HC Deb 15 January 1987 vol 108 cc429-42 '(1) In subsection (1) of section 1 of the Coal Industry Nationalisation Act 1946 there shall be substituted for subparagraph (a) the words "working and getting coal in Great Britain" (2) In subsection (2) of that section the words "to the exclusion of any other person" in subparagraph (a) shall be deleted. (3) Subsection (1) of section 36 of that Act shall be deleted. (4) Subparagraphs (a) and (b) of subsection (2) of that section shall be deleted.'.—[Mr. Fallon.]

Brought up, and read the First time.

4.36 pm
Mr. Michael Fallon (Darlington)

I beg to move, That the clause be read a Second time.

New clause 1 seeks to remove the monopoly that the National Coal Board enjoys, and has enjoyed for 40 years since the original nationalisation Act of 1946. That Act charged the board with the duty of securing the efficient development of the industry, and 40 years on it should be obvious to everyone that the record is not good. Almost every year of the NCB's existence has seen pits close and miners made redundant. During all that time the NCB has lurched deeper and deeper into debt and become more and more dependent on the goodwill of the Government and the support of the taxpayer. A whole series of Bills such as this have been enacted to transfer more and more of our taxes to the NCB, in return for which the taxpayer has seen little.

The NCB is not simply financially bankrupt, but is politically and socially bankrupt as well, and the reasons for this deserve some examination. It should be obvious to any student of the coal industry that the board has been living, since 1946, and certainly up to the recent strike, almost in a world of its own, protected from the real world, indifferent to, and oblivious, even contemptous, of the real disciplines of the energy market place. Had it not been so, we would have seen, long before the tragic strike of 1984–85, much better management, much more modern industrial relations and, above all, greater security, certainty for those who work in the industry, the miners, who for 40 years have been denied the opportunity to work in a successful and profitable industry and the chance of any share in that success and in profits.

The monopoly has insulated the Coal Board from reality. It is the privilege of the board alone to work and extract coal in the United Kingdom, and nobody else shall be allowed to do so other than with its permission, and that is at the heart of the industry's failure. Such a monopoly and privilege is not only wrong in principle, but has been disastrous in practice. There are no such monopolies in other countries. Private mining exists, and other countries do not have to bail out their mining industries or coal boards. During the past 20 or 30 years they have not had to divert resources to finance Hobart House which might otherwise have been spent on roads, schools and hospitals. Indeed, the mining industries of those countries have made a contribution to roads, schools and hospitals, as have our other extractive industries, instead of diverting resources away from them.

It is high time that the privilege and monopoly of the board was reviewed by the House and, after such a review, removed. I only regret that the Bill promulgates, yet again, the conspiracy between the Department of Energy and Hobart House further to defraud taxpayers of resources which they would wish to see spent on what is most needed, such as roads and hospitals, rather than on keeping uneconomic pits open for social reasons.

I regret that the Bill does not establish the basis of a new Act to supersede the 1946 Act and lay down the lines on which a restructured industry might be made ready for the 1990s and opened up to fresh opportunities, new investment and, above all, wider ownership.

The objective of removing the monopoly is threefold. First, it would allow private investment in the industry. It is clear that the industry, as constituted after the strike, will require substantial capital investment for several years. Yesterday's White Paper showed that capital investment of £648 million will be required in the next financial year, and £698 million in the two subsequent years up to the end of 1990.

Even if the board becomes profitable, it is still, because of its monopoly position, denied access to the private capital markets and is not encouraged even to consider the possibility of joint ventures with private industry.

We are speaking, not of selling parts of the industry or profitable investments, such as Selby, but of seeking ways to finance the Selbys of the future and to encourage fresh private capital into the industry through joint ventures and partnerships and through the sort of Phoenix schemes that we have devised for the steel industry.

The second purpose of removing the monopoly is to encourage the existing private opencast sector. That is a small but important sector, employing 1,500 people. My hon. Friends the Members for Erewash (Mr. Rost) and for Tatton (Mr. Hamilton) will, if they catch your eye, Mr. Deputy Speaker, make a powerful case for saying that the limits on this sector, which are at present imposed and controlled, not by the Department of Energy or the county councils on planning grounds, but by itself, should be removed, and that further opencast development should take place, providing cheaper coal and a continuing competitive stimulus to the Coal Board.

