HL Deb 19 February 1976 vol 368 cc607-17

5.3 p.m.

The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of ENERGY (Lord Lovell-Davis)

My Lords, I beg to move that this Bill be now read a second time. The National Coal Board (Finance) Bill is a short Bill, but an important one, as has been stressed throughout its proceedings so far. As with the 1975 Coal Industry Act, this Bill has its roots in the final report of the 1974 coal industry examination, the tripartite discussions between the Government, the National Coal Board, and the unions. At that time the Government endorsed the major investment programme by the National Coal Board based on the broad strategy for the industry over 10 years to 1985, contained in Plan for Coal. This programme has been endorsed with the affirmation that, as far as possible, the industry should operate free from burdens of the past. The 1975 Act clarified the National Coal Board's right to work coal and restored the compulsory powers of the Opencast Coal Act of 1938. These measures were essential if the Board was to meet the Plan for Coal projected output of 135 million tons per annum. This meant stabilising deep-mined output at around 120 million tons and expanding opencast production from 10 to 15 million tons.

In addition, the Act provided for a contribution of £100 million to be made to the compensation scheme for pneumoconiosis sufferers, worked out between the Board and the unions, which arose directly from the tripartite meetings.

A good start has been made, but there remains much work to be done. The Bill at present before the House is another step towards the consolidation of the industry's future. The longer term framework for the industry is a matter which may be considered in a more comprehensive piece of legislation next Session, but it is important that no time should be lost in implementing certain decisions. The aim of the Coal Board's Plan for Coal was to provide 42 million tons of new capacity by 1985: 22 million tons by expanding existing capacity and 20 million tons from new pits. The National Coal Board has already set in hand some 60 major projects which would yield about 12 million tons of that new capacity. Its proposals for a major new mine at Selby producing 10 million tons a year would increase this figure accordingly. The cost of the 60 major projects referred to is expected to be in the order of £190 million.

This progress shows the Board's determination to secure the positive contribution that the coal industry examination envisaged that coal could make to the energy output of the country. In order that the targets of Plan for Coal can be reached on time, especially when the lead times between investment and the realisation of benefit can be quite long, it is important that a rapid build-up to an early peak in capital investment should be attained. The financing of this investment plan and the Board's need for further working capital arc naturally increasing the Board's borrowing requirements.

Clause 1 of this Bill, by increasing the statutory limit on the National Coal Board's borrowings, will enable the Board's investment programme to continue according to plan over the next two years or so. The Board's borrowing requirement beyond then will be catered for in legislative proposals, which may be introduced in the next Session, to set the long-term framework for the industry. The industry should know that they have the fullest backing from us, and from the country, in exploiting our indigenous resources and helping us towards self-sufficiency in energy, especially in these days of high-cost imported energy, which almost every country has to rely upon to some extent. We are fortunate in our energy resources and it is imperative, therefore, that we make the greatest and most sensible use of them.

Clause 2 deals with mineworkers' pensions. The mineworkers' pension scheme was established in 1952, and for a small contribution paid a pension of 10 shillings a week. Subsequent measures in the pension were financed by creating a deficiency in the fund which was met by the Board, making annual deficiency payments. The Government have also made deficiency payments, totalling £25 million over the last three years. In April 1975 the Board revised the scheme to bring it more into line with modern practice, and this scheme was well received by the National Union of Mineworkers. This revised scheme is earnings related and applies to men who were serving mineworkers on, or alter, 6th April 1975. A man will now receive a pension of half his final wages at the end of 45 years' service.

People who were in pension before 6th April 1975 will receive their pensions on the basis of the scheme as it was then constituted. Broadly, there are four categories of such people: mineworkers who retired before 6th April 1975; widows and dependent children of men who died before that date; widows and dependent children of men now in pension; and men who left the industry before April 1975,and have a right to a deferred pension to be paid at age 65.

