HC Deb 25 July 1986 vol 102 cc895-902 12.56 pm
Mr. Dick Douglas (Dunfermline, West)

I welcome the opportunity to raise in the House the agreement on coal supplies between the National Coal Board, or British Coal, as we now choose to call it, and the South of Scotland Electricity Board. That title is a little different from that on the Order Paper where the electricity boards are listed in the plural, but the obvious concentration is on the agreement that I understand was concluded on 2 July between the NCB and the South of Scotland Electricity Board on coal supplies.

The broad compass of that agreement shows that for the year 1986–87 the NCB will undertake to supply and the SSEB undertake to take something like 3.6 million tonnes to the year ending March 1987. That is in the public domain. What is not in the public domain is the price at which that agreement or quantity has been concluded. Therefore, we are a little suspicious about the Government's overall attitude and inter-relationship with the boards as to any measures that the Government might take or make to sustain coal output in Scotland.

I want to look briefly at the pattern of coal consumption by the SSEB over a varying period of years. If we take the average over the four previous years, the consumption by the SSEB has been in the region of 4.5 million tonnes. A longer time scale, over about 10 years, would give us about 6.4 million tonnes. However, if we take the coal and slurry delivered in 1985–86, the total taken by the board was 7.6 million tonnes Therefore, a straight interpolation of figures would give us a reduction against the 3.6 million tonnes of 4 million tonnes. The 7.6 million tonnes for 1985–86 reveals a level of restocking after the miners' dispute. It would not be unfair if we considered the range of reduction over the period to be between 2.5 million tonnes and 4 million tonnes. I shall not be surprised if the Minister disputes these figures when he replies. However, I would be grateful if he could give us his figures of the reduction in coal uptake by the South of Scotland Electricity Board.

What are the reasons for this reduction? Obviously, there are short-term market considerations. I have examined table 9 in the current issue of "Energy Trends". That table shows the figures for February to April 1986. I have deducted the England and Wales figure from the total United Kingdom figure in that table. That may be something of an interpolation. However, I suggest that the figures show that there has been a drop of nearly 44 per cent. between February and April in coal consumption by the SSEB and an increase of oil consumption of around 50 per cent. That appears to confirm reports that the SSEB is leaning in short-term considerations towards cheaper oil.

We all know that it is very difficult to forecast energy trends. I became interested in energy and specifically in oil matters in the 1960s. I have tried to keep up my understanding of what is happening in that market ever since. I remember a conference in London in December 1973 when I put a point to Sheik Yamani—

The Parliamentary Under-Secretary of State for Scotland (Mr. John MacKay)


Mr. Douglas

That is not name-dropping. Ministers must not put their prejudices on other people. They must try to resist that temptation.

I told Sheik Yamani that OPEC was embarking on a policy that would be severely detrimental to western industrial economies and to the international economy. He gave me a succinct reply. He said, "What do you want me to do? When someone offers me $15 for a barrel of oil, should I say no, I only want $10?" Repartee is the answer which you think of on the way home. I could not think of an immediate response to the Sheik. It is very difficult to think of an answer to that question, even today. However, the tables have been somewhat reversed. OPEC would now like to get $20 a barrel but because it cannot get its act together, the world is offering about $10 a barrel.

It would take a brave man to forecast the price of oil in six or 10 months' time. A few years ago people said that oil prices would double in real terms by the end of the century, My bookshelves are littered with books and studies by people of great repute worrying about a shortage of oil in the latter years of this century. That worry has now disappeared. I am not sure whether that is a short or long-term view, but it is extremely dangerous to suggest that the United Kingdom can operate wholly on market considerations in terms of energy policy.

We might arrive at the wrong energy policy but the Government do not have any kind of energy policy. I echo the words of the Fraser of Allander Institute: The drop in oil prices is the biggest immediate threat to the coal industry. That drop imposes a temporary strain on the coal industry. It could be long-term unless the Government take action and give guidance.

What is the Government's attitude to the boards, especially the South of Scotland Electricity Board, reacting to the temptation to bring in cheaper oil-fired power stations at this time? What is their response generally and what discussions are taking place between Ministers? In this context, I welcome the presence of the Parliamentary Under-Secretary of State for Scotland.

My. hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) has been kind enough to give me a copy of a letter from the Secretary of State for Scotland dated 22 July. There has been a great deal of quoting both in and out of context in the House recently, but I hope that I shall not be accused of quoting the Secretary of State out of context on this occasion. In that letter the Secretary of State seems to take the view that The SSEB, like British Coal … must"— I emphasise the word "must"— operate in the market as it exists at present. What are the implications of that? Does it mean that the future of the coal industry in Scotland will be subject to short-term market considerations? If so, what view do the Scottish Office and the Department of Energy take of oil prices? The House deserves an answer. If the Government say that the industry must be subject to market considerations, what is the Government's view of the market? If the Government intend to adopt an arm's length position and say that that is a matter for the boards, what is the function of the Scottish Office and the Department of Energy? It is important to consider also how that view fits in with the longer-term attitude of other industrial nations inspired by the International Energy Agency which has sought to persuade industrialised countries in particular to reduce their reliance on oil. Are the Government contracting out of that? The House and the nation are entitled to know the Government's view.