The third aim of removing the monopoly is to encourage the private small mines sector. It is not generally known that small private mines are allowed to flourish in the Coal Board's back yard, provided that they employ not more than 30 men, rather as private agriculture is tolerated in the Soviet Union. There are 160 small mines in Britain and, interestingly, they are in areas of high unemployment. There are 90 small mines in Wales, 29 in the north-east and 20 in Scotland. They produce a formidable output of 800,000 tonnes of coal a year and employ about 2,000 people, but the cardinal point that also applies to the private opencast sector is that it would like to employ more men. It is willing and ready to employ more.

It is extraordinary that in areas of high unemployment, under a Government who favour the development of small businesses, there is a Coal Board structure which denies other mines and operations the opportunity to employ more men, even when they are already successful.

It is the view of the small mine owners, given in evidence to the Select Committee on Energy, that employment would expand significantly and considerably if this monopoly restraint were lifted. Anyone who is in any doubt about that should read memorandum 33 to the Select Committee on Energy, which is a damning indictment of the evils of monopoly and an eloquent testimony to the possibilities and opportunities that exist if this great industry is opened up to greater and further competition.

4.45 pm

The question is not whether the Opposition will defend this monopoly—obviously they will defend it, just as they defended the monopoly of the National Union of Mineworkers—but whether the Government have the courage and the vision to tackle the monopoly of the Coal Board in the same way as the Bill tackles the monopoly of the NUM.

Mr. Ian Wrigglesworth (Stockton, South)

I do not support the provisions of new clause 1, but this is a welcome debate for the House and I am pleased that the hon. Members for Darlington (Mr. Fallon) and for Tatton (Mr. Hamilton) have tabled the new clause.

The issue needs to be opened up and examined. No one in this House or in the country would want to protect a monopoly unless there was an absolutely overwhelming case for doing so. I am not sure that the case for a monopoly in the coal industry is any longer justified, but a debate on that should take place and we should examine the matter carefully. No doubt when the Act was put on the statute book against the background of private exploitation that had taken place in the preceding decades, the case for a monopoly was overwhelming. In the atmosphere and circumstances of that day we can understand and support what brought the industry into the modern, post-war era.

The National Coal Board has undoubtedly made a major contribution to Britain's industry and to the communities in which it has operated. However, if we look at the wording of the 1946 Act, which the hon. Member for Darlington and his colleagues seek to amend, we see that it is a product of the 1940s and of the atmosphere and circumstances that existed at that time. The Act states working and getting the coal in Great Britain will be carried out to the exclusion…of any other person…searching and boring for coal in Great Britain shall be carried out to the exclusion of any other person. There could not be a more abrupt and crude description of a monopoly than those words.

The Act then mentions the provision of licences. I wish to dwell on that for a moment, because it appears that putting the power to give licences in the hands of the National Coal Board is quite inappropriate. Oil licences are issued and the royalties are paid to the Government. The appropriate body to issue licences should be the Government, not an operator. That does not mean that the Government should give licences to anyone and everyone. It seems wrong that an operating business should have the royalties and the right to give licences in this way, even if it is a monopoly. The Government may decide to give what will be British Coal a monopoly to operate in this sphere, but it is no longer appropriate that that body should have the power to give licences and take royalties, even if it was appropriate in 1946. Therefore, I see a case for changing the provision to give the Government the right to do that.

Opposition Members who have had the association with the co-operative movement that I have had will believe that there are forms of ownership other than state ownership which could and, indeed do, make a success of running industrial enterprises in many spheres. Some hon. Members may even want to see co-ownership for organisations carrying out mining activities. During the dispute it was often suggested that some loss-making pits should be given to those who work in them. I was not in favour of that. If we give pits to anybody, let us give profitable pits to those who work in them, so that they can make a success of them. At present the Government do not have the power to do that because they do not issue the licences.

I can see a case for considering that argument seriously and for transferring the power to give licences and to fix and take royalties to the Government. That would be more consistent with the provision for issuing licences for extracting minerals in other spheres and, certainly, for extracting oil. The country has benefited from that system in other spheres and I see no reason why that provision should not be transferred.

