§ [Relevant document: Fourth Report from the Energy Committee of Session 1988–89 on the Department of Energy's spending plans: 1989–90 (House of Commons Paper No. 435)]
Motion made, and Question proposed,
That a further sum, not exceeding £24,044,000, be granted to Her Majesty out of the Consolidated Fund to defray the charges which will come in course of payment during the year ending on 31st March 1990 for expenditure by the Department of Energy on salaries and other administrative costs.—[Mr. Michael Spicer.]
§ Sir Ian Lloyd (Havant)
I am sure that Back Benchers on both sides of the House will have noted with great pleasure the energetic and forceful way in which you, Mr. Speaker, sought to protect our time. We value these opportunities to debate matters that come before our Select Committees and we believe that it is in the interests of the House and the country that we should have opportunities to comment.
I hope that my Committee, the Select Committee on Energy, has discharged its annual obligation to consider the Estimates of the Department of Energy and in particular to consider chapter 6 of the public expenditure White Paper and class VI of the Supply Estimates.
Last year when we undertook a similar task, we requested that the Department of Energy should improve its performance indicators and achieve a greater consistency of presentation. I am glad to say that it is the general view of the Select Committee that the performance indicators have been greatly improved and broadened and we look forward to that process being continued. We cannot yet make a judgment about the consistency of presentation because that is an ongoing objective which the Department will consider from time to time and from year to year, and obviously the Select Committee will consider that in due course.
The first subject on which I want to concentrate—the coal mining industry—has probably occupied most of the time of the Select Committee. In many senses, coal mining is a primary industry to this country and it imposes a primary financial burden on the state. There is no dispute about the fact that the industry's subsidies have been vast and are apparently unending, whatever its scale of operation. The industry's scale of operation has undoubtedly been reduced quite dramatically over the past decade.
We are concerned about the uncertainty of the industry's finance forecasts. However much year by year is budgeted by the Department and the Government in March, more appears to be required by October and this year is no exception. According to the exact figures in the public expenditure White Paper, the requirement from the state in January was estimated at £560 million; in February the Secretary of State told us that that figure would rise to £720 million and in July we were told that 703 there would be a summer Supplementary Estimate of £250 million which the Committee was told in evidence was "a temporary blip". All I can say is that it is some blip and, unfortunately, the evidence does not seem to support the use of the adjective "temporary", but we all hope that it is. We hope that, because of Sir Robert Haslam's undoubted achievements and leadership, these forecasts will be fulfilled. Nevertheless, some of us remain sceptical, and I think that that scepticism probably spreads throughout the Committee.
Break-even always seems to be about 18 months ahead. I suspect that what we are really looking at is a national reluctance to face facts whenever we examine the coal mining industry. There seems to be a genuine inability to conclude that the horizon is always receding and that we will never quite get there. I wonder whether we are being ground between the upper and the nether millstones. The upper millstone—I think that all members of Committee are agreed on this—is the fact that there is no secure substitute for plus or minus 100 million tonnes of indigenously mined coal. Whether it is deep mined or opencast is another matter, but there is no clear and secure substitute for it. I emphasise the word "secure". A great deal of argument can take place about what that means in different contexts.
The nether millstone is the fact that there seems to be no way in which our coal can be mined at world market prices, and no possible way of predicting exactly what those prices would be if we imported 50 or 60 per cent. of our national coal requirement.
The volume of international trade in coal and the competition is such that, in my judgment, the scope for market exploitation is small, although I fully understand and accept that there are many views on this question and that they cover a wide spectrum and are legitimately held.
Since there are no easy solutions, the Committee, considering the contemporary scene—it has tried to do so as specifically as it can—deplores the negotiating uncertainties which appeared to start between the South of Scotland electricity board and British Coal in Scotland, and which still seem to be hovering over the industry in a rather unfortunate way.
I think it is the view of the Committee that national policy—this is still a matter of national policy because neither coal nor electricity has effectively been privatised yet—should not be settled in the courts. Both are still in the public sector so there is a considerable obligation on the state to take the leaders of these two great and important industries by the hand and say to them, "For heaven's sake, get on with it and achieve a settlement." Even if both industries were in the private sector, there would still be such an obligation because it is in the national interest not to keep matters suspended indefinitely so that the managements of both major industries do not know where they are.
The additional £250 million Supplementary Estimate which the Secretary of State has asked for is discussed in some detail in paragraph 5 of our report. We noted there, with some dismay, that we were given four reasons for the extra money: mild weather, higher interest rates, accelerated closure costs and the repayment of existing loans. The Committee was somewhat dissatisfied with this explanation, first, because we thought that all those factors 704 could probably have been guesstimated at least somewhat more accurately further ahead and, secondly, because we felt that £250 million is too large a figure to be swept under the carpet in a one-line explanation.
On the broader question whether these matters would occur in some different institution or organisation, I should say that privatisation would not necessarily guarantee that the problems would be solved; nor would it alter the need for a national view to be taken, first, on whether coal should be mined; secondly, on how much coal should be mined; thirdly, at what cost coal should be mined—and certainly at what cost to the nation; and, fourthly, for what purpose coal should be mined.
That brings me to the other question that will not be eliminated by changing the structure or ownership of the industry. That question can be divided into separate parts. Again, the change that is foreseen will not necessarily solve the problem and eliminate these questions. One question is whether and to what extent the social obligation that will remain if we decide to keep a major coal mining industry in the United Kingdom should be borne directly by subsidy, indirectly through the price mechanism, or by a combination of the two. That is another way of describing the inevitable distribution of any burden resulting from a coal mining policy between the private consumer, the industrial consumer and the taxpayer.
Those questions will not easily be answered. If the record of the past 20 to 30 years is any guide—I do not share the most optimistic forecasts—those questions will be with us for the next 10 years. Whatever the answer may be, equivocation and uncertainty would be the worst possible outcome. Wherever possible, equivocation and uncertainty should be removed.
Perhaps optimistically and hopefully, in our report we used the phrasea strong and competitive indigenous industry.If the coal mining industry is a high-productivity industry, and it is becoming so at considerable and welcome speed, it will be competitive. Although recent productivity improvements have been dramatic, no solution is yet in sight.
The industry has received about £20 billion in subsidy, without achieving its target. It has borrowed and remains in debt to the extent of £4.3 billion. To illustrate the scale of that problem—generally speaking, such large numbers are lost to the public and to most hon. Members—that debt of £4.3 billion represents £86 per head of the population, and the total subsidy so far represents £430 per head of the population. Therefore, the Committee strongly supports new, specific and quantified objectives. They must be new if we are to solve the problem. They must be specific if we are to make sensible judgments about them. Obviously, if we are to be able to make policy measurements, they must be quantified.
The Committee was delighted that, almost uniquely among the major Departments of state, the Department of Energy described its research policy and performance in about 12 pages of "The Government's Expenditure Plans for 1989–90." That excellent example should be widely noted. None the less, some definitions are not sufficiently rigorous. For example, the figures under research and development include non-research and development elements. That can be clearly discerned from time to time. Also, energy efficiency monitoring and targeting are included under research and development, when they could not accurately be so described. Similarly, some 705 non-research and development nuclear programmes have been brought together under nuclear research and development. Again, that gives a slightly inaccurate and misleading figure when we should be able to know very precisely how much is being spent, where it is being spent and what the objectives are. The general analysis is greatly improved, and we look forward to seeing a continuation of it.
Energy efficiency is of increasing prominence. My Committee was in slight difficulty with that matter. Having taken evidence on the greenhouse effect over the past six or eight months, we are about to report to the House—a week from today—in great detail about energy efficiency in the context of the greenhouse effect. However, we felt that, in the light of the policy set down in the estimates, we could draw attention to what the Department is doing at the moment in some matters and what its priorities are.
Recently, the Committee visited the research installation at Grimethorpe and we were impressed by what we saw there. We were somewhat disturbed by the equivocation surrounding certain projects and the uncertainty, which was obviously having a depressing effect on the morale of those involved. If energy efficiency is as important as we shall suggest that it is in a few days' time, there is no doubt that the Grimethorpe project is one of the technologies that should be explored either to success or destruction, whichever the research proves. It should not be left in suspension, hanging and uncertain.
A great deal of work has been done in this country, in the United States and elsewhere, into energy renewables, and various suggestions have been made about what contribution these might ultimately make to energy supply in the United Kingdom. Although I have seen figures as high as 20 per cent., these generally seem to follow rather over-optimistic assessments both of the costs and of the technologies. More generally, fairly small figures, of perhaps between 5 and 6 per cent., are realistic targets. One then has to conclude that if renewables are to make a significant contribution to energy consumption—as everyone hopes, and as they must—a great deal more work is required on them.
The next issue to which I should like to draw the attention of the House is the more complex and controversial one of fast breeder reactors. The Committee is suspending its judgment because we have decided that we should undertake a full-scale inquiry into this important subject, and that will be starting towards the end of the year. In the meantime, it is our view that the research and development work on the post-thermal reactor technology should continue and should not be seriously reduced in any way.
In that context I—like, I imagine, other members of the Committee—was somewhat surprised and disturbed to see late last week an advertisement published in all the national newspapers by a large number of scientists, including 15 distinguished fellows of the Royal Society. They said, effectively, that nuclear power provides no realistic, safe, or possible solution to our energy problems. I find that extremely disturbing, although I have the greatest respect, as the House knows, for scientific opinion and judgment. If those 15 members of the Royal Society who signed that statement had listened to all the evidence presented to my Committee and waited one week for the report of the Committee, which is to be published next Monday, I wonder whether they would still adhere to the view that we need not, cannot and should not develop 706 nuclear power. My judgment is that many of them, being distinguished scientists, and essentially the most rational of human beings, would reverse that judgment.
§ Mr. Charles Kennedy (Ross, Cromarty and Skye)
I am encouraged to hear that the Committee will specifically conduct an inquiry into the future of the fast breeder reactor and associated issues. What time scale does the hon. Gentleman envisage for its report, and when will it be published? He will appreciate the great concern in the northern part of Scotland about the dislocation that the effective rundown of Dounreay is causing, and the controversy that that is generating on all sides.
§ Sir Ian Lloyd
I should imagine that the Committee would start the procedure for inviting memoranda fairly soon—probably the beginning of September. The notice of this inquiry has been published. Those parties who are likely to be principal witnesses will doubtless already be preparing their evidence to the Committee. However, I think it unlikely that the Committee will be taking verbal evidence before the House resumes in October or November and, if experience is any guide, it is unlikely that the Committee will be reporting on this inquiry, which is both important and complex, within the first four or five months of next year. We shall obviously proceed with great expedition, in view of the general importance of the subject.
Another important matter is energy efficiency in the public sector. We knew that it was large, but it always comes as a surprise when one realises that the public sector—that is public buildings owned by the Government or public authorities—spent £1.8 billion on energy in the most recent year for which figures are available. We give that information in paragraph 20. That is a large sum, and we are somewhat disturbed that progress in improving efficiency of energy conservation in the public sector is less rapid than it might otherwise have been.
