HL Deb 03 March 1960 vol 221 cc749-59

3.14 p.m.

Order of the Day for the Second Reading read.

LORD MILLS

My Lords, I beg to move that this Bill be now read a second time. This short but important Bill is designed to make the necessary financial provision to enable the National Coal Board to finance its operations and improvements over the next six years. As your Lordships know, provision was made under the terms of the Coal Industry Legislation between 1946 and 1956 to enable the National Coal Board to borrow money for capital purposes, including the provision of working capital. This legislation, however, imposed a limit on the total sum which the Minister of Power might advance to the Board and, since 1951, a limit on the sum which might be advanced in any one year. As these limits now stand under the Coal Industry Act, 1956, the aggregate principal outstanding up to August 2, 1961, must not at any time exceed £650 million, nor must it, in any one financial year, exceed by more than £75 million, the highest aggregate sum outstanding in the preceding year, unless a higher limit is authorised by order in another place.

The Bill which is now before your Lordships seeks to raise the overall limit to £700 million and provides for its further extension by Statutory Order to £750 million. At the same time it reduces the limit on borrowings in any one year from £75 million to £50 million. It is expected that the £700 million limit will be reached in the financial year 1961–62. The Bill thus seeks to provide the Board with the financial support necessary to the furtherance of its programme, whilst at the same time ensuring that Parliament has adequate opportunities to keep the Board's borrowings under fairly regular review.

My Lords, in considering this Bill we must seek to relate its provisions to recent developments in the coal industry and to the general proposals contained in the Board's Revised Plan for Coal. During the past three years the demand for coal has suffered a severe decline and coal consumption in this country last year was some 28 million tons below the level of 1956. In addition, our export and bunker sales fell by 5½ million tons, making a total fall of over 33 million tons. In order to avoid heavy and widespread mining unemployment, the National Coal Board, with the full agreement of the Government, decided that there should be no immediate and drastic cut in coal production to match supply and demand. Instead it was the Board's policy to make a gradual reduction in its output and to accept a consequent increase in unsold stocks. The Board's holding now amounts to 33 million tons of coal and 5 million tons of coke, valued at about £135 million. The building up of this stock has caused the Board to draw much more heavily upon the Treasury for finance than had been envisaged in 1956, and this is one of the important contributory factors which has led to the need for the present Bill.

A large part of the stocks may remain in the Board's hands for a number of years, and there has been some concern expressed about the sufficiency of the allowance made by the Board in its Accounts for the loss of value sustained by coal when it is held in stock. This is a matter of importance and I should, if I may, like to spend a moment or two on this question.

As my right honourable friend the Minister of Power has explained in another place, the loss in calorific value of coal in stock is small. The National Coal Board considers that on average—and here I would stress that the figure I shall give is an average—the loss on this account is not more than 1 per cent. a year. The Board's opinion is consistent with the findings of research which was conducted before the war, and with the findings of the Minister of Power's Scientific Advisory Council. But, in addition to deterioration in calorific value, there are other factors of which account must be taken, such as the reduction in the coking properties of certain coals, and breakage. And of still greater significance is the cost of double handling and storage. These factors and an allowance for contingencies are taken into account by the Board in valuing its stocks. The total costs allowed for, including a provision for interest, in the first year the coal is put on the ground amount to about £1 a ton.

The published accounts for the year 1958 showed that the stocks of coal and coke held at the end of that year had been valued at figures £17 million below the current value at the point of production. The accounts for the year 1959 are expected to show an allowance of £32 million.

LORD STONHAM

My Lords, is the £32 million in addition to the £17 million?

LORD MILLS

The stocks were valued in 1958 at £17 million below the cost of production. The stocks were valued at £32 million in 1959, so it is not an addition. It is an amount in respect of the total stock. As I have said, my Lords, much of the National Coal Board's present stocks may be retained for some years, but I am glad to say that the Board now considers the period of abnormal stock building has come to an end. In fact, this year the Board hopes to make a modest beginning on the reduction of its stocks, and although it would be dangerous to make any prediction based upon the few weeks of the year that have passed, I can say that recent developments have not been discouraging.

In its Revised Plan for Coal, which was published in October, 1959, the Board reviewed its prospects and plans for the period 1960–65. On the demand side, after a detailed review of its markets, and after consultation with the British Transport Commission, the Iron and Steel Board, the gas and electricity industries, the Board considered that with exports of 10 million tons a year, the total demand for coal in 1965 should be in the range of 200 to 215 million tons a year.