I hope that the debate will continue. There is no inherent reason why the coal industry should be a monopoly industry. Because of its set-up, it could be argued that every pit should operate as a separate commercial entity. I would not go anything like as far as that, but certainly there could be three state enterprises. If Labour Members do not want the coal industry to go into private ownership, we could have different public sector corporations, and in that way we could have competition and compare the operation and efficiency of different parts of the mining industry.

We have seen mining succeed in much more difficult spheres, such as in tin. That has been carried out successfully and efficiently and it may be helpful to have that sort of competiton in coal mining.

Mr. Kevin Barron (Rother Valley)

The hon. Gentleman spoke of different types of public competition. Is he aware that every colliery in the British coalfield works on the basis of price per tonne at that particular colliery and is in competition with other collieries, and has been since vesting day in 1947?

Mr. Wrigglesworth

That is a different consideration because it does not take into account the full free-standing commercial set-up of the sort that I am suggesting. Now is not the time to discuss that.

The coal industry has been in considerable turmoil in recent times. From both the national and industrial point of view now is not the time to embark upon a major change such as is being proposed. That does not mean that the 1946 statute should be set in concrete for ever and a day. Therefore, I welcome the opportunity to widen the debate and hope that it will proceed further and that we shall have many more discussions on this issue.

Mr. Peter Rost (Erewash)

I support the amendment and the way in which it was proposed, and hope that my hon. Friend the Member for Darlington (Mr. Fallon) will press it to a vote. My only regret is that the debate is necessary.

It is extraordinary that, after six years of a Government who believe in and have put into practice policies of competition, private enterprise, incentives and lower energy costs, they should have evaded amending the Coal Industry Nationalisation Act 1946, which provides such a stranglehold over what limited private sector mining has been allowed to persist. The Government should and could have removed the worst abuses of the Coal Board's monopoly long ago.

As my hon. Friend mentioned, there are about 160 small pits, producing about 1 per cent. of the deep-mined coal and employing about 2,000 people. Many are miners' co-operatives. They produced a great deal more in 1960, but since then the restrictions of the statutes have held them back. The Energy Select Committee's memorandum, for which evidence was taken from the Federation of Small Mines of Great Britain, is a most damning indictment of and explanation why the private sector has been so clobbered. For years the FSMGB has argued for the removal of the worst restriction in that Act—that a deep mine in the private sector should be allowed to employ only 30 men.

I visited one of those small pits in Staffordshire for a day to find out exactly what the problems were. It came to light that, because it was allowed to employ only 30 miners, it could operate only two shifts. It wants to work three shifts to optimise its potential and, indeed, employ more miners. There are plenty of miners looking for jobs since the board has been closing pits, but they cannot be employed in such pits. It is not practicable for the mine to split its 30 work force over three shifts as it would not be viable to operate a shift with only 10 men; at least 15 are needed. The result is that the pit is restricted from increasing its output, providing additional jobs and getting on with it.

Plenty of other small mines and sites could and would employ 40 or even 100 men. Those jobs could be created, many of them in workers-miners' co-operatives, but the Act prevents that.

Mr. Alec Woodall (Hemsworth)

How many miners made redundant by the Coal Board are working at the small mine that the hon. Gentleman visited?

Mr. Rost

I understand that British coal miners are only too willing to be employed in the mining industry, if they have the opportunity.

The Government are achieving a massive transformation of the British economy, creating new jobs and encouraging small enterprises, but in this case we are reluctant to set free an industry which could make a bigger contribution to the national economy than it is at present. Those small mines, many of which are co-operatives, wish to reduce their operating costs by operating more sensibly, but they are prevented from doing so by this stupid 1946 monopolies legislation that states that they should be allowed to employ only 30 men.

There is evidence that whole areas of potential coal mining are being artificially sterilised by that restrictive legislation.

Mr. William O'Brien (Normanton)

Will the hon. Gentleman give way?

Mr. Woodall

Will the hon. Gentleman give way?

Mr. Rost

I hope that Opposition Members will allow me to make my brief speech so that they may then have the opportunity to make theirs.

