DIRECTIONS BY THE SECRETARY OF STATE

HC Deb 08 March 1983 vol 38 cc758-72

'The Secretary of State shall give to any person (other than the Electricity Boards) who has established or acquired an electricity generating station, such directions as he may give to the Electricity Boards under section 8(1) of the Electricity Act 1957 which may restrict their access to particular types or sources of fuel supplies.'.—[Mr. Eadie.]

Brought up, and read the First time.

Mr. Eadie

I beg to move, that the clause he read a Second time.

We approached this issue on Second Reading, and to some extent in Committee, although for a time I was absent from Committee, because I was in hospital. Nevertheless, we attach great importance and significance to this new clause. It seeks to ensure that private generators will not be given blatant preference over the public sector in the use of fuels. As we have discussed this issue before, it is no secret that the main factor is coal.

The issue is somewhat complicated by the fact that the Government have continually spelt out that the Bill is necessary because they are wedded to the cause of privatisation. The Bill's implications are another matter. Indeed, my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) made some very caustic remarks about the Bill. Nevertheless, the Government will have to tell us whether the privatisation to which new clause 8 refers will be implemented come hell or high water. It is possible to obtain cheaper coal from other countries. Indeed, on Second Reading, the Liberals were very enthusiastic about the importation of foreign coal. I understand that the right hon. Member for Greenock and Port Glasgow (Dr. Mabon)—a member of the Social Democratic party—was a bit more cautious. He accused me of being rather hard on him. I think that I apologised to him at the Committee's first sitting, because he said that, with his anti-apartheid record he was not in favour of South African coal. My hon. Friends and I longed to see an amendment in Committee—or even now—saying that Liberal and SDP Members were in favour of importing foreign coal although the right hon. Member for Greenock and Port Glasgow was not in favour of importing coal from South Africa. The right hon. Gentleman has not clarified the issue. We are as perplexed as ever. I apologised to him during the first sitting of the Committee, but I do not know why I bothered. I seem to have been wasting my time.

7.30 pm

I used the phrase "come hell or high water" in connection with the importation of foreign coal. The Minister will recall the tripartite meetings that we held. At one time he was very much sold on the idea of tripartite meetings. In one of those meetings, the then Government agreed to stick to our indigenous coal industry, despite the short-term fluctuations of the market. In my view, it is a mistake to allow private generators to import foreign coal, bearing in mind the promises made by successive Governments to the miners and the general philosophy which seems to ignore the role that coal must play in our future energy needs.

Mr. Skeet

If it is possible for public and private operators to have free access to oil from any part of the world, in spite of the fact that we produce it, and the same applies to gas which we import and also produce, why should not the same rule apply to coal?

Mr. Eadie

I shall answer that question as I develop my argument. I am astonished at the hon. Member for Bedford (Mr. Skeet), whose knowledge of energy matters I greatly respect. He is a most diligent Member in this connection. However, I thought he understood that we are wasting our gas and oil assets. I thought he understood that coal is a fuel that we have in abundance. The reason that we should not allow the market to decide is that it would be disastrous to the nation.

I was talking about our future energy needs. Of all the fossil fuels, coal is the most abundant in this country. It will still be available when gas and oil have all but disappeared. At one time it was recognised that an industrial nation must have secure and safe energy supplies—preferably indigenous energy supplies. It means economic strength. It can even mean economic prosperity for a nation that aspires to be in the industrial league of nations.

That leads me to the strategic necessity for the country to preserve its energy supplies—particularly coal, which we have in abundance. I could develop the argument. I do not know what is happening at present in the OPEC negotiations. I do not want to talk too much about the middle east, but that is where most of the oil is and will be for some considerable time. Can we really say that there is political stability in the middle east on which we and the world can depend for our oil supplies? I could talk about the history of the Yom Kippur war and the next energy crisis. The middle east is a boiling cauldron when it comes to political stability. I put it no higher than that.

I am tempted to develop the speeches that I and my hon. Friends made from these Benches in the 1960s, when the contraction of the coal mining industry took place. We were voices crying in the wilderness. We tried to warn the House of the tremendous price that would be paid if the contraction continued. I suggest that we have been proved right. Our nation paid a terrible price for what, in my view, was the unnecessary contraction of the mining industry.

It could be argued that the Government are complacent because at present we are self-sufficient in energy. The Government may be hooked on their complacency about self-sufficiency in energy, and to some extent they are hooked on privatisation. That is why they are prepared to imperil the future indigenous energy supplies of our nation. If we pursue that complacency and dismiss it, saying, "No, it is because we are hooked on privatisation," we shall betray the future comfort and economic prosperity of our children and grandchildren.

The great fallacy that is perpetuated in the House—I have newspaper reports dealing with the present coal crisis—is that we can easily contract the coal industry. That is not true. Coal mines are not like factories where we can change production overnight. When a coal mine is closed it is closed for all time. There is no going back. The water comes in, the roof collapses, and there is no second chance.

We must bear in mind that there are long lead times in the sinking of new pits. My major criticism of the Government is that they are pursuing a policy of inevitable contraction in the coal mining industry. I should describe their policy as a black site policy. They are developing new seams and reserves in existing coal mines. I do not criticise them for that. When I was a Minister I said that we should develop existing pits, look for new coal seams and apply new technology. Indeed, it is a worthwhile investment for the nation to develop existing pits. My major criticism of the Government is that their policy will inevitably lead to contraction because they have all but abolished the green field site policy for coal mining.