Since the report was published, I had the occasion to visit a major hospital, which I shall not name, although there is no reason why I should not, in the Portsmouth area. I discovered two interesting points. The hospital management told me that the hospital was designed for an average winter temperature of not less than 34 deg. and if the temperature falls below that the management has considerable doubt about whether it can maintain the right temperature in the wards so that it can avoid the conditions leading to hypothermia. I found that a rather dramatic conclusion because I realised that if this is the way in which we have been building hospitals, at least within the past 20 to 30 years, it shows a surprising lack of attention to energy efficiency.
I was told that the difference in the energy bill for one major hospital between one year and another could be as much as £1 million. If that is so, it reinforces the Committee's conclusion that this is something to which the Government must pay the closest attention.
I have now a general question that has assumed an increasing prominence in the debate in the press within the past few months, and that is the need for a Department of Energy. We discuss this in paragraphs 26 and 27. It is a broad and controversial subject and, again, there is room for many points of view. I speak only for myself on this occasion, but I hope that I can speak somewhat more objectively than I might otherwise have been able to do because, in almost all probability, I shall not be opening 707 the debate on the Energy Department's estimates next year, although I hope to be around. Therefore, I speak with objectivity when I say that I reinforce everything that the Committee has concluded. This is not the right time to disband, dismantle or move around the Department of Energy.
Energy, as a major subject with enormous political implications, is rising into increasing prominence, almost with every month that passes. That does not suggest that now is the time to disperse a major and important Department among other Departments of state, however competent. Whatever the other arguments may be for such a dispersion and reorganisation of Government, the Department of Energy is an essential means for focusing attention on national energy policies. It will be far better if that is done centrally under a Secretary of State for Energy rather than peripherally by any other Secretary of State who has energy matters as a subsection of his Department.
I have no axe to grind. The words in paragraph 27 are largely mine and I am glad to say that the Committee endorsed them. I believe that the work of the Department and the Select Committee must continue, because together they will get it right.
§ Mr. Ted Leadbitter (Hartlepool)
It is convenient for me to respond to the Chairman of the Select Committee, the hon. Member for Havant (Sir I. Lloyd), by beginning my contribution on the expenditure report and on the work of the Select Committee by emphasising the importance of the Department of Energy.
I have spent many years in this House; this is my 25th. I spent many years with the old Science and Technology Select Committee, which became the Select Committee on Energy. Over the years during our hearings upstairs we have been privileged to see the growing competence of the people who serve in and represent the Department of Energy. We have many controversial cross-examining procedural requirements, merely to satisfy the thirst of Parliament. It is not a titillating exercise; it suits my personality to be aggravating, aggressive and questioning. That is what Parliament is about. In those years we have seen some excellent officers—excellent at stonewalling, at remarkable revelations and, sometimes, at confessions. Nevertheless, the Department is important to Parliament.
I shall seek to suggest, perhaps in a slightly different way from the Chairman of the Select Committee, how I look upon the significance of the Department of Energy, the importance of the parliamentary role in the work and development of energy policy and resources, and the paramount importance of public interest.
In any kind of human activity there must be one essentially striking objective—what it is expected to do. I pose that question in relation to the activities of the Department of Energy. The answer is not difficult or original. Our linguistic facilities do not give us the opportunity to be innovative in this regard. As Lord Rothschild would say, it is self-evident. The Department of Energy is expected to meet national energy needs, but the question is how best to use our energy resources. All things spring from that and therefore the desired objectives 708 must be a corollary to that main pillar that substantiates the need for some central place in which to discuss such matters.
As we are talking about energy and the use of it, there must be, above all things, the highest standards of safety. Related to that we must have the infrastructure required to produce the best regulatory conditions, licensing conditions where they apply and planning conditions. It is also necessary to satisfy the consumer, the people who matter, those who pay. I believe that it is difficult to divide consumers from workers because they produce. It is also important to have efficiency of supply. Research and development must play a supportive role and we must have policies to assist such development in the public or private sector.
In the exploration of the North sea we must have a substantial offshore share of the industrial activity. Therefore, we need a central base, a controlling edge, to encourage the highest levels of competition. One important essential objective is the ability to control and monitor. At all times there should be a national register of what is happening and how it is controlled in the nation's interest.
There is also a need for co-ordination in normal and emergency conditions. In the widening sphere of privatisation Parliament should be more concerned about co-ordination at times of natural disasters and other emergencies. The promotion of energy conservation must also spring from the centre. It cannot be left to the tides that flow from profits and deficits. It must be a positive policy so that energy conservation is as essential to our energy requirements as the physical resources. Such objectives should also include a concentrated dynamic and continuous flow of resources and the ingenuity of professional minds directed towards exploiting renewables.
I have followed the Chairman's theme by asserting that there is a need for a central place where such purposes and objectives can be pursued. Three basic elements are required to meet such objectives. First, we want a Department that is efficient and economically effective. Secondly, the role of energy in the economy must be promoted effectively. Thirdly, there must be co-ordination between the Department, industry, commerce and the public utilities to achieve an effective national role and to provide an international lead regarding the policies and resources requirements that will meet the targets of the Toronto agreement and that will reduce the greenhouse effect of present burn technologies.
The national interest is best served by effective national involvement in the use of our energy resources—oil, gas, coal, nuclear and conservational renewables—whatever the conditions of public or private ownership. Once we have considered those overall objectives and purposes the need for a Department of Energy becomes imperative. My experience, as I have suggested already, shows that there is no doubt about that.
Any transfer of subject heads from the Department of Energy to other Departments would invite a disparate condition. Such a transfer would mean that energy policy became ineffective, remote, subservient to the mainstream activities of other Departments and out of touch with the reality that means that energy is paramount in our lives. Energy is at the commanding heights of priorities and urgency given its ability to stimulate the economy and to improve the physical and climatic environment.
709 Exuberance about having a Department of Energy must he tempered with a degree of prudence. We have the report of the Energy Select Committee before us, and I am pleased that the Select Committee on the Environment has also produced a report about the way in which the Property Services Agency's estimates for the cost of a new Department of Energy headquarters have stumbled from £4.5 million in 1987 to more than £12.5 million.
We can only assume from that that there have been delays and disruptions. Whatever the excuses, one thing is certain: the original proposal could not have been thoroughly thought out. Perhaps the less we say about that, the better. By using those words, I am not suggesting that something dramatically untoward has happened, merely that the National Audit Office has decided to look into these disparities and, in due course, the House will be able to learn what went wrong, why delays occurred and what the disruptions were. Having made out the case for the Department of Energy with a great deal of enthusiasm, I was wanting only the accommodation it needed, and no more.
There are many issues involving millions of people which relate to energy. However, even now, we have no energy policy, or only a very vague one. In the new fashion of dispersal and the Government's abrogation of their responsibilities, there is a likelihood that there will be no policy at all. In that case, how will Parliament have an effective role to play? Any energy strategy works broadly within the parameters of nuclear and non-nuclear development and promotion. When the expenditure plans are directed towards investment and restructuring, the people are interested in the impact of both and neither is the monopoly of Government or private enterprise. The extent of nuclear development, its location and share in the power programme is a matter for the people. They are directly involved.
In the non-nuclear sphere, the coal industry's share in the power programme is of paramount importance to whole communities. The exploration of oil and gas and its impact on the economy concerns the people, and only through Parliament can the people find effective expression of their national interests as workers, consumers and shareholders in the environment. Our report mirrored that fact. We referred to the fast breeder programme and doubted whether the guessing game of commercial opportunity in 40 years' time justified the running down of Dounreay by 1994. The Chairman of the Select Committee has indicated that this issue is of sufficient importance for us to look at it in the timescale which he has described to the House.
We have expressed concern about the levels of research and development and the difficulty of identifying in the estimates its range and nature. We have also expressed concern about the reduction of financial support to the Energy Efficiency Office. We mentioned the ending of the energy efficiency survey scheme, in which we discovered that for every £1 of public money spent there was £13 worth of savings and millions of pounds—in some cases, a 20 per cent. reduction in bills—of the participating organisations were saved. Why that scheme was brought to an end puzzles many members of the Select Committee. These and other examples affect the public and show the need for Parliament to assert and protect its role of questioning and challenging in a Department which is totally involved in the matters we are discussing.
710 There is one outstanding example. I hope that the country and Parliament will join together in finding how best to bring to an end a tendency which brings unnecessary hardship to whole communities—the acceleration of coal mine closures. We should respond with much gratitude to that special kind of man called a miner. He is unique because over the decades he has inculcated in our minds a sense of loyalty, sometimes misplaced, which has brought about a record for which hon. Members should be generously grateful.
In 1985, we had 169 colleries; this year we have 94. As was suggested earlier, there is only one colliery left in Scotland. This position was brought about by the stupid, silly and irresponsible bickering of two chairmen, one of the electricity board and the other of the coal board, who would not get round a table and act like decent human beings. Instead they used our money for costly litigation, while Shell brought in imported coal, not in bulk carriers, but in small ships through small ports in Scotland. They did that at a loss to themselves, using the loss leader so that when they obtained the contracts they would make more profit, while our miners lost their jobs. As I have said, the number of colleries has been nearly halved.
§ Mr. Alexander Eadie (Midlothian)
I have listened carefully to the expose and analysis of my hon. Friend. He mentioned the present position in Scotland where we have only one colliery left, Monktonhall, and the difficulties surrounding the litigation which is taking place between the South of Scotland electricity board and British Coal. My hon. Friend said that one aspect of energy policy should be security of supply. The South of Scotland electricity board decided, at the end of last year and the beginning of this, to import 1 million tonnes of Chinese coal. Does my hon. Friend agree that that is hardly a country of political stability and would not necessarily give us security of supply in relation to energy?
§ Mr. Leadbitter
My hon. Friend has a profound knowledge of the energy industry and was a Front-Bench spokesman on the subject. There can be no doubt about the factual accuracy of his intervention or the serious conclusion which he has drawn.
There were 171,000 people in the industry in 1985, and that figure is down to 89,000. The daily output of tonnes of the long wall face was 845,000 in 1985 and, with a dramatically lower labour force, that figure has gone up by 35 to 45 per cent. to 1,458 tonnes. The operating cost to obtain coal has been reduced from £42.48 per tonne to £38.25 per tonne. That is a graphic, elementary, statistical thumbnail sketch of coal mining performance—fewer coal miners and colleries, but a remarkable increase in productivity. By 1987, productivity had increased by 70 per cent. as against the pre-strike level and this year it has increased by 19 per cent. on last year's level.
§ Mr. Michael Brown (Brigg and Cleethorpes)
No one can deny the statistics which the hon. Gentleman has adduced in support of his argument, but does he think that the events immediately before 1985 had anything to do with what has happened in the past four years?
§ Mr. Leadbitter
All activities that impinge on an industry have something to do with it. Whether they are of great magnitude is a matter to arrive at by analysis. There was a strike in the coal industry and that was unfortunate. It brought about an incredible state of affairs—the nearest 711 thing I have seen to the creation of a police state. Aggravation was heaped upon aggravation, but that is not relevant to this debate.
The rate of productivity after the strike showed that nothing was in the minds of those who worked in the pits but a desire to make a success of the industry this time. All, including the management, have worked extremely hard to put this unfortunate past behind them.
