HC Deb 26 July 1983 vol 46 cc1159-66

Motion made, and Question proposed, That this House do now adjourn.—;[Mr. Neubert.]

10.50 pm
Mr. Tony Blair (Sedgefield)

Fishburn coke works is in County Durham and is owned by National Smokeless Fuels, which is a wholly owned subsidiary of the National Coal Board. It is acknowledged on all sides to be a highly efficient and modern plant, producing some of the best domestic coke in the United Kingdom or, indeed, anywhere in the world. It has a remarkable industrial relations record. Its existence is pivotal for the community of Fishburn, yet National Smokeless Fuels tells us that it must be closed. I come, as it were, post haste from a meeting in the constituency about the Fishburn coke works. Although the mood is serious, sober and angry, it is not defeatist.

It is right that Fishburn should be debated in the House, because it is a symbol of what the north-east faces: not an economic recession, but an economic blitz. County Durham is a county under siege. Since July 1979, 25,000 redundancies have been declared. In the northern region as a whole, there are now 50 people chasing each vacancy. Moreover, 34 per cent. of all public investment in the north goes on paying unemployment benefit. The cost to the Exchequer, at the rate of some £5,000 per person unemployed, is over £1 billion per year.

Young people are particularly are risk. Fewer than 20 per cent. of those who come off youth opportunity schemes find permanent employment. While closures and redundancies take place on that scale, the need for sustained, and indeed increased, investment in the northeast continues, yet the level of investment has been drastically cut. Between 1976 and 1982 unemployment has doubled, yet public investment has fallen from about £380 million to £246 million. There has been a relative decline in private investment, too. In 1976 almost 15 per cent. of manufacturing investment came to the north, but now the figure is close to 10 per cent.

That is the broad canvass of decline and despair of which Fishburn is a part. Its prominence, and the reason why the north-east watches with such apprehension to see what will happen to it, is not hard to explain. Fishburn is part of a special employment black spot called the Wingate employment exchange area. In that area, the rate of male unemployment was 48.9 per cent. in February 1983. If Fishburn closes, it will rise to 57 per cent. The total rate of unemployment at present is 40.9 per cent., but if Fishburn closes it will rise to 45 per cent.

Last year, out of 100 school leavers from Sedgefield comprehensive, the major school just up the road from Fishburn, seven got jobs—;three on their fathers' farms. Fishburn coke works provides some 83 per cent. of male employment, or 61 per cent. of total employment for Fishburn. Of the work force, 28 per cent. is under the age of 30. Although many young people have migrated from County Durham and the Wingate employment exchange area, Fishburn coke works at least provides some sort of work and stability for young people. If it closes, 270 jobs will go directly. However, there are also indirect consequences for employment. Fishburn coke works imports about 290,000 tonnes of coal from the pits of Durham and Yorkshire. Road hauliers transport the coke from Fishburn to the retailers. Some coke is exported to Germany and to Scandinavia from Seaham harbour, which provides work for dockers. Against that background, the social reasons for not closing the coke works are compelling and could stand alone.

However, in this case they do not stand alone. The case put forward by National Smokeless Fuels rests on what it says is a fall in demand for the domestic coke made at Fishburn. It might be pertinent to ask, and it is curious, why after so many years of falling demand the company should decide now that it is unbearable. There is considerable apprehension among the coke workers and the people who live in the area that National Smokeless Fuels is being made fit for privatisation. No one has suggested that Fishburn is not highly efficient and productive, yet while Fishburn is run with only 50 per cent. throughput at present, private coke works, such as Randolph, cannot meet the demand for domestic coke. It is extraordinary.

At national level, domestic coke production has increased extraordinarily during the past year. In 1981–82, 65,000 tonnes of domestic coke were produced, and in 1982–83, 102,000 tonnes were produced. Yet during the past year there has been a reduction of almost the same amount in the coke produced by National Smokeless Fuels. I make no accusations of bad faith at present, But I pass on the apprehension of my constituents and the grounds for their apprehension.