If the Government are adopting an arm's length, hands-off attitude and the Secretary of State for Scotland wishes his words to be taken literally, the whole Scottish coal industry is under threat because, despite improvements, it is a marginal coalfield with high production costs. I have put the point extremely fairly and we are entitled to a reply from the Minister. The recent agreement for 3.6 million tonnes shows the pressure placed on the coal industry by international oil market considerations. I do not expect the Minister to tell us today the price that has been negotiated, but if the price reflects international oil market considerations the Scottish coal industry will be denied the cash flow that is essential for future investment. Although the impact on individual pits is a matter for the Coal Board to determine, the Government must surely have a view.

I give a preliminary welcome to the change in management that is shortly to take place in Scotland. Mr. McAlpine is due to take up his duties on 1 August. We naturally give him a welcome. With great respect to Mr. Loudon, who is a gentleman with whom we have had many good discussions, the previous incarnation, Mr. Wheeler, was not beneficial to good industrial relations in the Scottish coal industry.

What cash flows are likely to be forthcoming to Mr. McAlpine through British Coal for investment in the Scottish coalfield? I am always hesitant about mentioning pits and activities in other hon. Members' constituencies. I welcome the presence of my hon. Friend the Member for Dunfermline, East (Mr. Brown), who has miners in his constituency as well, but I think that it is only fair for me to ask: what are the implications in terms of investment policy for Seafield? We understand that some negotiations have been under way with the miners' union. What decisions have been made? What discussions have there been about Solsgirth? Over the water, what discussions and considerations have there been about Monktonhall and Bilston Glen, and, indeed, the Ayrshire coalfield?

I should like to refer to two pits in my area. The first is Castlehill colliery. During the strike, it was the subject of much publicity. There were photographs in the paper of the pit under threat. I visited the colliery on several occasions. It was saved by the activities of two individuals in particular—not constituents of mine, but constituents of my hon. Friend the Member for Clackmannan (Mr. O'Neill). That pit is returning to good productivity— indeed, excellent productivity. What have those two individuals got for their pains? Despite winning their cases in front of an industrial tribunal, they are still out of employment with the Coal Board. At present, if my figures are reliable, over 120 people who were dismissed during the strike are still not re-employed.

The second colliery that I should like to mention is Comrie. I was down in that pit a few weeks ago. I would not say that it would be the best job in the world. The face that I crawled along was in a pretty bad state. However, the longer-term prospects for that colliery will not be there at all unless there is investment in the five-ft seam. I am a realist. One should be honest and truthful with the 500 men who are there. I would not argue that people should work in terrible conditions just to have a job, but one cannot destroy men's bodies and morale by asking them to live from hand to mouth. They have to have a view of the longer-term employment prospects. The Minister and the Coal Board should give that now. Over and above that, I plead with the incoming director to wipe the slate clean in regard to good industrial relations in Scotland by bringing all those men, many of whom won their cases at an industrial tribunal, back to employment.

Something else that might have an impact on employment is the possible, indeed probable, bringing on stream of Torness. This is not the place or the time to develop all the arguments about nuclear power. I know that Scottish Ministers would say, "If you do not bring Torness on stream, the price of electricity will rise dramatically in Scotland." That may or may not be so. It depends on how one spreads the cost—whether it is on the SSEB's books or throughout the nation. But it would be prudent to call a halt to bringing Torness on stream in the light of what has happened at Chernobyl. Each day in the press there are new revelations about Chernobyl.

I put it to the Minister that the long-term prospects for new nuclear power stations in the United Kingdom are not good. I do not think that any Government could now embark—I will not anticipate the Sizewell conclusions—on getting sites in Scotland or anywhere else for new nuclear power stations. Thereafter, we have to turn back to coal. Indeed, the power station in my constituency, Kincardine, which is under-utilised, is an admirable site for the future development of a further coal-fired station. The problems of planning permission and other difficulties do not exist.

Perhaps I am asking for the moon. However, the Government, the SSEB, and the Scottish Office should be turning their minds to refurbishing stations such as Kincardine. I am not speaking for the Labour party in terms of policy but I am saying that we cannot subject coal mines and the coal industry in Scotland to short-term market considerations because one cannot mothball coal pits and then expect them to be brought into production over night.

