§ 5.30 p.m.
§ Order of the Day for the Second Reading read.
§ LORD HOBSON
My Lords, I beg to move that the Gas (Borrowing Powers) Bill be read a second time. This Bill is largely concerned with the provision of finance. Although it is not a Money Bill in the strict sense of being certified as such by the Speaker, may I suggest that in the circumstances the House agrees to the proposal that the Committee stage be negatived and that the remaining stages of the Bill be taken forthwith, as indicated in the italicised Order on the Order Paper. I trust that this course will be agreeable to your Lordships.
My Lords, this small but important Bill raises the borrowing powers of the gas industry from its existing limit of £650 million to a new initial limit of £900 million with provision for the Minister to increase this by an Order, requiring Affirmative Resolution, to a sum not exceeding £1,200 million. These are large sums, but, as 179 I hope to show, the increase is no more than is commensurate with the change in the scale of operations of the gas industry.
Your Lordships will no doubt have seen the brochure The Growing Gas Industry, which has been prepared and published by the Gas Council. The document outlines the industry's case for additional borrowing powers. It gives a concise account of the recent rapid changes in the fortunes of the industry, of the bright prospects now before it, and of the industry's plans to meet the challenge of the future. The task is a big one. In the space of a very few years the increase in the use of gas has rapidly gained momentum to reach the point where what used to be regarded as the growth in demand in ten years is now experienced virtually in a single year. The industry now expects that by the end of this decade gas sales will be more than half as much again as they were last year—an annual rate of growth of about 7½ per cent. per year. After a period of several years when sales showed little movement either way, gas has in a very short space of time got rid of the aura of an old-established industry struggling against the odds to keep pace with developments in other fuels, and has instead impressed the popular imagination as a growth industry in the van of the country's technological advance. This sudden transition, for which those in the industry have worked with devotion and foresight, has been due to two major and interdependent developments—a technical breakthrough in ways of making gas from new and cheaper sources of the materials for gas making, and the marketing of new, efficient and attractive appliances to meet the growing demand for higher standards of heating comfort in the home.
Although Gas Boards are increasing their sales to industry, the greater part of the revival in demand is attributable to the householder. Annual sales of gas room-heaters have recently been not far short of one million. In addition many more homes are being centrally heated by gas and sales of warm air units and central heating installations are already well over 100,000 a year. The industry expects to continue to gain an important share of the growing demand for higher 180 heating standards in the home and in factories and offices. As much of the additional demand is for space heating, it will arise mainly in the winter months and the winter peak demand is consequently expected to increase at a faster rate—10 per cent. per year—than yearly sales. It is this growth in peak demand which determines the rate of expansion of production and distribution capacity and which is largely responsible for the substantial investment requirements of the industry.
The new processes for producing gas from oil have many advantages. They are particularly suitable for meeting the new winter load. Capital costs are relatively low and there is a potential flexibility in operation which should enable them to adapt output more easily than hitherto to fluctuations in demand. There are substantial increases in productivity to be obtained. A typical large new plant is highly automated and requires only a few skilled men to supervise its running. Gas can be produced at a new works only two years after the placing of an order for the plant.
Perhaps the greatest merit of these new processes, however, lies in features which have yet to bear their full fruits. The new plants, drawing on a variety of feedstocks, produce non-toxic gases which are often of higher heat content than present-day town gas and certainly at higher pressures. The gas industry is modernising its distribution system to take full advantage of these new developments. High pressure distribution of richer gases will increase the capacity of existing mains which can then also be used to store as well as to carry gas. The new production processes therefore complement the technical advances in the storage and distribution of gases, advances which are essential if the best use is to be made of any large-scale supplies of natural gas that may become available in the future. Noble Lords will be familiar with one potential new development, the storage of gas underground, from our recent debates on the Gas Bill, which was introduced by my noble friend Lord Champion.
