HL Deb 13 December 1962 vol 245 cc838-52

6.12 p.m.

Order of the Day for the Second Reading read.

LORD DENHAM

My Lords, this Bill is a simple and straightforward measure, which I hope your Lordships will find uncontroversial. It has two main purposes: first, to enable the Minister of Power as well as the banks to make temporary advances to the National Coal Board and also to allow the Treasury to guarantee temporary borrowings by the Board from sources other than the Minister; secondly, to alter the Coal Board's financial year. Perhaps your Lordships will allow me to explain the background.

The Coal Board's main borrowing power is contained in Section 26 of the Coal Industry Nationalisation Act, 1946, which enables the Board to borrow from the Exchequer for capital purposes, including the provision of working capital up to £700 million. The Board also has power under Section 27 of the 1946 Act to borrow temporarily "by way of overdraft or otherwise"—which in practice means from the banks—up to a limit of £20 million. It is with this temporary borrowing power under Section 27 that the Bill is concerned. The original purpose of Section 27 was to give the Board the ordinary commercial overdraft facilities which any large organisation would expect to need in the course of its day-to-day business. It has always been accepted that it was right for the Board to have these facilities to meet any contingency, including a possible temporary deficit.

The National Coal Board has power under the existing Section 27 to seek temporary credit from the banks up to £20 million, with the approval of the Minister of Power. But when credit is restricted the Board may not always be able to borrow from them. This in fact happened at the end of 1960. The Board sought temporary accommodation to cover an end-year deficit, but the banks were unable to help because of the credit squeeze then in force. Some time or other this might happen again.

The Government have therefore thought it prudent to provide in the Bill for the amendment of Section 27 so that the Board can be sure of this kind of accommodation if they want it. The Bill provides that, for the purpose of meeting a temporary deficit only, the Board may apply to the Minister, as well as to the banks, for a temporary loan. It also enables the Treasury to guarantee temporary borrowings by the Board from the banks: this is a support already available to other nationalised industries, and it is purely an historical accident that the Board has not already got it. These amendments to Section 27 of the 1946 Act are designed to ensure that that section works in the way originally intended. That is their sole object. There is no change in the purposes for which the Board may borrow temporarily: nor is there any alteration in the limit of £20 million on all such borrowing, whether the Board borrows from the banks or (by virtue of the present Bill) from the Minister. There is no change in the Board's capital borrowing powers under Section 26 of the 1946 Act, and the limit of £700 million still stands.

I have dealt with the most important object of the Bill, but before turning to the other provision I should like to say a word about the National Coal Board's financial position in general. As your Lordships will be aware, the Board's financial prospects a year ago were giving some cause for concern. The Board's accumulated deficit had been mounting steadily, and there was the possibility of a further deficit in 1962. At the end of 1961 it was clear that the Board's internal funds were no longer adequate to finance the deficit, and Parliament accordingly gave the Minister of Power special authority in the Coal Industry Act, 1961, to lend the Board up to £50 million towards financing its accumulated deficit until the end of 1962. At the end of 1961 the Board's accumulated deficit had reached £93 million. Since the Board had internal funds available for deficit cover amounting to £63 million, it was necessary for the Minister to advance £30 million to cover the gap.

In the current year there has been a welcome improvement in the Board's financial prospects. It may even be possible at the end of the year for the Board to make some modest repayment of its deficit borrowings under the 1961 Act. The circumstances which made the 1961 Act necessary no longer apply, and it follows that no similar provision will be necessary when the 1961 Act expires at the end of this year. It will be evident to your Lordships that the provisions of the Bill now under consideration are of a very different nature from those of the 1961 Act, and are appropriate to the more encouraging prospectus we now have for the coal industry.

Finally, the remaining purpose of the Bill. This is to alter the existing provisions governing the Coal Board's financial year and is a purely technical change. Thus the Bill will change the dates of the Board's financial year to run from April to March, instead of from January to December as at present. There are several advantages in this. It will bring the National Coal Board's year more into line with the Government's fiscal year: it will bring it more into line with the financial years of the other nationalised power industries and so make the comparison and collation of figures easier; it will bring the financial year more into line with the "coal year", which is the period which ends when the winter, and therefore the consumption of coal, end. I think your Lordships will agree that this change is reasonable and indeed helpful. My Lords, I have sought to outline the purposes of this Bill. I hope that it will commend itself to all sections of the House, and I ask your Lordships to give it a Second Reading.

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

6.20 p.m.