How many new pits have the Government been responsible for sinking since they came to office? They have not sunk one new pit. There was the scandal about the vale of Belvoir. There are areas throughout Britain where new pits could be sunk, yet the Government have no energy or enthusiasm to pursue the green field site policy. My charge against the Government is that their black site policy inevitably means the contraction of the mining industry. Ministers come to the Dispatch Box and say that pits become exhausted in time; but, by not sinking new mines, the Government's policy means the inevitable contraction of the coal mining industry. I indict the Government for that policy.

I say with some feeling that the Government have smashed to smithereens the oil from coal scheme. I know that the Minister will tell us about the modified scheme at Point of Ayr. However, he knows that I do not think much of that. I have already said in the House that I have grave doubts whether Britain will ever begin to make oil from coal. I hope that I am wrong and that we will, but, even if I am wrong, it is a modified scheme that will take place at Point of Ayr.

The strongest indictment of the Government is that, since their election, they have failed even to begin the oil from coal scheme. The Secretary of State and the Under-Secretary know that I signed the agreement in 1978 to start the oil from coal scheme. I obtained £20 million from the Labour Government to start that scheme. However, this Government have procrastinated and made excuses. They have produced report after report and the scheme has never been started. Other countries are going ahead, but Britain, as usual, is laggard in approaching the new technologies.

The hon. Member for Bedford mentioned new technologies. We are years behind many countries in developing new technologies. We should be discussing the two pilot schemes, which are to be developed and finished in 1982, for the making of oil from coal. We should then go on to consider the commerial use of oil from coal plants. We have missed a wonderful opportunity.

New clause 8 is an indictment of the Government. It is monstrous to discuss the importation of foreign coal to suit their friends—the private generators—in order to pursue their ideological system of privatisation. We shall listen carefully to what the Government have to say in reply, but it is deplorable that, at a time when the Government are telling us of all the problems of the British coal mining industry, their solution is to import foreign coal. We indict the Government for that and look forward to the Minister's reply.

7.45 pm

Mr. Skeet

The hon. Member for Midlothian (Mr. Eadie) normally makes a good speech, but his argument was a little thin tonight. I could not help reflecting that this morning Mr. Siddall said that we had to restructure the coal industry to adapt output to what our customers will buy from us and at what price. He indicted others, but he also commented on the National Coal Board's inability to close more than 1 million tonnes of uneconomic capacity over the past eight years against 3 billion to 4 billion tonnes called for in Plan for Coal. He went on to argue that the 1975 plan is as dead as a dodo. I do not want to do Mr. Siddall an injustice. That is my interpretation rather than what he said.

I have considered new clause 8 carefully. The hon. Member for Midlothian wanted to give a specific directive to the industry generally about complying with certain conditions as to access to overseas supplies of coal. I understand that he is making use of section 8(1), (2) and (3) of the Electricity Act 1957 which gives the Secretary of State power to give directions of a general character. There is no clause in the Act that enables him to give a specific directive. He may give directives as to the use or disposal of any assets vested in the Board which are not connected with the generation, transmission or distribution of electricity. The Act goes on to deal with consultation with the Electricity Council.

There is no point in using that provision. It is miles away from what is required. It is desirable for everybody in the United Kingdom, including the CEGB, to go to the most desirable market for their fuel. The Government want to keep an eye on what their customers require. Clause 7(3) of the Bill provides that purchases by the board should be on terms which will neither increase nor reduce the prices payable by customers of the Board for electricity supplied to them by the Board. Amendment No. 10 provides: An Electricity Board, in fixing tariffs … shall not show undue preference to any person or class of persons and shall not exercise any undue discrimination against any person or class of persons. That is to ensure that the people who are dealt with get the fairest and the best possible deal. We are seeking to look after the customer.

New clause 8 wants a special directive to be issued to the National Coal Board and others saying that they shall not buy foreign coal even though it may have many advantages. For example, if we can buy coal abroad at a cheap price, is it unreasonable to customers in the United Kingdom that it should be imported?

The value of imported coal from the United States between January and September 1982 worked out at $39 a tonne. Approximately the same figure applies to Australia. The National Coal Board's average cost per tonne of deep mined coal was about $57 per tonne Assuming that somebody is about to set up a private power station, will he arrange to use fuel that is so expensive that he cannot afford to run the power station, or will he run it profitably and for the benefit of the people in industry that he is intending to serve? It seems absurd that we should say to private industry that it cannot do this.

I make it clear to the hon. Member for Midlothian that the Secretary of State has not given a specific directive to the CEGB that it should not buy Australian coal. He can twist the arm of the CEGB and say that, even though it has contracts to buy from 2 million tonnes to 4 million tonnes of Australian coal over the next two years, it must use its discretion and accumulate half on the European market and take the other half to the United Kingdom. However, he cannot give a directive to the CEGB. Therefore, why should he be in a position to give a directive to anybody else?

It is important that the National Coal Board monopoly should be breached, particularly as the CEGB is forced to buy 80 per cent. of its fuel from that one source. Imported coal is less costly than that of the coal board. I shall not quote the figures, but I refer to the CEGB's statement of case given to the Sizewell inquiry. On page 53, note 10.12, the case shows National Coal Board coal in one column and imported coal in the other, and gives projections for 1980–81 of 2,000 and 2,030. The point to be made from these figures is that whereas the price of coal from the National Coal Board goes up, the price of imported coal always keeps a differential on the cheaper side from coal mined in the United Kingdom. Therefore, it would be advisable in the longer term if the CEGB bought some coal from abroad.