Richer gases, whether from existing feedstocks or from new sources, would probably go in the first instance to industrial consumers, but research is going forward into all the problems connected 181 with the general conversion of the public supply of gas to richer gases, including the alterations necessary to consumers' appliances. The gas industry has every intention of supplying richer gases to the householder as and when it becomes technically possible and economically advantageous to do so. There are many uncertainties, and these developments in the distribution of richer gases may be a long way off, but the industry's plans are designed to provide sufficient flexibility to allow further technological discoveries and further changes in the sources of supply to be absorbed as smoothly as possible. The gas industry has been quick to realise and to exploit the potential of recent developments, and the Government believe that not only must its initiative be applauded but also that it should remain as free as possible, within the broad framework of fuel policy and the National Plan, to further the advance of the industry by the realisation of the benefits of cheaper materials and cheaper processes.
In the present and foreseeable state of knowledge of methods of gas making, it is inevitable that the use of coal should decline if the gas industry is to survive and flourish. Gas from coal at present can cost nearly twice as much as gas from oil-based plants. The Gas Council and the Area Boards seem likely, as a result of the Minister's request to consider measures to help the coal industry this year, to use some 300,000 tons more coal in 1965–66 than was expected at the beginning of the year. This is partly a reflection of the increased demand for gas, and though it will help the coal industry, it is not expected to have any significant effect on the financial prospects of the gas industry. Looking further ahead, the Minister is encouraging the efforts of the Gas Council in its research into finding new and economical methods of making gas from coal. Success in this difficult field, however, may prove elusive and may in any event be a very long way off.
It is not only in its rate of growth that the gas industry will be one of those leading the way to the greater prosperity for which we are planning. Productivity has increased sharply over the last few years and further gains are expected as a result of the modernisation now in progress. On its own conservative basis of 182 estimating productivity, the industry expects an increase of 25 per cent. over the next five years, but alternative methods of calculation such as those used in the National Plan would put the increase at more than twice as much as this.
The programme of modernisation and expansion to meet this rapidly rising demand has, not surprisingly, led to a sharp increase in the rate of investment. A few years ago the industry was investing at the rate of about £50 million a year. The industry's brochure estimates that investment is now expected to rise from about £117 million this year to an average of about £140 million a year at the end of the 'sixties. In the period from April 1, 1965, to December 31, 1970, total investment is estimated at £780 million, of which £320 million is for gas production and £460 million for distribution and other purposes. The industry's total capital needs, including £50 million additional working capital, are estimated at £830 million, of which some £430 million, or 52 per cent., is expected to come from internal resources, leaving £400 million to be met by new borrowing. As a result, the industry's borrowing powers need to be extended much earlier than had been envisaged even a short time ago. The additional £400 million new borrowing would raise the total borrowing from £585 million at March 31, 1965, to £985 million by December, 1970. The present limit of £650 million is expected to be reached before the end of this year.
The Bill sets an initial limit of £900 million to ensure that, on present expectations, Parliament will have an opportunity in about three years' time of reviewing developments in the gas industry. Thereafter, the Bill proposes a final limit of £1,200 million, some £200 million above the estimate of £985 million of total borrowing required on present plans. The reasons for this margin and the size of the initial and final limits have been fully discussed in another place. I need say here only that the Government accept the gas industry's case for allowing for a margin of the size proposed in view of all the uncertainties about the rapidity with which the industry may grow in the immediate future; and the possibility of North Sea gas is not the only unknown factor to 183 take into account. The Minister has also given the assurance that he would not be prepared to authorise any more borrowing than the industry could prove that it needed, and with the many Parliamentary occasions on which the fortunes of the gas industry could be reviewed, other than on the presentation of a Borrowing Powers Order or Bill, it cannot be said that the establishment of the proposed limits would deprive Parliament of proper control over the industry's borrowings. I think that is made adequately clear in the Bill.
