Motion made, and Question proposed,
That a further sum not exceeding £4,000,000 be granted to Her Majesty out of the Consolidated Fund to defray the charges that will come in course of payment during the year ending on 31st March 1992 for expenditure by the Department of Energy in connection with the privatisation of the coal industry. —[Mr. Heathcoat-Amory.]
§ Dr. Michael Clark (Rochford)
The Select Committee on Energy believes that we all want to get the best that we can from one of our big national resources—coal—and for that reason we have carried out an inquiry into clean coal technology and the future of coal after 1993. We are grateful for the opportunity of this Estimates Day debate to bring our report to the attention of the House.
Coal was the foundation of our industrial revolution and coal remained the lowest cost source of energy in this country until the long period of low oil prices in the 1960s. Then the coal industry, faced with tough competition for the first time, slimmed down, modernised, introduced new equipment and new working methods in a way that should be applauded because it did so at a time when the rest of British industry was resisting change. Coal, however, faced the challenge.
The coal industry certainly coped with contraction admirably on the first occasion. As a result, at the end of the 1960s it was in a much healthier and stronger condition, which would have been ideal to take advantage of the fivefold increase in oil prices in 1973. However, the industry then had the misfortune to suffer two of the most disruptive and damaging strikes in our history. The result was that, as a business, the coal industry did not progress, despite further major technical improvements and large investments. Its markets were sheltered by the high oil price in the heyday of the Organisation of Petroleum Exporting Countries cartel and to some extent the industry was cosseted by those high oil prices. Then there was the collapse of oil prices, followed consequentially by the collapse of world coal prices.
Since then, the industry has had to manage a second period of change much steeper than the first. That decline has again been managed remarkably well—indeed, better than any of us might have believed. For the second time in 25 years, something smaller but in every other way better has emerged. There may have been a vast reduction in employment but with the Government providing generous and substantial help, those who have gone from the industry have been properly provided for, while those who remained are better off, with high earnings, a safer environment and better equipment. The days lost by disputes are at a record low, and productivity is twice what it was five years ago. Of course, one has to commend the so-called super-pits for the way in which they can set European records, with outputs of some 30 tonnes per man shift.
788 Most politicians of all parties believe that, despite the many problems that the industry faces, British Coal can and should make a valuable long-term contribution to our energy economy, especially now that we face some decline in North sea oil and later some decline in gas. If' it continues to perform as it has done over the past five years, British Coal has a major part to play for the benefit of us all.
The problems that we have to deal with come in part from coal's position right at the end of a series of privatisations. The commercial freedom given to British Coal's principal customers—the electricity generators—has had a negative knock-on effect on the coal industry, which has to compete with other fuels and with imported coal for its share of the market.
We must make a clear distinction between three different challenges. First, there are the challenges arising directly from the structure which has emerged from the privatisation of the energy industries to date, with the consequent changes in the marketplace which have produced greater competition for British Coal. Secondly, there are challenges and problems which come from perceived need to clean up coal-fired generation. Thirdly, there is the greater availability of competitive fuels, such as gas which is used in high-efficiency combined cycle generators, and imported coal.
Let us consider price competition and market forces. There may be a case for easing the pain for British Coal by having to compete against world coal prices for a short while, but there is no case for the long-term ring fence accorded to the German and Spanish coal industries. Perhaps we need a European coal policy to get equality throughout the Community. To see the high cost coal elements preserved artificially in other countries within the Community, while at the same time our low-cost coal industry contracts, is economic folly—and no more so than when looking forward with all idealism to the spirit of 1992. If, as I am told, British Coal's anti-dumping case is technically sound, it should be investigated and not pushed aside simply because the Germans totally protect their coal industry.
Of course we are not immune to similar problems. We have to address our internal inefficiencies, the most striking of which is the protection of the nuclear industry and the way it benefits from subsidy. If we have to get rid of protection subsidies on coal, we should not perpetuate subsidies on any competing fuel.
Nuclear power must receive its proper credit for riot contributing to greenhouse gases and acid rain emissions. It must be given the opportunity to develop as a future source of fuel for the next century, perhaps as an insurance policy. If we neglect coal and lose our coal resources and our ability to mine coal, we are more likely to need an insurance policy.
§ Mr. Alexander Eadie (Midlothian)
I do not want to interrupt the flow of the hon. Gentleman's speech, but he has made pointed remarks about nuclear power. He was at the Nuclear Forum this year, and he probably heard the chairman of Scottish Nuclear say that he thought that there was a case for subsidising nuclear power in the interests of defence and strategic needs. Does the hon. Gentleman agree with that statement?
§ Dr. Clark
My view—I am not speaking for the Select Committee here—is that nuclear power is a power source 789 which cannot be ignored and which should be developed, even if there is a cost. We need the insurance policy, but we shall need it more if we allow coal to run down. If we allow coal to take its natural course and if we develop more coal-fired power stations with clean coal technology, the need for the insurance policy will be less obvious. Perhaps then we could run down our nuclear industry.
If we continue saying that we shall become dependent on oil, most of which will be imported in 40 or 50 years, and on coal which may be imported because we have no indigenous source of supply, the only indigenous source of supply left will be nuclear. In those circumstances, perhaps we should subsidise it. There are ways around that. One is to let coal come back naturally into the marketplace. Then we would not need to do so much for nuclear power. I did not mind the interruption; it may have helped to put my argument across.
If we are to get rid of subsidies on nuclear generation, we must do so fairly quickly, because we need to know where the nuclear industry stands by 1994 when the Government review its future. If we can get a proper review of the nuclear industry clearly before the country, we shall know better where the coal industry will stand after 1994.
Clean coal technology was dealt with in the first part of the report. The need to clean up coal-fired generation is a problem, in that massive expenditure is required to retrofit existing power stations to take out sulphur dioxide and stop acid rain emissions. Massive expenditure will be required on all existing coal-fired power stations, but the wise and economically sound solution is to build new clean burn coal-fired power stations which, due to their high thermal efficiency, create an opportunity for coal to compete more effectively with the gas-fired combined cycle generators which seem to be so much in vogue.
Clean coal technology cannot reduce the price of indigenous coal, but it can increase thermal efficiency so that coal in general, from wherever it comes, can better compete with gas. Clean coal technology can make a major contribution to solving the problem of carbon dioxide and sulphur dioxide emissions, because there will be less emission per megawatt of electricity generated. Clean coal technology can also help to increase demand for coal, even imported coal, thus helping our indigenous coal industry to expand in an energy market which accepts that coal is clean and economical.
In July 1991, the Select Committee that I have the honour to chair concluded that it attached great importance to clean coal technology, both in terms of providing an energy source and an electricity source for the country, and also in terms of the future of the coal industry. The Department of Energy said in evidence that it recognised the United Kingdomas an acknowledged leader in development of some aspectsof clean coal technology which has a research and development objectiveto support work which would not otherwise be undertaken on an appropriate timescale".The Department of Energy still refuses to give even modest help to demonstration projects. However, the Secretary of States has said that it isself-evident that there is a very big demand for clean coal technology.790 In the Select Committee report, we recommended that a credible long-term strategy should include certain elements. First, there should be a new sense of urgency, which recognises that the United Kingdom's competitors are making progress with clean coal technologies in the expectation of obtaining significant export markets. If we do not go ahead urgently and make some progress with such technology, in due course we shall have to import it.
Secondly, we should recognise that the United Kingdom is unlikely to succeed with clean coal technologies unless the Government are as supportive towards such technologies as are our competitors' Governments. In fairness, I acknowledge that the Department of Energy has given encouragement and funding to the project at Grimethorpe. However, that funding falls short of what is needed by that project. It also falls short of the funding that has been given to similar pilot plant processes in other countries. I hope that the Minister will address that when he replies.
Thirdly, new emphasis should be placed on demonstration projects, which go one stage further than pilot plants. That would require a significant increase in Government funding to ensure that the necessary resources are available to push the development of such technology forward towards commercial use.
There have been plans for a demonstration project at Bilsthorpe, but those plans are now on the back burner and the project may never materialise. However, I heard just a few days ago that a demonstration project is to go ahead at Gardanne in France. Well done, Gardanne, but it would be nice if we could have a demonstration project as well, so that, in due course, we do not have to import such technology from the other side of the Channel.
§ Dr. Clark
Perhaps, but I suspect that it will be low on that agenda.
Fourthly, there should be a realistic appraisal of the extent to which each stage of research, development and demonstration projects can expect to attract industry funding. The Government are rightly keen to get industry to fund such projects, particularly demonstration projects. Certainly, industry funding would be the most admirable way in which to make those projects work as well as a commitment to build those projects and to recoup the investment. The Government should encourage industry to make such investment, and perhaps they should also match some of the funding for the research, development and demonstration projects.
It is not yet known when the Government will reveal their strategy in response to our report or in response to the report from their own coal task force. That strategy may not be announced until after the election or until the plans for privatisation of the coal industry are announced, but the impact and importance of that strategy, when it is known, cannot be underestimated. That strategy will ultimately determine the final size of the British coal industry, it will influence electricity prices and it will have a significant effect on environmental protection.
In conclusion, the United Kingdom of the 1990s and beyond will be very different from that of the 1980s, which was overflowing with energy riches. Let no one think that it does not matter if we let British coal resources remain unexploited. It would be most ironic if the country's 791 largest fuel reserves disappeared at the very moment when the combined cycle might be readily available for coal-fired generation.
It would be ironic if we lost the ability to produce coal in this country at a time when the world was turning towards it and when, at the beginning of the next century, there might be a revitalisation of the coal industry. If that happened, our coal industry would be in danger of being unable to follow the rest of the world because we had allowed it to become too small and to decline too far. That would be to the detriment of us all.
§ Mr. Alan Meale (Mansfield)
It is extremely kind of you, Madam Deputy Speaker, to call me so early in this debate. That does not usually happen to me.
I am pleased to follow the hon. Member for Rochford (Dr. Clark), who made a remarkable speech. He examined many aspects of the coal industry, and some of his findings were forthright and honest. In particular, he identified the fact that the Government have shifted their energy policy away from the coal industry. Unless something is done about that, the nation will lose an important asset.
It is important to consider what has caused the Government to shift their support from the coal industry. Therefore, it is important to consider recent events in the coal industry. If one considers the past 12, or should I say unlucky 13, years of Conservative Administration, it is clear that there has been a policy shift away from the coal industry. That industry is having to pay for that today.
The conclusion of the Select Committee on Energy report calls for measures to ensure the future security of the coal mining industry. I must remind the House that those who work in that industry have always faced insecurity. Rumours abound about possible Government action after the next election. Hon. Members are aware that the Government never have tried to hide the fact that, if elected, they will introduce a Bill to privatise the coal industry. That Bill would hardly make those in the industry feel secure.
Recent leaked reports—they have been disowned, in common with others—reveal what will happen to the coal industry. Those reports have been commissioned at a great price by the Government. One such report recently predicted the devastation of the coal mining industry and predicted a further massive reduction in the number of coal mines. That is hardly designed to make miners feel secure. The Rothschild report predicted that, at best, there would be 14 pits left in Britain and, at worst, only 12. That was devastating news for the coal industry, and it has caused immense insecurity.