In terms of morale, we have to have some guarantees for the present 6,000 to 8,000 people. The Government's policy if I read it right, allowing short-term market considerations to operate, would mean that the whole of the Scottish coal industry would go to the wall. We require some reassurance from the Government and some indication of what discussions are taking place between the Department of Energy and the Scottish Office.

1.16 pm
The Parliamentary Under-Secretary of State for Energy (Mr. David Hunt)

I congratulate the hon. Member for Dunfermline, West (Mr. Douglas) on having been successful in securing this debate. The coal industry in Scotland, and its relationship to the SSEB, is clearly very important, and I am glad to have this debate.

In opening debates of this kind it is always difficult to strike a balance between recognising the contribution of the hon. Member and making life difficult for him in his constituency because of an excessive amount of praise from a Conservative Minister. However, I shall pay tribute to the hon. Gentleman. He is undoubtedly one of the energy experts in the House, and he is extremely diligent in promoting the cause of the dismissed miners. During the debate he managed to deliver a powerful plea for them.

My hon. Friend the Member for Argyll and Bute (Mr. MacKay) has been in the Chamber since the start of the debate. He has listened carefully to all the points that have been raised and has expressed concern on several occasions about the need to guarantee the future of this important industry in Scotland. I am also pleased to see present the Parliamentary Private Secretary, my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst), the hon. Member for Dunfermline, East (Mr. Brown), the right hon. Member for Glasgow, Rutherglen (Mr. MacKenzie) and the hon. Member for Barnsley, West and Penistone (Mr. McKay) who always expresses a great deal of interest in this great industry.

As the hon. Member for Dunfermline, West knows, I have visited the Scottish coalfield on a number of occasions since I assumed responsibility for this great industry. The Scottish coalfield—I must emphasise that I speak on behalf of my colleagues in the Scottish Office as well—is vital to Scotland. It is also vital to the coal industry and to the Government.

When I have visited Scotland, the people whom I have met have been anxious to tell me not only about what is going on in Scotland now but about plans for the future. Their determination to continue cutting costs and improving productivity is the best indicator that we could have of the future of the coal industry in Scotland. There is a great resolve among the people whom I have met to ensure that they get their industry on to a more competitive and profitable footing. I share their determination, and I believe that they can do so.

I welcome the hon. Gentleman's response to the appointment of the new director, Mr. McAlpine. I also welcome his praise for Mr. Loudon. However, he will not be surprised if I reject his criticism of the gentleman who I believe to be one of the most able directors in British Coal, Mr. Wheeler. A great deal of unwarranted criticism has been made of the recently concluded deal on coal supplies that has been struck between British Coal and the South of Scotland Electricity Board. I was pleased to hear that those two great industries had reached a mutually satisfactory outcome.

In the past, Labour Members have urged the Government to step in and tell the industries what to do and to impose some sort of rigid policy within which they must operate. Indeed, the hon. Gentleman strayed into that in his speech. There seems to be a feeling that the Government can see more clearly than anyone else what will happen in the future and should produce a formula that waves away the problems. I assure the House that the Government recognise that the long-term interests of industries, including nationalised industries, are best served if they are free to behave in a way that conforms to their commercial judgments and interests. That is how they will succeed. The SSEB and the NCB, trading as British Coal, have reached a satisfactory agreement which provides the prospect of a reasonably stable long-term coal take through to the mid 1990s and beyond.

The new agreement relates to the SSEB's requirement to meet the Scottish demand for electricity. In the present financial year the SSEB will purchase 3.6 million tonnes of coal from British Coal. That figure cannot be compared with the level of coal taken by the SSEB in the past, because it takes no account of the amounts taken into stock or of coal for use in exporting electricity to the CEGB system. In 1985–86 the SSEB total coal take from all sources, excluding coal slurry, was 7.2 million tonnes, of which 6.6 million tonnes were supplied by British Coal and 600,000 tonnes by private coal producers. The SSEB's total coal consumption was 6.3 million tonnes, of which 1.1 million tonnes related to exports of electricity to the CEGB. This year the level of electricity trading between the SSEB and the CEGB is a commercial matter for them, and, subject to price and other considerations, I understand from both boards that they fully expect this trading to continue.

The effect of the new agreement has been to allow the SSEB to maintain the reduction of about 3 per cent. in electricity prices which it introduced earlier this year to reflect savings in fuel costs. The hon. Gentleman will agree that that is good for SSEB customers. It is important to recognise that the SSEB has a statutory duty, in accordance with an Act of Parliament introduced by the Labour Government, to promote the economic generation of electricity. In pursuing that objective the board must take full account of the relative prices of primary fuels, including nuclear fuels, to achieve the most economic balance.