The gas industry, therefore, over the next five years expects to expand rapidly and to use a considerable volume of resources, half of which will be financed from its own funds, in order to achieve this. With these large sums at stake, the industry's financial prospects must be sound. The record of the last three years is encouraging. During this time the average revenue per therm from gas sales has risen only a little, despite increasing costs, and the industry as a whole has made good progress towards, and expects to meet, the agreed financial objective of earning 10.2 per cent. gross return on net assets employed during the five years ended March, 1967, although some Boards are not so well placed as others. In its present estimates the industry is quite rightly providing for a higher rate of return in the years ahead.
Investment in gas, therefore, is expected to pay its way by earning a proper return, sufficient to cover the charges on capital and to provide a substantial contribution to the resources needed for expansion. There are uncertain as well as exciting prospects ahead, but the Gas Council and the Area Gas Boards are demonstrating their ability for combining a flair for innovation with prudent financial management, and I am sure that your Lordships will join with me in commending the proposals in the Bill and the prospective developments in the gas industry on which they are based and which I have illustrated. My Lords, I beg to move that the Bill be now read a second time.
§ Moved, That the Bill be now read 2ª.—(Lord Hobson.)184
§ 5.45 p.m.
§ THE EARL OF DUNDEE
My Lords, when the Gas Council and the Electricity Council were first set up, some years ago, it was expected that the use of electricity would gradually displace the use of gas for a great many purposes. But that has not happened. What has happened is that both industries have expanded enormously, and the increasing use of gas, both for domestic and other purposes, requires a great deal more finance, as is provided for in this Bill. We entirely agree with the Bill, which is a simple one, and except for one small point, of which I have given notice, I cannot see that there is any justification for prolonging the discussion about it, although in another place it was discussed for no less than four and a half hours. Perhaps they are more gas-prone there than we are.
The only point on which I gave notice to the noble Lord concerns subsection (2) of Clause 1, which first provides that any order by the Minister authorising increased expenditure over the amount specified up to £1,200 million shall be subject to an Affirmative Resolution in the House of Commons. That is quite easy to understand. But then it goes on to provideand so much of Section 71(3) of the Gas Act, 1948 as provides that orders under that Act shall be subject to annulment in pursuance of a resolution of either House of Parliament shall not apply".That is to say, the right of your Lordships' House to annul, under the Negative Resolution procedure, any orders arising under the 1948 Act appears to be repealed. I should like to know what is the justification for doing that.
§ 5.48 p.m.
§ LORD BLYTON
My Lords, this Bill is introduced to raise the borrowing limits of the Gas Council for capital expenditure to enable it to meet its forward plans and development. In discussing this Bill we are bound to ask what effect the forward programmes will have on the other nationalised industries which are in the energy market. Do we go on importing fuel, closing our pits, leaving our indigenous fuel in the ground, and further add to our balance-of-payments difficulties? After years of argument by many of us who spoke from the Front Bench in another place, in Opposition, on the Labour Party's policy of 200 million 185 tons of coal in an increasing energy market, and on an integrated fuel and power policy, I hope that this policy has not been abandoned by the Government. We fought for ten years for an integrated fuel policy.
I may be told about the Energy Advisory Council, and I want to be perfectly frank. I cannot see a policy of integration in the energy industries coming from this Council. I cannot see how we can expect a policy of this character when each Chairman, of coal, oil, electricity and gas, will be fighting for his own industry on the basis, "I'm all right, and to the Devil with the consequences upon the other sectors of the energy industries," especially if they are all competitors in the energy field.
This is an appropriate moment for me to question the effect that new gas-making processes are having on the coal industry. I was ten years on the Select Committee on Nationalised Industries, and in the Session 1960–61 the Coal Board told us, when we examined the gas industry, that they believed that gas could be made in large-scale Lurgi plants at a delivered cost to the Gas Board of 8¼d. to 8½d. per therm. The Board proposed, and it was agreed, that fresh details of this Lurgi process should be worked out and carried out jointly by the Coal Board and the Gas Council. In the Report we submittted to the House of Commons in July, 1961, the Committee welcomed this decision, and in considering the relative merits of Lurgi and imported methane we said in our Report:Your Committee agree that it would be prudent to see whether the two schemes are enabling the industry to expand before proceeding in one direction or another.The then Minister of Power, Mr. Richard Wood, ignored this advice, and authorised the Gas Council to proceed with the importation of Saharan methane on November 3, 1961, before the joint study on Lurgi was completed. Further, he told the House of Commons that this decision would not prejudice the building of a large-scale Lurgi plant, yet the effect of this decision was to render the study of the Lurgi plant useless.