Mr. Eadie

The hon. Gentleman is playing a rather doubtful game with statistics in estimated costs. Would he care to guess what the price of a house, of a motor car or of petrol would be within his time scale? One can suggest a whole range of items. The hon. Gentleman is indulging in some doubtful playing with statistics.

Mr. Skeet

I do not think so, if people such as Scargill are going about the country suggesting further strikes over closures when the chairman is trying to make the National Coal Board profitable. If the coal board is to be profitable, it must reduce its prices to its customers and make it possible for the consumer to buy cheaper electricity. If the miners are to strike all the time—we have one threatened strike after another from Scargill—I forecast that the price of coal will escalate and inevitably the price of electricity will rise.

I have already mentioned the availability of coal by the end of the century. I know that this year the CEGB has agreed to buy 70 million tonnes, which is a substantial part of the coal board's output. The CEGB is going to buy a further quantity of 3 million tonnes at a different price. It can go above that if it has the requirement. Mr. Colin Robinson has given evidence on this matter. He is a well-known professor of economics at Surrey university. His calculation is that by 2000 AD the sales to power stations will drop to between 40 million and 60 million tonnes. These are not my figures, but they are possibilities that are taken seriously in the industry. If this is right, and if the National Coal Board cannot supply, it must be open to individuals to buy the best coal where they can find it in a market that can supply it.

I know that the hon. Member for Midlothian is extremely optimistic, in spite of all the circumstances, but he will have noticed the decline in the oil price. The price is coming down steadily. It may settle at between $28 and $30 a barrel initially, but it could go down to perhaps $25. If it comes down to that, fuel oil will begin to become competitive with coal. With those energy trends, the CEGB would burn more fuel oil and perhaps a little less coal.

Taking all this into account, one can see the absurdity of having a specific directive cajoling people to buy coal from stocks in the United Kingdom. If there is free availability from overseas suppliers who would put the coal on the shores of the United Kingdom at advantageous prices for burning in power stations, those stocks should be used.

The suggestion in the new clause would conflict with an EC directive of 14 April 1975 concerning the restriction of the use of petroleum products in power stations". Petroleum products can be used in power stations in the following cases, and Authorisation may be granted only in the following cases:—if the power station has a capacity of less than 10 MWe". We are now being told that this must be contradicted by the Secretary of State, who must tell the industry involved that it cannot use petroleum products, as has been laid down by the directive, but must use coal that has been stacked up in some part of the United Kingdom, simply for the convenience of the miners who want to ensure that their coal is used, whatever the price.

We must not fall into this trap. I have the greatest regard for the miners and for an extremely healthy coal industry in the United Kingdom, but the mining industry may have to be trimmed to a suitable size, because we cannot go on subsidising the industry, with capital investment or whatever to the tune of £1,000 million per year, which is a considerable sum. We must enable people to buy, if they can, and give them freedom of choice. This is what competition is all about.

I appreciate the argument of the hon. Member for Midlothian. The hon. Gentleman, as an ex-miner, puts forward his case with great feeling. Having said that, we have to appreciate that we represent our constituents who are the users of electricity. My constituents complain to me about the high price of electricity, and that is because of the high price of coal. If we are to have a private sector, we must ensure that it has the opportunity to buy the cheapest fuel in the market.

Dr. J. Dickson Mabon

The burden of the argument of the hon. Member for Bedford (Mr. Skeet) is that the new clause is not valid and that section 8(1) of the Electricity Act 1957 does not restrict access to particular types and sources of fuels by direction of the Secretary of State. Given that that is not so and the clause is valid, it strikes me as being a reasonable one. It is even-handed. If it is true that the Secretary of State has or should have these powers with regard to the public sector, and if it is in the national interest to direct the public sector to behave in a certain way with regard to certain fuels and certain sources of fuel, it is only reasonable and even apt that that power should be at his hand with regard to the private sector.

The only thing that is wrong with the clause is that it does not seek to achieve what its author wishes to achieve. He wishes the Secretary of State to direct that only British coal be consumed.

Mr. Skeet

The right hon. Gentleman has got it wrong. He will remember that with regard to BNOC there is a clause that enables a general and a specific directive to be given. Section 8 of the Electricity Act 1957 allows only directions of a general character, and gives no power to make a specific direction, which will be necessary if this amendment were to be carried.

Dr. Mabon

I always said that the hon. Member for Bedford should be a Minister. I am willing to accept on second hand that he may be right, and perhaps the Minister will confirm that there is no necessity for specific directions.

If there is some way in which the Secretary of State can influence these matters—let us not be confined in thought to this legislative action—it is conceivable that other instruments of government and statutes are available by which this can be achieved. I should be surprised if the Government could not find a way in certain empirical circumstances to prescribe a specific fuel from a specific source for a specific reason. That is possible. It may not be done in this way.