The SSEB, working closely with the North of Scotland Hydro-electric Board, has a good record over the years of building up a flexible, economic, generating system. That is reflected in the fact that average tariffs in Scotland are lower than those in England and Wales. Since 1981 electricity tariffs in Scotland have decreased in real terms. The benefits of that are felt by both domestic electricity consumers and the industry. It is important that primary inputs for industry, such as electricity, are priced as competitively as possible. Cheap electricity is vital if Scotland is to expand, retain its existing industrial face and secure inward investment.

The hon. Gentleman mentioned the role of nuclear power, and it has an important part to play. Without it, electricity prices in Scotland would have to rise by between 25 and 30 per cent. Power from the new station at Torness should allow the SSEB to save some £130 million in system fuel costs. I recognise that the hon. Gentleman is realistic about the need for Torness, although I would not go so far as to say he welcomed it. To abandon Torness would mean abandoning £1.7 billion of public expenditure and the prospect of cheaper electricity.

The nuclear power station at Torness should be viewed, not as a threat to the coal industry, but as a welcome further source of cheaper power. Cheap power means more demand, and more demand will increase the demand for coal, if the prices stay right. The future balance of fuels is of course a matter for the SSEB, but it will depend crucially on the pricing position.

Any suggestion that the SSEB is seeking to destroy the coal industry in Scotland is completely unfounded. It is simply not in its interests to prejudice its future supplies of coal in this way. It is obliged to provide not only an economical but a secure supply of electricity. The SSEB sees an important and continuing role for coal-fired generation in Scotland for the foreseeable future, and British Coal clearly has a vital role. A healthy, robust coal industry in Scotland is what everyone wants to see.

This Government have contributed a substantial amount of money to the support of the coal industry in Scotland. The Scottish area has sustained substantial losses in the past. To some extent, this is a reflection of the difficult geological conditions at some of the pits. However, the Scottish area is still operating at a loss. The Government have underwritten those losses through the provision of deficit grant. In addition, substantial amounts have been made available in social grants. This, too, has benefited the Scottish coal industry.

The hon. Gentleman raised with me the question of dismissed miners. As he knows, the dismissal of miners and their re-employment are matters for British Coal. Over half of those dismissed have now been taken back by the National Coal Board. I understand that in respect of some men who have been dismissed in Scotland the NCB has appealed against the judgment of industrial tribunals. I cannot comment on those cases. More generally, as the hon. Gentleman knows, the law does not require an employer to re-employ staff where this is the ruling of the tribunal, because compensation may be paid instead and there are certain rights of appeal. It is for management to decide which course to follow in each case, in the light of relevant circumstances, and the extent to which reemployment is possible when taking into account the effect on working miners.

Mr. Gordon Brown (Dunfermline, East)

I have asked and encouraged the mining unions to take cases to the industrial tribunals. Will the Minister take this opportunity to encourage the NCB, as a public body, to honour the decisions of industrial tribunals, which in many cases in Scotland have recommended reinstatement for dismissed miners?

Mr. Hunt

I recognise that on many occasions the hon. Member for Dunfermline, East has pressed the cause of dismissed miners. I hope that, equally, he will recognise that my right hon. Friend and I have been consistent in stating that this is a matter for the management of the Scottish area. That answer may not please him, but I hope he recognises that it is an answer that I have consistently given. The hon. Member for Dunfermline, West, who initiated this debate, recognised that fact by addressing his plea more to the new director than to me. It is a matter for the director of the Coal Board and for the management of the Coal Board in Scotland.

I think that the hon. Gentleman also recognises that the future of individual pits is a matter for the management in Scotland, in consultation with the trade unions, within the general colliery review procedures. I understand that reconvened colliery review meetings at a number of pits in Scotland are planned, but that is a matter for British Coal.

All this is perfectly in line with the board's policy of open communication with its employees. The hon. Gentleman was right to stress that it is vital that the men should be told exactly what the future holds, and I endorse that. I think he recognised that I would not be predicting the price of oil either today or on any future occasion. He said that it would be a brave man who would. We have made it clear that the board, like any other commercial organisation, has to respond to the market forces that a re working around it.

In conclusion, I repeat what I said at the beginning. I firmly believe that there will continue to be a steady demand for Scottish coal, not least from the electricity industry, because I believe in the continuing determination of those in the coal industry in Scotland to maintain the progress made in cutting costs and becoming more competitive. That realistic approach makes me optimistic about the future. As the hon. Gentleman knows, where pits must close—as they have always had to close—there is record investment by British Coal Enterprise in Scotland. It has invested £2.2 million of the total £15.5 million to create more than 1,100 initial jobs and 1,700 job opportunities. That presents a balanced approach to the future of the coal industry in Scotland in the light of the latest agreement with the SSEB.