LORD CHAMPION

My Lords, I am sure that the noble Lord will be happy to know that I shall be neither as critical nor ask as many questions as did my noble friends on the Bill we have just been discussing. This is the sort of Bill which in the normal way, I think, would have provoked a whole day's discussion on the state of the mining industry. The Opposition are conscious of the fact that the Government desire to complete the Committee stage of the Water Resources Bill before Christmas, and we, the Opposition, have no desire to hold it up. It is true that there has been some slight hold-up this afternoon, judging by the fact that we are starting this discussion at twenty minutes past six, instead of, as was hoped, at about five o'clock. But we feel that the Government ought not to have this Second Reading "on the nod". There are quite a few things that must be said about the coal industry.

As the noble Lord, Lord Denham, said, this is a simple Bill, and I can say at the outset that it is one which is welcomed by the Opposition and, also, I think, by the Coal Board. I am sure we are all delighted with the statement he has made that the out-turn for this year will be very much more favourable than had been feared. I understand that in the first six months of this year the Board made a profit, after interest pay ments had been allowed for, of some £9½ million—a reasonably satisfactory stale of affairs. This has been achieved partly as a result of a dramatic increase in productivity: output per man-shift has averaged 31.1 cwt., an increase of 2.3 cwt. over the same period of last year. I find the increase even more dramatic when I think back to the immediate post-war period, when the output per man-shift was somewhere in the nature of between 21 and 22 cwt. This increase is largely attributable to the Board's heavy capital expenditure, but it is also partly due to the closing of the less profitable pits.

I am sure that the decision by the Board to close those pits must have been one of the most difficult that they have had to take: to close that little hole in the ground, around which whole communities have been built up, has brought disaster to all too many of our towns and mining villages. I saw so much of this in the inter-war years in South Wales that it is impossible for me to watch unmoved what is happening now in Scotland and Durham. What is happening in Durham must, I am sure, be a great sorrow to my noble friend Lord Lawson, who is so much a Durham man, and who wrote so strikingly about the men and people of that county in his splendid book A Man's Life. I cannot imagine that even the Government can be wholly unmoved by the sight of whole areas becoming desolate.

But, my Lords, to feel sorry is not enough, if there is something you can do to prevent it. I assert that the Government can do something to ameliorate the conditions in these communities. The noble Lord, Lord Eccles, in what I thought was a remarkable and weighty speech in our debate on Industry, Population and Town Planning, said [OFFICIAL REPORT, Vol. 244 (No. 14) col. 1238]: I should like the Government, first of all, to decide how much capital investment they are prepared to allocate over the next few years for the purpose of simultaneous development in a few areas selected for economic expansion. If they could put aside, out of the whole of the public investment programme, let us say £200 million a year for ten years, we could break the back of this problem once and for all". Later on in his speech, the noble Lord said as to his proposal (col. 1239): That change of policy, my Lords, is absolutely essential if we wish to deal with the worst problems of local unemployment. If we do wish that, we must discriminate now in favour of the North. My Lords, those were not the words of some half-baked sentimentalist, but of a man who has spent by far the greater part of the last eleven years in ministerial posts of the highest responsibility; a man who has now had time to reflect, to consider the whole problem anew—which is something not easy for a Minister when he is weighed down by the problems of a great Government Department. His proposal seems to me to be particularly valuable in the light of the problems created by mine closures made inevitable by the change of circumstances in the coal industry.

It so happens that I live at the foot of the Rhondda Valley, and I shudder to think what would be the position there to-day had it not been for the positive steps taken by the Government immediately before and after the last war to diversify industry in that area. Government action which was taken then in an area which would otherwise have suffered after the war, with the further pit closures that came along, a reversal to the wholesale poverty and misery of the 'twenties and 'thirties, has turned that area into a prosperous and thriving community. This is true of the area in which I live and of the valleys of which I am now speaking. I am not saying that all is well in Wales, for we still have an unemployment figure which is above the national average: 3.6 per cent. as against the national average of 2.4. But there is prosperity in this area as a result of direct Government intervention and action. What was done for Wales we must now do at once for Durham and Scotland.

Turning back to the coal industry, I say of the mining industry, as I have said of the railway industry, that we cannot preserve intact the pattern of the nineteenth century. Uneconomic pits must close, as must uneconomic branch lines; for we dare not become a static economy, Common Market or no Common Market. We shall not be able to exist in this world if we try to preserve old and out-dated patterns.