Leaving that aside, let us consider the losses made by the coke works. In 1981–82 it lost £3.8 million, in 1982–83 the figure was cut to £2.7 million, and the prediction for 1983–84 is that it will be steady. We are told that the recession is ending, so one would expect the demand for Fishburn coke to increase. While the Fishburn coke works faces closure, and while we are told that there is a reduction in demand for domestic coke, at present about 5,000 tonnes of coke is imported each day into Britain to feed the Teesside-Redcar steel works. That is Japanese coke made from Australian coal. The placing of that order by the British Steel Corporation with Japan has had a major impact on the fortunes of National Smokeless Fuels, and indirectly on Fishburn.

The works at Teesside-Redcar requires blast furnace industrial coke. Fishburn could convert to supply industrial coke, at the best estimate within 36 hours, and certainly in a matter of days. The blend of blast furnace coke required by that steel works could be supplied by other blast furnace cokes in National Smokeless Fuels. There would then be a shortfall in the supply of ordinary blast furnace coke, and Fishburn could be converted to meet the shortfall. There is no question but that the decision by BSC to place the order with Japan has had a considerable impact on Fishburn.

The economic picture could be much improved were the British Steel Corporation to show a little national spirit and co-operation. However, accepting those losses of £2.7 million, how would a sensible and financially prudent Government view such a matter? The relevant question is, what would be the cost to the public purse if Fishburn were to close? Durham county council and Sedgefield district council have calculated the direct costs of closure as follows. In the first 12 months, almost £3 million would be lost to the Exchequer. Redundancy payments total some £1,237,000, about £940,000 would be lost through the payment of unemployment benefits and the loss of national insurance contributions, and there would be £424,000 of lost tax. If one adds the lost rates and other costs, the total is nearly £3 million. The continuing loss in each year after the year of closure is about £1,500,000 a year.

The cost of creating 272 jobs, if one takes a figure of about £10.000 a job—;that is what is thought to be necessary to create a job in Durham—;is also about £3 million. In presenting those figures, one leaves out the cost of writing off buildings and plant and machinery, and the knock-on effect on other jobs, such as the effect on local traders and on the waste gas supplies that are used to supply a nearby quarry and Winterton hospital, which will have to be supplied from elsewhere. A prudent Government, balancing their sums would see the economic case to be against closure. There is a further reason for not closing the works.

In 1980, when the Fishburn coke workers were told that the economic position of National Smokeless Fuels was deteriorating, they were asked to co-operate with the management and to do everything that they could to ensure that Fishburn was economically viable. They complied in a way that is a remarkable tribute to cooperation between unions and management. They did everything that the Government say trade unions should do. Where savings could be made they were made, where they could cut costs they cut costs; they co-operated in every conceivable way, and I challenge anybody to deny that.

The savings were made on the initiative of the workers. Their idea was to set up a performance review committee. About £300,000 of continuing savings were made each year, absenteeism and sickness were cut by about 3 per cent., and it is about the tidiest plant that one could see. They even, no doubt for the purposes of his education, invited the local manager to their local lodge National Union of Mineworkers meetings. They have done all that the Government have asked trade unionists to do.

Is the lesson that the Government wish the Fishburn coke workers to learn that, if one co-operates, one becomes reviled, that co-operation is trampled underfoot, and that all the efforts to help are swept disdainfully aside? If so, the lessons that the people of Fishburn will learn, and the lesson that the people in the north-east will learn, is that the only way to get on is to turn to other and less cooperative ways of fighting for jobs.

The mood of the meeting that I attended in Fishburn was one of defiance. The workers are not defeated and they do not intend to be. They know that what is at stake in Fishburn is not just jobs—;and not just their own jobs, but the jobs of their children and of their children's children. They know that what is at stake at Fishburn is the survival of a community. They are not prepared, and neither am I, to see that community go tinder. It is a living community with a living plant meeting a need. We should not kill Fishburn, but save it.

11.3 pm

Mr. Mark Hughes (City of Durham)

Having had the honour to represent Fishburn from 1973 until 9 June, I support every word spoken by my hon. Friend the Member for Sedgefield (Mr. Blair). This is.a marvellous community and a superb coke works, and these are people who have done everything asked of them. We have closed another pit in the Durham constituency in the past four weeks, and the threat of the closure of Fishburn is an inhuman insult to the people of south-east Durham.