There is, of course, no certainty about a forecast of this kind being fulfilled, but despite the inevitable margin of error we are entitled to draw a measure of reassurance from the estimate which has been made. It is very understandable that the sharp fall in coal consumption since 1956 should have aroused acute anxiety, particularly among those with bitter personal experiences of the industry between the wars. But the current estimates show that there is no reason to think of the recent rate of fall continuing.

Of the decline of 33 million tons, 6 million tons were due to the exceptionally warm weather in 1959, compared with 1956, and 5½ million tons represent a fall in exports and bunkers, which have been at a very low level. A further 6 million tons represent the increase in use of oil at power stations. The results to date of the negotiations to alter in favour of coal the original contracts for converting certain power stations to oil-firing are that the use of oil at power stations will be considerably reduced compared with the original plan—by the equivalent of some 1¾ million tons of coal in this year and by nearly 4 million tons of coal in 1965.

Furthermore, over the greater part of the period 1956–59, the effects of the growth in oil consumption and improvements in fuel efficiency were not being offset by increasing industrial activity. For some time now, industrial activity has been growing, and the effects on the coal market are beginning to become apparent. With an expanding economy there will certainly be a substantial increase in the use of coal by power stations and coke ovens between now and 1965. In addition, there are quite favourable prospects for the expansion of the Board's export trade. Expansion of these three markets should more than offset the falls to be expected in other sectors, and should suffice to ensure that demand in 1965 will at least reach the lower end of the Board's estimated range and thus be higher than it is at present.

In order that the industry can meet the expected demand for coal in 1965 at prices which will enable it to compete effectively, the Board's Revised Plan provides for the expenditure of £511 million over the next six years. This compares with the investment in the industry of about £610 million in the six years 1954 to 1959. As a result of this investment, the Board expects that by 1965 about 80 per cent. of its output will be coming from new and reconstructed collieries and that there will be a marked increase in productivity.

Since 1957, output per man-shift has improved from 25 cwt. to 28 cwt., and the growth in productivity will continue, so that by 1965 the Board hope to get 30 or 31 cwt. of coal per man-shift worked. There will also be a continuation of the fall in manpower. This has declined from the spring, 1957, figure of 706,000 to 625,000 to-day. In 1965 the Board expect to employ about 600,000 men. The anticipated further fall is comparatively small and in the light of the normal wastage of between 50,000–60,000 men a year should not prove a heavy burden. It does not follow, however, that there will not be pockets of unemployment following colliery closures in areas which are likely to be unattractive to other industries. Your Lordships will be familiar with the efforts the Government are making to guide industries to areas of unemployment or potential unemployment, and my right honourable friend the Minister of Power is in close touch with the Minister of Labour and the President of the Board of Trade about this matter.

The Revised Plan for Coal constitutes the best estimate that can be made for the future of this important and basic industry. It provides the justification for the important measure your Lordships are asked to consider this afternoon. I beg to move that the Bill be read a second time.

Moved, That the Bill be now read 2a.—(Lord Mills.)

3.32 p.m.

LORD STONHAM

My Lords, I very much regret that in the absence of our entire first team you must suffer the inadequacies of a member of the Strollers' Eleven. Of my noble friends who usually on this side of the House go in to bat at the coal face, Lord Hall is, unfortunately, in hospital, Lord Macdonald of Gwaenysgor is assisting in the nursing of his sick wife, and Lord Lawson is fulfilling a public engagement in Durham. I hope, therefore, that your Lordships will accept that I am speaking this afternoon not from effrontery but from necessity, and certainly not in the interests of finding another way of usefully using my leisure, because I realise that the task before me, to fill the gap which has been so unfortunately created, is quite a hopeless one.

I am most grateful to the noble Lord, Lord Mills, for his very lucid exposition of the Bill, for the extremely just manner in which he has presented the position of the coal industry at the present time, and above all for the comforting things which he has been able to tell us. We on this side of the House welcome the Bill, though we deplore its necessity. We accept the need for the Coal Board to extend its borrowing powers, but we cannot acquit the Government of a heavy responsibility for the present situation, and we regret that they have not so far sufficiently answered the unfair attacks which have been made on the Coal Board and on the miners by doctrinaire critics of nationalisation.