But, my Lords, there are some things we could do. We could have a fuel policy which would make us less dependent on imports of oil for fuel purposes. I think, too, that we could build coal-fired power stations in Scotland and Durham to export power to other parts of the country. I am advised that a power station of 2,000 M.W. capacity would consume 5 million tons of coal per year, and that that would guarantee the jobs of 10,000 miners, as well as provide employment in the building and running of those stations. In turn, of course, this would provide employment in the subsidiary trades and services. Indeed, it is estimated that one such new coal-fired station would support, directly or indirectly, some 50,000 people. One does not need, I think, in this Chamber to stress the boon that this would be at this time to Scotland and Durham. I do not think, either, that we ought to be shy of giving some protection to our coal industry. In this country most of our industries have some form of protection, and coal, like our land, is one of our few basic raw materials, so we ought to use and exploit this raw material to the full.

In this connection I have to praise the Government for their fairly recent decision not to license coal imports for the time being. I hope they will think a lot before they alter this "time being". I hope it will be a long time before they begin to license imports of coal into this country in the sort of circumstances that are existing in the coal industry now. But I am bound to say that I am not satisfied or happy about the continued imports of residual fuel oil from refineries abroad. It is an unnecessary drain on our balance of payments, and is, indeed, a blow to the mining industry at this time. Neither am I very happy about the reported interest shown by the Gas Authority in the import of natural gas from Holland and elsewhere. In our consideration of this question we must not forget coke, the by-product of coal gas, which is vital to our steel and iron industry; nor the solid fuel required in our smokeless zones. These things are essential to our economy.

I think that the future success of the coal industry must depend upon its ability to hold its markets. In this connection I feel bound to praise the sales policy of the Coal Board, and of our colleague the noble Lord, Lord Robens of Woldingham, in particular. To watch his vigorous leadership of this great industry is a joy. I believe that the greatness of any trade union, or of any industry of the country, depends on the quality of its leaders, and I am confident that in Lord Robens of Woldingham the coal industry has found such a leader. I have been brief about this Bill for fairly obvious reasons. I close by saying that we welcome this little Bill, and, in doing so, wish success to this industry and all those who are employed in it.

6.33 p.m.

LORD HAWKE

My Lords, this Bill gives this House the opportunity of saying a few words about coal, possibly at the expense of water. But, nevertheless, the opportunities are only rare in the year, and I think it would be entirely wrong if this Bill went through without some words on the subject from the Back Benches on this side. First of all, there can be no argument about the real reason for the Bill. It is necessary. I slightly regret that in this case the changing of the National Coal Board's year will, in fact, entail waiting a still further three months for the up-to-date figures. As it is, of course, the Reports always come out very late, like those of all the nationalised industries.

Coal has been a contracting industry. At the moment it is a concentrating industry, but we just do not know whether or not it is still contracting. Under those circumstances high morale is very difficult. I think the whole industry owes a great deal to the noble Lord, Lord Robens of Woldingham, the Chairman of the Coal Board, who exudes a robust confidence which is a great morale boaster in the difficult situation of a strategic retreat. His policy, a mixture of realism and compassion, is what one really requires in the best type of big industrialist.

There has been a run down of manpower in two years from just over 600,000 to 540,000, with only a 3 per cent. contraction in output. These figures, of course, are not the latest. To-day we hope that the industry is breaking even, though we cannot know for certain. The industry has not accomplished all this without hardship, but hardship has been mitigated by the National Coal Board's playing the role of a good employer. There has been this concentration of mines, the closing of mines. I wonder whether they paid equal attention to their administrative staff. I know that more than one of the giants of industry have, in the last year or two, surveyed their administrative machine and found to their surprise how much duplication was going on and how much economy they were able to achieve. From the last figures available in the 1961 Accounts, it looked to me as if the administration and general expenses had not decreased in proportion to the fall in wages, and so on.

The future is difficult to predict, because the factors are varying and contradictory. We have the increasing discoveries of oil going on all over the world; we have the Soviet dumping in Europe in order to gain foreign exchange, we believe; we have the increasing greed of the owners of many of the oil lands; we have the increasing desire for better and warmer housing in this and other countries; we have the normal industrial progress; and we have the normal progress in fuel economy. All these are conflicting factors, and on balance one does not know the outcome. But one thing that is quite clear is that there is great competition for the market going on with oil. Coal is protected to an extent, both by Government policy and by a fiscal duty. I am one of the people who once advocated that duty and I support it, though I believe almost every industrialist and economist in the country would be against me in that matter.

There is great competition, particularly in the space heating and water heating market. Coke is probably the cheapest fuel, but it requires manual stoking, and it is particularly inconvenient for the busy, the elderly, the women, and for people who want to be away from their homes. The National Coal Board is sponsoring alternatives and trying to develop automatic stoking. But they cannot get away from the fact that it cannot help but require labour to replenish hoppers, remove ash and clinker, and so on. Moreover, if there is going to be a small quantity of ash or clinker, the coal must be of a very high quality. Do we have that particular quality, such as anthracite, in large enough quantities to be able to boost the sales ad lib.? It is not really competitive with oil, taking convenience cum cost.