However, the hon. Member for Brigg and Cleethorpes (Mr. Brown) reminds me that he has been to South Africa. We are all concerned about apartheid—I have never seen such unanimity in the House as there is against it. But there is apartheid in this country. Miners who have never been found guilty of an offence are still refused their jobs back. Such men are deprived of their jobs against the background of their kith and kin increasing productivity by 70 per cent. since the strike and by another 19 per cent. in the past year.
§ Mr. Martin Redmond (Don Valley)
The strike came about because of the stupidity of the then chairman of the board and of the Conservative Government. If the hon. Member for Brigg and Cleethorpes (Mr. Brown) had spent as much time looking into the situation in this country as he had travelling to South Africa he would probably be better acquainted with the facts.
The miners wanted the dispute to go to the tribunal which was set up between the coal board and the union, but the Government refused to participate in it. I find it rather strange that that same Government are now arguing— —
§ Mr. Michael Brown
On a point of order, Mr. Deputy Speaker. This is very interesting and important but, as a member of the Select Committee, may I say that I have read its report and I can see no connection between what we are supposed to be debating and the hon. Gentleman's remarks of the past few moments——
§ Mr. Deputy Speaker (Mr. Harold Walker)
Order. The hon. Member for Don Valley (Mr. Redmond) is pushing at the fringes of the subject. Perhaps he will now have regard to the terms of the debate.
§ Mr. Leadbitter
I certainly agree with your advice and ruling, Mr. Deputy Speaker, but it was a bit naughty and cheeky of the hon. Member for Brigg and Cleethorpes to say that, because he raised the point in the first place. However, the House is forgiving and you, Mr. Deputy Speaker, are understanding——
§ Mr. Leadbitter
As usual, the hon. Gentleman apologises in the nicest possible way.
To return to my analysis, given the indisputable figures showing productivity up, and the pursuit of policies seeking to produce a degree of financial viability, and the hopes based on projections made in 1987 that the industry would have broken even this year, it is not without significance that British Coal showed an operational profit of about £500 million—a figure about which I am willing to be corrected if necessary.
712 The hon. Member for Brigg and Cleethorpes asked what other factors lay behind this improvement and pinpointed the strike as a major cause. Increasing competition from other fuels, unstable but lower oil prices than in the 1970s, inflation and high interest rates and the costs of servicing debt—these elements completely wipe out the operational benefits of the policies and productivity of management and men.
Also, a new term has crept into energy vocabulary—restructuring. It means accelerating closures and decreasing investment, which will fall from £650 million to about £500 million in 1992. That will help to make the books look good. But it is important for the House to consider the other costs involved. To pay for the restructuring programme, £311 million will be needed to pay off miners and to close pits—a high price to pay. No one yet has mentioned the social costs and the multiplier costs of a declining industry. No one has mentioned the knock-on costs arising from the closure of companies that supply the industry. Nevertheless, this restructuring will make the books look good.
Finally, imported coal is beginning to impinge on this country. More of it is arriving from some peculiar places and it is more than likely that it is produced by using cheap labour. This country can match the world in mining equipment and technology—we sell it to America, for instance—but we are using less and less of it here. Did we not learn the lessons of 1973, when oil prices hit the roof and everyone proposed not using oil? We did not. Oil prices have fallen to about $18 a barrel, so now everyone suggests using the cheapest fuel that we can get. The national interest should not depend on short-term price oscillations, however. That is a wrong philosophy and a wrong policy.
Let us look at the cost of regenerating industries in communities that have lost their livelihood. For every 2,000 people working in a pit community there is a tradesman to look after the service needs of the families. The social cost of keeping people idle is high. Does the House understand that it costs nearly £8,000 a year to service a man's idleness? My constituency has a high level of unemployment, although, blessedly, it is now falling. Each unemployed person would welcome a job on even £7,000 a year.
What a daft country Britain has become. What a silly, miserable, pettifogging idea it is to squander resources instead of using a lesser amount to promote the ingenuity and adaptability of our work force. Britain is not weak in the way that people abroad have tried to describe it. It is stultified by political blindness. It is more important in Downing street to overcome a peripheral crisis than to get hold of the broader issues in our country and provide a better deal for our people.
Our Select Committee report impinges upon the economy, upon our social well-being. It seeks to try to understand attitudes that are out of place with the modern dynamism that is required to keep this country great, our people at work and our economy healthy. There are a couple of million people out of work at an approximate cost of £8,000 per person. If we all sit down and do nothing, we will end by having nothing to pay ourselves.
The time has come for a Select Committee report to show that we must maximise the use of our energy resources. We must magnify the importance of the problem and invest in means that conserve energy and promote its better use. We must also provide the kind of 713 investment that will exploit to the full our indigenous energy resources—in this case coal. If we let coal die, a little bit of Britain, nay, a pretty big bit of Britain, will die with it.
In Britain a disease, a cancer, has stricken the shipbuilding industry, not because it was incapable but because politicians felt that that was the way to go. What has happened to the steel industry? Oh yes, it is making a profit, but once Britain was the largest steelmaker in Europe. Now our steel industry is but a major tiddlywink. One does not have to think twice before saying that, if our shipbuilding and steel industries and the use of coal are built up, Britain will not be the poor neighbour that some people in Europe seek to call it. We need to build up those industries, to invest in them and to put people to work in them. More than that, we must take note of the fine men who worked with fine officers, not only in the Department of Energy but throughout industry, to produce some guidelines about how Britain could make good in a way that will make it the pride of Europe. We will make energy tops if we say yes and keep the Department.
§ Mr. Peter Rost (Erewash)
I am grateful for the opportunity to follow the thoughtful, important and constructive contribution by the Chairman of our Select Committee, my hon. Friend the Member for Havant (Sir I. Lloyd). I am also happy to follow the equally thoughtful, important and constructive but somewhat more controversial contribution of the hon. Member for Hartlepool (Mr. Leadbitter).
I wish to concentrate on the energy efficiency budget that is exposed in the report. I readily declare an interest, which is well known to the House, as a consultant to a major energy management company. The energy efficiency budget, which was never a large percentage of the total Department budget, has been cut from £20 million last year to £15 million in the current year, and it is planned to reduce it further. I make no special point about that, as I accept that spending more money does not necessarily achieve more results. However, I wish to question, and not for the first time, the Government's priorities in their energy efficiency programme, and those are not necessarily reflected in a reduced budget.
The Government admit that there is still huge potential for improving energy efficiency, but they appear to believe that consumers are now well aware of that and will make their own decisions. In other words, the Government believe that investment in energy efficiency will go ahead because it is cost effective and because consumers realise that they will benefit by saving money. The Government are saying that market forces will do the trick. Nobody believes more in the market economy than I do, but I also believe that the market needs the right consumer signals. The Government's energy efficiency policy now needs a much higher overall priority in Government strategy. Much can and should be done which does not necessarily require increased expenditure but, rather, policy decisions. Let us look at regulation as one example. All my hon. Friends are reluctant to accept unnecessary regulation, and I share their philosophy. However, we need stronger guidance on building regulations and on energy labelling of appliances, as other countries have found. It is not good enough to try for 10 years to get voluntary agreement and progress in those areas.
714 Some years ago we saw the introduction of energy labelling for car efficiency. Nobody objects to that and it has worked as an important yardstick for the consumer. We accept regulation—perhaps reluctantly at first—in every other area of life. We accepted regulations for seat belts and we accept safety regulations wherever we regard them as necessary and in our own best interests.
It is time that we imposed a little more regulation in order to provide stronger signals to the consumer and to encourage the promotion of energy efficiency. I base that argument on the belief that energy efficiency is much more important than it was some years ago. The main thrust of the debate used to be that we must conserve energy because it is a finite resource, we are short of it, and it will run out. The main argument in support of greater energy efficiency today and tomorrow will surely relate to environmental factors.
If, within a few years, scientists reach a consensus that global warming is the greatest threat to future existence on this planet, further action will have to be taken. The consensus of opinion to the Committee, to the Government and to the Downing street conference is that in the meantime energy efficiency should be promoted, where it is cost effective, as an insurance policy if the day shortly comes when scientists agree that we have to take further and major international action to reduce the levels of carbon dioxide. Regulation must, therefore, play some part, but it is only a partial contribution.
What is needed, in addition to a little more regulation, is a priority programme of incentives. Again, however, we are faced with a Conservative philosophy dilemma. We do not believe that the free market needs to be motivated, but it does. If market forces are to operate, they need incentives. The Government have applied that policy in every other area. We believe that it is right to provide incentives to people to buy their own homes. That is why we give huge tax offsets to people with mortgages. We also believe that it is right that people should make provision for their own pensions, so we give them tax incentives. We believe, too, that the market signals are not strong enough to encourage home-produced food, so we give huge subsidies to agriculture. That is not challenged. We give all sorts of strong market signals by using the fiscal system to promote objectives that we regard as desirable. Why else do we spend taxpayers' money on urban renewal, job creation, huge training programmes and regional grants? We provide tax incentives to promote objectives that we regard as economically or socially desirable.
I believe that energy efficiency should also be regarded as a priority. If the market were achieving the energy efficiency objectives that the Government seek, my argument would be irrelevant, but it is not. My hon. Friend the Member for Havant reminded us that the energy bill for the buildings and other places controlled by Government, such as the National Health Service, is £1.8 billion a year. It is conceded that we could achieve a 20 per cent. saving by means of cost-effective investment in energy efficiency which would have a short pay-back period, yet that is not happening. Despite the Government's initiative, announced last January, to promote that investment, we have still not been given any answers about when the programme will start, what is to be spent on it, what monitoring there will be and what the pay-back period will be.
Furthermore, energy efficiency is not happening adequately enough and fast enough in the rest of the 715 economy. We all know that there is a short pay-back period for much of the investment in industry and in domestic areas, but it is not happening because the market signals are not strong enough. One might argue that the Government did not need to reduce the tax on lead-free petrol to encourage people to buy it because there was already a differential. However, the Government reduced the tax and widened the differential. They intervened directly in the free market to provide a stronger signal. The same argument applies to energy efficiency, but it must now be regarded as a priority.
There is a major inconsistency in the Government's strategy. We apply one rule to energy efficiency—that the market will sort it out and we do not need to interfere—and we apply a completely different rule to all other areas of Government policy—the tax incentives in all sorts of areas, to which I have already referred.
There is even greater inconsistency and illogicality about the Government's overall energy strategy. Huge subsidies have been provided to the coal industry. We have allocated a special slot to the nuclear industry; we have protected it by means of extra subsidy. Now, for the first time, we are encouraging renewables by means of the special protection that is provided in the Electricity Bill. Coal has always been protected and the nuclear industry is now being subsidised. We are providing protection because we believe it right to keep those two major sources of-energy alive and flourishing and able to compete, in case we cannot do without them in the future.
The same must apply to energy efficiency. Even if it is cost effective, it still needs to be given a stronger market signal. The nuclear industry would die tomorrow without Government support and the coal industry would have dwindled long ago without it. Energy efficiency has been struggling along because it has not been accorded the same priority by the Government. We must rethink our strategy and give greater priority to the promotion of energy efficiency. The Minister will appreciate the analogy that it is rather like suggesting that the Treasury should maximise revenue by imposing more and more taxes without ever considering whether expenditure should be cut, thus making more revenue unnecessary. The Government's economic success and our prosperity during the last 10 years have been built on the opposite policy of cutting taxes because we have been able to reduce expenditure. We are providing the supply side of the energy equation with all the incentives, but we are not giving the same priority to the consumption side. If we realised how cost effective energy efficiency is and how well it could be promoted if we gave stronger market signals, my case would be accepted and adopted.