8 pm

A valid case is being made to treat the private sector, which is being introduced into the public industry, in an even-handed way. What is unreasonable about that? If Ministers want to object to the new clause, they can object on the ground that it is badly drafted. That is not my fault. I have found it difficult to enter into the debate on the new clause. The hon. Member for Midlothian (Mr. Eadie) excelled himself in introducing the new clause. However, it has nothing to do with the case that he is making. His case has nothing to do with the importation of Polish coal, South African coal and so on. It has nothing to do with oil. Oil is not supposed to be included in the Bill. The new clause is about the consumption of British coal. It is wrong. It means that one can choose to import oil from Venezuela or take in gas from Norway. In other words, the clause is so open-ended that one can do anything one likes, but one does not have to do what the hon. Member for Midlothian is dedicated to doing. It is extraordinary. The hon. Gentleman is riding a bicycle that is taking him in the opposite direction.

I am prepared to vote for the new clause to please the hon. Gentleman. He apologised, which was a generous thing to do. He demands payment for an apology. I shall repay him by voting for the new clause, but as it stands it is meaningless.

Mr. John Spellar

The hon. Member for Bedford (Mr. Skeet) argued that the increase in the coal price was forcing up the price of electricity. That was an interesting argument, especially if one looks at the figures that were presented to the Select Committee on Energy. On 21 July the hon. Member for Melton (Mr. Latham) asked the Secretary of State for Energy: Can we turn to areas of 'Where there is no genuine market—as in electricity …' The Chief Secretary to the Treasury on 14 July gave the following information in Hansard. He said that for the period of July 1980–1981 the RPI went up 10.9 per cent., coal went up by 9 per cent. and electricity went up by 22 per cent. Therefore, the increase in the coal price was less than the increase in the RPI and the increase in the electricity price was dramatically greater. The argument of the hon. Member for Bedford that the price of British coal is forcing up the price of electricity is not valid. The Select Committee report also says: For the period May 1981–1982 … the RPI went up by 9.5 per cent.; coal went up by 8 per cent. and electricity went up by 10 per cent. That is to say that in both years electricity exceeded the RPI and in the first year it exceeded it by double but in each case coal was below the level of the RPI. Therefore, coal has not been driving up the price of electricity. We would argue that that has been deliberate Government policy, but it has been aided by the Government-led recession. The Secretary of State said in the Select Committee: Electricity is a very highly capital intensive industry. It follows that when there is a fall-off in demand as a result of the recession, this has a particularly serious effect on the electricity industry with its very high fixed costs. Therefore, the hon. Member for Bedford's argument against the hon. Member for Midlothian looks a little thinner. He argued that the coal industry was driving up the price of electricity. Now, as in Committee, the hon. Gentleman is missing all the arguments about the way in which the Government plan their energy policy. It takes about 10 years from the taking of a decision to when the coal is got out of the pit, with long planning inquiries, as with the vale of Belvoir. Inevitably those periods extend. The Government, of necessity, have to make an estimate of demand and the amount of investment that they will have to put in. We are now saying that a sector of the market will be able, irrespective of long-term strategy issues and the need for long-term investment, to buy on the free market.

I was interested in the hon. Gentleman's arguments about buying into oil. We have seen the immense instability in the oil price and the problems that it has created for the CEGB. Even now stations are being completed, which we started to build when oil was cheap on the basis of the then prevailing price of oil, which are still uneconomic on the declining price of oil. Therefore, to make decisions in industries, such as the energy industry, with long lead times merely on the basis of spot pricing and to disrupt those markets on the basis of spot pricing is neither good economics in the long run nor good strategic planning for the future of the country.

We cannot have the major industries with the substantial public investment in the energy sector being dependent on the vagaries of fringe producers who will be able to bring in at any time coal from other areas but who do not have a long-term obligation to provide electricity for their consumers. Although the consumers might be in a slightly more difficult position as a result of the passing of a previous clause, they will not have a right to perpetual supply from the private producer. If economics change, perhaps the private producer will switch back or go out of business. The CEGB is not in that position, nor is it in the same position as the private producer in relation to the National Coal Board. There are different relationships between bodies the size of the CEGB and the South of Scotland electricity board and Ministers and Ministers' potential relationships with a considerable number of private electricity producers. The continuing relationship between the Department of Energy and the CEGB leads to informal discussions and pressure of a gentle or not so gentle nature. That pressure is exerted so that there is stability in the industry and in the investment programme and to try to achieve stability in production.

It would be extremely undesirable in this as in a number of other areas if the public sector were to be the investor and provider of last resort, but subject to the vagaries of the decisions made by independent and fringe producers. Not just with oil but with coal there is political instability in many areas of production. Not long ago we saw the effect on the spot price of coal of the uncertainty in Poland. South Africa, another major coal producer, is not necessarily stable in that respect.

We must also look towards the turn of the century when oil supplies will not be so plentiful, the battle for coal supplies will become much more intensive and coal prices will become much more volatile not just because of production but because of the lack of facilities for loading and offloading all round the world.

Finally, we should consider natural gas, which has certain advantages for power production as it is easy to bring on stream rapidly. However, it is also extremely useful for space heating and as a chemical feedstock. It would be undesirable if the general dissuasion from using natural gas except as an emergency fuel were extended to its being used as a base load fuel in view of its long-term future.