It cannot, in our view, be too strongly emphasised that this Bill merely provides a loan which will have to be repaid with interest, and that the rate of interest is precisely the same as that which the Government have agreed shall be paid on the loan to Colville's, a private undertaking. It is in no sense of the word a subsidy—in fact the Coal Board has never been subsidised. It can, indeed, be argued that the boot is on the other foot and that the coal industry has subsidised the nation in quite a number of important particulars; for example, by bearing the £60 million losses on imported coal, by sales to industry at less than market prices, and through years of controlled prices on a sellers' market which prevented the accretion of reserves which would otherwise have accumulated. The coal industry has also subsidised the nation by bearing the enormous cost of its orderly contraction, without which 50,000 miners would have been unemployed and a huge bill would have been presented to the nation in unemployment pay and assistance grants.

But here I should like to express most grateful thanks to the Government, and particularly to the noble Lord the Minister, for having agreed with the Coal Board and for the way the contraction in this industry has been carried out. That contraction has presented the Coal Board with a very heavy financial bill which has not come to the taxpayers. But there has been this remarkable difference. In the early 1930's the decline in coal consumption was not so very much larger than that of which the noble Lord has just spoken, but in those days the unemployment among miners was 150,000, while a great many of them were on short time, as well as on very low wages. To-day, I believe, in a position of almost similar difficulty the unemployment figure has been some 6,000. It is very much to the credit of the Government and all concerned that this job has been done in this civilised way. I feel that that does need saying, because so many people, who either do not know the facts or will not admit the facts, are nevertheless ready to pick up any stick they can lay their hands on to beat this industry with.

Not only are these points material to a fair assessment of the Coal Board's financial results, but it is vitally important that they should be clearly stated by the Government in the interests of the miners. Their morale, naturally, is seriously affected by the present rundown. Boy recruitment has stopped—indeed, who would send a boy into an industry which is suffering the decline through which the coal industry is now going? The miners' feelings are still further depressed by unjust accusations and what I regard as the Government's timid failure to give both them and the Board the credit which is their due. We need these men, and we shall need them and their sons for many years to come; and we want them in good heart. I hope that the noble Lord will do, and will continue to do, whatever lies in his power to deal with this aspect of the matter, because it is important.

The Government must be much more honest than they have been so far in acknowledging the fact that they have in large measure created the present difficulties. For the first eleven post-war years, as has been pointed out, and as we all know, every ton of coal was needed for our recovery and expansion; indeed, our present prosperity is based on, and could not have existed without, the expansion which took place in those years. Miners were exhorted to secure as much as possible, exhorted to raise every ton, and they responded by increasing production from 181 million tons to some 210 million tons. Over the same period, as the noble Lord has pointed out, the consumption increased from 186 million tons to 218 million tons, the difference being made up by imports which are now, in some ways happily, ended, very largely due, I believe, to the successful efforts of the noble Lord in that matter.

Then came this dramatic change in consumption, and, as the noble Lord has said, this drop in the last three years of 27 million tons, plus the 6 million tons decline in exports—a total of 33 million tons. Miners who for years have been pilloried for not producing enough, and whose alleged absenteeism was always front-page news in the newspapers, now find themselves criticised by the same people in the same newspapers for, as it were, producing too much coal. No wonder that these men, who spend themselves with every breath they draw and every blow they strike, should be sick with apprehension about the future of their industry!

I must say that I honestly regard the Government as the real culprits, first and foremost because of the artificiallycontrived—that is putting it mildly—trade recession in 1958, with its cutback in steel production, its decline in other industrial productions; the consequent fall in the demand for coal; the consequent fall also in the traffic carried by the railways, which again meant a decrease in coal consumption, in addition of course to the alternative use of oil in diesel engines. Then, there were the instructions given to the Electricity Authority to change from coal to oil. I know that in those days those instructions were given in order to help to conserve coal, and it was thought better to switch over to oil. But only now, after long discussions and considerable delays, has this movement been put into reverse; and, as we have heard to-day, these changes will mean a consumption of 1▓ million more tons of coal this year and of 4 million tons more in 1965. I hope that when the noble Lord comes to reply he will tell us how many power stations will be thus affected, and whether the figure of 4 million tons which he mentioned as the extra consumption resulting from transfer back to coal in the power stations by 1965 is the limit, or whether that process will continue, because that is extremely important.

Then, there are these experiments with liquid methane gas. To me it seems incredible that, with our vast investments in the coal industry, our only indigenous mineral source of power, we should allow, let alone encourage, alternative sources of gas supply wholly dependent on imports and requiring considerable capital outlay on ships and other plant. I hope that the noble Lord, Lord Mills, will tell us and the mining industry that at least this incredible nonsense is not to be allowed to develop any further.