Even more serious than holding back the energy efficiency investment that we so desperately need and which a little more encouragement would provide is the disincentive to energy efficiency. What has happened to the neighbourhood energy action home insulation programme? It is dying on its feet, yet it was promoted by Ministers as the most cost-effective way in which to improve energy efficiency in low-income homes. There are other examples. Why are third-party financing arrangements for the public sector still so slow to get off the ground? Energy management companies that have offered to finance investment in the National Health Service on a 716 shared energy basis have still not been given the go-ahead, even though they could save the taxpayer huge sums of money by reducing energy consumption, while reducing environmental pollution.
Another example is the Government's deliberate encouragement of the industry to waste energy through their decision to privatise British Gas. The Select Committee on Energy and the major energy users council have received evidence that the 25,000 therm cut-off point and the tariffs now applied by British Gas as a result of the Monopolies and Mergers Commission report encourage consumers deliberately to waste gas. If a large commercial consumer uses just below 25,000 therms, it has to pay the domestic tariff, but if it wastes enough gas to use more than 25,000 therms its gas bill goes down although its energy consumption goes up. What is worse, firms that employed energy management consultants to reduce their consumption found that by reducing their consumption to below 25,000 therms they were increasing their energy bills because they had to pay the domestic tariff. That absurdity should be remedied; it is one specific example of how, far from promoting energy efficiency, we are encouraging energy waste.
I conclude with a note to the Government, and I hope that Opposition Members will shut their ears for a moment. I suggest to my right hon. and hon. Friends that green politics are here to stay and will intensify when scientists internationally persuade us that we have to take action on global warming. Green politics are not a protest vote, they are not relevant only to the United Kingdom, nor are green voters only Guardian readers. They are mostly articulate, well educated, informed, represent an ever-widening section of the public and are mostly Conservative supporters. If we are to remain in government, we have to respond more convincingly to those views or our opponents will take the initiative from us.
The rhetoric of improving energy efficiency and reducing fossil fuel consumption to reduce the greenhouse effect and global warming has to be accompanied by action. Government priorities and strategies for greater energy efficiency have to be adjusted. We should start next week by accepting the spirit of the Lords amendments to the Electricity Bill on energy efficiency and encouraging the promotion of combined heat and power which is a major way in which we can reduce fossil fuel burn and improve the efficiency of electricity production. We should make a start by accepting the arguments of the Select Committee on Energy over many years and in many reports that energy efficiency is cost effective, but needs a little more encouragement. In the next Session we should follow that up with an energy conservation Bill promoting what is cost effective to address environmental problems.
The Government should take the initiative positively to promote investment in energy efficiency because it will improve our productivity, reduce our energy bills and, above all, will give consumers stronger market signals to make the investments that the environment and our future survival will soon demand.
§ Mr. Charles Kennedy (Ross, Cromarty and Skye)
I am grateful for the opportunity to speak briefly in the debate on the Select Committee on Energy's report. I add my 717 voice to those who have paid tribute to the work of the Select Committee and its Chairman, the hon. Member for Havant (Sir I. Lloyd).
I should like to touch on one or two specific points, the first of which is the future of the Department of Energy to which the hon. Member for Havant referred. I represent Ross, Cromarty and Skye in the Scottish Highlands which is dependent for much of its economic well-being and activity on the health of the oil industry, not least the oil fabrication yards. The work force, and the people whose livelihoods depend on that work force, would view any thought, discussion or serious proposition that the Department of Energy should be wound up as extreme foolishness. It would be foolhardy indeed if we were to go down that track, despite the privatisations in the electricity industry which one can assume will be completed in the next few months. It is absolutely critical, and the report was correct to stress that we should maintain a Department of Energy into the future.
Turning to the oil fabrication sector, let me give the House one example of the dangers, or potential dangers, that confront the country and the oil industry. After 1992 and the Single European Act, it is extremely difficult to envisage how the Department of Energy will maintain the Offshore Supplies Office in its present form without its being counter to the provisions of the Single European Act. Yet time and again concern is expressed in the oil industry and the fabrication sector about unfair competition from other EC member states that are able to offer more advantageous power contracts or, through their system of local rating or local taxation, more advantageous property overheads for firms bidding for work against United Kingdom-based construction and fabrication companies. Therefore, there is a clear need to ensure as high a United Kingdom content as possible in the fabrication work carried out in domestic yards. Clearly, if the OSO cannot be maintained, a similar body would have a role to play.
A considerable worry is that Ministers acknowledge that it is likely that the OSO will run counter to the provisions of the Single European Act. They offer the industry a bland reassurance that some supervisory body or watchdog function will be maintained, but it has never been spelt out to those of us who are interested in what the Government propose to do in the next few years. I should be grateful if the Minister would pass my comments on to the Minister of State who takes specific responsibility for the oil sector, as there is growing concern about what will happen.
The problems that are fast approaching represent a strong argument, in addition to the many excellent arguments that the Chairman of the Select Committee set out, for maintaining a Department of Energy presence in the oil sector, and in all our energy reserves and production concerns.
I shall not follow in depth the excellent speech by the hon. Member for Erewash (Mr. Rost) about energy conservation, but it is worth putting on record the points about energy efficiency which the Select Committee set out in very fine fashion in the report. The amount of waste in the economy caused by a lack of attention to or emphasis on energy efficiency is marked. The Energy Efficiency Office, having had its budget reduced from £24.5 million to £15 million, will not be as effective as it should be. Speaking in another place, Baroness Hooper said that the proposed reduction was a direct result of the successes 718 achieved in the earlier campaign. Does that mean that the Department of Energy believes that the programme's work is complete? Baroness Hooper said that the Government will be "targeting our activities", but what does that mean? It is ill defined—
§ Mr. Kennedy
I agree with the hon. Gentleman.
Is energy efficiency still one of the Department's prime concerns? Government rhetoric about energy efficiency and the contribution that it can make to the economy and broader environment concerns is completely let down by the reality of the reduction in the budget for energy efficiency and conservation.
I was pleased that the Select Committee on Energy drew specific attention to research and development and industrial support. We have heard about the future of the coal industry, energy efficiency and the future of the Department. It is clear that within the evolving European Community and further afield, Britain will be left at the starting post if more is not done and more emphasis is not placed on industrial research and development and general support for the energy industry.
Welcome investment is being made in Britain, but all too often it is of an assembly nature and the conception, marketing and production is done in other countries, most notably Japan. In other sectors, conceptual work is done in Britain, but all too often, because of the lack of a coherent industrial strategy on research and development, manufacturing and production are located elsewhere in the European Community, frequently on other continents. That spells death for a nation that is seeking a long-term future but is an island economy. I was therefore pleased that the Select Committee's report drew attention specifically to the importance of research and development in energy. That point should be underscored.
I hope that the Government will offer an assurance, first and foremost from a local point of view, about the future of the Department of Energy and, more specifically, what will happen to the OSO as 1992 as the reality of the European single market approaches.
The report is timely and welcome in drawing attention to the importance of energy efficiency and a considerably enhanced role for research and development in this crucial sector of the British economy.
§ Mr. Michael Brown (Brigg and Cleethorpes)
A number of hon. Members have supported the recommendations made in paragraphs 24 and 25 of the Select Committee's report. I did not share the views of the rest of the Committee. In the private deliberations that we held last week it was incumbent on me to explain why I differed from the rest of the Committee, so it is incumbent on me to explain why I sought to divide the Committee on the future of the Department of Energy and on another matter regarding the coal industry.
I commend the speech of my hon. Friend the Member for Havant (Sir I. Lloyd). He has done an excellent job over the years as Chairman of the Committee. I pay tribute to the hon. Member for Hartlepool (Mr. Leadbitter). I disagreed profoundly with almost everything that he said, but he has a way of captivating the House and hon. Members enjoy listening to his speeches. I suspect that if 719 I were to pick up on one or two of the points that he made I should be in danger of being out of order, as I was half an hour ago.
I did not agree with other members of the Select Committee that the Department of Energy should continue because I believed that the Committee's remit was to investigate the spending plans of the Department over the past year and for the ensuing summer. The decision about whether we have a Department of Trade, a Department of Industry, a Department of Trade and Industry, a Department of Health, a Department of Social Security, a Department of Health and Social Security or a green department with responsibilities that are currently held by the Department of the Environment—in my humble view it should share certain responsibilities with the Department of Energy—is not one for a Select Committee or the House. We all know that one person has always decided the formulation of Departments. We should do better to wait until that person has made his decision.
We have an excellent Secretary of State for Energy and team of Ministers, but they need not worry about any changes being made to the Department because none of them will be out of a job. However, those who are members of the Select Committee on Energy will be out of a job. If there is no Department of Energy, there is no Select Committee. If there is a good reason for retaining the Department of Energy, it is because members of the Committee will be able to retain their status and because I shall be able to continue to enjoy my weekly audience at the feet of the hon. Member for Hartlepool as we engage in the rough and tumble of lively debate, which I should certainly miss.
On page XV of the report, I proposed that the following words should be deleted:Furthermore, even at the risk of slightly affecting the value of the privatised companies at flotation"—the electricity companies—we believe that the Government should make it plain to National Power, PowerGen and the Scottish electricity industry that the strategic national case for an indigenous coal industry means that they must pay what the SSEB described to us in 1987 as 'a modest premium' over international prices to ensure that British electricity supplies remain secure. BC should not be forced to reduce its prices to the lowest prices available on an unstable and unpredictable international market, however useful these prices may be to all concerned in the United Kingdom as an indicator of the energy costs of our competitors and hence the real cost of energy.It was not in the interests of my constituents or of our economy to go along with that part of the paragraph. After a lively debate, I sought to divide the Committee. Although I lost the vote, I was grateful to my hon. Friend the Member for Cambridgeshire, North-East (Mr. Moss) for taking the same view. It is absolutely essential that every pressure is put on the British coal industry to respond to competition because that is the only way to wean it off the unending subsidy which this report criticises.
§ Mr. Redmond
Will the hon. Gentleman expound his views on subsidised coal imported into this country, sometimes from countries where child labour is used in producing it? Does he want subsidised coal from various 720 parts of the world to continue to be imported? Is he in favour of that unfair practice and of bumping the coal industry in that way?
§ Madam Deputy Speaker (Miss Betty Boothroyd)
This is a reasonably wide debate which covers policy. If the hon. Member wishes to respond, he is at liberty to do so.
§ Mr. Brown
I shall respond most happily. I do not care who subsidises what, so long as it is not my constituents as British taxpayers. So long as the subsidies continue to come from my constituents and those of other hon. Members, I have a major objection to them. I have no views whatever on other countries subsidising their products and giving British consumers the opportunity of a better deal.
§ Mr. Redmond
The hon. Gentleman is right to worry about taxpayers footing the bills. Is he aware of the cost to his constituents, paid in tax, of subsidising the devastation brought about by his Government's policies?