Mr. John Moore

We have had a most interesting and enjoyable debate. I shall start, as one always must, by commenting on the speech of my hon. Friend the Member for Bedford (Mr. Skeet)ֵ. The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) was quite right to commend him. All Conservative Members know the diligence with which he brings his attention to energy matters. He has also applied it to constitutional detail. I am almost certain that he is right in that he is probably one of the few hon. Members who seems to have read new clause 8. In a Freudian way, new clause 8 does not refer to imports at all. It merely says which may restrict their access to particular types or sources of fuel supplies. My hon. Friend the Member for Bedford was right about the definition of the limitations of the clause and the ways in which the general powers of direction might be used. Powers of direction have never been used and if we tried to use them, it is extremely unlikely that they could be used in the proposed way.

As an ardent pro-European, the right hon. Member for Greenock and Port Glasgow will, I am sure, be delighted to know that, even if we attempted to use such powers., we cannot discriminate against European coal under European Coal and Steel Communities rules. We should remind ourselves that we have relationships there. Last year we imported about 431,000 tonnes of coal from the EC, although, of course, we are exporting many millions of tonnes to the Community.

I was intrigued by the Social Democratic party's approach to the subject. I listened with a sense of growing bewilderment when I tried to understand what its views were. I listened to the right hon. Member for Greenock and Port Glasgow talk about being even-handed—in other words, being pernicious in both directions or applying pressure negatively in both directions. I assumed, as he continued, that he was about to tell us that the alliance, or whatever it calls itself these days, embraces import controls. But no, he happily slipped away from that subject and went into what we must all remember from today's debate as a classic phrase that we shall carry to every part of the country. He said—I must quote him as his words will go down in parliamentary history, "I shall vote for this because it is meaningless." That must be the most perfect definition of a party that tries to be so even-handed as not to have a view on any subject under the sun.

Mr. Arthur Lewis

Is the Minister aware that there are four potential leaders in that set-up and that they are dithering about who shall be the Prime Minister designate when there is no such animal and cannot be any such animal? I have never heard of such a thing.

Mr. Moore

Like all hon. Members, I am a diligent reader of the Order Paper and I have noticed the early-day motion in the name of the hon. Member for Newham, North-West (Mr. Lewis). He needs do no more than remember always that they will vote for this new clause because it is meaningless. That covers all manner of sins, irrespective of which candidate stands for which office.

Dr. J. Dickson Mabon

I am sure that Hansard is more fair than the Minister. He will see that preceding the remarks to which he refers, I referred to the apology that the hon. Member for Midlothian (Mr. Eadie) insisted that he generously made to me and demanded that, in return, I support a clause of this type at this stage of the Bill. I said that I would do that and I am doing it.

Mr. Eadie

This is the first time that the Opposition have supported a meaningless clause.

Mr. Moore

It is interesting to give way to such extraordinary interruptions. The whole country will be interested in this exchange. In the absence of detailed discussion on the new clause, the right hon. Gentleman can address himself not to any argument in logic but, apparently, to some sentimental connection that he might still have with the Labour party. I respect the relationships that might still linger on the other side of the Chamber, but his conclusion on behalf of his party was that he would vote for the new clause because it is meaningless.

Much of the debate has concerned the coal industry, which deserves much more serious consideration. New clause 8 would help to entrench the coal industry in its past. I am the first to agree with the hon. Member for Midlothian, who knows the industry well from his own experience, that the coal industry has a distinguished past. Its contribution to Britain's industrial growth as a cornerstone of the industrial revolution is well documented. The coal industry can no more live in the past than can the rest of Britain and our economy and industry as a whole.

8.15 pm

Opposition Members, in supporting new clause 8, are motivated by a negative and defensive attitude to the coal industry. They appear to believe that the industry can and should remain isolated from its wider economic environment, with limited markets that are protected and subsidised, because they believe that our coal can never compete freely in Britain and the world. Surely our coal industry deserves greater confidence in its future and its potential than is evidenced by Opposition Members who support this new clause. The Government do not believe that the Opposition's way is the best way forward for the coal industry. Indeed, their way is backwards, which would mean retrenchment and retreat rather than progress.

The assumptions that underlie new clause 8 about British coal's competitiveness with oil and non-United Kingdom coal is not only defeatist and negative but fundamentally misconceived. At present, coal enjoys a significant price advantage over oil for industrial steam-raising, industrial power generation and a wide range of industrial processes. The Government's coal-firing scheme, which has already created an additional 631,000 tonnes of industrial coal demand from the 110 schemes that have so far accepted £11.2 million in grants, is helping private industry, at a time of tight capital availability, to overcome the capital cost penalties of switching to coal.

Not only is NCB coal highly competitive with oil for industrial use, but it is generally competitive with the price at which imported coal can be delivered to industrial customers in the United Kingdom. That is why they buy NCB coal. They do not buy it because there is constraint on the source of the coal. Thousands of industrial customers willingly buy NCB coal. Private generators of electricity will have to take their own decision about which fuel to use.

The aim of this legislation is to lift restrictions on private generators, who should be free to make their own decisions about which fuel to use on commercial and economic grounds. We do not wish to impose more restrictions. The hon. Member for Birmingham, Northfield (Mr. Spellar) referred to gas. He knows that controls already exist under the Energy Act 1976. The Secretary of State must be notified of any proposals for the construction or conversion of power stations to burn oil or gas or to enter into or renew a contract to supply gas. Moreover, he may direct that such a proposal should not be carried out or may attach conditions to that proposal.