It is important to consider what has happened to the coal mining industry in recent years—an industry that formed the backbone of British industrial production for decades. That industry has suffered the loss of 180,000 direct jobs, together with the loss of hundreds of thousands of associated jobs from our coalfield communities.
We in Nottinghamshire have suffered the loss of 25,000 jobs in coal mining, with the loss of 4,000 ancillary jobs. In other words, we have lost about 29,000 jobs in eight or nine years. In that area, the capital of the coal mining industry, 80,000 further jobs have been lost in service and 792 other industries that supported or were reliant on coal. Well in excess of 100,000 jobs, representing absolute devastation, have gone from Nottinghamshire.
The action and planning that have resulted in that degree of loss have not helped to create security in coal mining. Not only do those still working in the industry feel insecure, but the threat of Rothschilds or something similar hanging over their future makes them feel terrified.
I know that the hon. Member for Rochford appreciates the plight of those in the industry, because his home is in the area and he has connections with the county of Nottinghamshire. I am anxious to remind hon. Members who are not familiar with coal mining about the situation in Nottinghamshire, because it is not dissimilar to what is happening in other coalfield communities.
Nottingham is a new coalfield compared with many others. People working there originated in Scotland, the north-east, Lancashire, Yorkshire, Wales and Kent. Many of them arrived in Nottinghamshire as their second or third move from other coal-mining areas. Some had moved from Scotland to the north-east, on to Yorkshire, on to Nottinghamshire or Derbyshire and then even further afield. It is incredible to think that that has happened within a few short years. Many families in my constituency have had to move more than once or twice in that way.
Many of my constituents who are anxious to live and work in the area are being denied the opportunity to do so by the insecurity that is being forced on them. I know many men who are working in their fourth or fifth pit in the Nottinghamshire coalfield because of the rate of close-down elsewhere in the country.
With the demise of 25,000 jobs in Nottinghamshire, we are left with only 14,000 miners—in a part of the industry that was described only a few years ago as the king, the capital of the British coal mining industry. The Government should put an end to policies which create that degree of uncertainty, and I am grateful for the recommendations of the Select Committee on that score.
We cannot consider the future of British coal mining without taking account of the Government's attitude to imported coal. In the past, some Conservative Members have argued that imported coal is important for the continuation of deep-mined coal in the British coalfield. That is absolute nonsense: it is a smokescreen for Conservative policies towards the industry.
I remind the House of the long battles that took place against the imposition of private ports designed to cater for imported coal from, for example, Australia, Poland, China and Colombia. Much of it was blood coal, extracted at low labour cost, shipped to Europe, mixed with other coals elsewhere in Europe and then imported into Britain. We fought long battles in this Chamber over Immingham and Killingholme to try to stop the building of ports, the main activity of which was the importation of cheap foreign coal. Indeed, I recall a chairman of the then CEGB admitting, on being questioned, that up to 8 million tonnes of cheap foreign coal would be imported via those ports.
Conservative Members also argue that we cannot have a European coal policy. They go so far as to say that such a policy would be illegal. That, too, is absolute nonsense. We could get our act together for the benefit of the British coalfields, because we produce the cheapest deep-mined coal in Europe. We shall soon have a Labour Government, 793 but whatever the complexion of the British Government, hon. Members in all parts of the House should get them to get our act together and achieve a Europewide policy.
Conservative Members argue that GATT prevents us from restricting imports from areas outside the European Community into Britain. They claim that such action would be illegal. We should tell the other Governments in Brussels that we welcome aspects of the social charter and want them applied to trade agreements with countries outside the European Community. Then, the miners in those countries, including children—in Colombia, South Africa, China and so on—would work under a law approved by the EC. That would enable them to benefit from that social charter when digging coal in their countries. On that basis, coal could be landed in Europe only if it had been mined in accordance with that law.
§ Mr. Dennis Skinner (Bolsover)
My hon. Friend will know that we have been in the Common Market for 18 years and that for all that time the member countries have not bought our coal. We hear lots of talk about our colleagues in the EC and about how we are all working together. We buy their goods, manufactured and otherwise, and although we have the cheapest deep-mined coal in Europe, our so-called colleagues never buy our coal. One would think that, after 18 years, they would be buying some by now. That prevents me from going down the EC road which my hon. Friend seems to be taking. Is he suggesting that we get deeper into the EC web, when the countries of Europe are not delivering—
§ Madam Deputy Speaker (Miss Betty Boothroyd)
Order. I suggest that we return to the subject of the report that is before the House.
§ Mr. Meale
I am grateful to my hon. Friend for that intervention, because he and I have been, and remain, close on European matters. My argument is that, as we are in the EC, like it or not, we should try to establish with our European partners a common policy for coal, including cheap international imported coal.
I appreciate the point that my hon. Friend makes. He too spent many long hours in the Chamber campaigning against private ports being used to import cheap coal. For example, South Africa coal was shipped to some of our partners, notably Holland and Belgium, mixed with cheap coal there and then sold on to Britain as European coal. That cannot be a common European coal policy. Instead, we must try to get our act together to ensure that the coal industry is supported.
I thank the hon. Member for Rochford for some of his comments. I welcome the report, which starts to put some of the arguments together. I hope that it will make hon. Members, wherever they stand, realise that coal is one of this country's major assets for the future. I hope to God that we shall not throw it away.
§ Mr. Peter Rost (Erewash)
I entirely agree with the hon. Member for Mansfield (Mr. Meale) that the coal industry and its future should have a European dimension. We should recognise that, in so far as we have a European Community energy policy, the European Community as a whole should take a view on how far we can allow our major indigenous energy source to run down.
794 May I offer an additional solution to this major problem? In their reply to the report of the Energy Select Committee, the Government said that a strong market will develop for key coal technology at the end of the decade. I am sure that that is right, but I am concerned about whether we shall still have much of a coal industry left at the end of the decade if we wait until then. That is why I shall consider the problem from a shorter-term perspective. My solution could help to get the coal industry out of its present dilemma and allow it to survive long enough to meet demands for energy at the turn of the century.
We all know that British Coal is fighting to retain its market. It is threatened by cheaper imported coal and, above all, by gas, which is the flavour of the month for combined cycle gas turbines. Furthermore, environmental pressures to develop cleaner energy are imposed on us by the European Community and the Toronto protocol.
Against that background, it is not surprising that we are now undertaking a huge investment in gas turbine power generation. I have just been involved in a working party with a number of experts, including representatives from the National Union of Mineworkers, British Coal, the power generators and industry. We are producing a report trying to assess what the market for coal will be—a second guess to the Rothschild report. Our best estimate is that we have at present 6.5 GW of combined cycle plant under construction or firmly committed, with probably another 10 GW likely to go ahead, which in total will almost certainly replace some 30 million tonnes of coal. That is the dilemma.
Although new combined cycle gas turbines offer cheaper electricity than new coal-fired plant, they do not compete with existing coal capacity. Electricity from existing coal-fired power stations underprices electricity from the new combined cycle gas turbines. There is plenty of evidence of that, for those who want to find it. The evidence comes from PowerGen and National Power, which have admitted that they are pushing up the price of electricity in the pool to justify the cost of new investment in combined cycle gas turbines. We know that environmental considerations are an additional reason. The power generation industry has rightly been told that it must reduce emissions over a period of years.
Those are not the only reasons why we are developing so many combined cycle gas turbines. Such development is not justified on economic grounds, because it is leading to the premature closure of coal-fired power stations that could still compete in the electricity market. National Power has admitted that it has already closed down 3 GW —3,000 MW—of coal-fired plant in the past two years, PowerGen has closed down about seven of its coal-fired power stations, and both companies propose to close more. I challenge the suggestion that all those power stations are uneconomic, as both generators maintain.
§ Mr. Kevin Barron (Rother Valley)
I agree with the hon. Gentleman. I have heard those arguments directly from one of the big generators that he mentioned. Does that not run contrary to the ideology behind the privatisation of the electricity supply industry—that new competition would force down prices?
§ Mr. Rost
I shall come to the question of competition. I do not accept the manner in which the hon. Gentleman puts his case. I shall argue that we do not have proper 795 competition. If we had, we would not be closingdown so many coal-fired power stations. They are being closed down because there is a duopoly rather than a series of competitive producers. The duopoly is more than anxious to get rid of excess capacity, some of which could compete in the marketplace.
In order to get rid of excess capacity, an artificial scarcity in electricity is being created, so that the duopoly can justify its huge investment in new combined cycle gas turbines. Some of the existing coal-fired plant that is being closed produces electricity at the marginal cost of some 2p per kilowatt hour. New combined cycle gas turbine plants cannot produce electricity at that price—it costs 2.5p to 3p, depending on the gas contract. Some of the new gas turbine plant that is about to be ordered has yet to obtain a long-term gas contract. I should be surprised if the cost of that were not at least 3p per kilowatt hour. Much of our existing coal fired plant underprices that.
If I am wrong, let us put it to the test. The coal-fired plants which the duopoly is closing down, has already closed down or proposes to close down because they are supposedly uneconomic, should be offered for sale to others who think that the duopoly may have got it wrong. They should he offered to a wider range of independents, or perhaps to the regional electricity companies or British Coal.
I presume that, if they are of no interest to National Power of PowerGen, their only value is the site or scrap value, so it would not cost much if anyone else wished to prove that they could still bid into the electricity market at a competitive price. I suspect that many of them could. Some of them could be and would be refurbished as clean coal-burning fluidised bed combustion plants, as is already happening at the Slough estates and as some of the regional electricity companies wish to do. That would also meet the emission standards, and produce a higher thermal efficiency.
If that competitive opportunity is denied by the duopoly, and the market for British coal is thus restricted and contracted, British Coal will be unfairly penalised in the market. I go further, and suggest that British Coal should be allowed to compete fairly in the new, privatised energy market. British Coal should have the same opportunity to invest in power generation as its main competitior, British Gas, which is using its fuel to compete in power generation. Why should not British Coal use its coal for the same reason?
British Coal should now—before privatisation, or it may be too late—be given sanction to raise money that it requires for commercial decision taking by its shareholder the Government. If not, it should be free to raise funds in the financial markets, as do privatised industry and its competitors in the energy market. That would enable it to make viable decisions to enter the power generation business, perhaps in a joint venture. After all, British Coal has competent directors and management to make such decisions.
Given such a level playing field of opportunity to compete, I suspect that British Coal would look for joint ventures with independent power generators or regional electricity companies in order to prove that some of the coal-fired plants that PowerGen and National Power claim are uneconomic could compete in the electricity market. If British Coal were privatised, I believe that it would now be doing just that. I have no doubt that British 796 Coal would have taken a more active commercial step to protect its market, as any industry does if it sees its market collapsing around it.