In the coal industry examination the Government recognised that the past contraction of the industry presented a financial problem for a viable pension scheme because of the consequent exceptional ratio of pensioners to contributing members (which approaches 1:1 instead of the more normal 1:5), coupled with the fact that pensioners can neither make further contribution to the pension fund, nor can they contribute to the industry's performance. In order to help the Board with this burden of the past, the Government undertook, subject to Parliamentary approval, to assist in meeting the existing deficiency in the pension fund so far as it relates to beneficiaries and prospective beneficiaries under the pre-April 1975 rules.

There is no precise way of determining how much of the total deficiency in the Fund is related to beneficiaries and prospective beneficiaries under the pre-April 1975 scheme, but in making a generous contribution of £250million the Government have aimed to match the broad order of magnitude of this part of the deficiency. It is proposed to spread the payments forward over 20 years, during which most of the liabilities to the existing pensioners will be discharged. We are advised that this means a payment of £18 million a year. Pensions of the pre-April 1975 pensioners will have to be increased from time to time in line with the rise in the cost of living, and this will result in an increase in the amount of the deficiency related to those pensioners. When this happens, my Lords, a review will be made of the state of the Pension Fund and the Board's general finances. If, in the light of this review, and with the advice of the Treasury, an extra Government contribution seems called for, authority will be sought for it by laying an instrument subject to the approval of Parliament.

Clause 3 of the Bill is necessary to put right a minor anomaly arising out of Section 7 of the 1973 Act, which enables the Government to make grants to the Board to assist with the cost of stocking coal and coke. These powers do not extend to helping the National Coal Board with the costs they incur when they deliver stocks to major customers for deferred payments. This clause will ensure that, in future, aid can be paid in respect of such stocks. This is an important factor in encouraging the Board and their major customers to enter into arrangements for delivery of stocks in excess of immediate requirements—arrangements which enable the National Coal Board to avoid the cost of double-handling and to keep coal moving away from the pithead.

My Lords, I commend this sensible strategy as the most logical and economic arrangement. The actual use of this enabling power would of course have to be considered against the Board's overall financial position and the level of stocking undertaken by them. The three clauses I have described deal with disparate elements of the Board's finances. But there is a unifying principle, and that is the Government's undertaking, following the coal industry examination, to chart a new path for the future of the industry, and one freed of the burdens of the past. It is on this forward-looking constructive note that I recommend this Bill to the House. My Lords. I beg to move that this Bill be now read a second time.

Moved. That the Bill be now read 2a. —(Lord Lovell-Davis.)

5.12 p.m.

Viscount LONG

My Lords, I should first like to thank the noble Lord, Lord Lovell-Davis, for explaining this, the second such Bill we have had within the last year. I know he has been away a great deal; and he has explained it in record time—though, looking at the figures, quite a lot of money is being spent. My Lords, I often think that, looking at a second Bill such as this, the noble Lord presenting it might soon be wearing a "dog-collar ", for I have the feeling he might be saying, "If you know any just cause or impediment why these two should not be joined together, ye are to declare it ", and so on, because already he has announced that there is a third Bill to come, so we can finish the vicar's words on the occasion of a marriage.

As to this Bill, my Lords, we on this side of the House quite openly understand and agree it, and tonight I am merely going to probe into the corners of it and make observations to see whether I can help the coal industry in any way. It is to the point that we are not able to go any further with this Bill beyond Second Reading on the nod "because it is a finance Bill, and so for my own part I want to make only a few observations. I should like to begin by saying that I believe—and I am sure there arc other noble Lords, not only among those here this afternoon but also among those who are not here, who also believe—that, within the energy industry, coal is both an economical and an essential item as against oil. It is a product which we have been mining for many generations, and we have the experience, the men and the machinery. I feel that we shall be beginning to lose our senses, my Lords, if we believe too much in oil when we have enormous seams of coal in this country. These seams, I am given to understand, could last us over 200 years, whereas in the case of oil we might not have it from the North Sea after approximately 50 years. We in Parliament, or anybody outside, would not be sensible to ignore the importance of the coalmining industry.