There are whole areas with mining potential that the Coal Board does not want because they are too small. They could be developed as small and medium-sized mines if private enterprises were allowed to employ more than 30 men, but they are not. That is restricting the coal industry's economy and job opportunities. How can Government—this Government of all Governments—justify the fact that they have ignored this abuse that should have been dealt with long ago?

5 pm

There is evidence on record of pits which the Coal Board has closed but which the private sector would have liked to have taken over, or existing miners or management would have liked to have taken on. Such pits would have been made viable and economic if the private sector had been given that opportunity, but because it would have involved the employment of more than 30 miners they were not allowed that opportunity.

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

Where is the evidence of those pits being offered to the miners who would have taken them over and made them profitable? The only time when miners wanted to do that they were refused. I am aware of the small mine that the hon. Gentleman has visited, but can he tell us how many present small mining operations do not employ 30 men even though they are allowed to do so?

Mr. Rost

The hon. Gentleman has proved my case. They do not employ that number because they are not given the opportunity—[HON. MEMBERS: "Of course they are."] If the hon. Member for Pontefract and Castleford (Mr. Lofthouse) wants evidence from me he may study some of my voluminous files afterwards if he wished to do so.

There are other restrictions that ought to have been removed long ago and not just restrictions on the numbers employed. I refer to the issue of licences, which the hon. Member for Stockton, South (Mr. Wrigglesworth) referred to so eloquently. The issuing of licences to the private sector is under the patronage of its major monopoly competitor, the Coal Board. The board exercises that patronage in an arbitrary and rather restrictive fashion. It is the judge and jury. What is even worse is that there is no independent right of appeal when there is an abuse or alleged abuse. The private sector wants a licence but can be stopped by the Coal Board. That is unjustifiable and should have been amended long ago.

A third restrictive factor should have been removed long ago. It is bad enough that the private sector is inhibited and restricted by the original statutes, but on top of that it must pay royalties per tonne, not to the Government or the Department of Energy but to the Coal Board—its major competitor.

In the deep mine sector that royalty works out as the equivalent of £1 per tonne. That is really quite extraordinary. The Government and not British Coal should be the custodian of coal reserves and all mines should pay a royalty to the Government in the same way as the oil and gas exploration agencies pay a royalty. There should be no restrictions on output or manpower.

I believe that if we study the past 40 years it will be clearly seen that there has been an abuse of monopoly and that that has been condoned by Government. I am ashamed to say that Government have failed. They should have put this right long ago.

In its 1983 report the Monopolies and Mergers Commission said that private operations provided a valuable element of competition and should be encouraged as a means of increasing the efficiency of the NCB. We have moved a little since then but certainly not in the right direction.

The royalties that the private sector has to pay to the Coal Board out of its profitable operations provide part of the subsidy for the board's loss-making operations. That is quite unacceptable.

The other area of the private sector coal industry that has been graciously allowed to continue in a modest little way is opencast mining. Private opencast sites provide about 10 per cent. of our opencast coal—about 1.4 million tonnes—and employ about 1,500 people. That is only a fraction of the opencast coal produced. The rest is mined by the Coal Board. Over the years we have had voluminous evidence to suggest that the private sector has the potential to produce more and employ more people if it were allowed to mine the smaller opencast reserves that the Coal Board and the Opencast Executive do not want to know about. Once again, there is a restriction because the licensing power is under the patronage of the Coal Board. The main complaint that the National Association of Licensed Opencast Operators has put to Government over many years is that the monopoly producer, the Coal Board, is also the regulator for the other producers.

The 1983 report of the Monopolies and Mergers Commission recommended that the limit of production for opencast mines in the private sector—standing at 25,000 tonnes a year—should be raised to at least 100,000 tonnes. We now have some flexibility but it is still up to the Coal Board to decide whether to allow a licence to exceed the 25,000 tonnes. That is a ludicrously small amount. In practice it means that potential opencast mines that the Coal Board does not wish to operate because they are too small but which nevertheless could be developed by the private sector are not tapped because the limit on private sect or production has not been increased to at least 100,000 tonnes a year.

