THE FUEL AND POWER INDUSTRY

HL Deb 26 October 1960 vol 225 cc1100-9

3.11 p.m.

VISCOUNT HALL rose to call attention to the fuel and power industry; and to move for Papers. The noble Viscount said: My Lords, it is some time since your Lordships' House has had an opportunity of considering the fuel and power position in this country, and as there has been quite a bit of criticism from many quarters about the recent increase in the pay of certain sections of the coal miners, I thought that the time was opportune to have this debate. The main facts for and against the recent price increase have been lost in a welter of protests from consumers and in very gloomy prophecies contained in some of the leading articles in certain of the Press of this country about the future of the coal industry.

Coal prices, unlike the prices of many other commodities, have remained unchanged since July, 1957, and this increase means merely that the Government and the Coal Board want to sell the coal at a price sufficient to cover the cost of operating the industry, plus a very substantial amount to be paid to the Government for compensation for the mines and interest on the heavy capital cost of the rehabilitation of the industry since nationalisation. Now, what was the increase? Not 10s. a ton, as most people understood, but an average, covering all consumers, of 6s. 8d. per ton. The fixed amount of 10s. applies to house coal, smokeless fuel and coal for the railways. To other consumers the increase varies from 8s. 11d. to 5s. ld. per ton. The direct effect of these increases on retail prices will be about one-fifth of a per cent. point; and on the steel and other industrial products about one-third of a per cent. point.

And what was the amount of the pay increase? Five shillings a week was given to 370,000 day wage men; no increase was given to piece-workers. In addition, there was a reduction of one hour in the working week. Both of these were granted by the Tribunal and both will cost about £3¼ million a year. Little attention has been given to the fact that between January and August of this year weekly rates of wages for 7,540,000 work-people have been increased by far more than 5s, a week, and there has been a reduction in the working hours of some 5½ million workpeople.

It was not the increase of wages and the one-hour reduction in the working week that caused the increase in the price of coal; about 2s. per ton would have covered that cost. It was almost covered already by the increase in productivity, which during 1959 had reached a record level average for all mine workers of 5.3 per cent. over productivity in 1958, and which, in spite of extra cost, brought about a reduction of Is. 6d. per ton in the average cost over the year. That gave an operating profit for the year of some £13 million. But then, the Minister of Power came along and held out his hand for the sum of £38 million in payment of interest due, which left a deficit of some £24 million, the largest deficit since 1947.

It is not generally known that Her Majesty's Government have had control over the price policy of the industry, and in the first ten years after nationalisation the price of coal was kept well below market level. Coal then could have been sold for at least 15s. to £1 per ton more than it fetched, and if it had been sold at that price it would have provided a basis for the Coal Board to accumulate by now a substantial surplus of profits. Instead, the Coal Board have to bear the heavy financial burden of compensation for the take-over of the collieries, the heavy capital outlays required for the rehabilitation of the industry, and, in the last three years, I understand without any Government assistance—in contrast to the position in the coal-producing countries of Western Europe—the high costs of the stocking of coal. Last year alone the cost amounted to no less than £27 million.

My Lords, notwithstanding all this cost, the National Coal Board had an operating surplus on all collieries since vesting date of some £186 million, and in addition the surplus on the opencast working and ancillaries, which means another £67 million. This operating surplus has been turned into a deficit of some £52 million by the payment of £258 million interest to the Government. The recession in the coal industry is still proceeding. This year, up to the end of September, output was reduced by some 10 million tons as compared with last year. By the end of this year, 126 pits will have been closed and manpower will be down to about 580,000 men, the lowest for the last 90 years and 90,000 below 1959. The programme for next year, 1961, includes the closure of some 35 more pits, and a further reduction in employment of some 10,000 men. What will happen after 1961 no one knows.