However, we know that British Coal has been restrained by its shareholder and the Treasury from investing or diversifying in power generation. I believe that British Coal, under privatised management—which should have happened many years ago—would be taking on the duopoly power generators. I believe that it would be saying to them, "All right, you do not want to buy our coal, so we will use it ourselves and show that we can compete with you." My theory should be put to the test in order to prove whether existing British Coal and British power stations fuelled by coal can compete with the new combined cycle gas turbine power stations. I believe that they could.
British Gas and the oil industry are already entering the power generation market. Industry is also doing so, through combined heat and power. In addition, regional electricity companies are competing in power generation. Why should not the nation's leading producer of fuel for generation also have the freedom to do so, especially when its future is being undermined by its competitors and it is unable to compete fairly because its hands are tied behind its back?
If the Government want a successful privatised British coal industry, which I am sure they do, would it not be a great deal easier to privatise British Coal as a stronger commercial asset, which would make it more attractive to potential buyers, if it were involved in some profitable power generation and had thus secured some of its own coal markets? British Coal's freedom to move into power generation by taking over power stations that National Power and PowerGen had rejected and by using its own coal would also help to build up competition in the electricity market which does not currently exist. That point relates to the issue raised by the hon. Member for Rother Valley (Mr. Barron).
The competition does not presently exist, because the duopoly is, to some extent, abusing the system. It has all the power plants at present, although, in due course, independent plants will come in at the margins. At present, the duopoly is getting rid of excess capacity, even though some of it could still be competing, which is restricting competition.
If the Government want to help the competitive power market, they have an opportunity to allow a new player into the power generation market: British Coal. That would not only provide competition but would make British Coal a more attractive proposition for privatisation and, above all, would give British Coal a life saver in the transition period between now and the turn of the century, when, hopefully, the new clean coal technologies will come to its rescue.
I hope that my hon. Friend the Minister will at least consider my argument reasonable and worth some consideration. I hope that he thinks that my proposals go some way to finding a solution to the difficult transition period now facing British Coal.
I believe that the energy balance—the economics of energy—will change in years to come as gas prices begin to rise because of the extreme pressure of demand throughout Europe. I believe that the balance will begin to change back in favour of coal, which will make the clean coal 797 technologies the investment choice by the turn of the century. I hope that, by that time, our coal industry is still able to participate.
§ 8.7 pm
§ Mr. Terry Patchett (Barnsley, East)
I am grateful to have caught your eye, Mr. Deputy Speaker, but I shall be brief, as I know many of my colleagues who wish to speak have a genuine interest in the coal industry. I am fortunate in that my constituency still contains the semblance of a coal industry, albeit its manpower is less than a third of what it was in 1985.
I find it difficult to speak in this debate, given that its subject is the future of the coal industry. I believe that both parties in any debate should have a genuine interest in the subject, and be open and honest. The Government, on their past record, do not meet any of those criteria. They have always stated that British Coal should take its chance in a fair and free market, but they suported private Bills—for example, the one that is now the Associated British Ports Act 1990—which helped British Coal's rivals. They have used the British coal industry to pursue Tory dogma. They initiated an unnecessary year-long strike which cost the taxpayer £5 billion. They did so just to make the trade unions look bad, ably assisted by their friends in the press. That did no good and had nothing to do with the industry.
The Government's friends in the press vilified, and attempted a character assassination of, a trade union leader whose heart and soul was genuinely in the industry —Arthur Scargill. His only crime was to speak the truth about the Government's pit closure programme. In this very Chamber, he was called a scaremonger and a liar. Ministers, including the then Prime Minister, told the House that they had no such programme, but history proved who was telling the truth.
If the Government are really interested in British Coal, they should take an interest in the health and safety of its workers, yet they have proceeded to deregulate health and safety. I refer to certain types of support systems and the number of hours worked in a shift. I have been involved, and I know the inherent dangers. This dangerous move displays a callous indifference to the work force, but it fits in well with the former Prime Minister's love of Victorian values. Hers was an era that cared little for the life and limb of the work force.
If the Government really care about free and fair market forces with no Government interference, why have they allowed more private mines? Why have they assisted opencast mining by relaxing planning controls and allowing the rape of our countryside unnecessarily? We can well do without opencast coal, yet the Government have interfered and helped rivals of British Coal.
I am satisfied that only the Opposition have adopted an open and honest approach to the industry. I know that the Rothschild report will be mentioned often in this debate, so I will not dwell on it, but I am worried about one or two of its aspects. For instance, why was there a need to commission the report when the way in which the generating industry is moving shows that the Government are implementing Rothschild's recommendations in advance? The Government have been moving in that 798 direction for many years, so why spend taxpayers' money on a report that changes nothing and merely supports the Government's political ideology?
The report does not mention any effect on our balance of payments. It is typical of the Government to pursue the dogma of privatising coal without a thought for the economic consequences of that decision. Social consequences are never mentioned in the report, yet we all know of the traumatic problems brought about by the lack of tax revenue and the increases in unemployment payouts—these are the social costs. We are talking about social costs and human problems, not exclusively about profits.
The Government have clearly shown their interest in the coal industry by the amount of money that they have poured in to supplement redundancy terms. That is a sign of the way in which the Government want the industry to go.
I was pleased to hear the Chairman of the Energy Select Committee refer to clean coal and especially to the fluidised bed experiment at Grimethorpe in my constituency. The privatised energy industry has shown a distinct lack of interest in that experiment and has put little money into it, but if it is proved a successful and profitable venture, the privatised industry will be in there with its sticky hands to cream off any profits that may be had.
I should like to take this opportunity to ask the Minister to assure the House that the fluidised bed experiment will be allowed to be completed. If the Government have a genuine interest in British coal, let them show it by some real action.
§ Mr. Andy Stewart (Sherwood)
This debate on the coal industry is not only opportune but imperative in view of the report by the Energy Select Committee, and I congratulate the Committee and my colleagues who have already spoken in this debate.
In the past 100 years, the House has heard much more about the coal industry than about any other, and rightly so, because coal was the parent of our industrial revolution, and until 1950 our only indigenous source of energy. The industry controlled our economy, and 2 million families associated with it.
With each and every debate—the last being on 14 November—we get an historic resume, political criticism, and emotional speeches from Members who have been miners and speak from experience, which is understandable. Nevertheless, I hope that they accept that Conservative Members who represent coalfield constituencies care about the industry no less than they do.
My speech on the Coal Industry Bill on 14 November at column 1262 touched on the past and present and questioned the industry's future role and size. While it would be in everyone's interests to repeat that speech in full, time is limited, so I will concentrate my remarks on the essential parameters of renewed contracts with the power generating companies post-1993, and the opportunity for British Coal to secure every tonne of commercially viable business. This, of course, will depend on the total demand for electricity and the share given to coal in generating that energy.
My right hon. Friend the Secretary of State for Energy has often said that British Coal must face the challenges to its markets head on. It has done that—only to find half the power stations' fuel market in England and Wales entirely 799 removed from that marketplace. That is not free and open competition, but rigged protectionism, denying consumers the benefits which would accrue from the unique offer made by British Coal—to supply coal at lower costs and steady prices.
What my constituency miners want to know is why an annual productivity-induced unit cost reduction of £150 million is not passed on to the consumers, as it would he in a truly free market. In addition, they have to subsidise Nuclear Electric, allowing it 20 per cent. of the electricity market share, costing three times the unit price of coal. That is not the market working, but political intervention. Some would like to call it a diversity of supply. That may be so, but it is a feeble excuse to use to our miners who have done so much in the past five years, increasing productivity by 108 per cent. and reducing prices by 40 per cent. in real terms.
Further commercial mismanagement is about to surface from gas also being given favoured status. From their new-found cash resources, National Power and PowerGen have signed continuous gas generating contracts coming on stream up to 1995, equivalent to 25 million tonnes of coal. Having done so, the companies now discover that 40 per cent. of this market share is hopelessly uneconomic compared with their present coal-contracted generation.
Unlike Nuclear Electric, the companies are not asking British Coal for a subsidy to fund this mistake; their means are more subtle—to remove the competition by closing 12 GW of modern coal-fired generating stations, and to demolish the plants. To the lay person, that may seem an insignificant figure, but it is equal to all the power plants in the Trent valley, which currently produce a third of England's electricity requirements. If that was all, it would be bad enough, but a further 17 million tonnes of coal-equivalent gas contracts are waiting for the signature of my right hon. Friend the Secretary of State for Energy, all at unit prices 30 per cent. above those of British Coal. In view of those indisputable facts, my right hon. Friend will have no difficulty in returning those contracts to sender unsigned.
Having 50 per cent. of the energy market protected by intervention, British Coal looks to a potential market after April 1993 of between 50 to 55 million tonnes, most of which it could meet at economically sustainable prices. To get there would require a degree of predictability and orderly progression which only the Government can sponsor. That process must be undertaken soon. Miners are despondent because they continually hear vague promises that, if they keep going, success will come, while at the same time seeing their market decrease and ever-increasing investment in port capacity to handle large quantities of foreign coal.
I make no apology in returning today not only to the question of the wisdom of importing coal on spurious economic grounds but to the extent to which our strategic requirements could be put in jeopardy by allowing such a policy.
Winston Churchill, our great leader and a man of vision, secured in 1914 a 51 per cent. stake in the Anglo-Persian oil company, now British Petroleum, for no other reason than to secure oil supplies. History has proved him right, and nothing has changed to remove that 800 need except that we have now abdicated our responsibilities to two commercial companies, National Power and PowerGen, whose only claim to fame so far is their record-breaking dash for gas.
My constituency miners also demand an economic audit on the importation of coal. It costs 1.80 to produce a gigajoule of domestic electricity worth £20 from British coal compared with £1.50 from imported coal. Eliminate the former, and the cost of the latter will rise through the roof, leaving industrial and domestic consumers at the mercy of foreign Governments.
The United Kingdom already has the lowest domestic electricity prices in Europe and, given the opportunity, British Coal can offer long-term guarantees to keep that price advantage at or below the United Kingdom retail prices index. The starting price could well be reasonable —say 160p per gigajoule or 10 per cent. below present prices—but the contracts are unlikely to be firm, with reopeners at regular intervals. With action as described, British Coal could secure 50 to 55 million tonnes per year, most of all on a firm five-year basis and at much the same price as would be achievable from the lower volumes should any of that market share go to imported coal.
Therefore, we need the Government's support not to dictate on future coal contract prices, but to ensure that the dominant position of the generators is properly regulated rather than abused and that the contract negotiations are decided on genuine, not make-believe economic grounds. Otherwise, instead of the desired increase in competition, there would be an inevitable and dangerous decline in the diversity of energy supplies available to the consumer. The Rothschild report was just one of several options in the privatisation of British coal, but in the end it could be the only one. To abandon the United Kingdom coal industry in that fashion would be a decision which was not only historic but irreversible.
§ Mr. Malcolm Bruce (Gordon)
I am grateful to the Select Committee on Energy for its report. It is particularly helpful that it has highlighted its concern about the potential decline in the extractable reserves of British Coal to a critical level. My only concern about that is it has left it a little late: it might have been helpful if that concern had been registered earlier. Some of the closures that have taken place are irreversible.