The challenge for the coal industry is to make and keep itself efficient and competitive. Only then will it retain existing markets and win new ones. The chairman of the NCB recently drew attention to some important and encouraging indicators of the industry's potential. He announced that the first Selby coal would come on stream in two to three weeks, building up to a full output of 10 million tonnes a year at an average output per manshift that is about five times the present national average. He also announced that, recently, overall productivity in the coal industry had created all-time records. Productivity per face worker is consistently exceeding 10 tonnes per manshift.

I do not believe that the coal industry can or should live in the past, but it has the potential to stand on its own feet and win a good future for itself. The Bill can create new opportunities for the coal industry. Therefore, it has the potential to help the future development of its industrial market, provided that coal can be supplied competitively and reliably. The board already supplies about 8 million tonnes a year to the private sector industrial market, some of which is already being burnt for private sector industrial power generation and combined heat and power schemes.

More companies, including household names such as Dunlop, Ford UK and ICI, are converting their major plants to coal with the help of the Government's coal-firing scheme. The assumptions about the coal industry on which the proposed new clause is based are misguided. The coal industry continues to work hard to make itself more competitive and productive, and it must maintain that approach to capture new and to hold existing markets, and to move forward to the viable world that we see for it. Neither it nor the country can afford it to remain static and to rely on defending its existing markets and its uneconomic capacity by recourse to the taxpayer, who is already investing heavily in the industry to help it progress.

As to competition with other fuels, the paper published last week by the CEGB on comparative generation costs shows that in 1981–82, taking into account capital as well as operating costs, the CEGB's modern coal-fired stations had no less than a 70 per cent. cost advantage over its modern oil stations. It is hardly surprising that the CEGB relies on coal for more than 80 per cent. of its fuel, almost all of which comes from the National Coal Board.

As to competition with foreign coal, the NCB must look to the world market in setting its prices. It is in that market as an exporter. Far from being insulated from external pressures, the coal industry is well used to seizing opportunities to develop its markets. If the Bill opens markets in private electricity generation, I am sure that the NCB will seize that opportunity. Its present position in the market for power station coal is hardly weak. Despite the world recession and depressed world coal prices, the NCB competes successfully with other producers at most power stations in its delivered price. The coal imported by the NCB under its present contracts is an economic proposition only at coastal power stations.

The CEGB has agreed to limit its imports for the time being. However, no direction was issued to it by the Government. The NCB and the CEGB have negotiated commercial arrangements for the supply and price of NCB coal. The CEGB is being compensated for its additional costs by the taxpayer, so that in this interim period no extra burden falls on the electricity consumers.

Dr. J. Dickson Mabon

The Minister contradicts himself. He said at the beginning of his 'speech that specific powers in the new clause do not exist. Now he suggests that he can achieve the objective in some other way and can compensate the CEGB for any loss that it incurs in doing what the Government wish. That is a substantial change in argument. The new clause seeks to treat both private and public generators in the same way. If the Minister says that he can do that by means other than new clause 8, will he also say that he will do it for the private supplier? That is the essential point of the debate.

Mr. Moore

One cannot distinguish between the capacity of a company such as the CEGB, that absorbs more than 70 million tonnes of one main producer's supply, and individual producers who enter the market on normal terms. It is unrealistic for the right hon. Gentleman not to recognise that the relationship between the Government and a nationalised industry must, even without powers of direction—as the hon. Member for Northfield, with his experience, recognised—be different. We are debating whether statutory powers should be used to enforce conditions when there seems to be no need for statutory directions.

The new clause is negative and backward and its assumptions about the coal industry's potential to stand on its own feet and to win markets competitively are misguided. I hope that the House will reject the new clause.

Mr. Eadie

The Minister made a stuffy defence of coal with which I would not quarrel, but it is a bit much to suggest that I was looking backwards. In my speech, I looked to the future, but the Minister tended to ignore that. He did not say that he had smashed the oil from coal system to smithereens. That is new technology and a new use for coal. He knows that Opposition Members advocated the introduction of new technology to the mining industry and considered other uses for coal. Whatever arguments the Minister may wish to advance, he cannot say that our arguments were backward. We tried to push the industry towards new technologies and ideas for developing coal.

Although the coal industry receives grants from the Government, I hope that the Minister was not trying to deceive the House by suggesting that all the money that the coal board gets for investment is by way of Government grant. It receives money, but it must pay interest on what it borrows and that is an additional financial burden on the industry. It is nonsense to suggest that the Government only give to the coal industry.

The Minister's arguments were unconvincing. The Opposition have looked to the future, but the Government have looked back and have tried to constrict the industry. I advise my right hon. and hon. Friends to vote for the new clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 162, Noes 196.

