already that productivity has not gone up by very much, and that there have been difficulties for the citizen or the taxpayer. This is not the time at which to go further into the points which arise on this matter. After October we shall be having a new Bill, which will no doubt be cast on the framework of the Coal Industry Act 1980. I hope that it will be borne in mind that, while the miner has the right to a good future, the citizen also has the right to a reasonable return from the money that he has conceded. This is not one of those industries into which one pours enormous sums of money and just hopes for the best.

12.53 am
Mr. Frank Haynes (Ashfield)

I am not at all surprised at the contribution made by the hon. Member for Bedford (Mr. Skeet), because there are far too many attacks made on the National Coal Board, the industry and the workers within it in this place. It is high time that many Conservative Members went to have a look at exactly what is going on in the industry—just as the Minister does. He interests himself in it. But Members of Parliament have a responsibility, too. It is easy to stand up here and criticise severely the industry that we are discussing tonight. I happen to have come from it; I know what it is all about. I know the effort that has been put in over the years.

The hon. Member referred to output per manshift going back over three or four years. He can go even further if he wishes, but he must remember that there has been a serious reduction in manpower in the mining industry. Yet productivity and OMS have increased, even though it has been indicated tonight that OMS increase is small. That is the impression that has been given. But there is another problem. It is all right to talk about the amount of finance that has to go into the mining industry. We have great difficulty in replacing machinery and equipment. Clapped-out machinery has to be used continually. That does not help production or output. We have to look at the problem sensibly. It is easy to stand here and criticise what is going on in the mining industry.

The hon. Member for Bedford is not only nuclear weapon barmy; he is also nuclear power station barmy. He should talk to some of the people outside who are opposed to that and favour the mining industry. That industry can supply energy for hundreds of years.

The Minister and the hon. Member for Bedford referred to the stocks that we have. Not long ago we were crying out for every ounce that we could produce. We could not produce enough and we were having to import coal. Why do we have such stocks now? It is because this damned Government have closed industry down. That is what is wrong. If they could get industry back to work the stocks of coal would disappear.

That leads me to Belvoir. I realise that there must be arguments in the Cabinet about Belvoir. I want to make it clear to the Minister that I believe that there is something behind what he has said tonight about fresh legislation for the mining industry in the future. I believe that the Government will be exerting further pressure to close pits. That is coming over loud and clear to me. The hon. Member for Bedford is backing that.

The people who work in the mining industry will not accept that sort of pressure. They did not accept last time and they will not do so next time. This country's industry and economy is based on coal. The sooner we realise that the better off we shall be.

Mr. Skeet

It is based on oil and gas, too.

Mr. Haynes

We shall need Belvoir in the future as well as our present pits.

I come from an area—the county of Nottinghamshire—where figures have been announced today of the output and massive profits that have been made. I am proud to come from there. Some of the pits that have made decent profits in my constituency will go on.

Mr. Skeet

Yes, indeed, the profits have been made in the Nottinghamshire area, but in the pits of Wales enormous losses have been contracted. Therefore the good areas are demoralised because they have to pay for the losses of other areas.

Mr. Haynes

The hon. Member for Bedford has been here for longer than I have, but I can remember the first legislation that went through for the mining industry. It was not a question of having to make a profit, but of breaking even. The hon. Member knows what the figures are for the whole of the industry. They are above breaking even. The industry has made a profit every year, but it has been strangled by interest rates and interest repayments. That is what is wrong with the mining industry over die years. If one pushes that aside the industry has made a profit since nationalisation.

The hon. Gentleman has been here longer than I have, but he should understand what was done at the beginning and what is happening now. I maintain that there is a brilliant future, as the hon. Member said, for the coal mining industry. But we must be sensible about it. Some of the other things that the Minister says from time to time are sensible. I give him credit for looking at the industry. He gets among the lads who understand the industry and do the job. He talks to them, to try to understand the mining industry, what it is all about and what it can do in the future and what the Government can do to help the industry that the country will need so desperately in the future.