§ Mr. Brown
I do not agree with that. The hon. Gentleman was not a Member of the House in the early 1980s when I represented the British Steel plant at Scunthorpe. You will recall, Madam Deputy Speaker, that I often sought to catch your predecessor's eye. During the first four years of my membership of the House, the BSC work force of 19,000 was reduced to 6,000 or 7,000. I never once suggested that taxpayers should subsidise my constituents and keep them in jobs producing a commodity that customers did not want to buy. On every occasion that the Secretary of State for Trade and Industry came to the House to support Mr. Ian MacGregor, the chairman of the British Steel Corporation, I publicly gave my full support to their policies. I can report to you, Madam Deputy Speaker, that as a result of the decisions taken in the early 1980s, supported by me, today the BSC does not ask the taxpayer for one ha'penny.
§ Mr. Brown
It contributes as a taxpayer, paying corporation tax because it makes profits. It now manufactures a product which is sold because people want to buy it in preference to foreign steel. That is the position in which I want the coal industry to be.
I have been through what Opposition Members fear. In my constituency, 19,000 people worked in the steel industry one year and only 6,000 people four years later. I know that it is painful, but I ask the hon. Gentlemen to face that pain because the recovery afterwards is a joy to behold. I understand their legitimate concern for their miners and constituents, but it is misplaced. Those miners would be left on an unending diet of subsidies, and it is those subsidies that the report criticises.
§ Mr. Allen McKay (Barnsley, West and Penistone)
The hon. Gentleman seems to forget that I, too, had a steelworks in my constituency where the work force was reduced from about 16,000 to about 6,000. 1, too, went through the pain. I acknowledge that there is a difference between the histories of the steel and coal industries. If the hon. Gentleman will consider the history of coal rather than talk about market forces, he will realise how wrong he is.
§ Mr. Brown
I am not sure that the histories of those two great industries are so different. They were both starved of investment in the early part of this century and both were nationalised. One has been nationalised for 40 years and is in a worse state than the one which has been nationalised, thankfully, only for 20 years. There is a clear parallel between them.
I have explained to the House why I and my hon. Friend the Member for Cambridgeshire, North-East felt it necessary to divide the Committee on the paragraphs that I mentioned. I did not write them; they were presented to me for my approval, as was the rest of the report. It may be out of order to say this, but Back-Bench Members of Select Committees should have a greater opportunity to be involved in drafting reports before they are presented with them for final approval. That would help us when we consider Select Committee proceedings on estimates days and in other debates of this nature.
There is much in the report to commend it to Ministers. The detailed work of all involved provides food for thought which, I am sure, my right hon. and hon. Friends at the Department of Energy will consider carefully.
§ 6.6 pm
§ Mr. Geoffrey Lofthouse (Pontefract and Castleford)
The hon. Member for Brigg and Cleethorpes (Mr. Brown) will understand why I do not follow him down that road. It is fortunate that the majority of the Select Committee Members rarely follow his suggestions.
The House will not be surprised if my speech mainly relates to the effect of the estimates on British Coal. Over many years the Select Committee has highlighted the problems that would face British Coal if the Government took certain actions. Unfortunately, the Government have rarely taken much notice of our reports. If they had taken notice of the 1987 report on coal and the report on electricity, they would not have taken the action that they did.
Three quarters of the money made available in the estimate through the vote is to assist British Coal. It is right and proper that a large slice of the report dwells on that industry. I am sure that the Chairman and members of the Select Committee will agree that it has not always been too impressed with the reliability of the estimates and the value to be placed on them. This year's estimates seem to have been treated with some scepticism for that reason.
Paragraph 5 of the report tells us that the uncertainties for British Coal are enormous. That is true. For many years it seems that we have never managed to get the Government to come clean. From time to time we have used our crystal ball and mostly the Select Committee and the House have been correct. The Government have ignored many of the Committee's recommendations and suggestions and on most occasions the Committee has been proved right.
722 We are aware that £250 million is a lot of money, but, as the Select Committee recognised, it is being used simply to run down the coal industry, as the Government have planned to do since 1984. The Government are on their way. We must ask, "Do we need a coal mining industry?" If the answer is yes, what size of industry is required? I should have thought that it should be the size required to meet the demand to generate energy and to mine for coal on these shores. It is obvious from the evidence to the Select Committee that that is not the Government's view.
Recently, in evidence to the Select Committee, Sir Peter Gregson made it clear that he expected the contract agreements between British Coal and the Central Electricity Generating Board to be completed in a few months' time. He said that his Department had been keeping in touch with developments. One can take that as one wants, but these decisions will be based purely and simply on conditions in the marketplace. The Government have had to provide £311 million in the estimates to bring about the loss of a further 15,000 jobs in the mining industry this financial year. The spin-off from the last financial year is about 5,000 jobs. This means, as Sir Peter Gregson told us, that by March next year the estimates will cover some 20,000 miners' jobs.
In 1987, the Select Committee suggested that there might be only 69,000 underground workers in the mining industry by 1990. The Government denied that. It is now obvious that by 1990 that number could fall to 50,000, which means that the mining communities will be in a more traumatic position than they have been in since 1984, when there were about 200,000 men on the colliery books. We have seen the industry run down rapidly. Although in the past there were tragic circumstances in many mining communities, at least the men over 50 were provided with a weekly income to cushion the blow. I have made these points several times in the House and in Committee and I do not apologise for repeating them. The 20,000 miners about whom we are talking in this financial year are not over 50; their average age is 34. They have no weekly income to cushion the blow. There is no alternative employment in the mining communities that these young men can take. There has been no action by the Government since 1984 to provide them with alternatives.
What is the Government's answer? What should these men do? What are the plans for them if 20,000 jobs are lost? It is not sufficient for the Government to argue that the coal industry must stand on its feet and fight the competition. If one accepts that—I never will —the Government have an obligation to the mining communities not to wipe them out for reasons of political dogma and to provide employment to take the place of the staple industries in these communities. There are no signs of that happening.
We hear about the marketplace. Does anyone, from the Secretary of State, to civil servants, to British Coal, believe that British coal can compete with coal from other countries? We hear about all the records and wonderful achievements since 1984. The majority of coal mines are making a working profit—£500 million in the last financial year. Through technology and the hard work of miners, these wonderful achievements have been made, which hon. Members on both sides of the House and Sir Robert Haslam praise. However, we can only produce coal for power stations at a price of £46 to £48 a tonne and it is possible to import coal for between £20 and £28 a tonne, because of subsidies and slave labour in other countries.
723 British coal will not be able to compete in the short term with coal from abroad. That is why the Select Committee decided that there should be some form of assistance to the coal industry and that the industry should not be left to the marketplace. Vast assistance will be given to the nuclear sector under privatisation, so why throw our industry to the wolves when everyone knows that it cannot compete? That is why some people, including the Government, have pushed hard to extend the ports at Immingham and elsewhere. They know that the negotiations between British Coal and the CEGB will result in contracts for 60 million tonnes of coal—10 million more tonnes of imports, resulting in the loss of miners' jobs.
Do we want to leave this country in a state where it cannot meet the demand of our power stations for coal because the industry has been so run down and we need more imports? Does anyone think that the prices of £20 and £28 a tonne for imported coal will be available then? No. Schoolchildren know that. We saw what happened during the oil crisis. It is crazy to do this. Without using my Yorkshire words, may I say that the Select Committee recognised that. Coal is the natural power we have available. If the Minister is in possession of the facts, will he tell us how many British pits, of those that are left, are really uneconomical? There may be a few, but if "uneconomical" means that they must produce coal at the marketplace figure for imports of £20 to £28 a tonne, every pit in this country must be uneconomical. If that is so, there is no great future for the mining industry, although we shall have serious need of that industry one day.
I have referred to figures in the past, and I will not bother the House with them tonight. It seems that some Conservative Members have no respect for the industry, and the hon. Member for Brigg and Cleethorpes seems to think that this argument is a big laugh. He should come to my constituency to see whether pit closures are a big laugh. He would see miners' estates, which some members of the Select Committee have seen. Half the estates are boarded up and those properties that are occupied house aged miners and the widows of miners. Shops and schools have been knocked down. The hon. Gentleman should look and decide whether the social consequences of the savage running down of the mining industry are a laughing matter. I assure the House that they are not.
The Select Committee expressed its concern that the Department's research and development expenditure is set to fall in real terms in 1989–90. As the hon. Member for Havant (Sir I. Lloyd), the Chairman of the Select Committee said earlier, it is essential that the Grimethorpe plant and others like it should be kept operating and that if there is a lack of private funds, the Government do not allow the Grimethorpe plant to close. We talk now about the greenhouse effect and carbon dioxide. That plant contributes to research into the greenhouse effect, which is one of this country's worst problems.
Last year, the Committee criticised the expenditure incurred by the Department of Energy when it moved to expensive headquarters on a prime London site. The Government have said that some of the major Departments should move out into the regions, so one cannot make a case for spending a colossal amount of money on a new building in London, as my hon. Friend the Member for Hartlepool (Mr. Leadbitter) said. I recall 724 that the Committee suggested last year that it might be suitable to erect that building in an area such as Pontefract or Abertillery. I support the proposal for Pontefract or Castleford, but unfortunately that has not happened. A report today on the Property Services Agency main estimates showed the vast increase in costs of this new development and there should be some explanation for that.
I noticed that the hon. Member for Brigg and Cleethorpes left the Chamber immediately after his speech. Unlike him, I believe that the Department of Energy has a continuing part to play, especially in view of our energy prospects. There is also a major part for the Select Committee on Energy to play, and I hope that the Government agree. I also hope that the Minister will give great consideration, when wiping out 20,000 mining jobs, to negotiations. Although nobody on the Government Front Bench appears to be listening, I will say to the Minister that his Department should negotiate with others to see what can be done to introduce alternative employment in the communities that will be wiped out, especially when one considers all the young men who will have no weekly income.
§ Mr. Alexander Eadie (Midlothian)
I have followed the debate closely and I understand the strong plea made for the preservation of the Department of Energy. Many hon. Members may not be aware that the Department of Energy was a creation of the party of the present Government. Although the Department was defended in strong and strident terms, I have my doubts about the outcome. As we have said in previous debates, when the present Secretary of State took office, one of his terms of reference was to abolish the Department of Energy. I hope that the defence put up for the Department is listened to, but I have my doubts.
We have heard today about manpower in the coal industry. The House must be informed about how catastrophic the contraction of manpower in the coal industry has been. I recently had an exchange with the Under-Secretary of State for Energy on the figures and I was able to point out that, in the past seven or eight years, the coal industry has contracted by 151,000 or 152,000 men. It is the greatest contraction suffered by any industry in so short a period.
We are not talking about pits being closed because of dud technology, because they are using outdated technology, because there are no coal reserves left or because the manpower is aging. A young age group works in the coal industry at present. The average age is about 34 and the older men have left the industry. We do not close pits that have been exhausted; we close those that have great reserves of coal. When it was proposed to close Bilston Glen colliery in my constituency, I pointed out that that pit had hundreds of years of coal left. Even in Monktonhall, which has been mothballed, £30 million, £40 million or £50 million was spent in reaching coal reserves which would last for hundreds of years. In the Midlothian constituency, there is coal lasting for hundreds of years, yet it was decided to close those pits.