On November 28, 1961, the Parliamentary Secretary to the Minister of Power told the Commons that the imported methane, reformed to town gas, 186 would cost 8¼d. a therm. The Report of the Lurgi Study Group confirmed the view expressed by the National Coal Board to the Select Committee, that a large-scale Lurgi plant could produce gas enriched to town gas standard at 8¼d. per therm. There was therefore no economic advantage in the imported methane scheme. These imports of foreign methane most certainly aggravate our balance-of-payments difficulties, and a very substantial part of the operations, including field cost of gas, is in foreign hands. This is all the more distressing when Lurgi gas could have been produced at the same cost.
The Minister of Power in 1961 told the Commons that in the year 1965–66, as a result of importing methane, about 100,000 tons of gas-making coal previously allowed in the industry's development plans would not be needed. Yet the gas industry contracted to import 350 million therms per annum, which on current yield of gas per ton of coal is equivalent to 4½million tons of coal per annum. Now we know as a result of a Question in the Commons on March 31 of this year, and a reply by the Minister of State to the Board "of Trade, that the annual foreign exchange costs of imports of North African methane will involve this country in an expenditure of £7 million per annum. All the long-term forecasts given over the years to the Coal Board of how much coal will be needed have been rashly over-estimated. As recently as 1958 the Gas Council estimated that it would need 27 million tons of coal in 1965–66. It looks like being about 17 million now. Estimates for 1970 at one time looked like being as high as 30 million tons. Now the figure is as low as 9 to 10 millions. On June 2 last year, the noble Lord, Lord Erroll of Hale, who was then the Minister of Power, told the Commons that the gas industry would require 14 million tons in 1969. We now know that even that figure does not stand.
It was on these long-term estimates that the coal industry based its plans, invested millions of pounds in pits, bought plant and machinery, recruited and trained workers, built colliery villages and encouraged the supplying industries to expand. The coal industry cannot turn coal on and off like a tap. It takes eight to ten years to sink and equip a colliery 187 before the first ton of coal is mined. All this is now to be scrapped; pits are to be closed, involving difficult and social economic problems for whole communities—all because of the too-rapid move from coal. The imported methane project, in my opinion, is a scandal, and those responsible for making that decision in the middle of investigations by the Study Group should be brought to account. I consider that the Select Committee on Nationalised Industries should investigate this matter and challenge those responsible for the waste of public money involved and the added burden to the balance of payments, creating a completely unnecessary burden upon the economy.
The result of the liquid methane project has been that millions of pounds have been spent, both at home and abroad, without any advantage to the gas consumer. I hope that the Government are not going to allow the gas industry to take credit for making a profit which can be achieved only by failing to give due return on investment which has been made for the gas industry by another nationalised industry. Clearly, two courses are open to the nation. The first is to support the Gas Council's hurried abandonment of coal in favour of fuels—feedstocks which cost Britain valuable foreign currency. Such a course would, in effect, throw away public money, which, acting on the figures supplied by the Gas Boards themselves, the Coal Board have invested in gas coal pits. The second course is for the Gas Boards to slow down their move away from coal without swerving from their path towards greater technical efficiency. In this way the nation would obtain some return on the millions of pounds which have been spent by one nationalised industry in support of another.