1.5 am

Mr. Nicholas Lyell (Hemel Hempstead)

I am not a coal specialist but I speak with much good will towards the coal industry. I endorse what the hon. Member for Ashfield (Mr. Haynes) said. We must discuss this sensibly.

When we consider this country and its future based on coal, the hon. Member will agree with me that that future cannot be bright unless we can mine that coal profitably and competitively, so that whether we use it at 75 million tonnes per year, or whatever figure it may be, to create our own electricity, or whether we seek, as I hope we shall, to export it into Europe—where by the end of this century there will be an export market of 350 million tonnes a year, with all the opportunities and jobs that that market can provide—we can produce that coal paying the interest charges on the investment that we have made at a price that enables us to sell competitively against the Australians and against coal from the United States, with which we shall be competing.

The hon. Member for Ashfield and other right hon. and hon. Members know, and have continually stressed, that the heart of this country is coal, running south from Scotland to Oxford. They are seeking decisions—and I understand why—to mine the very best seams of coal in Britain. Hard and difficult are those decisions for any Government to make. But how can we ask the British people to put their hands in their pockets and lay out the investment for the future, whether it be for Belvoir or any other coalfield, unless we cart see a profitable future—let us not shy away from it—which will bring good jobs and good working conditions, and a good return to the taxpayers who have put forward that investment?

As we debate these orders, we simply cannot forget the realities that faced the present Government and our coal industry, in which we believe, in February this year. A tremendous fuss was whipped up, wrongly and unfairly, about pit closures. I must say this, because I feel kindly towards the coal industry and it is not kindness to let this be forgotten.

Mr. Eadie

The hon. and learned Gentleman says that a fuss was unfairly whipped up. Do I take it that the hon. and learned Gentleman, as a Back-Bencher, has learnt nothing from the errors made in the Coal Industry Act 1980? Is he really telling the House that that Act was adequate to deal with the mining industry's problems? That is a very important question.

Mr. Lyell

I shall answer the hon. Gentleman in this way. I asked the chairman of the National Coal Board how many pits we were seeking to close this year. The answer, including the two about which there had been agreement, was 23. Those 23 pits were losing £74 million in this year. They were employing 13,000 people. They were producing 4 million tonnes of coal, at an average rate of 1½ tonnes per manshift—if I have my figures right. If those pits had been closed, more than two-thirds of the gallant miners who worked in them would have been found new employment in better pits—

Mr. Eadie

Answer the question.

Mr. Lyell

Let me continue for a moment.

Of the remainder, a great many miners were rising towards retiring age. Would they not be so much better off by taking the excellent redundancy payments that were offered, as opposed to continuing to work in those outdated conditions?

Mr. Eadie

They want to work.

Mr. Lyell

I appreciate that miners want to work. I am saying nothing against the individuals. I am simply drawing to the attention of the House the answers that I was given by the chairman of the NCB as to the realities of the position we face.

All that I ask, on behalf of those parts of the country that do not live out of coal, is that when we put our hands in our pockets for the golden investment for the future, we all look at is sensibly, in the words of the hon. Member for Ashfield, and do so on a sound economic basis. We have subsidised the industry substantially over the past 10 years and produced a massive £800 million investment for this year, which has not been generated by the industry. But if there is to be a sound long-term future the investment must pay for itself and meet the interest charges that other businesses have to meet.

That is all that I ask of the coal industry and if those points can be met I shall be happy to support it wholeheartedly.

1.8 am

Mr. Allen McKay (Penistone)

I should like to comment on the Coal Industry Act 1980 and the furore about colliery closures. Those in the mining industry have lived with such problems all their lives and they quickly catch on to what is happening.

Even the chairman of the National Coal Board condemned the 1980 Act, because it was obvious that about 60 pits were scheduled for closure. The 22 or 23 pits that the Minister and the chairman have referred to would have been closed anyway, because they were exhausted. No one wants to work in a colliery that reaches that stage. The 1980 Act contemplated the closure of about 40 pits that were not exhausted. They were uneconomic, but we have to be careful when talking about such pits. I know of at least three that were uneconomic on paper, but we were pleased 12 months later that they were not closed, because they all became record breakers.