Division No. 87]	[8.26 pm
AYES
Adams, Allen	Cunliffe, Lawrence
Allaun, Frank	Dalyell, Tam
Alton, David	Davidson, Arthur
Anderson, Donald	Davis, Terry (B'ham, Stechf'd)
Archer, Rt Hon Peter	Deakins, Eric
Ashton, Joe	Dean, Joseph (Leeds West)
Atkinson, N. (H'gey,)	Dewar, Donald
Barnett, Guy (Greenwich)	Dixon, Donald
Beith, A. J.	Dormand, Jack
Bennett, Andrew(St'kp't N)	Dubs, Alfred
Bidwell, Sydney	Duffy, A. E. P.
Booth, Rt Hon Albert	Dunwoody, Hon Mrs G.
Boothroyd, Miss Betty	Eadie, Alex
Bray, Dr Jeremy	Eastham, Ken
Brown, Hugh D. (Provan)	Ellis, R. (NE D'bysh're)
Callaghan, Rt Hon J.	Ellis, Tom (Wrexham)
Callaghan, Jim (Midd't'n & P)	English, Michael
Campbell, Ian	Evans, loan (Aberdare)
Campbell-Savours, Dale	Evans, John (Newton)
Canavan, Dennis	Ewing, Harry
Carmichael, Neil	Faulds, Andrew
CarterJones, Lewis	Flannery, Martin
Clark, Dr David (S Shields)	Ford, Ben
Clarke.Thomas (C'b'dge, A'rie)	Forrester, John
Cocks, Rt Hon M. (B'stol S)	Foster, Derek
Cohen, Stanley	Foulkes, George
Coleman, Donald	Freeson, Rt Hon Reginald
Concannon, Rt Hon J. D.	Freud, Clement
Cowans, Harry	Ginsburg, David
Craigen, J. M. (G'gow, M'hill)	Golding, John
Crowther, Stan	Gourlay, Harry
Cryer, Bob	Graham, Ted

Hamilton, W. W. (C'tral Fife)	Race, Reg
Hart, Rt Hon Dame Judith	Richardson, Jo
Haynes, Frank	Roberts, Albert (Normanton)
Heffer, Eric S.	Roberts, Ernest (Hackney N)
Home Robertson, John	Robinson, G. (Coventry NW)
Homewood, William	Rooker, J. W.
Hooley, Frank	Roper, John
Howell, Rt Hon D.	Ross, Ernest (Dundee West)
Howells, Geraint	Rowlands, Ted
Hoyle, Douglas	Sever, John
Hughes, Mark (Durham)	Silkin, Rt Hon J. (Deptford)
Hughes, Robert (Aberdeen N)	Silverman, Julius
Hughes, Roy (Newport)	Skinner, Dennis
Jay, Rt Hon Douglas	Smith, Rt Hon J. (N Lanark)
Johnston, Russell (Inverness)	Snape, Peter
Jones, Rt Hon Alec (Rh'dda)	Soley, Clive
Jones, Barry (East Flint)	Spearing, Nigel
Jones, Dan (Burnley)	Spellar, John Francis (B'ham)
Kaufman, Rt Hon Gerald	Spriggs, Leslie
Kerr, Russell	Steel, Rt Hon David
Kilroy-Silk, Robert	Stewart, Rt Hon D. (W Isles)
Lambie, David	Stoddart, David
Leighton, Ronald	Stott, Roger
Litherland, Robert	Strang, Gavin
Lofthouse, Geoffrey	Summerskill, Hon Dr Shirley
Mabon, Rt Hon Dr J. Dickson	Taylor, Mrs Ann (Bolton W)
McGuire, Michael (Ince)	Thomas, Jeffrey (Abertillery)
McKay, Allen (Penistone)	Thorne, Stan (Preston South)
McKelvey, William	Torney, Tom
MacKenzie, Rt Hon Gregor	Wainwright, E. (Dearne V)
McTaggart, Robert	Wainwright, H.(Colne V)
Marshall, Dr Edmund (Goole)	Walker, Rt Hon H.(D'caster)
Marshall, Jim (Leicester S)	Wardell, Gareth
Martin, M (G'gow S'burn)	Weetch, Ken
Mason, Rt Hon Roy	Welsh, Michael
Maxton, John	White, Frank R.
Maynard, Miss Joan	White, J. (G'gow Pollok)
Mitchell, R. C. (Soton Itchen)	Whitlock, William
Morris, Rt Hon A. (W'shawe)	Wigley, Dafydd
Morris, Rt Hon C. (O'shaw)	Willey, Rt Hon Frederick
Morris, Rt Hon J. (Aberavon)	Williams, Rt Hon Mrs(Crosby)
Morton, George	Wilson, Gordon (Dundee E)
Newens, Stanley	Wilson, Rt Hon Sir H.(H'ton)
Oakes, Rt Hon Gordon	Winnick, David
O'Halloran, Michael	Woolmer, Kenneth
O'Neill, Martin	Wright, Sheila
Orme, Rt Hon Stanley	Young, David (Bolton E)
Palmer, Arthur
Park, George	Tellers for the Ayes:
Pavitt, Laurie	Mr. Walter Harrison and
Powell, Raymond (Ogmore)	Mr. James Hamilton.
NOES
Alexander, Richard	Butcher, John
Alison, Rt Hon Michael	Butler, Hon Adam
Ancram, Michael	Carlisle, John (Luton West)
Arnold, Tom	Carlisle, Kenneth (Lincoln)
Atkins, Rt Hon H.(S'thorne)	Carlisle, Rt Hon M. (R'c'n)
Atkins, Robert (Preston N)	Chalker, Mrs. Lynda
Atkinson, David (B'm'th.E)	Chapman, Sydney
Baker, Nicholas (N Dorset)	Clark, Hon A. (Plym'th, S'n)
Beaumont-Dark, Anthony	Clark, Sir W. (Croydon S)
Bendall, Vivian	Clarke, Kenneth (Rushcliffe)
Benyon, Thomas (A'don)	Clegg, Sir Walter
Benyon, W. (Buckingham)	Cockeram, Eric
Berry, Hon Anthony	Colvin, Michael
Bevan, David Gilroy	Costain, Sir Albert
Biggs-Davison, Sir John	Cranborne, Viscount
Blackburn, John	Critchley, Julian
Boscawen, Hon Robert	Crouch, David
Bottomley, Peter (W'wich W)	Dickens, Geoffrey
Braine, Sir Bernard	Dorrell, Stephen
Brinton, Tim	Douglas-Hamilton, Lord J.
Brittan, Rt. Hon. Leon	Dover, Denshore
Brooke, Hon Peter	du Cann, Rt Hon Edward
Brown, Michael(Brigg & Sc'n)	Dunn, Robert (Dartford)
Bruce-Gardyne, John	Durant, Tony
Buck, Antony	Eggar, Tim
Budgen, Nick	Elliott, Sir William
Burden, Sir Frederick	Fairgrieve, Sir Russell