However, at least Conservative Members now recognise that the Government must do a bit of thinking about the coal industry's future in relation to the consequences of the privatisation of electricity, the opening up of the market for coal, which even the hon. Member for Sherwood (Mr. Stewart) accepts may not be an entirely level playing field, and the future ownership of the coal industry.
I make no apology for being particularly concerned about the future of what little is left of the coal industry in Scotland. We have one operating pit and two mothballed pits. That is the Scottish coal industry. The consequences of the coal strike were more devastating for the Scottish coal industry than any other region. The industry was effectively decimated.
I spent some hours this morning in the company of members of the Monktonhall miners' consortium. As the Under-Secretary of State well knows, it has put in a bid to take over the licence for the Monktonhall colliery from 801 British Coal, and British Coal has said that a decision is likely to be made by the end of the year, which presumably will be announced early in the new year. It is my firm belief that that bid is being treated seriously by British Coal only because the consortium has persisted in its determination to try to take over its old pit.
It is a matter of some concern that a company that so far has shown no interest has suddenly popped up at the end of the day and said that it will put in a counter-bid. That is of particular concern when one knows that, in spite of the fact that the principal of that company may be from the Isle of Lewis, he has been as far away from Lewis as he could be for most of his life, and his interest has only materialised recently. Indeed, he has said that he was desperate to take over Monktonhall as soon as he learned that the licence might be available. He has not said when he learned that, but I am sure that it was nothing like as long ago as the Monktonhall miners, who have for three years been trying to take over the licence from British Coal.
It is perhaps also a matter of concern that, for the past two years, the company has made donations of £50,000 a year to the Conservative party. One wonders whether that may be why it has some expectation of results. It is my experience that companies give donations to the Conservative party not to promote and uphold free enterprise but in order to prevent the effective operation of free enterprise and to secure advantages within the marketplace from a Government who are willing to be deflected from their professed ideology in order to favour their friends and backers.
§ The Parliamentary Under-Secretary of State for Energy (Mr. David Heathcoat-Amory)
The hon. Gentleman has just made a serious allegation to which I shall be responding in due course, but meanwhile, will he tell the House whether the consortium which seeks to take over Monktonhall, or the coal industry generally, will be helped by the Liberal Democrats' call for an immediate carbon tax, as set out in their recently published environmental policy document?
§ Mr. Bruce
The hon. Gentleman is wrong: we have not called for an immediate carbon tax. We have raised the question that the Government have also raised—how we should deal with the problems of carbon dioxide emissions and the operation of the market. The chairman of the Conservative party, a previous Secretary of State for the Environment, is on record as saying that energy taxes will have to rise if we are to deal with our environmental problems. Therefore, the Conservative party is in no position to cast such aspersions on how we deal with the problems of carbon dioxide. The Government's record on that is less than impressive.
The particular point about which we must now be concerned is whether the consortium that has put in the application for the licence for Monktonhall will be successful, and the Government's role in that.
I am glad that, on this occasion, the Under-Secretary of State is in his place. I am not criticising him for his absence when this matter was previously debated, because I know that his colleague the hon. Member for Lewisham, East (Mr. Moynihan), who is responsible for oil and gas, reported the debate to him and the concerns that I 802 expressed at that time. As a result, I am pleased to note that he met the consortium and the Chairman of the Energy Select Committee, I think on the same day, and I know that the consortium welcomed that opportunity. That leaves the interesting question why those meetings took place, when the Secretary of State, the Under-Secretary of State, and the Minister at the Scottish Office responsible for industry refused persistent requests for meetings over the past three years—saying that it was a matter not for the Government but for British Coal.
I wonder whether it had to do with the fact that the request for a meeting came from a Conservative councillor in Edinburgh who had previously shown no interest in the consortium and is not directly connected with it. Is it not odd that there should be that sudden change of Government policy? I suppose that that is an indication of the way that things have changed in recent years. As a rule, Ministers did meet Members of Parliament wanting to make representations to them. It is interesting that Ministers are only prepared to do that now for outsiders who are members of their own party. That is a regrettable development.
More seriously, to what extent does that indicate a change of Government attitude? In the past, they said—the Minister knows my view, that this is the wrong position to take—that the licensing of coal pits was entirely a matter for British Coal, and there was no point in meetings, because they would interfere in the management of British Coal. The Minister knows that, when I have attempted to meet Ministers' requests to seek a meeting with British Coal directors, they have refused to do that, or to discuss matters in any way, shape or form.
Ministers who are supposedly accountable to the House refuse to accept their responsibility to be accountable to Members of Parliament, and then pass the buck to people for whom they are responsible, but who in turn refuse to meet right hon. and hon. Members. The business of the House is being frustrated and undermined by the inability of right hon. and hon. Members to make proper representations on the policy of a Government who have been in office too long, and who have grown too arrogant about the power they hold.
Who will make the decision on Monktonhall, and what impact will it have on wider proposals for the privatisation of British Coal? If the decision is to be made by British Coal, why did the Minister meet the consortium? If the Government told British Coal what they want the outcome to be, why did they not tell the House, and outline the priorities?
I have twice tried to put amending legislation through the House to transfer the ownership of British Coal and its licensing responsibilities to the Secretary of State. The Under-Secretary has shown that he is not unsympathetic to that suggestion. That ought to happen before British Coal's privatisation, particularly if coal is to be privatised in a different way from that adopted in respect of previous privatisations of single monopolies. Do the Government have any clear thoughts on privatising British Coal as a single entity or in a different way?
The Monktonhall miners consortium simply wants to take over the pit's licence as soon as possible, and certainly this side of a general election. They have waited long enough, and the signs are that a decision will be made shortly. Will the Minister make it clear that the Government believe that the licence should go to that consortium, unless there are commercial or other reasons 803 why that would be inappropriate—in which case, the Government should state what they are? The consortium has managed to persuade its financial backers of its viability, which suggests that its proposition is realistic.
British Coal should not put any charge on that licence. Monktonhall has been a liability to British Coal, and is costing it money. If anything, British Coal ought to put a little money in, to have the pit taken off its hands. However, the consortium does not seek that—only to take over the licence. Will the Government indicate that will be allowed to happen?
The consortium is frustrated because, over the past three years, it has received very little support from quarters from which it might have expected it. An expensive report commissioned by the National Union of Mineworkers, Lothian regional council, Midlothian district council, and East Lothian district council—the political complexion of which I do not need to point out to the Minister—is fundamentally an attempt to persuade British Coal to take over the running of the pit.
It is an interesting point that the miners consortium has no confidence in British Coal and does not believe that it could run the pit any more profitably than before. The miners believe that the consortium in which working people own the pit could be effective and profitable. It is only right to give them a chance to prove that. I thought that the Conservative party would also consider that something worthy of its support. The consortium should be given an opportunity to show that the commitment it has shown over the past three years can yield results. There is no public money at risk—only the opportunity for the local community to prove that it can deliver the goods.
The membership of the consortium totals 250—which is greater than the number of jobs that would be created in the first instance. The members have all said that they would put up £2,000 of share capital in the consortium, and there are more people to work in the pit, above and below ground, than could initially be provided with employment.
Critics have said that a constraint on the consortium is the limit of 250 underground workers for that pit. Initially, that limit would not be exceeded anyway, but eventually the consortium would be able to employ about 500 people. Will the Minister make it clear that there is no reason why that limit should present any obstacle? Every year, Bills on the coal industry go through the House. The Government have already upgraded and amended—
§ Mr. Barron
The limit would have to be changed by statute, as was the case with the Coal Industry Act 1987, which raised the limit to 150 persons. Why has not that same argument been advanced in respect of the current Coal Industry Bill by the hon. Member for Southwark and Bermondsey (Mr. Hughes), who was supposed to be the Liberal Democrats' spokesman on the industry?
§ Mr. Bruce
The hon. Gentleman knows perfectly well what happened with the previous Bill. My amendment was 804 defeated by 21 votes to one, because Labour Members voted with the Government to defeat it. I know exactly what is Labour's position in that regard.
The miners in the area in question are thoroughly and utterly disillusioned with Labour for its total lack of support. They say to me, "Isn't it extraordinary that here you have working people wanting to take over a pit that they care about, and putting up their own money to that end, and Labour is backing the bosses who closed the pit in the first place—to prevent those workers taking over their only means of a livelihood'?" That is what Labour does for working people, and that is why working people in that part of the world will turn against Labour at the next general election.
I ask the Minister to recognise that he is in a position to ensure that those miners are given the opportunity to do what they have spent three years trying to do—to take over the pit they know and to show that they can make it profitable.
§ Mr. Malcolm Moss (Cambridgeshire, North-East)
The hon. Member for Gordon (Mr. Bruce) made a number of assertions, to which my hon. Friend the Minister will no doubt reply later. As to the case for Monktonhall, it seems that the hon. Gentleman is seeking privatisation before a Bill has passed through the House. That is an interesting line from the Liberal Democrats.
Few industries in this country or in the Community as a whole have seen such tremendous changes over the past decade as the coal industry. Those changes essentially relate to a slimming down in the industry itself, but also to significant structural changes.
On the debit side, over the past 10 years output reduced by 35 million tonnes or 28 per cent., but the parallel decrease in consumption is much less. It has fallen by only 11.6 million tonnes, or 9.6 per cent. On the plus side, there have been dramatic productivity increases, from 2.32 tonnes per man shift in 1980–81 to 4.70 tonnes in 1990–91 —a rise of 103 per cent. in 10 years. That was not achieved at the expense of health and safety, because over the same period fatal accidents fell by 72 per cent.
Over the same period also, British Coal cut colliery costs by 40 per cent. in real terms. Those are not the statistics of an industry in terminal decline. It is high time that some of the myths presented by Labour Members were buried once and for all. The first is that the British coal industry will be decimated in the near future; the second is that the present Conservative Government are actively working to achieve such a decline, together with the substantial job losses that accompany pit closures.
The Government's commitment to the coal industry has been clear over the past 10 years or more; they have also shown their commitment to a successful future for the industry. After all, who invested more than £25 billion over the past decade—some £2 million each working day? Who put British Coal on a solid financial footing by writing off its debts with a massive £5 billion capital reconstruction programme? Who introduced a Bill—long overdue—to deal with the coal mining subsidence problem? Who restructured British Coal so that it was able, last year, to make a profit of £78 million—the firs bottom-line profit for 13 years?
Was it the Labour party, operating behind the scenes? Was it the National Union of Mineworkers, under its 805 renowned leader? Were those achievements the result of efforts by Labour Members? Of course not; they are the tangible evidence of a Government's full commitment to one of the country's major industries.
Let us contrast those achievements with Labour's record in office. The Labour Government closed more pits in their two terms than the current Conservative Government have ever closed. Under Labour, between 1964 and 1970 and again between 1974 and 1979, a total of 295 pits were shut down; since 1979, there have been just under 140 closures. That is half the closure rate under Labour.
§ Mr. Jimmy Hood (Clydesdale)
Can the hon. Gentleman tell us what percentage of collieries have been closed under the present Government, and what percentage were closed under the last Labour Government?