The hon. Member for Bedford (Mr. Skeet) referred to a return on investment, but we have to ask what the NCB is investing in. The hon. Gentleman seems to think that it is investing continually in coal face machinery and updating it, but the Coal Board is looking to the future, and the biggest investment is in the development of coalfields and in washery plant—not the production of coal, but the quality of coal.

The new washery plants can be changed to power station coal or coking coal at the turn of a switch. In the past, problems were caused because plant could deal with only one type of coal or the other. The new plant can deal with either, as and when required. The coalfield that I worked in was virtually based on coking coal, but it could switch over quickly as the steel industry ran down, because of the recession and, I regret to say, Government policies.

The rundown of the steel industry is one reason why we have such high stocks of coal. But for that rundown, that coal would have been sold. We are selling a lot of coal abroad because of the problems in Poland. We are taking advantage of what is happening there and we hope that we shall be able to keep the new markets.

Morale and production in the industry are high. The hon. Member for Bedford spoke about the rise in output per man shift, and given that seams are getting thinner in certain areas and bearing in mind the differences in work styles, there has been considerable progress.

One reaches a plateau in any mechanisation programme and it becomes difficult to go further. Following mechanisation of the coalfields, the difference in output was tremendous, and rose steeply, but it eventually reaches a stage when it can rise no more without further innovation. That is what the new investment is all about.

The Vale of Belvoir cannot or, it would perhaps be better to say, should not wait. The lead time for the Vale of Belvoir is about 13 years. In all the collieries in the Leicestershire coalfield, the period is between seven an nine years. Any decision not to develop the Vale of Belvoir at the present time means that one has wiped out the whole of the Leicestershire coalfield. Once that happens, the miners and their sons are no longer available. The capacity no longer exists.

Why, therefore, is the Leicestershire coalfield not developed, especially as the inspector says that he has no objection? Three possibilities occur to me. The Government could be considering a bargain under which money would be made available for the Vale of Belvoir provided that agreement was reached on the closure of collieries. Secondly, the issue could become a matter for bargaining in the next wage negotiations. Thirdly, it is possible that the oil companies in Britain, like those in the United States, which are investing in Australian coal, may be wondering where to invest. The thought occurs to me that oil companies here may wish to invest in British coal. What could be better than a coalfield, already explored by the National Coal Board, ripe for picking?

Mr. Lyell

I am delighted to hear the hon. Gentleman even raising this topic. I greatly respect his knowledge of the coal industry. Nothing would please me more than to see BP able to make investments in British coal. Is the hon. Gentleman prepared to contemplate such an idea?

Mr. McKay

Not at all. I have seen the benefits of nationalisation in this industry. I have seen the benefits for the miners and their families and for the country. I shall always fight for the National Coal Board. This is a State industry. It belongs to the nation. It should continue to belong to the nation. It should certainly not be hived off to private enterprise.

I was pleased to hear the Minister say that he will be keeping a close watch on the National Coal Board, although his reasons are, possibly, not the same as mine. The money, even though generous, is not generous enough. That mistake will probably become evident in a short time. I hope that there will be no attempt to cut back on investment. If a request is made for money, I hope that it will be granted.

1.15 am
Mr. John Moore

With the leave of the House, Mr. Deputy Speaker, I shall seek to reply to the debate. I regret, like the hon. Member for Midlothian (Mr. Eadie), that there always seems limited time for these debates on a key aspect of energy. If any points raised by hon. Members are not covered in my reply, I shall write to those hon. Members. Anyone reading through the records of this House must recognise the exhaustive experience of my hon. Friend the Member for Bedford (Mr. Skeet) on energy matters. He and my hon. and learned Friend the Member for Hemel Hempstead (Mr. Lyell) drew attention to the fact that this debate is concerned not only with the coal industry but with the cash that taxpayers provide for the industry.