Electricity, which is the means of carrying piped coal into every home, is superior to oil in convenience, though of course it is inferior in cost. In addition, electricity of course is an all-purpose method of using coal. I therefore suggest that the National Coal Board concentrate on selling coal through coal-produced electricity, in the markets where convenience tends to outweigh cost. They are already having a selling campaign for off-peak heaters, which in many cases are suitable for schools, shops and some homes. The extent of the sales has surprised them, and it is rather a pity that the people who make the time-switches have not been sufficiently advised, with the result, I understand, that there is a shortage of time-switches. Modern flats are being built more and more with under-floor heating by electricity, and this is a typical market where convenience outweighs cost to quite an appreciable extent.

Moreover, electricity is the principal form of power which is made cheaper over the years by inflation, because of the large proportion of the capital cost involved in the production of the energy. There should be a great liaison between the coal and electricity industries through the Minister, because the electricity industry wants a balanced load. A great spread of night storage heating would probably do much to produce this balanced load, and there must be the most careful examination as to how far this night storage scheme can go and how cheap the electricity can become, so as? to enable us to balance our loads from the great new power stations which should be erected on the coalfields. The noble Lord, Lord Champion, has referred to Durham and Scotland. A policy of diversification has been earnestly advocated in those areas as the cure of unemployment. From the coal angle, I do not know how far those coals are most suitable for the purpose.

But all this will not prevent the concentration going on: in fact, it might increase it. The life of pits in our country has been so long that people tend to forget that mining is a transitory life. If one goes abroad to a mining town, it is not known as a city or a town: it is called a mining camp. That emphasises the transitory nature of a miner's life. Then again, mines all over the world—not so much coal mines but mines for base metal, gold and so on—have to adapt themselves to the market prices of their products; and one frequently finds a mine where ore of a certain grade is extracted when the price is high and ore of a different grade is extracted when the price is low. So it should come as no surprise to real miners to find a coal-pit in this country no longer able to keep open. Many miners have recognised this and have moved, and they have received great help from the National Coal Board in housing and so on. But these men can be only a minority—and, of course, they tend to be the youngest and the most enterprising in the community. There remain many, and among these there will be many elderly, and others who are not 100 per cent. fit. I hope that when a pit is definitely exhausted all steps possible will be taken to try to restore the condition of the land to that which it was before the pit was ever opened—and, of course, there is employment in this activity.

In some cases, mining villages which are very much out of the way may have to be abandoned. It is better that a village should be abandoned than that it should be only half inhabited; and the people who are left should be rehoused nearer the industrial sites in the same part of the country. But with modern transport the range within which people can move to their daily work has been considerably increased, and there cannot be many mining villages in England which are completely out of distance of industrial estates, and so on. But the problem of bringing more work to those industrial areas is not at all easy. Even if it can be proved that for transport reasons the costs of industry will not rise, it is very difficult indeed to induce the bosses to move. As noble Lords who read articles in The Times will realise, people who run businesses in the South do not like the idea of moving to the North.

I am sure that we shall have to come to definite discrimination in favour of the North. Government contracts might well be placed in certain districts, giving them a favourable percentage. Only this morning somebody advocated to me the suggestion that there should be differential income tax. That I should regard as rather impracticable; but, inasmuch as the Chancellor of the Exchequer has power to impose a pay-roll tax, I wonder whether he would not have equal power to impose a pay-roll discount—in other words, if you run a business where he wants you to run it he will pay you 2½ per cent. of your pay-roll. That is the sort of thing which has got to be done.

There is also the question of retraining. Many of our older industries decline, but we have many new needs. By and large, housing is short of plumbers, carpenters, bricklayers, slaters and similar workpeople. The service industries need more people, and the repair industries. Electrical apparatus is pouring out into our homes; motor cars are pouring out on to the roads. All these are going to break down, and somebody has to repair them. I do not believe that there are nearly enough skilled repair workers being trained in this country to do it.

So we really come back to the great problem of the depressed industrial areas in the North and the prosperous South. We have debated it from the angle of the population of the South; we mention it from the angle of coal today; and we are going to debate it from the Scottish angle at some future date. I suggest that in the New Year we should have a debate on the subject as a whole, and try to treat it as a scientfic problem and not as a Party political shuttlecock. We urgently need a better way of dealing with the problems of population and employment caused by the decline of old industries and the rise of new ones, and this House may have something to offer the Government from its collective wisdom if we have such a debate. I support the Bill.