As I have said before, we have always argued that in an increasing energy market coal could provide a base load of around 200 million tons to meet the energy needs of the country. There are rumours, and even a statement in the Sun, by Geoffrey Goodman, that the Government intend to cut back the coal industry to 175 million tons. If this is correct, it means that to meet our energy requirements other fuels will have to be imported. This state of affairs I regard as 188 serious. Our greatest difficulty today is in trying to achieve a balance of payments, and in increasing our exports to meet the cost of our imports. Where are we to get the huge amount of foreign exchange to meet this added importation of fuel if the coal industry is cut down to 175 million or 160 million tons? It is estimated that it will add £80 million a year to our import bill. To-day, oil imports are something like £500 million a year, and as there are also re-exports one can never get down to the true figures. So, as we cut back the use of coal, we increase the country's balance-of-payments difficulties. In my opinion, this is real economic folly and most certainly not in the national interest.
In our energy policy we have fought for a base-load of coal of about 200 million tons. The Government only recently announced a figure of about 190 million to 200 million tons, but now there are rumours that in an economic White Paper on Planning, to be published in September, the coal industry is to be further cut back to 175 million tons. I warn the Government, as an ardent supporter of them, that the present trends in both production and consumption, unless arrested, will even destroy such stated aims. This is a direct question that I put to the Government, especially to the Ministers responsible for planning. Is there really a serious and genuine intention to stabilise coal's share of the energy market at levels which we ourselves have suggested in the past?
I am not alone in being possessed of a strong suspicion that the industry is being allowed to drift until such time that it will not have the men or the capacity to fulfil even the amended target of 190 million to 200 million, or even 175 million tons. We have always known over the years in which I spoke from the Opposition Front Bench for the Labour Party that there were powerful forces pressing for a cutback in coal production. This needs to be said, because the longer the present drift is allowed to continue the more difficult it will be to arrest.
The most serious feature that we face is the rate at which men are voluntarily leaving our mines. In the last twelve weeks voluntary leaving has averaged 1,000 men a week. The figure for 1964 was 10,000 up on 1963, and in the first 189 twenty-one weeks of this year manpower in our pits has dropped by over 13,000 —and that is at a rate of 30,000 men per year. In the main, the men who are leaving are the young men, men under 40, and this most certainly affects the quality of the remaining labour force. There is a serious unbalance of manpower at many of our mines. Productivity increases have been seriously impeded in the most efficient pits and coalfields, making others uneconomic and increasing the losses in those already in difficulties.
The stark truth is that there is a crisis of confidence in the future of mining. Recruitment is merely confined to the mining communities with a tradition of mining employment. Our manpower has dropped by 250,000 since 1958. Hundreds of pits have been closed. Intensive rationalisation measures have been adopted, with their effects upon the nature and availability of jobs. The cumulative effect of all these changes has shaken confidence in job security in the industry, and little is being done to restore it. In fact, if we cut back to 175 million tons the position will be further aggravated. It is said that that will dear out 140,000 men from our pits.
I am sorry to say that in recent years judgment of the viability of the mining industry has been based upon short-term market considerations which prevail at the present time, completely ignoring the long-term needs assessed against available resources. The repeated advocacy in a large section of the community that coalmining is a dying industry, that it must give way to other forms of energy, is in a large measure responsible for our existing manpower problem; and continuing this attitude is responsible too for impeding the advance of productivity, thus holding back the viability of this industry.
My Lords, I worked underground in the mines for 32 years, and I have no desire that men should go down to the bowels of the earth to get coal for a moment longer than is socially necessary. But, meanwhile, we must have stability; we must know what is the intended size of this industry. The smaller the industry gets, the more dependent the nation becomes on imported fuels with costs affecting our balance of payments; and the smaller 190 it is the less viable and competitive it becomes, because of its fixed charges. The present situation, compelling a smaller industry by the play of anarchic market forces, and the present uncertainty are ruinous. The nation, the Government at least, owe it to this industry to make clear their plans without further delay.