What is even worse is that private sector opencast mines have to pay a royalty, not to the Government or to the Department of Energy but to the Coal Board. That royalty is about £16 per tonne. The royalty that the private opencast mine industry has to pay to the Coal Board is higher than the Coal Board's profits per tonne from its own opencast operations. That says something about the relative efficiency of the two sectors.

How can such monopolistic restrictions be justified by the Government? The royalty penalty that the private sector must pay to the Coal Board also limits the number of potential sites that can be exploited. There are many potential sites in the private sector that could be profitable but are not developed because the £16 royalty must be taken into account.

I ask the Minister to consider how much coal the Coal Board could profitably produce if it did not receive these payments from the private sector or instead had to pay a £16 per tonne royalty on its production. I shall be interested to hear his answer.

Private opencast operators are afraid to complain—this this is one of the worst abuses of the monopoly—because they fear that they will be victimised and refused further licences from the board if they do not accept the few crumbs that are given to them under the patronage scheme. The private sector has to take this lying down. There is evidence to support that. That position is quite unacceptable.

I cannot understand why nothing has been done to amend the Coal Industry Nationalisation Act 1946. That measure has represented a shameful restriction on competition and employment opportunities for miners. It is holding back the production of cheaper coal and preventing a further addition to the creation of wealth in Britain, which our economy desperately needs. I suggest that the time for action is long past.

Mr. Neil Hamilton (Tatton)

Next year it will be 50 years since a Conservative Government nationalised the coal industry in Britain. I greatly appreciated the spirited defence of capitalism by the hon. Member for Stockton, South (Mr. Wrigglesworth), but, despite what he said, it was a Conservative Government who nationalised this country's coal reserves in the Coal Act 1938, which set up the Coal Commission. Thus, it is 50 years since we began nationalisation, although it is only 40 years since the 1946 Act replaced the Coal Commission with the National Coal Board.

People are bound to admit that nationalisation has proved to be a failure, even on the basis of the arguments put forward for it at the time. For example, it has manifestly failed to guarantee employment in the industry, as only 15 per cent. of the manpower needed at the time of nationalisation remains. It has also manifestly failed to provide the cheap coal on which industry depends, and imports are kept out only by hole-in-the-corner and backdoor agreements that are forced on the Central Electricity Generating Board. Moreover, nationalisation has failed to protect our market share in the energy industry. By contrast, the consumption of coal as a proportion of the total amount of energy consumed has increased in other parts of the world during the last 10 years.

Nationalisation has also failed to produce a social return. Billions of pounds have been wasted. Before the strike the figure was £1 billion per annum, and in the 10 years from 1974 to 1984 the figure was £6.5 billion per year. In addition, the taxpayer provides £700 million each year for investment. The NCB has been a great ball and chain round the ankles of British industry because it has kept our power prices at least 10 per cent. higher than they would otherwise have been if the CEGB had been able to buy its coal on a free market.

Even more obviously, nationalisation has failed to bring about good labour relations. When nationalisation took place, the great hope was that the old battles between the owners and the workers would disappear, but that has not happened. In 1972 and in 1973–74 there were great strikes. Most damagingly of all, there was the Scargill strike of 1984–85. Thus, in the past 10 years in particular, the coal industry's record has been worse than that of the Arabs when it comes to interrupting energy supplies.

Conservative Members see, and want to see, a great future for our coal industry. I am astonished that Opposition Members do not want to give more support to our proposals, which attempt to secure that advance. The new clause invites my hon. Friend the Minister and my right hon. Friend the Secretary of State, who is the Government's great privatiser, to give the coal industry the benefits that this Government have given in other areas since 1979 through their privatisation programme.

As I always do in such debates, I shall declare an interest, in that I have a connection with the National Association of Licensed Opencast Operators. However, what I have to say is no different from what I have said in virtually every coal debate since becoming a Member of Parliament and prior to acquiring that interest. Privatisation is successful in other areas, and there is no reason why that success should not be repeated in the coal industry. Unlike the NUM, which pursues solely political goals, Conservative Members seek to pursue social and economic goals that will benefit those who work in the industry as well as the whole nation—taxpayers and consumers alike—through the increased efficiency that privatisation will bring.