§ Mr. Moss
I think that absolute figures are much more important than percentages. In the last analysis, they relate to the number of pits, and the number of jobs available at each pit.
Under Labour, productivity increased annually by an average of just 2.5 per cent. Since 1979, under the present Government, that figure has trebled to more than 6.5 per cent. The message is loud and clear; according to any measurement that we care to take, the Conservative Government's record on the coal industry is significantly better than that of Labour.
What of the future? Of course, the coal industry faces real challenges—environmentally, for instance. Stringent targets relating to carbon dioxide, sulphur dioxide and nox emissions make it difficult for coal to compete with other fuels, especially in power generation. Coal also suffers from competition from gas, which is more environmentally friendly, and—as we have heard this evening—is becoming far more important in terms of baseload electricity generation in the near future. The third challenge comes from the liberalisation of world energy markets, a trend that will undoubtedly continue through the GATT negotiations.
None the less, British Coal has achieved remarkable improvements in the past decade, which can and should continue. Tribute should be paid to both management and work force for those tremendous achievements: they deserve the highest praise. The same management and work force face the challenges of the current position, but there is nothing to suggest that they lack the collective will, expertise or enterprise to negotiate a very successful future for themselves and their industry.
Much has been made of the contracts coming up for renewal with the main power generators in the United Kingdom—National Power and PowerGen. Their generating capacity, however, still lies to a significant extent in coal-fired generation. Their new gas plants will not be on stream for several years; they need a secure, well-priced coal contract for a long time to come. As my hon. Friend the Member for Sherwood (Mr. Stewart) pointed out, as negotiations are currently progressing, there is every chance that some 50 million to 55 million tonnes will form part of that contract negotiation. 806 Coal-fired plants are mainly located inland, and very close to existing coalfields. That surely gives British Coal a distinct advantage over importers in negotiations.
The hon. Member for Mansfield (Mr. Meale) raised another possibility for British Coal's immediate future. British Coal produces the cheapest deep-mined coal in Europe; the cost is substantially lower than that of coal from many other producers in the European Coal and Steel Communities. Surely there is tremendous scope for diversification of British Coal sales into European Community countries, particularly Germany. Here, national subsidies are under continual threat of elimination as discussions progress within the ECSC and under the treaty.
As we have stated clearly and repeatedly, the Government are pledged to achieve the largest economic coal industry that the market can support. To say anything less would invite protectionism, ring fencing and subsidy. With privatisation, after the next election, the industry will be more effectively structured to meet its challenges and build on its achievements.
What of Labour's plans for the future of the coal industry? Its pledge is to maintain the industry "at around about its current size". Let us ignore for the moment what Labour actually means by that; how will it deliver on its promise, bearing in mind the fact that the nuclear industry is already ring fenced, gas contracts have already been signed and committed to combined cycle gas turbine plant, and coal imports are perfectly legal under European law?
Labour's coal strategy simply does not stand up—first, on environmental grounds. Labour is pledged to freeze carbon dioxide emissions at 1990 levels by the year 2000; that is five years ahead of the Government's pledge. How will that be possible, given that Labour wishes to phase out nuclear, which could easily push up carbon dioxide emissions by at least 10 per cent. a year and prevent the development of combined cycle gas stations, which emit half as much carbon dioxide as coal-fired stations?
Sulphur dioxide emissions would also increase if that strategy were implemented. The only way in which to meet sulphur dioxide targets would be the adoption of a massive flue gas desulphurisation programme on existing coal-fired stations. Who would pay for that? If Government grant is given to the companies running the stations, it will come from taxpayers' money. Or will National Power and PowerGen be forced to do the retrofit? That would mean significant increases in the price of electricity for consumers. We have heard nothing this evening about where the money will come from.
§ Mr. Eric Illsley (Barnsley, Central)
The hon. Gentleman said that Labour would need to implement an FGD programme, and asked who would pay for it. Surely the Conservative Government have already set out proposals for such a programme: they should be telling him where the money would come from.
§ Mr. Moss
The existing programme represents a commitment by National Power and PowerGen to retrofit about 8 GW. That is clearly contained within their financial programmes. Labour's plans involve an increase, or a stabilisation, of coal burn in our power stations, at the expense of gas or nuclear, at the same time as a reduction in both carbon dioxide and sulphur dioxide levels.
807 Without FGD retrofit across many more stations than are represented than those 8 GW, I do not think that that will be possible.
§ Mr. Barron
What does the hon. Gentleman think about the fact that National Power and PowerGen are currently importing orimulsion and getting permission to burn it? Orimulsion emits three or four times as much sulphur as coal.
§ Mr. Moss
The point at issue is whether National Power and PowerGen meet the carbon dioxide and sulphur dioxide targets that have been set for them.
The hon. Member for Rochford (Dr. Clark) raised the question of clean burn technology. I have no doubt that additional points will be raised about that aspect later because of the Select Committee's excellent report. I have little doubt that it represents a future for coal-fired power generation in the next decade. However, it seems that the technology is not right at the moment in economic terms to fill the gap and to play a part in the crucial current round of negotiations in which the future of the coal industry in the next three to four years is the most important issue.
Furthermore, Labour's policy of reducing or banning imports of coal and of reducing the development of gas-fired stations is, in many eyes, quite illegal. First, the banning of imports might land the Labour Government in the future in front of a European court and, secondly of course, if the Labour Government attempted to use their 40 per cent. stake in National Power or PowerGen to bring pressure to bear on those companies to reduce the development of gas-fired stations, they might end up in a United Kingdom court for breaking United Kingdom company law.
I believe that Labour's statement that it will maintain the coal industry ataround about its current sizeis unworkable—especially in the light of the developments that are already in train—and also uncosted. British Coal has an excellent future. There are still sizeable markets within this country and in the European Community. We cannot consider the future of British coal with preconceived notions of output, size and number of pits because that would be unrealistic. Further improvements in productivity and price are, of course, necessary but the price gap between British coal and the generators is certainly not unbridgeable.
§ Mr. Alexander Eadie (Midlothian)
In considering this important subject, it would be churlish not to congratulate the Select Committee on Energy on the report that it has produced, which to some extent analyses the current position of the mining industry and its position in the future. However, I wonder whether the Government will pay a blind bit of notice to the report, which illustrates not only what will happen to the mining industry but what will happen if we allow it to contract.
When the Chairman was introducing the report, I intervened on the question of nuclear power. I do not say this in a malicious way or to score debating points, but I said that the chairman of Scottish Nuclear had argued at the Nuclear Forum that there might be a case, in the strategic interests of the nation, to subsidise nuclear 808 power. We have argued for a long time that there is a peripheral argument that in the strategic interests of the nation we should be concerned about the coal industry.
To judge from the way things are going, there will be difficulties in respect of the size of the industry. The hon. Member for Sherwood (Mr. Stewart) wiped about £30 million or £40 million off the take from the coal industry. He said that his first speech in the previous coal debate made the headlines of Coal News, but I do not think that the chairman of British Coal will he grateful that the hon. Gentleman has halved the take and production of coal in his remarks.
If we see the demise of the coal industry, the nuclear power industry will be subsidised. That is, in essence, what I was told. Let me remember how unforgiving the nuclear power industry is. To think that we should destroy the coal industry and then say, "Well, if we have no coal industry, we shall have to have a nuclear power industry and what it costs does not really matter because it is in the nation's interest to do it," does not make sense.
When one reads and analyses the admirable report, one discovers a number of threats—the importation of foreign coal, the question of how the board will react to privatisation and the Government's Rothschild report which is not, in fact, a report but a slaughter of the coal industry. The estimates that we are debating propose that a further £4 million should be spent on preparing the future privatisation of the coal industry, but what is £1 million or £2 million between friends? If the taxpayer understood what the Government are planning with this privatisation and what they are doing to the coal industry, there would be no doubt what would happen at the next general election. It is absolutely disgraceful that this proposal should be put before us. Who is getting the millions of pounds? It is certainly not the miners.
The whole point of the admirable report is to point out what is the biggest threat to the coal industry. It is, of course, the gas industry—there is no doubt about that. It is a threat because the Government have sat back willingly and said that they do not care if another 30 million tonnes of coal is taken out of the take and if there are to be gas-fired power stations. One of the hon. Members who spoke earlier pointed out the dangers, and I wonder whether the Government are aware of the dangers of the policy that they are pursuing in relation to gas-fired power stations. It will affect not only the coal industry but the consumers who will have to pay an ever-increasing price for gas.
There is an assumption that gas is a green fuel. The Government are helping to support the idea that coal is a pollutant but that nuclear power is green friendly and that gas is green friendly. In addition, it is said that gas is cheaper, but that is not true on two counts.
Because of the lack of time I shall draw attention to a recently published report entitled "UK Energy Policy Post-Privatisation" which was written by Professor Fells. He meets head on the issue of the future of gas and its price. It is time that the Government examined the issue because as a result of the policy that they are actively backing—or at least not opposing—the consumer will face colossal electricity bills because of the escalation in gas-fired power stations.
The report to which I have just referred states:Reserve depletion, especially of oil and gas, must still be a concern for the long-term, but in the medium-term, constraints of supply security and the environment are more 809 worrying than is depletion of the resource base itself. Probably now, and certainly after 1992, it is not certain that gas in the United Kingdom sector will be landed in the United Kingdom; it is likely to be sucked into mainland Europe, where prices are higher. Viewed in this perspective the privilege of the United Kingdom is temporary; the price and availability of natural gas in the United Kingdom dependon many other factors into which I do not have time to go. I put that comment on record as the position is serious.
The hon. Member for Gordon (Mr. Bruce) said that he met the consortium today. He has not discussed the matter with me, although Monktonhall is in my constituency. I have never made any secret about the fact that my view on Monktonhall colliery is that British Coal should reopen the colliery. We have had many meetings on that, and the miners' parliamentary group has met the chairman of British Coal several times. We have had long meetings with the Secretary of State for Energy on the future of Monktonhall. There is no question that the issue of Monktonhall was not put forward, as the hon. Member for Gordon seemed to imply. I have never made any secret of the fact that I believe that the future of Monktonhall lies in British Coal working the pit and we have said that from the start.
It is a bit much for the hon. Member for Gordon to show a report and to say that it was compiled by Labour-controlled Lothian regional council. He obviously has not read the report—
§ Mr. Eadie
If he had, he would not have made the remarks he did. The report on Monktonhall was compiled by an independent consultant; it had nothing to do with political views. It was unanimously agreed by Lothian regional council, including Liberal Democrat councillors and Tory councillors, that there should be a report. The hon. Gentleman did not say that.
The report said that what was happening at Monktonhall should be costed. It went into great detail about how much it would take to start the colliery again and said that it would cost millions of pounds. It said that the capital's availability in the open market was doubtful and suspect. My view of the consortium has always been, "Good luck to it." However, I am concerned about where the money will come from and what the rates of interest will be. I want to ensure that my constituents do not lose the money that they are supposed to invest.