According to the N.E.D.C. Report, based on a 4 per cent, increase each year in total national output, in the next fifteen years we shall need no less than 165 million tons of coal or coal equivalent more than we are using now. Even if coal production continues at about 200 million tons, the consumption of other fuels will have to double in the next fifteen years, and most of these other fuels will have to be imported. Can this nation, which had a deficit of £800 million in its balance of payments in 1964, afford to import between 6 and 7 per cent, more oil every year? We hear every day about the difficulty of pushing up British exports, but we shall have to sell far more goods abroad to pay for the extra imports of oil and other fuels. I know it is argued that industrialists should go for the cheapest fuel that can be got at any moment. Conversion to oil, which is cheaper in a company's own accounts, may not, however, be cheaper in terms of the nation's bookkeeping. How can imported fuels on the scale suggested be cheaper, if their purchase adds to our balance of payments problems?
I believe, and I say this honestly to your Lordships, that in the national interest a healthy British coal industry is the best protection our industrialists and other fuel users can have against rises in world energy prices, which are sure to increase when oil and other fuels have a real grip on British markets. Therefore, it is in the interests of the nation—and this is my plea—that the coal industry, on the basis of the progress it has made and is still making in production per man, should be given time—time to allow the growth in energy to catch up with the present surplus of fuels; time to get on with its policy of concentrating on the more efficient mines, and time to push on with its mechanisation and new technical developments. To give it that time, it needs help in the few years ahead to sell around 200 million tons; and nothing should be done 191 now to impair its ability to produce that amount of coal when it is needed, as I believe it will surely be needed before long. France, Germany, the U.S.A. and Russia have recognised that their national interests are best served by fortifying their coal industries, and it will be a national calamity if we do not do likewise. Given temporary help, coal should be efficient enough to compete on national terms with its rivals, and sell about 200 millions a year on its commercial merits.
This Bill, my Lords, with its forward plans linking the Gas Council to oil, will have disastrous effects on County Durham, Scotland and South Wales, which are gas-coal producing counties. There is great anxiety in these areas, especially in my own county of Durham. We all recognise that uneconomic pits will have to go, and we recognise that a redeployment of men will have to take place. But, unlike the past, it is now essential that, when pits will have to close in these gas-coal producing counties, industries should be brought to the areas before a closure takes place. Whilst younger men will migrate, men over 55 years of age, men like light-rate compensation men and sick men who do light jobs, will have to be catered for at the closing of the pits, as jobs of this kind will be already filled in the receiving areas. In the past, many of these men have just been left with no alternative employment. The importance of looking at book-keeping from a national point of view is clear. If large-scale conversions to oil, because it is cheaper, result in men drawing unemployment pay and National Assistance, how can oil be cheaper for the country as a whole?
My Lords, I have spoken at some length on this Bill; and, while I recognise that the present Minister cannot unscramble the omelette of the La Conche Agreement on liquid methane which the Tories left us with, he can as Minister see to it that coal gets its rightful place in the economy, and that the integrated fuel policy for which we have all fought over the years now becomes a reality, and that redundant men are given work. Otherwise, the mining community will consider that we have broken our pledge to them. It is to this urgent task that I ask the Government to give their consideration, and let us know how far it is 192 intended to make our economy dependent on an imported fuel, to the detriment of our own indigenous industry. I have raised these matters to-day as the increased borrowing powers of the Gas Council to meet future plans are to have such a serious effect on our own indigenous industry, and the Government's future plans, which are said to cut back further our own national industry of coalmining, will have such a calamitous effect upon our people. I hope, therefore, that the Government will take note that this whole situation, which we have studied over the years, ought to be based on the policy for which we have always argued.
§ 6.14 p.m.
§ LORD HOBSON
My Lords, I propose to answer both the points that have been raised by the noble Earl, Lord Dundee, and I shall feel constrained to answer at a little length the speech made by my noble friend Lord Blyton. First, with regard to the noble Earl, Lord Dundee, I entirely agree with him that no one would have anticipated that gas would come to the forefront in the manner in which it has done, particularly with regard to space-heating. It really is an amazing achievement. We were all aware of what was happening in electricity, for obvious reasons which I need not go into—chiefly industrial demand and, of course, space-heating, a considerable amount of which is done by electricity, too. But because of the tremendous growth of this industry we must have this Bill, to provide this considerable sum, rising up to £1,200 million, for extra capital for development of the gas industry. It is a marvellous achievement, and the Gas Council and the whole industry deserve the thanks of the nation for what they have achieved. It really is a first-class organisation, and this afternoon there has not been a single criticism of the industry as such, or, indeed, of their need for capital to develop the industry.