I wholeheartedly support what my hon. Friend the Member for Erewash (Mr. Rost) said about the necessity for liberalisation in advance of privatisation. That could be done very simply. I shall not rehearse those arguments, however, as I put them on Second Reading. Nevertheless, I hope that on this occasion my hon. Friend the Minister will reply to some of the points that I made. The 1983 report of the Monopolies and Mergers Commission made recommendations to liberalise the small private sector regime. I hope that my hon. Friend the Minister will give us some convincing reasons today to show why the Government have not yet found legislative time to make the small changes necessary.

5.15 pm

It is vital that Britain should have an efficient coal industry that is capable of providing for our expanding energy needs in an acceptable way. A monopoly is a disadvantage, because in the present structure there is a means of manipulating the price to the consumer. Happily, we now see less of that because, under the direction of my hon. Friend the Minister and my right hon. Friend the Secretary of State, the Government have made immense advances in securing a stable and expanding future for the coal industry, but the pressure would always be on the Government—particularly if we should ever have the misfortune to have a Labour Government—to protect a nationalised industry against the forces of competition and efficiency.

The economy of scale arguments that are normally advanced for such nationalised arrangements cannot really, in all logic, be applied to this industry. It is unlikely that we need a single monolithic entity to secure economies of scale in coal. Moreover, there are more likely to be difficulties with an industry that is organised on its present basis. I say that because of the complexity of organisation, administration and so on, and all the competing claims that are made, for example, on managers' time in having to lobby Ministers and provide the detailed reports required by the Department of Energy.

The coal monopoly is not by any means a natural monopoly. Indeed, it is a political monopoly that has been imposed by statute. As the hon. Member for Stockton, South said, there is no reason why we could not have competition within the industry in a variety of different forms, whether by co-operative or joint ventures, individual mines or groups of mines, or whether it be that the industry is broken up by area on a profit-making basis. A huge variety of opportunity is open to us.

Thus, we could end the conspiracy against consumers and taxpayers that has gone on for the past 40 years. I hope that my hon. Friend the Minister will assist the coal industry in achieving its statutory obligation to secure the efficient development of a coal mining industry in this country. Before 1979 that was not achieved, and it is only in the past two or three years that we have made significant strides towards that.

I believe that denationalisation and privatisation will bring immense benefits to the industry and to us all, as taxpayers and consumers. Moreover, I can see enormous opportunities for efficiency gains and expansion. Opposition Members often say that they want new coalfields to be developed, but they deny us the means of doing that. The Coal Industry Act 1980 imposed an injunction on the NCB to break even by 1983–84. There is now an injunction for the industry to break even by the end of this decade. I hope that the date will not be postponed yet again.

The necessity for Government to act is brought about only by the artificial statutory regime in which the industry has to operate. If it was in private hands, it would be profitable and would operate in the interests of the whole country. The cost of electricity to consumers would be greatly reduced, as Lord Marshall said during the strike, possibly by 10 or 15 per cent., if we had the freedom to purchase coal in the cheapest market.

There is no reason why Britain should not have the cheapest market. Efficiency is not the enemy of the miner, as can be seen from the increase in earnings of those still in the industry. The tragic number of job losses in recent years would not have occurred if the industry had become more efficient earlier on. There would be a bigger market for coal in Britain if it were not for the likes of Mr. Scargill, who has frightened industrialists off coal, because they feared that their supplies could be interrupted at crucial moments. They were frightened off because they did not want to build up stocks as an insurance against the possibility of a strike and incur the cost of keeping coal idle as a result. The cost fell on the whole nation, because mothballed oil-fired stations had to be kept in operation against the possibility of a strike. The huge cost of the oil burn during the coal strike would not have been necessary were it not for the backward-looking, dinosaur attitudes of Opposition Members and their supporters.

According to Opposition Members, the coal strike of 1984–85 started because of the failure of the Coal Board to observe the guidelines for pit closures. If there were the opportunity for private market investors to put their money into pits, there would be no need for colliery review procedures. The market would be the review procedure. If a pit was inherently profitable, people would put money into it and keep it in operation. That would involve a more hard-headed decision than the bureaucratic self-serving one that the industry takes at the moment.