I want to give an example of the economic lunacy we practise and of the logic of bedlam. I was at a meeting with British Coal where we were having discussions with Mr. Moses, a director of British Coal. We were talking about 725 how a British pit could survive in the present economic and competitive climate. The general secretary of the National Union of Mineworkers said that British Coal was telling us that a pit must produce coal at so much a gigajoule, although British Coal also said that it could not control the cost per gigajoule because factors in the market place determined that. We were told, for example, about the effects of rises in the value of the pound and about competitive bids from other countries. We asked whether Selby's closure would be considered if it did not live up to the gigajoule cost because of the balance of payments crisis and interest rates. Selby is the so-called jewel in the crown of the coal industry, but Mr. Moses' reply was, "Yes, we would have to consider it."
The Chairman of the Select Committee on Energy told us about the subsidy that the mining industry is receiving. I am not saying this in a spirit of cirticism, but if we are dealing with the costs of producing energy we must consider other arguments, such as the cost of nuclear power over the years. We must also consider the security of supply—which could be the subject of a valid debate in the House. I can best illustrate my argument with reference to the ridiculous position of the South of Scotland electricity board. The SSEB has gone back on previous understandings and agreements. It had previously said that we needed an indigenous coal industry. Indeed, the present chairman of the SSEB is on record as saying that it would be unthinkable if we did not have an indigenous coal industry in Scotland. He said that we would always need a coal industry in Scotland. However, he has changed his mind about that and is now putting forward similar arguments to those advanced by Conservative Members and is saying that the competitive argument must be considered. The chairman of the SSEB followed that competitive argument, despite the fact that the Secretaries of State for Scotland and for Energy have been told that something had to be done because otherwise the coal industry in Scotland would contract to nothing.
The chairman of the SSEB went ahead with commercial considerations as the Government told him to do and did a deal for the importation of 1 million tonnes of Chinese coal. What about the argument for security of supply? The chairman of the SSEB said that that coal was cheaper. I am certain that it could not have been cheaper. Indeed, all the evidence and analyses are proving that it could not have been cheaper. Surely one cannot defend supplying our power stations with Chinese coal because by no stretch of the imagination could one say that that would give us security of supply. That is why I said that this policy is the height of lunacy.
I do not want to take up much more time because I want to leave the Minister time to respond to the debate. As a result of this debate, all the information that the Select Committee has given us and all the appraisals, I hope that we will agree that factors other than cost are involved. I hope that the Government will do something about the present uncertainty in the coal industry.
If we are to talk about blatant preference in our energy policy, the coal industry and the coal communities also have a right to express their blatant preference about the production of coal. We can still use the same argument on behalf of coal that was used 10, 20, 30 or even 40 years ago. We have coal in abundance. Therefore, we would be foolish as a country to contract our coal industry to such an extent that we would be dependent on imports of coal. 726 I hope that we can get that message across in this debate to both the Government and the members of the Select Committee.
§ Mr. Alex Salmond (Banff and Buchan)
I was glad that the hon. Member for Pontefract and Castleford (Mr. Lofthouse), my colleague on the Select Committee, referred to vote 3 and the administrative costs of the Department of Energy. I am also pleased that almost a full ministerial team is now present because I believe that I speak for all members of the Select Committee in saying that we should like specific answers to the questions about the administrative costs and the location of the Department that we have raised in successive years in estimates debates.
We have questions about the expenditure incurred on the refurbishment of the offices of the Department of Energy. We are seriously concerned by the Department's apparent lack of consideration of the unanimous view of the Select Committee—again, expressed in two successive years—that the Department should seriously consider moving its staff from central London to other locations. Indeed, so irritated was the Select Committee by the unspecific and cursory response to last year's report that we described it in this year's report as "Civil-Service-speak for doing nothing". The Department is hardly paying even lip service to the Government's professed aim of decentralising staff from London.
The public will find it remarkable that a Department which is now spending £13 million on refurbishing its offices opposite Buckingham palace—at an actual cost that is about 280 per cent. above the original estimate—is not seriously considering whether it is possible to move most of its staff out of central London. I understand that the report of the Select Committee on the Environment today has expressed parallel concerns about the costs involved in refurbishing the offices of the Department of Energy.
Sir Gordon Menzie, the chief executive of the Property Services Agency, has described the £13 million expenditure—and the 280 per cent. increase over the original estimate—as an extremely good deal. If that cost escalation over a two-year period is an extremely good deal, one is tempted to ask what an extremely bad deal would be. If we take Sir Gordon Menzie at his word—and he is arguing that that expenditure is only half the standard commercial cost of office accommodation in central London— I expect that we are meant to believe that we are lucky that the expenditure on the refurbishment of the offices of the Department of Energy and its move to its new location opposite Buckingham palace has not amounted to £26 million. When is the Department seriously to consider moving its staff outside central London?
The public will be astonished that a Department with running costs that we have detailed in our Select Committee report as being over £30,000 per person this year, compared to the Welsh Office expenditure of just under £20,000 per person per year—just over one third less than the expenditure of the Department of Energy—is not seriously examining relocating its staff outside central London. In view of the fatuous explanations that we received both in oral examinations before the Select Committee and in written answers, the people of Scotland 727 will find it disgraceful that the oil division of the Department of Energy is not located where it belongs—north of the border.
On 26 June 1989, the Minister of State, Department of Energy referred in a written answer to the reason for the location of the oil division's staff in London, stating:Moreover the division is very much involved in providing advice to Ministers and has day-to-day discussions with the headquarters of the companies in the oil and gas industry, most of whom remain located in London.That view was confirmed in oral evidence to the Select Committee by Sir Peter Gregson and others. It demonstrates a total lack of understanding about the causal relationship between the location of the Department of Energy and the location of the headquarters of the oil companies. The Department of Energy is in London because the oil companies are located in London. The simple fact is that the corporate headquarters of the international oil companies are located in London because the Department of Energy is located in London, with its key divisions of petroleum engineering and offshore licensing. The written answer also states:No specific discussions have been held with the companies on this issue."—[Official Report, 26 June 1989; Vol. 155, c. 359.]That is an interesting admission because less than two weeks ago I had discussions with a major international oil company which currently has its operational divisions in Aberdeen and its corporate headquarters in London. I asked its representatives directly and specifically what their response would be to the movement of the Department's petroleum engineering division and licensing staff north of the border to Scotland. The answer was quite specific: they would review the location of their corporate headquarters in London and would follow the Department's movement of staff.
The Select Committee would like a direct answer to our direct question: when will the Department give proper and serious examination to the question of relocation generally, and to the specific question of relocating the oil division north of the border?
Since the Select Committee made its recommendation on this point last year, we have gathered some interesting allies to our cause. I am thinking in particular of Professor Ross Harper, the president of the Scottish Conservative and Unionist Association, who has become a recent convert to the idea of moving the whole of the Department of Energy north of the border.
I do not want to be too rough on Professor Harper because in the past few days he has had some hard lessons on the reality of power politics between Edinburgh and London. No doubt some English Members have been following this interesting episode in Scottish politics. Professor Harper was the nominee or choice of the Secretary of State for Scotland for the post of chairman of the Conservative party in Scotland. Unfortunately for Professor Harper's ambitions, he ran into the Prime Minister's favourite son, the Under-Secretary of State for Scotland, who was appointed against the advice of the Secretary of State. Professor Harper has been learning some lessons about where the power lies in the Conservative party and where power lies in relations between Edinburgh and London.
728 It would be worthwhile for Professor Harper to examine why for the past 10 years there has been no move by the Department of Energy to locate oil staff north of the border. The only move in that direction was 15 years ago, when the Offshore Supplies Office was established in Glasgow as a direct result of political pressure from the Scottish National party at the time.
It would also do Professor Harper some good to look at the Select Committee's minutes of 25 January this year. On that day, I was engaged in discussion with the Secretary of State for Energy about a related matter—where it would be proper to locate the office of the Director General of Electricity Supply. I suggested that perhaps that office could be located in Scotland. The Secretary of State replied that that was "an eccentric notion". Perhaps Professor Harper should consider why the Secretary of State for Energy regards it as an eccentric notion to try to supervise the electricity industry of England and Wales from north of the border yet finds it entirely natural and normal that the direction and policy of the oil industry, which is located largely north of the border, should be run from London. That is a clear example of the hypocrisy and the fatuous reasoning that underlies the location decisions of the Department of Energy.
Those in the regions of England and in the nations of Scotland and Wales are of the opinion that it is high time that they ceased to subsidise the south-east of England through the concentration of Civil Service staff in London. That subsidy arises not just from the payment of Civil Service salaries and inner London weighting but from the whirlpool effect on the private sector and on private sector headquarters. This process of subsidy has ceased to be acceptable in the regions of England, and in Scotland and Wales.
The opinion in Scotland is that it is totally unacceptable that the oil divisions of the Department of Energy should continue to be located in London. That is not because we think that it is crucial that the 200 staff of the division should be located north of the border but because we recognise the thousands of jobs that would follow from the major oil companies if the Department made such a decision. It is not acceptable that the oil jobs concentrated in Scotland should be the jobs at the sharp end of the industry—the dirty, dangerous, offshore jobs. We are entitled to the policy jobs and the corporate headquarters employment now located in London which should be in Scotland.
Hon. Members have referred to the question of the continuation of the Department of Energy itself. The oil industry provides a neat illustration to show why it is by no means rational to say that because segments of the energy industry have been privatised we do not need a Department of Energy to overlay a policy. At present, no less than one third of the Department's total staff is employed on oil-related matters. For a number of years the oil industry has been largely in the private sector and it is now almost completely in that sector, yet the Government concede that there is still a need for a large proportion of the Department's staff to be devoted to that vital industry. Whether industry is in the public or the private sector, there remains a public policy requirement and a requirement for an energy strategy—something, of course, which this Government have manifestly failed to provide.
§ Mr. Rhodri Morgan (Cardiff, West)
It is a great pleasure to be able to participate in this slightly unusual debate. By dint of these rather special circumstances Front Benchers have become Back Benchers and vice versa. You, Madam Deputy Speaker, are the fairy godmother. Your powers end at 7.26 pm, and we shall all revert to our normal status. Opposition and Government Front Bench spokesmen will not wind up the debate; that will be for the hon. Member for Havant (Sir I. Lloyd) to do. It is a particular pleasure for me as a former member of the Select Committee to note that one glass slipper belongs to the hon. Member for Havant and the other to my hon. Friend the Member for Hartlepool (Mr. Leadbitter). The Minister and I, on the other hand, are discussing this very important set of subjects as ordinary persons and with no kind of superior status.
I suppose that the most important question of all—it is the subject on which I propose to concentrate—is whether we need a Department of Energy and a Secretary of State for Energy. The former Member for Scunthorpe reinforced that point. The hon. Gentleman now represents the next-door constituency, whose name I temporarily forget—
§ Mr. Michael Brown
Let me help the hon. Gentleman. I represented Brig and Scunthorpe from 1979 to 1983 and Brigg and Cleethorpes from 1983 to the present.
§ Mr. Morgan
I am grateful to the hon. Gentleman for that characteristic intervention. At least we can have that right, if nothing else.