To come now to the point of which the noble Earl, Lord Dundee, was good enough to give me notice (which I appreciate very much indeed), as to what are the powers with regard to the Affirmative Resolution, I have been at some pains to find out what the exact position is. We are not departing from anything that has been done before and under previous 193 Administrations. For instance, the practice of establishing an initial financial limit, increasable by Order and subject to an Affirmative Resolution, was established by the Electricity (Borrowing Powers) Act 1959. I do not propose to read the section. That would be rather delaying your Lordships' House at a late hour. Another precedent is in the previous Gas (Borrowing Powers) Act, which has precisely the same clause in it. Therefore, there has been no departure; and I can give the assurance that there is no intention on the part of the present Government to undermine the power of either House in this connection. In other words, to put it in a simple phrase, it is indeed the status quo ante—and I am sure that the noble Earl, having supported this arrangement in the previous Acts under a Conservative Administration, will hardly criticise us for following suit.
I want now to come to my noble friend Lord Blyton. First, I must say that we all realise the lifetime of service which he has given to the mining industry. If any one of us wants to know anything about mining in detail, we always go to my noble friend Lord Blyton. We appreciate his past fight for the welfare of the miners and the improvement of their conditions, and I also realise the tremendous work he did on the Committee of Nationalised Industries when he was in another place. But I must cross swords with him on one or two points which he raised in his speech. It is perfectly true that France and Germany are modernising their coal industries in precisely the same way as ourselves; but it is equally true that France is using natural gas; it is equally true that Germany is developing atomic power; and it is equally true that Germany is taking gas from the Groningen natural gas fields for its industry. So we start off there with the three great industrial nations of Western Europe on a par, because we are all doing precisely the same thing.
As to the idea that we are ignoring the claims of the coal industry for supplies of coal for the gas industry, this really is not true, because, as I said in my speech, the use of coal by the gas industry this year is likely to be 300,000 tons greater than had been expected. Therefore, there has not been any deliberate cutting down of the amount 194 of coal which is required for the industry. Nobody is more aware than I am of the social consequences of closing down pits. I was brought up in the Yorkshire coalfield—on the fringe of it, just South of Leeds. I know the upheaval involved. I know there are compact communities with their own social life and, in many cases, their own culture. Therefore, one can appreciate the sense of hardship they must feel when pits are being closed down. But, really, we cannot, in the face of the economics involved—and I should be wrong to give any assurance that we can—go on continually using coal for the purposes of gas making.
I propose to give the reasons why, and I think they will be seen to be quite simple, really, when I quote prices. For instance, gas made from naphtha costs 6d. to 8d. a therm and from imported natural gas 8½d. a therm. Liquefied petroleum gas can be bought for from 6½d. to 8d. a therm and refinery gas for 6d. a therm. Gas produced from coal by conventional carbonisation costs from 12d. to 14d. a therm. Really, these are formidable figures.
§ LORD BLYTON
I am not talking about the old conventional way of getting gas. I was dealing with the Lurgi plant.
§ LORD HOBSON
I anticipated that the noble Lord would deal with this aspect: I made the point in my own speech. We have said that if any development takes place for producing gas from coal more cheaply than by other methods we shall be only too pleased to use coal and to help the coal industry. In view of the figures I have given, however, to insist on using coal would penalise our industries and households to an unreasonable extent.