I shall endeavour to return to the specific point raised by my hon. Friend the Member for Bedford about the self-financing ratios over 10 years. I cannot go back that far from memory. I can, however, inform my hon. Friend that the self-financing ratios before grants for the past two years, 1979–80 and 1980–81, were minus 11 per cent. approximately in both years.

The hon. Member for Midlothian asked many questions, telling us that he was putting down certain markers for later debates, when we consider the next Coal Industry Bill. I look forward to such occasions. Under the present Government we have had many tripartite continuing discussions, which have been very useful and successful.

I cannot give any binding commitment that a particular debate will take place at such a discussion, but I can say that the debates wind all the way round the coal industry. I cannot imagine that the NCB, the unions and the Government would not wish to consider all issues. No future tripartite discussion has been planned, but no future one has not been planned. The date was left open at the end of the last discussion on 16 June.

Like the hon. Members for Ashfield (Mr. Haynes), Penistone (Mr. McKay) and many others, the hon. Gentleman mentioned the North-East Leicestershire prospect, if I may so describe it. The position is as I made clear on 6 July, in the last round of oral questions on energy, when I repeated that no decision had yet been taken."—[Official Report, 6 July 1981; Vol. 8, c. 15.] My right hon. Friend the Secretary of State for the Environment is considering the board's planning application. I cannot go further, but those who read our debates will be aware from this debate of the interest in the subject.

The hon. Member for Midlothian also legitimately raised such matters as Margam and Musselburgh. He will know from his experience as a Minister, in the job that I now hold, the degree to which one can and cannot become involved in the NCB's detailed management. I shall draw the board's attention to the hon. Gentleman's questions, but the decisions on investment projects must be made by the board—within the total size of the investment, which I shall come to.

The hon. Gentleman mentioned his hon. Friend the Member for Edinburgh, East (Mr. Strang), who cannot be with us tonight. I have told his hon. Friend that I shall visit the area in September to visit a pit and be shown around the project that the hon. Gentleman had in mind. [Interruption.] There is no need for any special protection when visiting any parts of our coal industry. The industry is noted for its courtesy and the way in which it treats visitors from all parts of the House, and I am sure that that will continue.

The hon. Gentleman asked about boiler conversions. There have been a thousand inquiries so far. Detailed questions must be addressed to the responsible Minister, my hon. Friend the Minister of State, Department of Industry, who announced on 22 May this year the detailed procedures. I shall draw the hon. Gentleman's questions to my hon. Friend's attention.

The hon. Gentleman then asked about the overall and outline position of "Plan for Coal". As my hon. Friend the Member for Bedford said, the industry has seen more than £3 billion invested in it since the initiation of "Plan for Coal". I am not decrying that; it is a substantial sum. We are discussing the nature of long-term capital investment. We have all seen in the board's annual report, published today, that for the year 1980–81 mining capital expenditure rose by 19.3 per cent. to £736 million for the fiscal year just ended. The hon. Gentleman talked about heavy-duty equipment and the nature of long wall modern face techniques. I draw his attention to the fact that spending in that area and major colliery projects rose in that fiscal year by 32.1 per cent. to £333 million. As I told the House on 6 July, capital investment within the £1,117 million external financing limit in 1981–82 is at the rate of £805 million.

I shall give the hon. Gentleman more detail in writing, if he wishes, about the increase in the EFL of £231 million and the increase in grants of £300 million. The hon. Gentleman asked how that would impact on the capital expenditure. Here we are almost in accountants' nightmares.

I draw the attention of the hon. Member for Midlothian to the fact that increasing the borrowing further would add to the board's interest bill and to its deficit, thus reducing the sums that are available for other developments. Increasing the grants within the EFL relieves the interest burden, and helps the board. I draw his attention to that aspect of esoteric accountancy. However, I am sure that we shall return to that matter, in the Committee considering the next Coal Industry Bill.