11.4 pm

The Under-Secretary of State for Energy (Mr. Giles Shaw)

I congratulate the hon. Member for Sedgefield (Mr. Blair) on the way in which he argued his case. His constituents will recognise not just the promptness with which he acted but the skill with which he handled the matter. I accept fully not just his views but his right to express them on behalf of the community that he represents.

The hon. Member for City of Durham (Mr. Hughes), who is well used to these matters, will recognise how cogently the hon. Member for Sedgefield, who is new to our affairs, put the case for his constituents at Fishburn. As the hon. Member for City of Durham said in his endorsement of the speech of the hon. Member for Sedgefield, he has known about these problems for a long time. The hon. Member for the City of Durham is aware of the long-term problems that the coal industry faces. The Fishburn works are a significant but none the less relatively small part of that industry.

Tomorrow, the National Coal Board publishes its annual report and accounts for the financial year 1982–83. That report will expose fully the factors that have led to the decision by National Smokeless Fuels to propose the closure of the works at Fishburn.

Despite the large amounts of money that have been invested in the coal industry over the last decade, the board's financial position has continued to deteriorate markedly. In 1982–83 the board has shown a loss of £111 million after Government grants of £520 million.

There is every sign that before deficit grant alone, the board's losses will be about £600 million in 1983–84.

Why is the board's financial position worsening? Increased capital investment has led to increased productivity. I endorse fully the remarks made by the hon. Member for Sedgefield about the remarkable co-operation over a long period of the workers at Fishburn. Investment in the industry has been high throughout. As the hon. Member for City of Durham will be aware, it is in excess of the 1974 "Plan for Coal" level which predicted about £1.4 billion. About £4 billion has been invested already, two thirds of it under this Government and their immediate predecessor.

Mr. Roland Boyes (Houghton and Washington)

Will the Minister tell the House what the level per tonne subsidy is in other EC countries compared with that in Great Britain?

Mr. Shaw

The hon. Gentleman will find the answer to that in a written answer given within the past two weeks. If one is comparing, in absolute costs, what the Government have done in support of the industry here, one must include the amounts of investment as well as those additional aids which are given in coal support. There can be little doubt that the total amount that the Government and the United Kingdom have invested in support of their coal industry exceeds any other within the Community.

The National Coal Board produces far more coal than it can sell. I believe that must be agreed on both sides of the House. The board produced slightly more coal last year than it did in the previous year but consumption was down by over 6.5 million tonnes. Thus, yet more coal has had to be put to stock, which means that the coal board's associated interest and other charges have increased. National Smokeless Fuels whose Fishburn plant we are discussing is in much the same position.

National Smokeless Fuels Limited is a wholly owned subsidiary of the National Coal Board. It produces coke for the foundry, domestic and blast furnace markets as well as manufacturing domestic smokeless fuels and a wide range of other products derived from coal. National Smokeless Fuels has been hard hit, not only by the worldwide slump in the demand for steel—;the hon. Member for Sedgefield referred to the problems with BSC—;and consequently the reduced need for blast furnace coke, but by the fall in demand for iron castings which has led to a fall in demand for foundry coke by almost 50 per cent. in the past five years. The domestic coke market has declined by a third over the same period.

Markets for coke have declined, but there has been no corresponding fall in production capacity. Coke making is a continuous process. The hon. Members for Sedgefield and City of Durham know much more about that process than I do. Throughput can be reduced, but the fall in demand has inevitably led to high unit costs. NSF, with the co-operation of the workforce, has done what it can to improve efficiency and to find new markets, but coke exports in the past two years have come mainly from stock. That has helped to improve the company's cash flow position, but not its profitability.

The Government have continued to give stocking aid to coke amountingto £8 million last year. We have also extended the period during which the foundry coke subsidy will be paid until the end of this calendar year. As the hon. Member for City of Durham will recall, that subsidy was introduced as a temporary measure in July 1981 to help the United Kingdom foundry industry, rather than the coke industry, to improve its competitive position in relation to its European counterparts. United Kingdom foundry coke prices are now comparable with the general run of prices in Europe, but neither of those forms of Government support has disguished the fact that NSF has been incurring losses in the past few years. It incurred a loss of £8 million in 1981–82, and the loss in 1982–83 is likely to be about £13 million.