It is good to know that, for the first time in four years, coal stocks are falling slightly, and I understand that possibly they will be down by a few million tons by the end of the year. I am in complete agreement with Her Majesty's Government and the National Coal Board, as I am sure are other noble Lords, in putting the surplus coal in stock rather than having thousands of miners unemployed, which would have cost millions of pounds in unemployment benefit, or selling coal at bargain prices, which also would have cost millions of pounds in revenue, without necessarily leading to more sales. And, to cut back more drastically would have destroyed the morale of the miners and their confidence in this important industry. Not that I desire that men should have to work in the pits in danger and dust to toil and sweat any longer than is absolutely necessary; nor, I am sure, do my two noble friends, who have had long experience of colliery work.

Much of the criticism which has centred on the Coal Board has been made without giving the slightest thought to what the fuel situation would have been had it not been for the valuable work which has been done since vesting date. The last five difficult years have presented problems which could be solved, without irreparable harm to the industry, only by the kind of determined leadership given by the Chairman of the National Coal Board, Sir James Bowman, and his colleagues on the Board and in the divisions. It is only which could overlook these obvious facts. All the coal industry really wants is a breathing space to continue its work in providing the nation's coal free from hostility, acrimony and bitterness. For, with all the dangers that have to be faced, the miners will get the coal.

As an example of pit modernisation, I may mention a 90-years-old pit, which ten years ago was very much worn out, has been modernised and is now one of the most efficient pits in its division. Output at the coal face before modernisation was 81 cwt. per man-shift; at the present time it is 121 cwt. And in the same colliery there is a team of fillers whose average is 20 tons per day.

A statement recently issued by the T.U.C. and the Labour Party on the nation's fuel and power points out that one of the worst features of the fuel situation is not that the coal industry is contracting but that contraction has been allowed to take place without any consideration of present or long-term needs. In the last few years while each of the fuel and power industries has been encouraged to proceed with its own plans, the Government have ignored the crucial need for co-ordination between them. Trusting to unregulated competition between coal, electricity, gas and atomic energy, the Government appear to be giving little thought to a positive policy, which is necessary especially in relation to the future of the coal industry.

Coal is cheap and efficient and is the only source of fuel supply which the nation has completely under its own control. To rely on imported fuel, especially oil, which at any time can go up in price, or the imports of which can be curtailed or seriously reduced at any time, can do great injury to our balance of payments. And this is the most serious factor in the falling demand for coal. In the first six months of this year oil was replacing coal at the rate of 38 million tons, an increase of 22 million tons over the figure in 1956. The Electricity Generating Board is coal's largest consumer—it used about 43 million tons last year. And the Board makes very good use of this coal. It was pleasing to read in the Annual Report of the Generating Board for last year that not only have construction costs of generating stations been greatly reduced but operating costs have also moved favourably in line with improved thermal efficiency. This can best be illustrated by saying that in 1959–60 the output of electricity per ton of standard fuel was 25 per cent. greater than in 1948–49, the standard fuel being coal. The Board and the fuel deserve great praise.

Notwithstanding the efficiency of coal, the Electricity Generating Board has increased its oil consumption from 250,000 tons in 1956–57 to 4 ½ million tons last year—a coal equivalent of some 7 ½ million tons—and we are told that by 1965 10 per cent. of the electricity generated will be generated by oil, 10 per cent. by nuclear power and the remainder by coal. It has been stated, however, that the recent price increase of coal may lead the Electricity Generating Board to revise its policy on the use of coal in power stations. One can see no reason for any change owing to the present price of coal, for the increase in price to the Electricity Generating Board is 5s. 1d. per ton. In 1959–60 the Board was fortunate, in that while the general level of pithead prices remained the same during the year, the delivered cost fell by 4s. 1d. per ton. So coal cost after the last increase is only 1s. 4d. per ton more than it was in 1948–49. With coal at that cost, about £3 15s. a ton, two tons of coal can be purchased for the price of one ton of oil. I picked some figures out of the Minister of Power's Digest for 1959. There I find that the falling price of oil was the cheapest for the last twenty years. It came out at £7 11s. 2d. per ton for oil which was used for the purpose of generating electricity. The average cost per ton of oil in the five years 1951 to 1956 was £10 11s. 6d., and in the two years 1956 to 1958 it was £8 5s. As the thermal equivalent of coal to oil is 1.7, coal is the much cheaper fuel. Its operating costs may be a little lower, but who can guarantee that fuel oil will remain at this low cost?