The noble Lord raised the question of Lurgi. I have been at some pains to find out what the real prospects are; but I must be brutal. I will give the reasons why. So far as the Lurgi process is concerned, it is not economic and, so far as can be seen at present, has no future. That had better be understood straight away. What is the position? A Study Group was set up to look into the Lurgi process. It was set up jointly by the gas and coal industries, and it was calculated that the cost per therm would be 9.6d. in a large-scale plant 195 This is higher than for gas produced from the new oil-based processes, and the plants themselves are costly. The imported methane is needed almost entirely for enrichment. The Lurgi process produces a gas of low heat value, technically called "lean" gas; and it must be enriched. If we are to give the housewife higher quality and non-toxic gas and move towards the supply of richer gas at higher pressures for industry—and nobody knows better than the noble Lord, Lord Blyton, the amount of gas that is used in the steel-making industry, for instance—it is essential that the developments now taking place in the gas industry should go forward.
When we come to the question of the cut in the coal industry, the Government have not decided to cut the coal industry down to 170 million tons. The Government have, however, agreed with the Coal Board that on present trends the market for the coal industry in 1970 is likely to fall, and steps are being taken to deal with the problem to which this gives rise in the coal industry. Here again, as the noble Lord knows well (and I am sure he will admit it from his knowledge) there is continual consultation between the National Coal Board and the Government, whichever Government may be in power. Let us be partial; let us be political—the noble Lord knows that a Party such as the Labour Party, which was almost founded by the mining industry, whose pioneers came from that industry, are not going to desert their friends and be harsh in their treatment of them. One does not do things like that; and I should be the last to do it.
But the fact is that we cannot get over it. We have to consider development taking place, for example, electricity, with the use of atomic power. An announcement was made only three weeks ago in your Lordships' House about a breakthrough (I hate to use that word) in the atomic energy field by which we are to have higher pressures and higher steam temperatures for the use of atomic energy and in the use of supplies of electricity. These are things that no Government can ignore. It is perfectly true that coal is indigenous. We cannot export coal as much as we used to because of the factors operating in other countries, but Her Majesty's Government will consider 196 any development that can take place in the coal industry scientifically or any new processes that can be produced.
So far as our future fuel policy is concerned the noble Lord, with respect, answered his own question; because he stated categorically that a statement of the fuel policy would probably be made in late autumn. I am sure that all the factors that my noble friend, Lord Blyton, has raised will be taken into consideration, but I should be misleading the House, and misleading my noble friend Lord Blyton, if I were to say that coal will be a prime necessity in gas-making in the future. I think I have proved the case. I say, with respect and humility, that the figures as given with respect to the new feedstocks for making coal make this clear beyond peradventure. It is impossible to put the clock back. We cannot do it. I will give the noble Lord this point: that it is true that methane is imported from abroad. It comes largely from the Sahara; but it will interest the noble Lord to know that we are hoping that there are prospects of considerable quantities of natural gas in the North Sea, in our section of the Continental Shelf; and we are developing and not ignoring this kind of interest. There is also the prospect of development of natural gas from Nigeria.
§ LORD BLYTON
I do not object to finding gas in the North Sea because that does not affect the balance-of-payments problem.
§ LORD HOBSON
I do not think that this will affect the balance-of-payments problem in the long haul, because it is coming from the sterling area; and secondly (and this is a more important reason) because of the fact that if you are going to increase the price of the prime raw material—which in these cases is gas—for certain industrial processes, the cost of the exports is going to be of such a character that you will price yourself out of the market. The fact is, and we cannot repeat it too often, that the profitability in terms of gas and converting raw materials is more lucrative than exporting the basic raw materials. This is historically true. The noble Lord will find it if he looks up the statistics, past and present.
But I appreciate the position when pits are closing down. One cannot help feeling it. The industry and the unions concerned 197 have been very realistic about the situation. I want to assure the noble Lord—though I am sure that, in his heart, he knows it—that the present Government will do everything in their power to alleviate any form of wholesale closing-down of pits that would bring hardship to the milling communities. As the noble Lord himself stated, nobody wants people to go into the bowels of the earth and to hew coal if, as a result of lower prices of prime fuels and power supplies, we can become more competitive. And as a result of this there is more likelihood of the development not only of small factories but of very large and important factories on the North-East coast.
§ On Question, Bill read 2ª: Committee negatived.
§ Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 22), Bill read 3ª, and passed.