6.49 p.m.

VISCOUNT ALEXANDER OF HILLSBOROUGH

May I say that I have listened to the noble Lord, Lord Hawke, with very great interest. He has been rather less controversial than he is sometimes, and, although I may not agree with every word he said, I have appreciated his speech. Incidentally, it prompts me to refer to what my noble friend said about the use of coal as an appropriate fuel for getting reasonably-priced electricity. I was informed the other day that the Coal Board are anxious to do the very thing that my noble friend mentioned this evening, and to get enough confidence in coal for the production of electricity to avoid the closing of a couple of pits. I was informed that negotiations were going on with the Electricity Authority and that there seemed to be some haggling over price as between the cost of coal and the cost of oil fuel. I understood the difference in the particular circumstances to be of the degree of 0.002 pence per unit. That is 1/500th of a penny per unit. I heard the noble Lord, Lord Hawke, tell of the enormous number of things we might have to turn to to deal with the situation, and the cost of them. It would cost far more to put right the disaster of closing a couple more pits than would be entailed in the use of coal for electricity instead of oil in these particular circumstances. I would ask the Minister whether he could make a note of this particular point to put to his right honourable friend to see what can be done about it.

LORD DENHAM

My Lords, I should like to thank the three noble Lords who have spoken for the general support they have given to this Bill. With your Lordships' permission, I do not intend in my reply to go quite so far in giving such a comprehensive summary of the coal industry as the noble Lord, Lord Hawke, has done. But I should like to answer one or two points that have arisen during the debate. May I deal with two points raised by my noble friend? First, I would set his mind at rest with regard to what is really the least important part of this Bill, the change of the financial year. I understand that the Board publish half-yearly results, and so there will be some information coming out before the end of the new financial year. I do not think that the noble Lord will be able to see the results quite so soon as he would have done if the financial year was not changed. Secondly, my noble friend, seemed rather worried lest the reduction in administrative staffs was not keeping pace with other economies. I am advised that that is not quite so. The Board is fully alive to the need to reduce costs by keeping non-industrial staff to a minimum. Despite increases in mechanisation and other technical developments, which call for a higher proportion of technical staff, the number of non-industrial staff has fallen by 12 per cent. over the past five years and further reductions are expected. The cost of salaries per ton of coal produced fell from 1s. 9d. in 1957 to 1s. 7d. in 1961, although the tonnage produced was some 13½ per cent. lower in that year and rates of pay had increased. I am sorry if it appears complicated but the noble Lord will be able to work that out better tomorrow when he sees Hansard.

The Board are constantly seeking opportunities to streamline the organisation, and since 1957 have reduced the number of administrative areas from 48 to 43. Further reductions are planned. All of your Lordships were very worried about hardship—possible future hardship, and hardship already caused—and what Her Majesty's Government are doing to alleviate it. Of course Her Majesty's Government are not unmoved by any hardship that exists. The noble Lord, Lord Champion suggested that one of the ways to improve the situation would be building additional power stations in Durham and in Scotland to pipe power, in the form of electricity, to areas where it is needed. So far as Scotland is concerned, I am advised that we cannot assume there is sufficient coal in Scotland that can be mined and delivered at prices to compete with coal obtainable from the low-cost coalfields of Yorkshire and the Midlands. In its Report the McKenzie Committee limited its estimates of availability to one coal-fired station of from 2,000 to 2,400 megawatts, and it is such a station that the South of Scotland Electricity Board now have under consideration for meeting Scotland's own needs.

So far as Durham is concerned, my right honourable friend is at present considering representations received from a number of sources that there should be a new coal-fired power station in Durham to export electricity to other parts of the country; and he is shortly to meet representatives of county interests to discuss the proposal. During the review of this matter, my right honourable friend will naturally take into account the points made by your Lordships. I will bring particularly to the notice of my right honourable friend the remarks made by the noble Viscount who leads the Opposition. Steps are being taken to see what can be done to alleviate hardship.

There are three points. The Board make every endeavour to find jobs in collieries within easy reach of their homes for men displaced by pit closures. So far they have been highly successful in doing so. For men for whom jobs are not available nearby the Board have a well-developed transfer scheme under which most of them can be offered jobs in other collieries further afield, often in the prosperous coalfields of Yorkshire and the Midlands. For those for whom transfer is impossible or unattractive the Board have a system of redundancy payments. I know that ray right honourable friend will read with great interest and attention all the remarks your Lordships have made in the debate this afternoon. I am very glad that the general principle of the Bill appeals to your Lordships and I hope that you will now give it a Second Reading.

On Question, Bill read 2a, and committed to a Committee of the Whole House.