Last month a five-nation oil conference met in Baghdad to consider the unhealthy competition between the oil-producing countries. At the close of the conference it was reported that it was resolved that participating countries should take all measures to raise prices to the same level as existed before the cuts were made by the oil companies and all were to maintain stable prices. A second Arab petroleum conference was held in Beirut over the weekend, attended by delegates from fifteen countries. That conference denounced the oil companies for reducing the price of crude oil and petroleum products without the approval of the Governments of the Arab producing countries. The low cost of oil is causing a good deal of anxiety to them. America is a large oil producer, but as the imported oil from foreign fields is much cheaper than even America can produce, she has now put a protective restriction on the import of oil.

My Lords, it is strange that in the very few years of coal scarcity the nation has searched almost world-wide, and has spent large sums of money, for fuels to compete with our basic fuel upon which the prosperity of this nation and our great industries was based and maintained. Now we have more coal than is required; we import oil and uranium at very heavy costs. Most of it has to be stored, and we are told that it costs several million pounds per year to pay the interest upon locked-up capital. Now, we are informed by the Press that there is the possibility that the Gas Council will approve the purchasing of some thousands of millions of metres of natural gas or methane a year from the Sahara into Britain, starting in 1962.

This was confirmed by the Chairman of the West Midlands Gas Board at a Press conference held on October 9. He said that there was a good chance that the Sahara methane project will come off, for it was warmly received by the Gas Council. He said that the question of whether it was economic to import this methane depended upon differences in the price, and there was some hard bargaining going on between the Gas Council and the Continental authorities. The Gas Council should know whether it is economic, for it is said in the Report of the Gas Council that the ship used to import liquefied gas has been in operation now for about two years and has made seven voyages, and the subsequent treatment of this liquefied gas has proved that its importation is technically possible. New studies have been made on the economic aspects of large-scale importation of this oil. Again I repeat that the Gas Council should know the economic aspects of this liquid methane, because the experiment has been going on for two years and a substantial amount of money, almost £400,000, has been spent upon it.

I am sure that the Minister of Power will take note of the report of the Wilson Committee on Coal Derivatives, which should be debated in your Lordships' House soon. This Committee has spent much of its time dealing with the product of gas. The Report, which dealt with the use of natural gas, said: Gas made by non-traditional methods must therefore approximate the traditional gas, unless its cost could be so reduced as to make it profitable to adapt or change all the existing domestic appliances at home. In the United States of America abundant supplies of cheap, natural gas have become available. The latter policy was adopted—the changing of domestic appliances. But it is estimated that the cost of a similar action in Great Britain would average about £10 per consumer. In the summing up the Committee said that it seems unlikely that any of the processes which we have considered would show a sufficient margin of advantage to justify this change. The conclusions of the Committee stated that cost rules out methanation as a means of enriching gas for most purposes.

The Deputy Chairman of the Gas Council was a member of this Committee, and he must have approved the findings of that Committee. As a result, I trust that the Minister and the Government will think very seriously before they proceed with the importation of these thousands of millions of metres of liquified gas into this country. The nation's finance bill for the importation of fuels to compete with coal has now become a great burden to our balance of trade, and many persons and organisations are convinced that the time has come when the Government should look more closely at the situation which is being created by the increasing flow of fuel oil imports from overseas refineries, the possibility of imports of natural gas and, indeed, the cost of the importation and the storage of uranium. Last year, fuel oil alone amounted to 30 million tons of coal equivalent—90 per cent. up on that of 1956—and so far this year it has increased by 30 per cent. upon 1959, with little, if any, advantage to its users.