One does not have to look at the report which the hon. Member for Gordon has thrown away with such disdain. The Government with British Coal decided that they would get an independent consultant's report to study how the mine could be put up for licence—whether under the consortium or under private ownership. I have a copy of the consortium's report and the hon. Member for Gordon should have got a copy because it was identical to the Lothian report. The only difference was that the consortium's report said that it would cost another £250 million for subsidence damage.
The consortium has been advised by a mining engineer who was made redundant by British Coal. He proposes that the coal seams should be worked in the advance. It is good mining practice that if one is to work all the mine that has already been developed—and £60 billion has been 810 spent in its development—one does not work it in the advance, but in the retreat. I have good reasons to be doubtful.
The hon. Member for Gordon says that the people of Midlothian are sick of the Labour party. The people of Midlothian are sick of the Liberal Democrats, because an argument is going on at present in Midlothian about who most wants to back the consortium and whether it is the Scottish National party or the Liberal Democrats. The Liberal Democrats write to The Scotsman and say that they were the first to back the consortium. They should not play about with people's livelihoods.
§ Mr. Eadie
I did not interrupt the speech by the hon. Member for Gordon. If the hon. Gentleman wants to make a speech about the constituency of Midlothian, he will have to do a lot more homework than he did tonight. We have problems, and the hon. Gentleman is one of them. We have problems with the Liberal Democrats, who change their mind every five minutes and who have a different policy for every constituency. I want to try to be kind to the hon. Member for Gordon because he is out of his depth. He knows nothing about mining.
I do not know what will happen about Monktonhall. I want it to remain open, but I also want to understand the position. I do not want only Monktonhall, but the 100 years worth of coal which stretches to Musselburgh bay to be developed. Incidentally, I knocked down the girders that were to go to develop a new pit which would come from Monktonhall into those reserves.
I do not need the hon. Member for Gordon to lecture me about my affinity with the mining industry. I worked in that industry for 30 years. My record will stand alongside his in relation to the future of mining in Scotland or in relation to any miners in Midlothian. If the hon. Member for Gordon wants to make speeches criticising the Labour party, he should do more homework first.
§ Mr. John Home Robertson (East Lothian)
I am grateful to my hon. Friend and constituency neighbour for giving way so that I can express the East Lothian interest in Monktonhall because Musselburgh bay lies under the east Lothian coast. My hon. Friend has long experience in the mining industry and is aware that the proposed privatised operation at Monktonhall would be restricted to an underground work force of only 150 people. Does my hon. Friend feel that justice could possibly be done to the coal reserves in that pit with such a small squad?
§ Mr. Eadie
I am obliged to my hon. Friend for his intervention. The hon. Member for Gordon treated this matter as a little joke, saying in the local press that everything could be changed in only five minutes. He has said that one only needs a dispensation from the mines inspectorate. That is a load of rubbish. One could not get a dispensation from the mines inspectorate to increase the manpower. I appeared on the Front Bench in the Committee Sitting in which the hon. Gentleman referred and received an assurance from the Minister that getting a dispensation would not be a problem. However, when I tabled a question to that effect, the Under-Secretary of State, the hon. Member for Wells (Mr. HeathcoatAmory), answered by stating that, before the position could be changed, primary legislation would be required.
811 The hon. Member for Gordon does not seem to understand either that primary legislation would be required or that such primary legislation takes longer than five minutes to be put on the statute book.
I shall finish on this note—
§ Mr. Stewart
I am grateful to the hon. Gentleman for giving way, because I listened to what he said earlier and have since checked my speech. There is only one small difference between what I said on 14 November and what I have said today. I said on the 14th that the equivalent of 25 million tonnes of coal gas contracts had been given, with a further equivalent of 10 million tonnes lying on the table for the Secretary of State to sanction. I have since discovered that that figure is not 10 million tonnes but 17 million tonnes. That is the only difference.
§ Mr. Eadie
The hon. Gentleman should read his speech again.
I shall conclude now because I am taking up valuable time. When I first became a Member of the House, I learned that one should never speak about things that one does not know or does not understand. As that applies also to the subject of mining, I shall give that advice to the hon. Member for Gordon, who spoke on a subject about which he knows very little—and it showed.
§ 9.6 pm
§ Mr. Geoffrey Lofthouse (Pontefract and Castleford)
I am sorry that the hon. Member for Sherwood (Mr. Stewart) appears about to leave the Chamber, as I intend to refer to him. The Chairman of the Select Committee on Energy apologised to me earlier for the fact that he has had to leave the Chamber because he is due to make a speech on clean coal technology elsewhere in London.
I listened with interest to the hon. Member for Gordon (Mr. Bruce) when he said that the Labour party did not have much interest in or seek to represent the Monktonhall miners. I assure the hon. Gentleman that the Select Committee carefully considered the Monktonhall bid and that our discussions were forcefully led by my hon. Friend the Member for Dundee, East (Mr. McAllion).
I do not mean to be offensive to the hon. Member for Sherwood when I say that he has entertained us with his prepared briefs in many of our coal debates, but that it is a bit rich of him continually to criticise the contraction of the coal industry when he has supported many of his Government's policies on the industry. I hope that the Nottinghamshire miners and Coal News will note that that is hypocritical. When I read Coal News after our last coal debate, it appeared as though the only people to speak on behalf of the mining industry were the hon. Member for Sherwood and his hon. Friend the Member for Nottingham, South (Mr. Brandon-Bravo). I hope also that British Coal has not helped to produce some of the briefs that we have heard in previous coal debates.
I am a long-standing member of the Select Committee on Energy and like, I am sure, many other members of that Committee, am beginning to feel like a parrot. We have produced reports year after year expressing anxiety at what was happening to the British coal industry. Over the years, we have had different witnesses, different Secretaries 812 of State and different chairmen of British Coal. They have told us, "There are no figures at all. All you read in the newspapers about running down the mining industry has no truth in it."
However, the Select Committee report is based on clean coal technology, on which we have taken a great deal of evidence from expert witnesses. I am trying to cut my speech short because other people want to speak. I simply say that it is fairly obvious that Britain could have taken the lead in clean coal technology. Unfortunately, we have failed to do so. We have had leading opportunities in British Coal's topping cycle for coal-fired generation. We had the British Gas Lurgi coal gasification and coal liquefaction. We have failed miserably to support those experiments financially.
The Government contribution to the Grimethorpe project was much less than that of foreign Governments. We now find that, because we have failed in the past 10 or 12 years, to recognise the need for clean coal technology and support the schemes that were in operation, it will take eight to 10 years for plants to become operative and produce clean coal. In the meantime, foreign competitors are moving ahead of us.
The biggest problem is that when the clean coal technology plants are available, judging by present progress, the British coal industry will be run down to such an extent that it will not be able to meet the demand from the plants. Once again, we shall be in the hands of our foreign competitors.
It is rather ironic that we continue to run down our coal industry and sterilise billions of tonnes of coal. I shall refer to the Rothschild report later. I hope that the Government have read the latest British Coal press release from its chairman. I shall not read it out, because there is not time, but it makes the very point that, purely and simply for medium-term policies and commercial reasons, we shall sterilise billions of tonnes of coal.
§ Mr. Illsley
May I draw my hon. Friend's attention to the Government's response to the Select Committee report? Both he and I were members of the Committee when the report was produced. The Government's response was:it is not true to say that the reserves are lost forever if pins currently accessing them are closed.On the following page, the British Coal memorandurn says:The Committee is right to draw attention to the fact that, once a mine is closed, the capacity is effectively lost.Does that not show how wrong the Government are?
§ Mr. Lofthouse
Now that my hon. Friend has brought me to the matter, it is right to put on record the comments of the chairman of British Coal in the press release.:Speaking in London almost a year after becoming Chairman of British Coal, Mr. Clarke said: 'What we are seeing is a sort of energy arms race, with attempts to justify it on the grounds of guaranteeing security, diversity and competition—but in reality, guaranteeing nothing but higher electricity prices, a rapid abandonment of other fuel reserves, and reliance on as yet unproven overseas resources.' … Coal's advantage still held good when account was taken of the cost of fitting flue gas desulphurisation equipment, said Mr. Clarke. The next supply contracts which British Coal will negotiate with the big electricity generators would offer electricity users an even better deal because of coal's success in reducing costs.…'This is no exercise in abstract economics for British Coal,' Mr. Clarke stressed. 'The dash for gas affects us directly, and in a particularly perverse way.' The economics of gasfired stations meant that investors 813 wanted long term supply and sale contracts to make them bankable. Typically, such contracts were for 15 years. 'Each new contract, each new gas station, eats into coal's share of the market—a share we could supply competitively. And we have to close down capacity as a result. Because we can't re-open mines, that capacity is lost for ever.'That is the case, and no expert would refute it.
The future of British Coal depends on the results of the next general election in a few months' time, and I do not think that any hon. Member or the Minister would refute that. That will decide whether we have a mining industry able to supply the demand for coal in the medium and long term, or whether we shall have the Rothschild recommendations. The Minister has an obligation to tell us whether the Government intend to implement Rothschild if they are returned to power. If that is the case, we may as well throw all our debates and the report out of the window.
The Minister has heard speeches from the chairman of the Energy Select Committee and all its members, including my hon. Friend the Member for Barnsley, Central (Mr. Illsley) and the hon. Member for Erewash (Mr. Rost), who have been privileged to listen to expert witnesses. People without any political bias have given honest evidence and enabled the Select Committee to produce the report, which was a genuine effort to draw to the attention of the Government their folly in running down the coal industry to the extent that they are planning to do.
The Committee has done so in the past, but the Government have taken no notice. Even though they are hellbent on privatising the coal industry, I hope that at this late stage they will take notice of the Committee's report. It is a sincere and honest endeavour to try to inform the Government of exactly what is happening to the industry and what folly it would be if they allowed privatisation.
I hope that there will be no opportunity for the Government to introduce the Rothschild recommendations and that a Labour Government will be returned. They will treat the mining industry and the country in a responsible way and will maintain reserves of fuel which the country so badly needs in the medium and long term.
§ Mr. Kevin Barron (Rother Valley)
I do not know whether the Minister would agree that, until now, we have heard explanations from both sides of the Chamber about the imperfect and expensive competition which has arisen as a result of the privatisation of the electricity supply industry. The House should ask what we are doing taking a decision on class V, vote 9, which will give the Government an extra £4 million from the Consolidated Fundto defray the charges that will come in course of payment during the year ending on 31st March 1992 for expenditure by the Department of Energy in connection with the privatisation of the coal industry.I do not know whether the Minister agrees with the evidence given by the hon. Member for Erewash (Mr. Rost) and by my hon. Friends about privatisation of the electricity supply industry. However, it is obviously as much a waste of funds to give money to privatisation of the coal industry as it was to give money for the poll tax.
814 A lot of nonsense has been talked—and a lot of myths —when the privatisation of the coal industry has been discussed in the House and elsewhere.