Mr. Stanley Orme (Salford, East)

The hon. Gentleman has said it all.

Mr. Hamilton

That is certainly true. All of us have said it all. The right hon. Gentleman has said it all before as well. I shall continue to say it all until the right hon. Gentleman agrees. I suggest that he addresses his remarks to my hon. Friend the Under-Secretary of State. The sooner the right hon. Gentleman agrees with me, the sooner I shall keep quiet.

There are many benefits of privatisation. Technical progress would become more rapid and relevant to different scales of operation, as we have seen in the North sea, where advances in the development of big oilfields have accompanied the ability to exploit smaller, previously inaccessible deposits. We would thereby achieve a greater security of supply with competitive suppliers. Above all, we would depoliticise the economic decisions that we have been obliged to take. There would be pressure to reduce costs, keep down prices and raise efficiency.

The Government's role would then be the proper role of the Government, not that of a Department interfering in the day-to-day management of the industry. The Government's role would be to maintain competition and to internalise the external costs of mining which otherwise would fall upon the community, and that would be wholly admirable. I counsel my hon. Friend to take to heart the words of my right hon. Friend the Secretary of State for Transport, who was the architect of the privatisation programme during the last two Parliaments. In a recent publication he is reported as saying: It is already clear to me who mainly prospers through privatisation. The shareholders of the companies we have sold prosper. the employees prosper, and most of all the customers and the whole Nation prosper. That is why privatisation in the United Kingdom has been such a success and why the programme will continue until all state-owned commercial industries are returned to where they belong—to the private sector. I emphasise the last few words, all state-owned commercial industries. I hope that this legislation clearly presages the return of the coal industry to the private sector, so that it and we can prosper together.

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

I am grateful to the hon. Member for Darlington (Mr. Fallon) for raising this issue, which is important to his party. His colleagues are known for their enthusiasm in this matter. They will not be surprised at my response.

I must, however, dissociate myself from the comments of my hon. Friend about an alleged conspiracy between my Department and Hobart House to defraud the electorate. Perhaps he went a little over the top.

The hon. Member for Stockton, South raised some important points concerning the power to fix royalties. My hon. Friend the Member for Erewash (Mr. Rost), who has always robustly argued his case, made some important points about the private sector in the coal industry, both the licensed opencast sector, to which much reference is made, and the private deep mine sector, to which perhaps insufficient reference is made.

My hon. Friend the Member for Tatton (Mr. Hamilton) clearly laid out the social and economic goals which he considers will benefit all those in the industry, as well as the taxpayer and the country. I am advised—I do not rest on this argument—that the new clause would not have the effect that some hon. Members seek because, under schedule 1 to the 1946 legislation, the residue of coal will remain with British Coal.

My substantive response is that there is scope for the private and public sectors effectively to work together. The opencast sector is a prime example of how best that can be done. In 1983 the Monopolies and Mergers Commission reported private sector output of 700,000 tonnes a year. By 1985–86 output had risen to 1.4 million tonnes, which is about 10 per cent. of the UK's annual opencast output.

My hon. Friend the Member for Erewash rightly mentioned the subject of royalties, which is a matter for negotiation between private sector operators and what will be British Coal. He mentioned the figure of £16 a tonne. He will know that many companies do not pay that level of royalty.

My hon. Friend will be aware also, I hope, that in 1981 my predecessor, the Under-Secretary of State, as a result of meetings with the National Coal Board and the National Association of Licensed Opencast Operators, laid down five clear guidelines. The so-called five principles of 1981, which were agreed between the National Coal Board and private operators, and endorsed by the Government, have allowed arrangements to work well. The fourth guideline states that the NCB agreed to set royalties at levels which will permit efficiently-managed operators to develop their business profitably. That is an important guideline for the private sector.

The other guidelines, under which the NCB agreed to license opencast sites with up to 35,000 tonnes of workable reserves to resume the practice of considering a second licence for adjacent sites, bringing the total tonnage of contiguous reserves under licence to around 50,000 tonnes, to exercise the greatest possible flexibility on the maximum size of licensed deep mines, to phase out the practice of requiring many opencast licensees to deliver their coal to the board by offering all new licences free from any delivery requirements, and to reduce royalties for new licences in any case in which accounting evidence was provided which demonstrated that profit expectations would otherwise be cut to unreasonably low levels, are important and have worked well.