The key question is whether we need a Department of Energy, and that is dealt with under vote 3 in the Select Committee's report. It is uppermost in the minds of the Secretary of State and of civil servants in the Department as they contemplate their future, following what I understand is known in Harvard business school jargon as the endgame strategy that the Secretary of State is pursuing. Having privatised the pylons and other appurtenances of the electricity industry, the right hon. Gentleman can dispense with the Department and tell the Tory party conference about it, to rapturous applause. At that point, the right hon. Gentleman will presumably have had some form of promotion or will receive it shortly thereafter. That is known as following the principle, "privatise or perish". I do not think that I am attributing anything to the Secretary of State that he would not be happy to have attributed to him when I say that he must already have written his Tory party conference speech a thousand times in his head. He must have contemplated how wonderful it will be to refer to the notch on his belt once he has got rid of a large electricity supply industry and put it into the private sector. Having got rid of a large nationalised industry—perhaps the biggest—to the private sector, he can then justify the abolition of a Department of State.
This is a matter of interest to me not only as an ex-member of the Select Committee but as an ex-civil servant at the Department of Trade and Industry at a time when that Department still had responsibility for energy. I witnessed from inside the split up of the Department following OPEC's massive oil price rises in July 1973—from $2.50 a barrel to $10 a barrel—when energy was the word on everyone's lips. Superficially at any rate, there is a justification for saying that energy is no longer in crisis.
730 On a superficial level we may be justified in saying that we do not face that great financial cataclysm of the Financial Times index being as low as 146. It is about 2,000 now and that must warm the cockles of the hearts of some Conservative Members who have a direct interest in that sort of thing.
The western world has survived 13 years of high oil prices, and so there is a belief that we can, to use an apposite phrase, put the energy issue on the back burner. It is fair to say that the Secretary of State for Energy takes that view. For him the important thing is promotion and his next Tory party conference speech. However, the rest of the country is concerned about energy. After the legislation privatising the electricity supply industry is enacted, will there still be energy questions which require a separate Department of Energy? We may have said after the great oil price rises in 1973, "Nice one Faisal", but after the abolition of the Department of Energy, will we be happy to say, "Nice one Cecil"? Some of us believe that energy questions remain the same no matter how many nationalised industries fall within the purview of the Department and the Secretary of State for Energy.
It is fair to warn the Secretary of State for Energy that if he is pursuing an endgame strategy and wants to race to his promotion and get rid of the Department of Energy as a notch in his belt, he cannot blame other Secretaries of State such as the Secretary of State for the Environment for muscling into the energy question. He cannot even blame his right hon. Friend the Prime Minister—another fairy godmother—if she and her colleagues refer to proposals for coal and carbon taxes at international conferences or in Tory party think-tank papers.
The Secretary of State appears to be asking whether we need a Department of Energy. Is it enough for the Secretary of State to say, as he appears to be saying now, "I will shovel all the shares in the electricity supply industry off the back of the lorry and then I will sell the lorry"? There is something extremely irresponsible about that view unless the Secretary of State can show that energy questions have become much less important than they were.
We are concerned about this because the Secretary of State is in a paradoxical position. He is trying to be the commandant of Colditz and the secretary of the escape committee at the same time. He cannot slide out of his responsibilities at the Department of Energy.
Important questions are covered by other votes that we have discussed tonight. Colossal questions remain in relation to the remainder of the coal industry, although that is a much shrunken industry at the moment. How do we handle the question of the future of the British coal industry? What about the formulation of a policy for the industry? How can we make reasonable estimates for the coal industry? The Chairman of the Select Committee on Energy, the hon. Member for Havant, raised this matter earlier. Why do we go through this whole annual rigmarole of having two sets of estimates for the coal industry? The Department of Energy always underestimates the size of the restructuring grant and the time within which the industry will break even point. Perhaps the Department of Energy believes that that is the right way to provide incentives for the management and the men in the industry.
§ Mr. Allen McKay
Does my hon. Friend agree that the figure of £311 million represents about 15,000 redundancies? If there are 15,000 redundancies and the restructuring money has gone, will there be a new restructuring grant or will we depend on normal redundancies? The hon. Member for Brigg and Cleethorpes (Mr. Brown) seemed to say that he did not care what other countries do to subsidise the products of this country provided that his constituents do not pay a subsidy. That appears to be a return to the old days of the empire when the country depended on the empire for subsidies.
§ Mr. Morgan
My hon. Friend has raised a very important point. Reading between the lines in the estimates it seems that we can calculate the number of impending redundancies, but the Minister refuses to confirm those figures in parliamentary questions. If the full story about the real number of possible redundancies for the following year was included in the estimates, that would frighten the life out of us. That is why the Minister does not do that. We need a Department of Energy to deal with such questions.
In addition to the coal industry, the Department of Energy must also consider energy conservation. We do not know the Department's policy on energy conservation. It has reduced expenditure on energy conservation, but it has not said that energy conservation is a less important issue. If we consider the Government's policy according to what is said rather than deeds, it would appear that energy conservation is, in the view of the Prime Minister and her Cabinet, the most important issue facing the planet. However, we are proposing to abolish the Department which should have the clear remit to formulate energy conservation policies.
We do not know the Department's policies on energy conservation. What are they? How much expenditure is involved? Where would the Department of Energy fit in with the other Departments and make a contribution, for example, with the Department of Education and Science, the Departments of Health and for Social Security—particularly if we are thinking about the implications of hypothermia? We must bear in mind that we have the worst record with regard to hypothermia in western Europe despite having one of the mildest climates. Those are huge issues which make a case for a separate Department to deal with energy matters.
Another important energy-related matter is the greenhouse effect. That is a top priority issue if we consider the Government's words and not their deeds. The hon. Member for Erewash (Mr. Rost) referred to the need for better technology with regard to energy conservation and efficiency, for example, in connection with combined heat and power and the insulation industries.
What about the relationship between privatisation and the nuclear industry rump which would remain in the private sector? We understand that even if the bulk of the electricity supply industry is privatised, some vehicle will have to be found to keep the risk part of the nuclear industry in the public sector by loading it into British Nuclear Fuels plc, which would remain under the wing of the Department of Energy instead of being privatised alongside the power stations. The dodgy part of the industry, the equivalent of the sewerage problem in water privatisation, will be kept in the public sector. The private sector will take the assets and profits and poor old Muggins—the British taxpayer—will continue to bear all 732 the risks of unexpected rises, which we all know are expected rises, in the costs of nuclear waste disposal, reprocessing and power station decommissioning. The issues related to fairness, handling, monitoring and the estimating of BNFL's costs—as it will have to carry the risks on behalf of the taxpayer—require a separate fully-fledged Department of Energy.
In the end, we are not primarily concerned with how many nationalised industries come under the wing of the Department of Energy. Rather, we are concerned with the size of the energy questions that it must handle. We know that the price of energy has, in general, been falling since February 1986 in real terms. We have had three mild winters in succession and we do not hear weekly stories about pensioners freezing to death in their council flats as we heard during the harder winters of 1985 and 1986. That has tended to make Ministers believe that those issues are less important now.
If the Government try to proceed with the idea that they can get rid of the Department of Energy because they have disposed of its major, remaining nationalised industry, they would be very irresponsible, particularly when they are apparently now still thinking of trying to find a way of unloading the industry on to the private sector by guaranteeing or writing off the risks, debts and difficult parts of the electricity supply industry and keeping them with the taxpayer. That is the application of an old principle of Roman law called "nil prospectus desperandum"—in other words, "Do not do anything that frightens off the shareholders," or, "Let us leave something in it for the stags, otherwise it will not seem a popular privatisation."
If the taxpayer is to continue to carry the can for all the risks involved in the electricity supply industry after privatisation, he must have a proper, fully-fledged Department that can examine the big issues in the industry. Opposition Members do not want the Department to go out in a huge fireworks display involving the employment of expensive advisers and advertisers, and finally see the Secretary of State move on somewhere else, leaving all the problems to his successors.
§ 7 pm
§ The Parliamentary Under-Secretary of State for Energy (Mr. Michael Spicer)
I am not sure about the implication of the remarks of the hon. Member for Cardiff, West (Mr. Morgan) about hon. Members speaking as private individuals. For my part, I will work on the assumption that, if I get it wrong, I will still be held to ransom by a wide audience and not only by the wonderful constituents of Worcestershire, South, whom I have the honour to represent.
I congratulate the Select Committee on Energy on yet another thorough report and on the way in which my hon. Friend the Member for Havant (Sir I. Lloyd) introduced it. With good reason, much of the debate has been about the coal industry. The first sentence of paragraph 4 of the report states:The Vote for assistance to the coal industry takes up over three-quarters of the money which Parliament is asked to vote in support of the Department of Energy.It has been quite apparent from debates in the House and in Committee that a variety of advice is coming forward to the Government. My hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) is right to say that the hon. Member for Hartlepool (Mr. Leadbitter) made an 733 impassioned and fluent speech. We seem to be throwing bouquets across the Chamber, but I must tell my hon. Friend that I disagreed with most of what the hon. Gentleman said. The hon. Gentleman characterised the position of British Coal as one of profitability, were it not for the fact that debt servicing, redundancy costs and one or two other things mean that so-called operating profits are turned into losses. He would not get away with that kind of statement in the private sector.
The fact is that, over the years, British Coal has accumulated losses of £2.5 billion, and the Government are coming before Parliament for supplementary estimates. I heard the criticisms that were made by my hon. Friend the Member for Havant. Next year we may have to ask for further grants to the industry. The hon. Member for Barnsley, West and Penistone (Mr. McKay) asked about that point in the context of restructuring grant. British Coal's costs are still above those of international competitors. It is not sensible to ask whether British Coal is currently profitable and whether, with all these flush funds, it will now be able to do all sorts of exotic things that it would not be able to do without them.
The vital question that is being asked by many hon. Members is whether British Coal will be able to compete in the future. My hon. Friend the Member for Brigg and Cleethorpes made an interesting intervention. The implication behind his views about the future pricing structure of British Coal is that British Coal can compete in the future. That lies at the root of what he said.
§ Mr. Leadbitter
The Minister was kind enough to refer to my interpretation of the operation and profitability of British Coal, bearing in mind inflation, high interest rates, changes in the market, oil prices, competition, and so on. He did not really accept my view. I took my information from a letter dated 6 February 1988 from the Secretary of State, which was sent to the Select Committee on Energy on that day for our consideration.
§ Mr. Spicer
Some people define profitability to encompass the idea of massive money still being spent on the industry. I have gone through the facts. The industry is costing the taxpayer a lot of money. I know that British Coal defines its present performance in terms of making operating profits. Strangely, as a Minister in the Department of Energy responsible for coal, among other things, I continue to find myself, in the context of this profitable industry, returning to the House and, in effect, begging the House for more money for that industry. Therefore, it is legitimate to ask whether the industry can compete in the future.
My hon. Friend the Member for Havant said that there is no way that coal can be mined at world prices. To some extent, that brings him into conflict with my hon. Friend the Member for Brigg and Cleethorpes. It is certainly not my view. As many hon. Members have stressed, there has been a massive improvement in the efficiency and productivity of the industry. There has been almost a 100 per cent. improvement in productivity in the past four or five years. There is no dispute about that.