Now the first myth that deserves a liberal dollop of embalming fluid is the notion that British Coal management can't do the business. That a change of ownership would usher in new ideas and allow productivity to soar and new markets to be exploited.I do not know whether the Minister agrees.
I can tell you that's absolute rubbish".Also, people believe that there can be "a quick fix". I do not believe that there is a quick fix for the coal industry. Anyone who thinks that he can improve on the commitment and effort of British Coal managers reveals how little he knows about the coal industry and coal mining.
Those two quotes about "absolute rubbish" and "a quick fix" are not my words; they were taken from the speech made on Thursday last week by the chairman of British Coal. He ought to know; he was appointed by the Department to run British Coal. He says that the idea that British Coal can bring anything new to the industry or the nation is a myth. I should like the Minister to tell us whether he believes the myth about privatising the coal industry. If it is a myth, how can he justify the request for another £4 million of public funds to be spent on merchant bankers and other advisers like N. M. Rothschild sending reports into the country in brown envelopes which show that the future of the British coal industry is bleak?
We are debating the issues in the report of the Select Committee on Energy. I welcome the commitment of the Select Committee to secure the future of the coal industry in Britain and to develop a credible long-term strategy for research and development of clean coal technology. The whole House should commend the conclusion of the Select Committee in paragraph 89 that the strategy must includerecognition that the UK is unlikely to succeed with clean coal technologies against foreign competition unless the Government is as supportive towards those technologies as competitors' governments.The failure to support our industry is amply illustrated by the Bilsthorpe and Grimethorpe projects. In the case of Bilsthorpe, the Secretary of State's excuse for lack of Government support was that the project was neither commercial nor a demonstration project. In paragraph 78, the report records the Secretary of State as saying:the view that we took was that the technology that was involved was reasonably well proven … We were perfectly satisfied that it would work.While the Government were refusing to take a 20 per cent. stake in the project, a fluid bed boiler of the same size and design was built at a mine in Lorraine on the initiative of the French Government, who funded 60 per cent. of the cost. That is a fair example of how Britain is lagging behind the rest of Europe.
In their response to the report, the Government have said that the Bilsthorpe project failed to achieve the support of the European Commission after an assessment by technical experts. Is not it the case that the European Commission, through the THERMIE programme, would back Bilsthorpe only if it was certain to go ahead, and that the only way to ensure that was through Government support? All the indications are that the Government did not support it and, as a consequence, it was not supported by the European Commission. Now the Government choose to blame the European Commission instead of putting the blame where it rightly lies—on their own lack of support for the project.
815 We have also had what is described by the Select Committee as the "sorry tale" of the Grimethorpe topping cycle. In paragraph 72, the Select Committee says that it reflectsthe lack of a long-term strategy and the failure to review the R & D role of the Government and other bodies in the wake of privatisation.Apparently, the Government now agree that such a long-term project needs to be funded in such a way as to avoid unnecessary delays.
I wonder whether the Minister can tell us whether the project at Grimethorp is now securely funded, so that it will be able to complete its programme of 1,250 hours of operation? Will the money run out, as it did once before, with the consequential loss not only of the technological advantages gained but of the scientific and technical expertise? My hon. Friend the Member for Barnsley, East (Mr. Patchett) has taken an avid interest in the Grimethorpe project, not only because of its impact on his constituency but because of its impact on energy development. Will Grimethorpe complete its current programme without any further problems? My hon. Friend and I want to know the answer.
The report of the Select Committee is notable because it managed to clarify the Government's position in relation to the generators commitment to retrofit flue-gas desulphurisation systems to coal-fired power stations. Paragraph 107 of the report notes the Secretary of State insistence that PowerGen, the smaller of the two generators, cannot withdraw from its programme of 4 GW of FGD retrofits to coal-fired stations. However, from evidence submitted by McLoskey Coal Information Services and the British Association of Colliery Management it is clear that orimulsion, the fuel from Colombia, has a higher sulphur content than British coal. That means that those coal-fired power stations which use that fuel need FGD retrofitting. National Power and PowerGen have been given permission to burn that fuel at their power stations at Pembroke, Richborough and Ince.
The Select Committee took a great interest in the issue of FGD retrofitting. Will the Minister confirm that the Government will take the necessary steps—if necessary through Her Majesty's inspectorate of pollution—to ensure that PowerGen complies with its commitment to retrofit 4 GW of coal burn should it not do so voluntarily? The Ferrybridge sea power station has not got permission for its 2 GW coal burn. That power station is the biggest sulphur emitter in Britain, and any investment in plant to get rid of sulphur emissions should be directed at such a power station.
Will the generators be required to retrofit FGD if they decide to burn orimulsion? Would the sulphur emitted by that coal be in addition to the 4 GW limit set now?
It is a pity that the hon. Member for Cambridgeshire, North-East (Mr. Moss) is not in the Chamber. Attendance on the Conservative Back Benches is thin to say the least, especially when the Government tell us how much they support the coal industry. I note that my hon. Friend the member for East Lothian (Mr. Home Robertson) has moved to those Benches in an attempt to put the imbalance right.
The hon. Member for Cambridgeshire, North-East made much about sulphur emissions, but the Government are taking no action to stop generators bringing in foreign coal. Surely that behaviour is anomalous. The Government say that those generators need the coal 816 because it has a lower sulphur content, but at the same time they give them permission to burn orimulsion, which has a higher sulphur content than any coal produced in Britain. The Minister must explain that dichotomy.
The consultation paper of the coal task force recommended:the Government should accept the need for it to take action to provide a framework to encourage the development and promotion of new cleaner coal technologiesThat view is also reflected by the Select Committee's report, paragraph 67 of which states:without Government assistance no demonstration plants wil be built. Without demonstration plants, the UK's clean coal projects cannot proceed towards commercial implementation. Without commercial implementation, the UK's R & D in this field will have been largely futile.Most people would agree. I hope that the Government will take on board what the all-party Select Committee has said about clean coal technologies and act on those recommendations as a matter of urgency.
The second part of the Select Committee report is about Government intervention in long-term contracts for the British coal industry. Paragraph 137 of the report says:it is precisely because of the uncertainty over future energy needs and supplies that secure, indigenous sources of fuel are important.Indeed they are, and most energy commentators in Britain take that view. We do not know whether a certain institution takes that view, because it has little to say about whether the long-term security of indigenous sources of supply is an asset to Britain. The institution to which I refer is the Department of Energy.
Even so, the Government reiterate their belief that the supply of fuel is a market-only decision. Theybelieve that only the participants in the market can have the necessary knowledge and the incentive to determine the economic size of an industry. It is therefore for the electricity supply industry to ensure that it has access to secure long-term supplies of competitive fuel.In stubbornly repeating that, they rebut the Select Committee stance which rejects total reliance on the market. Indeed, in its conclusions in paragraph 149, the report points out:if the generators take decisions which turn out to have unfortunate long-term consequences, it is the nation as a whole (and electricity consumers in particular) who will pay the price, rather than the generators themselves.If decisions are taken for short-term economic reasons and in the full knowledge of their likely effects, a future Labour Government would not see their duty lying in protecting the profits of the generating companies at the expense of consumers. I want the message to go out loud and clear that a future Labour Government would not feel that we had to put consumers at risk because of decisions taken now by generators in the knowledge that, while coal is offered at home with guarantees on its price structure for years to come, they feel that they should run elsewhere for short-term economic gain.
The Government's stated belief in a free and open market on the basis of willing buyers and willing sellers, their unwillingness to subsidise what they term uneconomic production and their rejection of the coercion of customers sits uneasily on the protection of the nuclear industry's markets through the non-fossil fuel obligation and the nuclear levy.
In the debate on Second Reading of the Coal Industry Act 1990, I spoke of the European Commission's proposed reference price for coal. The Minister seemed unaware of the proposals. Indeed, he said: 817He did not tell us what was in that plan"—referring to the plan that I had mentioned—other than mentioning something called a reference price". —[Official Report, 14 November 1991; Vol. 198, c. 1318.]It was astonishing to hear a Minister say that in November 1991, when the European Commission had for many months been discussing exactly that matter in relation to the future of the European coal industries.
The Select Committee has no such qualms, for it said in paragraph 145:the concept of a reference price band … is … an important step towards a harmonised policy in respect of European coal reserves and towards defining the value of the security which indigenous coal production provides.The Select Committee called on the Government to play an active part in the deliberations on that. When one considers that that was said in July and that the Minister responsible for coal said in November that he did not even know about the reference price, one cannot have a great deal of faith in him or in his ability to protect the British coal industry.
The Government's formal response to the Select Committee is muted, to say the least. They will give, as they call it, only "careful consideration" to proposals when they emerge, rather than be actively involved in formulating the proposals. That should come as no surprise to us, given the Government's record. Nevertheless, it is disappointing that the Government do not take a more positive attitude.
In a recent letter to George Stevenson MEP, the EC Director-General for Energy said:the Commission believes that the current world market price for coal is not a sufficient criterion for assessing the competitiveness of Community coal. It is therefore realistic to define a security premium for the Community coal production which covers both the long term prospects for the evolution of the world coal market and the coal supply security.I hope that the Minister will join more enthusiastically in the vital discussions on long-term markets and security of supply which affect the future of the British coal industry.
The Commission's paper on reference prices says:it would be particularly unfair for pits to continue to close in those Member States which have nearly completed the restructuring exercise, while substantially less productive pits in other coal-producing Member States are kept running thanks to a national system of subsidies and other protective measures.That was also pointed out by the Chairman of the Select Committee. Surely that covers the British coal industry because, if our restructuring is not complete, how many more pits will have to close in Britain?
The letter to George Stevenson MEP also states:Further reductions of British coal production capacity are certainly worrying.It is a shame that the Government are not worried by such prospects. Their approach to negotiating a new contract between the coal corporation and generators is a clear expression of their easy come, easy go approach to the coal industry. I cannot believe that it is in the national interest for the Government to proceed as they have. We must not lose the nation's assets because at some stage there will be a national crisis in terms of where our energy resources should come from.
I do not think that I could conclude my speech better than by reporting the warning in the conclusions the Select Committee report:if a significant proportion of the UK's coal reserves were abandoned … resulting in a major reduction of long-term 818 energy security, the Government should understand that the country would see this not as a commercial decision, but as a largely irreversible decision of historic significance for the UK.I hope that the Minister and the Department of Energy will take our great national assets more seriously than in the past and ensure that we have an asset that will serve the national for many generations to come, as it has for centuries past.
§ The Parliamentary Under-Secretary of State for Energy (Mr. David Heathcoat-Amory)
I congratulate the Energy Select Committee and all who serve on it on the quality of their report, which is one of the subjects of this evening's debate. They examined the prospects for the coal market after 1993 and the possibilities of clean coal technology. Naturally, I do not agree with all their conclusions, but I recognise the high standard of the report.