This is not an area in which the Government have closed their minds. It is important to ensure that the relationship between the private and public sectors and between private opencast mines and private deep mines is encouraged. I do not think that my hon. Friend the Member for Erewash, despite his usual efficiency, has visited all the 160 privately operated deep mines or the 75 private licensed opencast sites. This private sector already has an important share in the coal industry. I repeat that the private sector is an important part of our great coal industry.

The Bill is the wrong vehicle for a lengthy and major debate on the issues that have been raised, although I recognise their importance. My hon. Friends will know that on many occasions I have said that there are no plans for privatisation. Equally, my right hon. Friend the Secretary of State and I have said that we shall support any move to give the work force—men and management in the industry—a more direct stake in their industry. With this Bill we recognise that, over the past two years, there has been a massive process of restructuring. It has resulted in a stable, viable industry that is capable of offering secure, long-term employment and of contributing positive benefits to the nation.

There will always be restructuring in an extractive industry such as coal mining. The important news for the industry in this legislation is that the major restructuring of recent years is drawing to a close with the end of the redundant mineworkers' pension scheme at the end of March this year.

The legislation is designed to assist those final steps by which management can achieve its goal and, for the first time, run a great industry independent of handouts from the taxpayer. Our coal industry is the only one in Europe that has that possibility within its grasp, and it is the only coal industry in Europe that is improving productivity. Surely that is justification, if any were needed, of the path that management, with Government support, has taken and the response that it has had from the men.

In those circumstances, I ask my hon. Friend the Member for Darlington (Mr. Fallon) to withdraw the new clause.

5.30 pm
Mr. Fallon

With the leave of the House——

Mr. Deputy Speaker (Mr. Harold Walker)

Order. The hon. Gentleman does not need the leave of the House.

Mr. Fallon

We have had a useful debate, perhaps more useful than I could have anticipated. If I understood the hon. Member for Stockton, South (Mr. Wrigglesworth) correctly, alliance Members suggest that they no longer support the monopoly in principle and that they favour transferring the licensing power from the board to the Secretary of State. I pay tribute to the hon. Gentleman because he is well ahead of his alliance colleagues in recognising the importance of markets and competition. His understanding that state regulation and state licensing do not necessarily also mean state provision should be better known on Teesside and also in Stockton, South.

I welcome also the contributions of my hon. Friends the Members for Erewash (Mr. Rost) and for Tatton (Mr. Hamilton), who have supported my case—one with great eloquence and the other at great length—and who made the case against monopoly. Nobody could seriously defend the monopoly that was enshrined in the Coal Industry Nationalisation Act 1946.

The reply of my hon. Friend the Under-Secretary of State did not surprise me as much as it disappointed me. I hope that one thing will result from the debate—perhaps my hon. Friend the Minister can help me in this—and that is that news of the debate can be leaked back to his Department. Perhaps it could be conveyed, not only to his Department, but by some agency to Hobart House so that those who preserve the monopoly and operate its restrictions can be made a little more aware of the spread of competition and the removal of monopoly that has taken place, not only in other industries, but in other Departments in Whitehall.

I make it clear that in the new clause we were not proposing the privatisation of the coal industry. We were not even suggesting——

Mr. Deputy Speaker

Order. The hon. Gentleman must not seek to elaborate on the speech that he made when he proposed the new clause to the House.

Mr. Fallon

We were not proposing privatisation or the transfer of ownership of existing assets. However, we suggested that the industry should be opened up to change, private investment, joint ventures and to the competition that could be provided by an expanding independent sector.

It is clear from the debate that that discussion has only just begun and that it will continue. For that reason, I do not wish to press the new clause to a Division, despite much encouragement to do so, because it is clear that, if leave to withdraw the new clause is refused and it is negatived, Opposition Members will be shown to be the defenders of monopoly, privilege and restrictive practice. I beg to ask leave to withdraw the new clause.

Motion and clause by leave, withdrawn.

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