The hon. Member also referred, rightly, to aspects of the discussion about "Plan for Coal". He mentioned the recent tripartite discussions. I was glad that he drew attention to the way in which the Government have honoured their two prime commitments, which were referred to this evening in our discussions about imports and the Government's commitment to help the NCB with the cost of withdrawing the proposals to accelerate pit closures.

The hon. Member mentioned the Point of Ayr project. I was privileged to be a guest of the National Union of Mineworkers at its conference in Jersey. May I correct one thing for the record? So far I have not been privileged to be asked to speak from the conference platform, but I am sure that the union will extend that courtesy to me at some time during the many years that this Government will continue in office. I was pleased to listen to the right hon. Member for Leeds, South (Mr. Rees), whose speech at that conference I particularly enjoyed. However, I wish to correct one statement, because it creates a degree of unnecessary concern about the nature of the moneys that the Government have sought to advance. It was said from the floor that they were moneys from the board's external financing limit. As the hon. Member for Midlothian said, the £5 million comes from the Department of Energy Vote, and has no connection with the board's EFL.

The hon. Member raised certain questions about the Point of Ayr project. All of us wish the project well, but I want to make it clear that the NCB has been in active discussion with the Department and other potential sponsers about how the project might make progress. I shall leave it there. In all areas of government we want more taxpayers' money to be spent, but taxpayers' money is a rare resource. Let us see what progress is made.

I revert to what was said about the impact of the problems of the 1981 fiscal year. I mentioned this subject in my earlier speech, but I remind the House that there were five reasons for the nature of the difficulties of the 1980–81 fiscal year. The reasons did not simply relate to the Coal Industry Act 1980. The five reasons that I adduced were, first, the nature of the recession. In the autumn of 1980 the Government recognised the ways in which the recession was having an impact on coal demand, as I mentioned when I introduced these orders.

Secondly, beyond recession, there was increased production. I mentioned the figure of increased production from opencast and deep-mined production, where the investment over the years was beginning to pay in terms of increased production. There is no question of that. We should recognise as a part of the problem the very success of the industry.

Thirdly, there are the changes in productivity. Everyone hopes that they will be successful, but during the past two years we have not seen the increase in productivity that we had assumed in "Plan for Coal", of 4 per cent. per annum. That has not happened. We had hoped to be further forward.

Fourthly, there is the slower pattern of the closure rate of uneconomic capacity. That is a feature of the 1980–81 supply and demand imbalance.

Lastly—something that we do not discuss sufficiently—is the way in which many of the demand assumptions that we thought of in "Plan for Coal" are no longer well-founded. Those who take part in energy debates will be aware that the nature of the fundamental changes that occurred post-1973, compounded by the nature of what happened in the post-Ayatollah world, have changed the whole pattern of energy demand.

Despite that radical change in energy demand, which affects the nature of energy demand in our country, coal has been helped since it has maintained its price advantage relative to oil. It has improved its position and therefore grown, so that in April this year it was the prime energy supply in Britain for the first time in 10 years. That is good. Equally typical is the reality of radical changes in energy demand patterns since 1974.

We keep coming back to the word "competitive." Why should we keep referring to the word? There is no particular attachment to it. I suggest to those who are as interested as I am in the success of the coal industry that we use the word because we want a future for the industry, not simply a past. I do not want a stagnant industry. But I do not want an industry in radical decline as it is in Belgium and France. I want a future because I want to see the industry grow in competitive markets where its products will sell.

As my hon. Friend the Member for Bedford said, we already have 78 per cent. of the electricity generation market. The industry cannot penetrate further. Its future is in markets that are competitive in price terms and in fuel terms. For the miners, not just for the nation's energy interests, it is crucial that we have a successful industry if we are to gain the markets of the future. I commend the order to the House.

Question put and agreed to.

Resolved, That the draft Coal Industry (Limit on Grants) Order 1981, which was laid before this House on 2nd July, be approved.

  1. COAL INDUSTRY 23 words
  2. c956
  3. TRANSPORT [MONEY] (No.3) 130 words
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