The hon. Member for Hartlepool answered his own question about redundancies when he rightly said that there has been almost stable production over that period, with half as many men producing the same amount. That growth in productivity is not only something on which British Coal and those who work for it should be 734 congratulated but is evidence that, if the process is continued, the industry will stand on its own feet, particularly when we bear in mind two additional factors. The first was mentioned by the hon. Member for Sedgefield (Mr. Blair) in a recent debate—the present difficulties in the world market. The Government accept that difficulties in the world market, perhaps leading to hardening prices, may exist if the electricity industry goes overboard with imports. There is a small world steam coal market because there are difficulties in the international trading of steam coal. That points to yet another intrinsic advantage—the infrastructure of a home-based coal industry. The Government take the view that, if we can continue the admirable process of improving the efficiency of the British coal industry, it can stand on its own feet and compete against foreigners.
I do not mean to quarrel with my hon. Friend the Member for Havant, as I agree with a lot of what he said. I agree that privatisation of the coal industry cannot guarantee its future, but a policy to privatise the industry is certainly a statement of the Government's faith in the future of the industry. Were the Government not to believe in the future of this industry, they could not properly embark on a policy of trying to sell it to the private sector. Coal is a perfect example of a Government who are backing an industry with massive amounts of money. Hon. Members will have heard Ministers say many times that we are spending £6.5 billion, £2 million every working day, of taxpayers' money on the industry. These are enormous sums of money, but the Government have also shown their faith in the future of the industry and in its ability to stand on its own two feet.
The second theme of this interesting and wide-ranging debate has been energy efficiency, to which my hon. Friend the Member for Erewash (Mr. Rost) referred in particular. The Government agree with him about building regulations, and amending building regulations will shortly be laid. As he said, this is an important part of any energy efficiency programme. I do not have time to go back over many of the detailed points that were made, but I shall make this point. Energy efficiency has been properly debated and no doubt will be debated again when the Electricity Bill returns to the House. The hon. Member for Cardiff, West nods his head, and I am not surprised that he will be raising this matter.
The Electricity Bill can be characterised in terms of an energy efficiency Bill. It is about efficiency in the production of energy. The whole purpose of the radical reform of the generating side of the electricity industry is to produce energy more efficiently. One of the results of that policy, which is a problem for the coal industry, is that in the production of more efficient energy gas-fired systems are coming forward. In their concentration on coal, the Opposition have to contend with the fact that, while Grimethorpe may produce some wonderful answers, the maximum saving of CO2 suggested for the topping cycle at Grimethorpe is between 15 and 20 per cent. In terms of gas over coal-fired stations, the figure would be nearer 40 per cent. We cannot just discard these points when discussing energy efficiency. Nor can we discard the fact that, under a privatised and much freer system, which will exist after the Electricity Bill becomes law, energy efficient production systems will be forthcoming. That needs to be stated, because it seems to have been forgotten that it is critical to our policy.
735 If that were not accepted by the Opposition—and they have an interest in not accepting that our Bill will produce greater efficiencies in the production of energy—they have only to look at the wording of the Bill. If, for instance, they wish to concentrate on whether energy will be used more efficiently, which is the other side of the coin from the production side, then they will be pleased to see that, for the first time, the regulator will have a statutory duty to promote the more efficient use of energy.
§ Mr. Spicer
I shall give way in a moment, when I have finished this point. It may be on this that the hon. Gentleman wishes to intervene. I have heard arguments that that duty of the regulator under the Electricity Bill should be further strengthened. We are listening to those arguments. However, I want to make it clear that, for the first time, if Parliament accepts the Electricity Bill, there will be a statutory requirement on a public body to insist on the promotion of the better use of energy.
§ Mr. Morgan
I am sorry to disappoint the Minister, but that was not the point I was going to make as it will come up next week. The point I shall make has come up before, and we have not yet had a satisfactory answer. The Minister has the simple-minded, free-market belief that all the provisions to free the electricity supply industry are bound to mean more efficient manufacture of electricity, or there will be no new entrants. Therefore, can he tell us whether there will be any new entrants into electricity generation who will not be doing it simply on take-or-pay contracts, negotiated beforehand so that nobody will know at the point of starting construction whether they will be more efficient?
§ Mr. Spicer
Although perhaps, unlike the hon. Member, I do not have a crystal ball, I can say that the circumstances will be such that new entrants can come in. A particular point is the removal of the control of the wires, or the distribution system, from the generators. At the moment, that is not the situation. The major generator, or monopoly generator, controls the wires. The playing field will be set on an even basis for new entrants. We have been given signs that there will be many new entrants into the system.
§ Mr. Spicer
The exact basis on which they finally come in, and the contracts that they strike, will be a matter for them.
A running theme in the debate is the location and cost of offices. The lease of the offices of the Department of Energy at Millbank ran out in 1982, so that this problem has been with us for some time. Decisions were made in the early 1980s not to move policy-making parts of the Department out of London. To quote the Energy Committee back to itself, it said in another context:This is not the right time to move energy policy away from centre stage.The hon. Member for Cardiff, West spoke at length about whether the Department of Energy should be amalgamated with another Department, but that is not a matter for the Department to determine, as my hon. Friend the Member for Brigg and Cleethorpes said. Whether or not it 736 is, a certain number of policy advisers will need to be based in the capital. For instance, some must be ready to assist in the process of reporting to Parliament—which, as far as I understand it, plans to stay in the capital.
§ Mr. Spicer
I thought I might prompt the hon. Gentleman to rise to his feet. I have only three or four minutes and the hon. Gentleman has made his point. The House has heard him, and I must carry on.
For many years, some of the key operational personnel in the Department of Energy have worked outside London. For example, the Offshore Supplies Office works out of Glasgow and Aberdeen, the energy efficiency regional offices are spread throughout the country, as are the electricity meter examining service personnel. We were the first Department to set up a typing pool outside London, in Lytham St. Anne's, and it still exists. However, it has been clear for some time that the major policy-making functions of the Department would need to continue to exist in London.
It is worth stressing that the Department of Energy is a small Department, with only about 1,000 employees. Therefore, the real question is more about how the functions should be located in London. Some 13 options were considered. The major criterion was that the offices needed to be reasonably close to Parliament so that Ministers and officials could get backwards and forwards to Parliament with relative ease. I do not know whether my hon. Friend the Minister of State agrees with me, but I think that negotiating Parliament square from the top of Victoria street, when on a three-line Whip, will not be as easy as coming down the Embankment from Millbank, but one cannot have everything.
The costs of rent and refurbishment have risen. The latter, as the Committee noted, is mainly a matter for the Property Services Agency, which is part of the Department of the Environment. In the context of what has been said about energy efficiency, I should put it on record that we shall be moving from what must be one of the least energy efficient buildings in London to one that will incorporate state-of-the-art technology for maximising the efficient use of energy, and will be something of a show case.
§ Mr. Spicer
No, I will not give way as I do not have time.
The notional rent paid by the Department to the PSA, another branch of Government, will be high because it will reflect market rents, which are high in that part of London. The actual rent paid by the PSA, which negotiated favourable terms with the developers, is about half the current market costs in that part of London. That means that the offices will be an extremely good deal for the taxpayer, although the policy of charging opportunity costs to Departments will mean that the Department of Energy's vote incorporates the full market rent.
§ Mr. Spicer
I am sorry, but I am not giving way as I must give my hon. Friend the Member for Havant time to reply.
I have been asked what our energy policy is, and I shall give the House the benefit of it. Before I do so, however, I believe that we are entitled to ask the Opposition what 737 are their energy policies. A policy that relies on conservation, the abolition of nuclear power and a cut in CO2 from coal all in one breath is likely to lead, at the very best, to the statutory wearing of thermal underwear. It certainly would not produce sufficient energy to satisfy our nation's needs.
Our energy strategy is extremely clear and it comprises several simple principles. First, customers should be free to choose the energy they want and should do so from a multiplicity of energy sources—coal, nuclear, renewables, oil and gas. Secondly, energy must be supplied as cheaply and efficiently as possible. Thirdly, to that end, we should ensure that those who work in the industry are well motivated and, as far as possible, shareholders in the privatised companies. Fourthly, we want to make an important distinction between the regulatory bodies and the operators. The regulators of safety, the environment and competition should remain in the public sector. Decisions about investment, capital allocation and management should be put in private hands.
I should have liked to consider the many other interesting and important questions that have been raised, but at this point I will give my hon. Friend the Member for Havant the opportunity to reply.
§ Sir Ian Lloyd
With the leave of the House, I shall give a few broad conclusions to the debate.
I appreciate the wide-ranging reassurances that my hon. Friend the Minister has given. He has opened up a number of areas for debate and it is a great pity that we do not have a couple of extra hours in which to explore those important questions.
The hon. Member for Hartlepool (Mr. Leadbitter) has been one of the most assiduous and persistant gladiators in our Committee for a considerable time. He said that a miner was a very special kind of man. I am sure that the whole House believes that to be true. My hope, as I expressed it once to Joe Gormley, is that the day will dawn, perhaps after Fleischmann and Pons have got it right, when human beings do not have to spend their working lives several thousand feet underground. Until then, however—that goal may be half a century away—the balance between miners' skills and the rewards that society offers must be reasonable, defensible and sustainable. Those words cannot have either a constant meaning or quantum.
My hon. Friend the Member for Erewash (Mr. Rost) 738 concentrated with great skill, as he usually does, on energy efficiency. He referred in an anticipatory sense to global warming. We are faced with the problem of global warming and the immense problems that that creates versus global stupidity, global self-interest and global nationalism. My hon. Friend also referred to green politics and said that they were here to stay. I believe that the major parties are more likely to accommodate the green criteria than the Greens are likely to develop coherent economic, defence, social, energy and health policies.
The hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) concentrated on support for the Department of Energy and I am glad to have his support on that point.
My hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) disagreed in his usual courteous way with the Committee's view on the future of the Department of Energy. He said that only one person will decide that particular question and I entirely agree with him. We all know who that one person is. The decision is of such immense importance, however, that the nation is entitled to debate the merits of the issue whatever my right hon. Friend's final judgment may be. I have the greatest confidence in that judgment and I believe that it will be used at the right time in the right way.
The hon. Member for Pontefract and Castleford (Mr. Lofthouse) made a most interesting speech in which he said that the future size of the coal industry must be determined by demand. I believe that there is a great distinction between whether demand is the determinant of the future size of the coal industry or a determinant. Never have greater issues turned on the fundamental difference between those two little words, "the" and "a".
The hon. Member for Midlothian (Mr. Eadie) also concentrated on the contraction of the coal industry. He rightly referred to the young industry, but he also talked about collieries with hundreds of years of reserves being closed. I have no doubt that that is so, but it always raises questions as to how deep one should mine and at what cost. What are the geological problems? Are the seams faulted? I do not believe that one can dismiss such questions simply because it is desirable for social and many other reasons to maintain particular collieries in particular places.
§ It being three hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER interrupted the proceedings.
§ The Question necessary to dispose of the proceedings was deferred, pursuant to paragraph (4) of Standing Order No. 52 (Consideration of estimates).