I listened with particular interest to the opening speech of my hon. Friend the Member for Rochford (Dr. Clark), who spoke with great authority on his report. He has given me notice that he is unable to be here for the latter part of the debate. Obviously, I entirely accept his apology and there is no possible discourtesy. My hon. Friend and other hon. Members referred to the painful restructuring that has taken place in past decades in the British coal mining industry. There is nothing new about colliery closures. Indeed, my hon. Friend the Member for Cambridgeshire, North-East (Mr. Moss) drew attention to periods under Labour Governments when similar pit closures were experienced and large numbers of coal miners were displaced.
We have ensured that restructuring and social grants are available to help that painful process. We have also provided deficit grants to aid the industry more directly. Since 1979, more than £7.5 billion of new investment has been made available by the Government through British Coal. The total grant aid provided in those years comes to more than £17 billion—including more than £6 billion of deficiency grant provided in the Coal Industry Act 1990. It cannot be said that the taxpayer has been stingy in supporting the industry.
§ Mr. Derek Enright (Hemsworth)
Does not the Minister agree that the blocking of the RECHAR grants has deliberately stopped considerable sums of money that should have come to districts such as mine, which was a considerable blow?
§ Mr. Heathcoat-Amory
That is a separate issue. I regret that one of the European Commissioners is apparently refusing to release RECHAR money to this country as it could be of direct assistance to some of the affected regions. I know that discussions are taking place between the Government and the Commission on that issue, and I hope, that before too long, the Commissioner involved will authorise the release of the money, which we can certainly put to good use.
I am sure that all hon. Members recognise—it has been asserted again in the debate—that the coal industry faces competition from other fuels. That would be true under any Government and whether the industry were in private or public hands. It faces competition from the nuclear industry, the growing number of renewable energy sources 819 —which, although few at present, are of growing significance in total—and also from the gas industry, which is now to provide power for electricity generation.
Under any Government, a number of large gas generating plants would be commissioned over the next year or two, which would inevitably affect the market for coal. However, we believe that there is still a significant market for coal. The prospects of British Coal winning that market are good, particularly if we succeed in transferring the industry to the private sector.
That is why we are working out proposals to do so after the next general election and are bringing forward the supplementary estimate which is one of the subjects of this evening's debate. Decisions on the timing and details of the privatisation package and the Bill that we shall bring before the House will be taken after the next general election, but it is sensible to consider in detail the technical issues involved and some of the options that may be appropriate.
The hon. Member for Gordon (Mr. Bruce) wanted us to act faster and transfer ownership of the Monktonhall pit to a consortium of coal miners in advance of the main privatisation Bill. It is not possible for us to do that without changes in the law, so I think that he must have meant that the licensee should be the miners consortium, although there was some confusion in his remarks between the two different approaches.
The hon. Member for Gordon prefaced his main suggestions with an allegation that applicants could influence the choice by contributing to Conservative party funds. I very much resent and utterly reject that allegation. He then, confusingly and paradoxically, suggested that I should involve myself in the choice of licensee. He went further, and said that my choice should be his favourite consortium—the mineworkers consortium—which has discussed its proposals with me. I make it clear to the hon. Gentleman, to the House and to the mineworkers consortium: the choice is not for me but for British Coal. I am glad that an independent operator may be given the chance to work these reserves if the necessary conditions can be guaranteed, but the choice between competing applicants is not one for me to make.
§ Mr. Malcolm Bruce
I. accept that, but does not the Minister accept that British Coal may be compromised? The Government have made it clear that it is to be privatised. They have also said that it will continue to be the licensing authority for private coal pits. Does not that leave British Coal in a position in which its judgment of who may be the best operator for a pit may be the one likely to be the least successful, or at least less of a threat, not the one who might operate in the best interests of competition, the local community or the wider economy? Should not the Government transfer the licensing role from British Coal to the Secretary of State as soon as possible?
§ Mr. Heathcoat-Amory
We are working within the statutory framework of the 1946 nationalisation legislation. Until it is altered by this House, it would be quite wrong for us to suggest that any other body could act as a licensing authority. However, when we bring our proposals for the privatisation of the industry before the House, it will be entirely appropriate to deal with matters such as this. I hope that the hon. Gentleman will support 820 our efforts to give outside independent private miners and mining companies opportunities to exploit British Coal reserves. But that is a matter for another debate.
I noticed that the hon. Member for Gordon failed to answer my earlier point, which was that the Liberal Democrat party poses as a friend of coal—he did this evening—but the environmental document recently published by that party is extremely enthusiastic about a carbon tax and makes it clear that such a tax would bite most savagely on the combustion of coal. The economic and industrial implications of a carbon tax are discussed in the latter part of that document, but it is entirely silent on the question of the coal industry.
Not only would the Liberal Democrat proposals be highly damaging to the industry that the hon. Gentleman purports to support, but his document fails to discuss the issue at all. So I take his professed support for the British mining industry with a large pinch of salt.
Other hon. Members have rightly discussed coal research and development, a subject which formed an important part of the Select Committee's deliberations. I hope that hon. Members will therefore welcome the fact that last year we initiated a major review of the United Kingdom's coal research requirements in the longer term. We set up a coal task force, which was the Department's advisory committee on coal research, and it produced a consultation document in August.
That has already led to a large number of comments from overseas as well as from the United Kingdom industry. The report has been generally well received, and it certainly deals with the anxieties expressed this evening in favour of research being long-term. Research and development carried out in the United Kingdom should certainly be conducted in a framework that includes the long-term implications of coal burn.
At present, we are reviewing the comments that we have already received, and in the course of next year we shall publish a considered response to the coal task force. It gives the strategic direction referred to in the debate.
I emphasise that we are not standing still while we await the outcome of that review. In partnership with British industry, British Coal and overseas agencies, we have recently launched five new clean coal projects with a contract value of about £20 million, bringing the total contract value of coal research and development to more than £100 million. Further projects are at the planning stage, and announcements will be made in due course.
We believe strongly that collaboration between the Government, the coal industry and the rest of British industry is essential, not only to attract additional money for coal research but also for the technical and commercial skills that it can bring.
Reference has been made to the need for demonstration plants. We have already established an industrial working party, drawn from British Gas, the electricity generators and other plant manufacturers, to examine prospects for an integrated gasification combined cycle demonstration plant.
The hon. Gentleman also referred to Grimethorpe and the need to complete the research there. It is not true that the Department has delayed the development of the topping cycle at Grimethorpe and elsewhere. In fact, my Department found £.3.7 million at short notice last year to keep the project on schedule. An important feature of that 821 research is that we are working closely with other partners, in particular PowerGen, GEC Alsthom and British Coal, to decide the most appropriate next steps.
§ Mr. Heathcoat-Amory
I am aware of that closure and the experiments and research carried out there. There is no immediate prospect of large-scale funding from my Department, but we remain interested, and if industrial partners come forward to carry that research to another stage, my Department will be interested in encouraging that.
The hon. Member for Rother Valley (Mr. Barron) referred to a reference price for coal. No such request, information or details have been sent to my Department from the Commissioner concerned. However, we understand that the object of a European reference price is not to boost subsidies for coal, but rather to put a limit on them. We remain in touch with the thinking in Europe about a reference price, but the hon. Gentleman is wrong to suggest that proposals have been made. At this stage, no such proposals have been made.
No one pretends that in the years ahead the coal market will be easy. If faces severe environmental and economic pressures. We accept that the Government have a role in ensuring an adequate collaborative research and development programme, and I have instanced some of the projects that we are hoping to take forward. We believe that combined with our proposals to return the industry to the private sector after the next election, the outlook for the industry is by no means bleak.
§ Mr. Eric Illsley (Barnsley, Central)
I am grateful for the opportunity to have a few minutes in which to speak, having been a Member of the Select Committee on Energy which produced the report that we are debating, part of which related to the coal industry's future after 1993. The sad fact is that, at best, the coal industry's future at that time will be uncertain and at worst it will have no future.
The Government have said that, if they are re-elected next year, the coal industry will be privatised, and their advisers have suggested that about 14 collieries will be left if that privatisation goes ahead.
This evening, the House is asked to vote £4 million for the industry's privatisation. Under the present Government, the coal industry does not really have a future, and privatisation is to go ahead without any word of the industry's liabilities after the next general election. They will include concessionary fuel to those beneficiaries who are entitled to it, and the industry's existing liabilities in respect of compensation for industrial deafness claims and so on, which date back a good few years.
The industry has very little in the way of assets. After 1993, it will not even have a production contract unless the generators relax their stand and agree to renew their contracts for substantial tonnages, whereas they have indicated tonnages of half the present figures.
The industry faces problems other than its run down and privatisation. It has a future only if it can sell the coal that it produces, but the power generators made it clear 822 that they do not want its coal, for several reasons. The generators talk about importing coal, orimulsion, and using gas, to force extra concessions from the beleaguered coal industry, such as lower prices. The generators do not want reliance on British coal but diversification and a number of fuel sources.
The generators also want the flexibility to switch from imported to domestic coal. Despite advice from British Coal, the Government are reluctant to accept that once British collieries are closed, they cannot reopen for several reasons—one of which is the economics involved. All that despite the fact that the industry has improved its productivity by more than 100 per cent., and decreased its costs by more than 25 per cent. by closing collieries and reducing manpower.
Private sector generators have only one goal—to increase profits for their new shareholders. To do that, they will burn the cheapest fuel. They will go for cheaper prices and increased profits. Hence the dash for gas—increased gas generation, which has required British Gas to implement a 35 per cent. price increase for some projects suggested for the future. It could not see that enough gas would be available to meet all the new gas projects on the drawing board.
The generators talk about importing gas from Norway and the Soviet Union. The uncertainty in the Soviet Union at least means that gas supplies from that source may not be relied on. We are using a fuel to create a fuel, and wasting it for the sake of short-termism and increased profits.
We have heard also that the power generators will burn orimulsion, because Venezuelan tar sand is very cheap, but it has very high sulphur levels. The hon. Member for Cambridgeshire, North-East (Mr. Moss) said that the generators could burn orimulsion and still remain below their emission targets, because they would be burning gas, which has much lower emission standards. I make the point that the generators are willing to go to the limit—and because orimulsion is cheap, they will burn it, despite the fact that it will produce high emissions.
The Government have deliberately encouraged the coal industry's complete rundown through privatisation. The industry's only answer is further to increase production, to try to reduce its costs. We have heard that opencast production could be increased to reduce costs. That will merely flood the market with coal which the industry will not be able to sell, because the generators do not want it. Consequently, more pits will close as the industry argues that it needs low-cost capacity in a handful of collieries.
Over the past 10 years, the Government have simply allowed the coal industry to be whittled away, leaving the rump of pits mentioned in the Rothschild report. That will happen after 1993, when the generators say, "No, we will not burn 60 million tonnes, or 50 million: we will burn half what we burned in the past."
§ It being Ten o'clock, MR. SPEAKER interrupted the proceedings, and the Question necessary to dispose of the proceedings was deferred, pursuant to paragraph (4) of Standing Order No. 52 (Consideration of estimates).
§ Mr. SPEAKER, pursuant to paragraph (5) of Standing Order No. 52 (Consideration of estimates), put the deferred Questions on Supplementary Estimates, 1991–92 (Class XIV, Vote 1 and Class V, Vote 9).