NSF has two works in county Durham—;Fishburn and Hawthorn—;both of which produce Sunbrite, which is a domestic smokeless fuel. The works are less than 10 miles apart and both are working at only 50 per cent. capacity. Running costs could be cut by concentrating production at one plant, thus gaining all the advantages of lower unit costs. Fishburn and Hawthorn lost approximately £2.5 million each last year—;£5 million in total. If throughput were concentrated in one works, the loss would be reduced to between £500,000 and £1 million per year. As the hon. Member for Sedgefield will recognise, this would lead to a saving of £4 million per year compared with the initial cost of closure of £3 million in the first year.

As I have already said, I am all too well aware of the high quality of the work force at Fishburn. As the hon. Member for Sedgefield said, it is efficient and co-operative and has done everything asked of it by its employers in the recent past. I think that the hon. Gentleman would agree that that is true of the work force within NSF generally. It is extremely effective and co-operative.

Nevertheless, when there are no customers for a product, painful decisions ar inevitable. The Fishbum works can also produce blast furnace coke and it has been suggested that it could produce coke for Redcar steelworks, which now imports coke from Japan. Although Fishburn could technically produce that coke from imported coal, the fall in demand for steel coking is such that NSF is perfectly able to meet it from the other works.

As the hon. Member for City of Durham will know, the Hawthorn works was built four years later than the Fishburn works. Its ovens, being that much younger, are therefore in better condition. I understand that the byproducts plant at Hawthorn is also in better condition and that space is available to extend the plant should the need arise. That is not the case at Fishburn.

Hawthorn receives 60 per cent. of its coal by conveyor from an adjoining pit. The cost of transporting the raw material to the coke works is thus correspondingly lower than at Fishburn, where delivery is by both road and rail. The introduction of British Rail's new Speedlink freight system would require major investments and extensive changes at Fishburn to enable that works to handle the new types of wagon, whereas Hawthorn already has adequate road and rail facilities.

Higher throughput at Hawthorn and the resulting lower running costs are the kind of measures that must be taken if NSF is to meet its objective of returning to viability. Only when NSF's running costs are in line with those of its competitors will it be able to price its product at competitive levels and thus ensure continued employment for its work force.

The output from Hawthorn after the proposed closure would be similar to the current output from both works. There would be little change in the amount of coal used and claims that the closure of Fishburn works would lead to pit closures are not true.

As has been mentioned, NSF has customers for the surplus gas from Fishburn. The company is well aware of the implications for its customers should the closure go ahead, but any further consideration of the detail of these is a matter for commercial negotiation between the board and its customers. Special arrangements will, however, be made to ensure that supplies to Winterton hospital are secure.

I am well aware that the hon. Members for Sedgefield and City of Durham, and other hon. Members present today, are concerned about the effects that the proposal would have on employment in the area and in the county of Durham in general. Claims have been made about the scale of unemployment that would result. Fishburn is within 25 miles of all National Smokeless Fuels' other northern works. There are also a number of collieries in the area. Some men will be required at Fishburn on demolition and salvage works if the closure proceeds. National Smokeless Fuels intends to offer jobs to all Fishburn employees who wish to continue working in the industry, either at other NSF works or, through the good offices of the NCB, at collieries in the area. Those who do not wish to continue will, by virtue of years of service, be offered redundancy terms under the redundant miners payments scheme which, as hon. Members who study coal matters will know, are among the most generous in any industry. It is, therefore, wrong to claim that all the workers at Fishburn would become unemployed, or to base calculations as to long-term costs on that assumption.

In conclusion, I must stress two points. First the proposal to close Fishbum coke works is a matter for the management of National Smokeless Fuels and is still under discussion between it and the unions, using the agreed review procedures.

Secondly, in this instance and in the totality of the problems facing the National Coal Boa-d and the coal and coking industries, realistic calculations must be based on the state of the market and the forecast development of coal as the prime source of energy. It is inevitable that there will be reappraisal of past investments, and it is right that there should be new investment for more efficient production. If the market has shown that it is no longer capable of supporting the products from plants, however, rationalisation is inevitable, whatever the strength of the case for individual plants. No better case could be made than that made by the hon. Member for Sedgefield today, but the problems with which the NCB and National Smokeless Fuels have to deal are very great indeed.

Question put and agreed to.

Adjourned accordingly at seventeen minutes past Eleven o'clock.