Sir Christopher Hinton, whose excellent work at the Atomic Energy Authority and in his present position is greatly appreciated, in an article about electricity generation, said that developments in the conventional field are far more exciting than those in the nuclear field. The economies have steadily made it more difficult for nuclear generation to break even with power from coal or oil. At the same time, the still substantial programme of nuclear investment to which the Generating Board is still committed, largely to encourage the manufacturers to keep on with the development of the nuclear-fired stations towards the break-even point with coal, reacts back on the advance of coal-fired stations. The nuclear stations which have been built will have such very high capital costs that they will shave to stay on the base load for the whole of their operating lives, and it is estimated that the operating life of a nuclear power station is about ten years.

I read with interest a speech made by a nuclear scientist speaking at Cardiff last February, who said that Britain's nuclear power stations lead the world, but when their useful days are over they will be an eyesore. Britain's folly was building reactors to generate electricity above the ground. He preferred the American and the Russian system of building reactors and stations underground. As a result, coal-fired station using super-critical steam conditions will have to be regulated to part-time running earlier—this is from Professor Hinton—than would have been the case, making the present economies that their thermal efficiency can offer far more marginal than they deserve to be. This was supported by the Chairman of the Atomic Energy Authority who, at a conference of the International Atomic Energy Authorities in Vienna, said that nuclear power generation was unlikely to be economically competitive before the late 'sixties. He said the impression, when the Agency was established three years ago, that atomic energy was a key ready to hand which with little effort could open the door to an age of plenty, was proved by experience to have been too facile. Since then, there has been a growing understanding of the effort and expense involved in even a small atomic energy programme.

If it only breaks even in generating costs, as stated, is it still the intention of Her Majesty's Government to carry through the present plan, which states that in 1965 nuclear power and oil will each contribute something like 10 per cent. of the Board's total energy requirements with solid fuels supplying the remainder? If a break-even in costs is all it can do, does it mean that the policy of importing in larger quantities the fuel oil, uranium and, possibly methane, will be continued, whilst we have a suitable fuel on our doorstep giving results as good, if not better, than what is imported?

What should be uppermost in the minds of Her Majesty's Government are the disquieting figures given of the nation's balance of trade, which showed a reduction of some £38 million in the first six months of this year; and the trend still is that our exports are not rising fast enough and our imports are rising too fast. The largest import is under the heading of oil petroleum and its products. That includes fuel oil, gas and diesel oil. Its cost last year was £465 million, of which the diesel gas and fuel cost £66 million. We exported £120 million out of that, but that left a balance against our balance of trade of no less than £343 million. As we produce very little oil in this country we must, of course, import oil to live; but to continue to permit the unrestricted inflow of fuel oil and possibly natural gas at any time, but particularly when there are difficulties in balance of trade such as there are, while we have an abundance of fuel which gives us as good results on our doorstep, is surely nonsensical.

My Lords, there is little prospect of preventing the continued recession of the coal industry unless Her Majesty's Government can be persuaded to limit the importation of fuel and other heavy oils, or, as has been suggested, to place the fuel and other heavy oils on the same basis as almost all other oils which are imported—that is, to restore the tax on them which existed from 1933 to 1947, when it was removed only because of the then scarcity of coal. Even a small tax, 1½d. or 2d., would bring in revenue of from 35s. to £2 per ton, which the oil industry can well afford to pay. For a long time the nation must rely primarily upon home-produced coal, with United Kingdom refined oil and possibly a limited import of some fuel oil. Nuclear energy cannot play a major part in the generating of electricity for at least another decade, if then, but its potential contribution, of course, must not be forgotten. For those reasons the Government should immediately set up a minimum figure of coal production for sonic years ahead. This is the coal industry's major need, for without a specific target the National Coal Board will not be able to plan its investment and production programmes; nor will the crisis of confidence which the miners working in the pits are now experiencing be overcome. I beg to move for Papers.