Fell, Sir Anthony	Morrison, Hon C. (Devizes)
Fenner, Mrs Peggy	Murphy, Christopher
Fisher, Sir Nigel	Myles, David
Fletcher, A. (Ed'nb'gh N)	Needham, Richard
Fletcher-Cooke, Sir Charles	Nelson, Anthony
Fookes, Miss Janet	Newton, Tony
Forman, Nigel	Onslow, Cranley
Fraser, Peter (South Angus)	Osborn, John
Fry, Peter	Page, John (Harrow, West)
Gardiner, George (Reigate)	Page, Richard (SW Herts)
Gardner, Sir Edward	Parris, Matthew
Garel-Jones, Tristan	Patten, John (Oxford)
Goodhart, Sir Philip	Pattie, Geoffrey
Goodhew, Sir Victor	Pawsey, James
Goodlad, Alastair	Percival, Sir Ian
Gow, Ian	Pink, R. Bonner
Gray, Rt Hon Hamish	Pollock, Alexander
Greenway, Harry	Prentice, Rt Hon Reg
Griffiths, Peter (Portsm'th N)	Price, Sir David (Eastleigh)
Grist, Ian	Proctor, K. Harvey
Gummer, John Selwyn	Raison, Rt Hon Timothy
Hamilton, Hon A.	Renton, Tim
Hamilton, Michael (Salisbury)	Rhodes James, Robert
Hampson, Dr Keith	Ridley, Hon Nicholas
Hannam,John	Ridsdale, Sir Julian
Haselhurst, Alan	Rippon, Rt Hon Geoffrey
Hawksley, Warren	Roberts, Wyn (Conway)
Hayhoe, Barney	Rost, Peter
Heddle, John	Rumbold, Mrs A. C. R.
Hicks, Robert	Sainsbury, Hon Timothy
Hill, James	St. John-Stevas, Rt Hon N.
Hogg, Hon Douglas (Gr'th'm)	Shaw, Giles (Pudsey)
Holland, Philip (Carlton)	Shaw, Sir Michael (Scarb')
Hunt, David (Wirral)	Shelton, William (Streatham)
Hunt, John (Ravensbourne)	Shepherd, Colin (Hereford)
Irvine, Rt Hon Bryant	Shepherd, Richard
Godman	Sims, Roger
Irving, Charles (Cheltenham)	Skeet, T. H. H.
Jessel, Toby	Smith, Tim (Beaconsfield)
Johnson Smith, Sir Geoffrey	Speed, Keith
Jopling, Rt Hon Michael	Speller, Tony
Kaberry, Sir Donald	Spence, John
Kimball, Sir Marcus	Spicer, Michael (S Worcs)
Knight, Mrs Jill	Sproat, Iain
Knox, David	Stanbrook, Ivor
Latham, Michael	Stanley, John
Lawrence, Ivan	Stokes, John
Lawson, Rt Hon Nigel	Stradling Thomas, J.
Lennox-Boyd, Hon Mark	Taylor, Teddy (S'end E)
Lester, Jim (Beeston)	Thomas, Rt Hon Peter
Lewis, Sir Kenneth (Rutland)	Thompson, Donald
Lloyd, Ian (Havant & W'loo)	Thornton, Malcolm
Lloyd, Peter (Fareham)	Townend, John (Bridlington)
Loveridge, John	Townsend, Cyril D, (B'heath)
Luce, Richard	Trippier, David
Lyell, Nicholas	van Straubenzee, Sir W.
McCrindle, Robert	Waddington, David
Macfarlane, Neil	Wakeham, John
McQuarrie, Albert	Walker, B. (Perth)
Major, John	Waller, Gary
Marlow, Antony	Warren, Kenneth
Marten, Rt Hon Neil	Wells, Bowen
Mates, Michael	Wells, John (Maidstone)
Mather, Carol	Wheeler, John
Maude, Rt Hon Sir Angus	Wickenden, Keith
Mawby, Ray	Wilkinson, John
Maxwell-Hyslop, Robin	Wolfson, Mark
Meyer, Sir Anthony	Young, Sir George (Acton)
Miller, Hal (B'grove)	Younger, Rt Hon George
Miscampbell, Norman
Moate, Roger	Tellers for the Noes:
Monro, Sir Hector	Mr. John Cope and
Montgomery, Fergus	Mr. Ian Lang.
Moore, John

Question accordingly negatived.