Finally, there is the virtually unrestricted expansion in the use of fuel oil. I fully appreciate the reasons for using the output of fuel oil from our own refineries. But why import fuel oil when we have 36 million tons of undistributed coal stocks—stocks that in the first year, as we have been told this afternoon, have already cost the Coal Board £32 million in depreciation and other costs, and which will cost £7 million every year they remain unused? As the noble Lord told us, it may be some years before they are used up. Sixty per cent. of the fuel oil we are using is imported. Other European countries with difficulties in regard to coal have stopped the import of foreign fuel oil. I should like to know why we should not do the same. It is not merely a question of assisting our coal industry, it also means assisting our balance of payments. I am not talking about fuel oil that is refined here; I am talking about imports of foreign fuel oil. I think that these questions build up to a heavy indictment against the Government. They are questions to which I think answers must be provided—answers which, when they are provided, will, I hope, indicate a change of policy.

I understand that some £50 million out of the sum which this Bill proposes to provide for the Coal Board is needed to finance these stocks. If that is so, that means another £2 million a year in interest for which the miners have to work and pay—because, of course, it does come out of their work. I understand also that the right honourable gentleman the Minister of Power estimates consumption in this year at 196 million tons and production at 195 million tons—a drop of I million tons in the stocks. That is a drop in the ocean. According to many people—I shall be glad to have the noble Lord's reassurance on this point—even this drop in the stocks of I million tons or so is in doubt unless the Government take some of the steps that I have suggested.

Then there is the Coal Board's estimate that in 1965 they will need to produce between 200 million and 215 million tons of coal to meet the expected demand. The noble Lord has told us this afternoon (I did not take down his words, but they were something like this) that there is no reason to expect that the demand will not reach at least the lower figure of 200 million tons. But the question is: why must there be such a wide margin of 15 million tons—which means the work of some 40,000 miners—in the target to be achieved by 1965? Why cannot the Government fix a definite target and guarantee it? Surely it is not so difficult. We shall be dealing only with deep-mined coal, because by that time opencast production will virtually have ceased, except for some special qualities and areas. We know that in five years' time more than 200 pits will have been closed, and we know that output per man-shift is increasing by some 5 per cent. a year. Indeed, we have been told that it is expected that, by 1965, it will reach some 30 to 31 cwt. per man.

Again, we know that by 1965 80 per cent. of our coal will be coming from reconstructed or new pits, and will be produced under the most efficient conditions. We know, too, that these improvements will be wrought at a cost of more than £500 million in capital expenditure, of which the Coal Board is going to find four-fifths from its own resources. In other words, we know the facts necessary for the computation of output in 1965 to within, say, 1 million tons. All that is needed, therefore, is for the Government to decide the figure of our requirements; and that, too, allowing for anticipated industrial expansion and improved fuel efficiency, can be precisely assessed. The only thing necessary for any final adjustment—for the agreeing, as it were—of these two figures in 1965 is a decision to regulate fuel oil imports according to the requirements, if that should prove to be necessary.

I think we must agree that it is intolerable that, for lack of such a decision, the Coal Board must estimate five years' hence to within 40,000 miners the size of the labour force that we shall require, or to within 40 pits the number that will have to be closed down. Surely, that is a situation that ought not to be tolerated. Because if it is, then the Government are jeopardising the future of one of our greatest assets. It is sensible to suspend opencast mining because the sites are still there if we want them. It is not sensible to risk closing pits before they are exhausted, because once they are closed they become unworkable and the miners go elsewhere. We should never get them back, or be able to reopen those pits if we wanted them again, as may well be the case. We say to the Government, "You are giving generous help to the shareholders in the steel and the cotton industries. You are willing to take big financial risks with the British aircraft industry. It is your duty to be just as imaginative and generous with British coal in which we are all shareholders."

This is not a debate in regard to the rival merits or principles of nationalisation and private enterprise; it is really a debate on a Bill which is going to settle, perhaps, the future of our greatest industry. It is going to settle the future of some of the finest working men in this country, men who, in my view, in real terms, are the finest blood and guts in the country. For two centuries our mines and our miners have buttressed the nation in peace and war. They have never let us down. And we on this side of your Lordships' House ask you now to give this great industry the chance of a new lease of life, the chance to achieve standards of efficiency and prosperity never attained before and a chance to do something which will benefit us all.