My Lords, a moment ago I mentioned the word "oil ", and I stress very strongly that we must keep our minds firmly fixed on the coal seams, the miners and the engineering that is involved. It was only just recently that a new coal seam, far greater than the one at Selby—much larger, I understand—was discovered in Nottingham. I also feel that it would be disastrous for us to ignore the mining industry and to let it run down. No one knows the mines better than the miner himself. In the last ten days there has been a rather cold wind blowing across the industry, and I suspect that some of us must have wondered what was going to happen. It was because of the closing of a certain mine, and also because the miners were going to vote for the banning of overtime.

I think it is worth mentioning at this moment that a certain union leader by the name of Mr. Gormley has once again jumped straight into the breach and has held his miners. It is a very tough world, and I think Mr. Gormley is doing a very fine job. I bring that thought before your Lordships because he inspires his members. He inspired them in more difficut times three years ago, and he is doing it again. No one knows more than he the difficulties of unemployment and of the running-down of a mine which may be uneconomical and yet keeping on the mines that are economical. I feel it is worth mentioning this afternoon that we have a great stalwart in Mr. Gormley, and I notice from tonight's rapers that he has just won the vote again. He has stuck his jaw out, and he has done a very brave deed for the industry, because he knows that oil and other parts of our energy industry could well overtake the mining industry if he were for a moment not to lead his men.

Having said that, I think I ought now to turn to the Bill itself. It is not a very big Bill, but I should like to make one observation to your Lordships. It concerns the difference between private enterprise and the nationalised industries. We are constantly seeing too much of the nationalised industries plunging themselves into trouble in one way or another and then coming to Parliament cap in hand, asking Parliament to dig them out of that trouble. I think that for them to do this is unfair, and is a disadvantage, to private enterprise. A few months ago we had the example of Chrysler running into difficulties. Let us face it, my Lords, they had had an enormous export market for this country for many years. We also had the case of a very large oil company, Burmah Oil. Members of the Labour Party considered this to be a very nasty piece of inefficient, capitalist working. But, in my view, it is unfair for the nationalised industries to cut across the path of private enterprise.

It is probably a dream, but I should like to see the nationalised industries getting on their feet one day (or being pushed on to their feet by a Government, whenever that may be) and then, when anyone nationalised industry goes wrong or needs help—and as an example, I give British Rail; for they will never have a product to sell and will always need help —the other industries will come in and help. My dream may never come to reality, for I do not think it will be possible. One would like to see the group of nationalised industries giving help, provided they make a profit, to the others who need it. That is my observation on the nationalised industries.

My Lords, I come to Clause 1. The noble Lord, Lord Lovell-Davis, has given us the figures and explained why the National Coal Board needs this money. I know from the report of the National Coal Board that they were in bad straits due to enormous wage increases and so on. I should like to congratulate the NCB on their report. I thought it was a good one and easy to read. It was criticised by certain Members in another place for being a somewhat glossy, public relations type of magazine—those were the words, I think. In my view it is a good report. Clause 1 allows the NCB to borrow further money for pensions and other items. In view of the enormous amounts for which the NCB are asking, can I ask the noble Lord to tell us more about the use of these millions, because they are to be up to £18 million a year? For instance, there is the matter of timing. How long will the loan last? With inflation running as it is, the Minister or the NCB could well be coming back to the Government next year for more help. Is this to last for one year or is it the idea to come back to Parliament every two or three or five years?

While I am on the subject of borrowing powers, I notice that the Coal Board put up their prices recently both to the domestic householders and industry. Can I ask the noble Lord why the nationalised industries are allowed to put up their prices when, if I am right, the price control exercised by his right honourable friend Mrs. Williams has nailed down prices so that no one is allowed to put up prices, retail or otherwise? How is it the nationalised industries are allowed to get away with this? If I or if anyone else goes out into the streets, we will find that the average pensioner cannot understand why coal is allowed to go up in price—in fact, immediately coal went up, electricity went up. Perhaps the noble Lord could explain why these prices are allowed to rise whereas private enterprise must hold prices down.

In the last Bill we discussed pneumoconiosis and we dealt with pensions for that; I am sure that we are all pleased that these pensions are now more in line with present day living conditions for pensioners. I will not comment further on that—and I am sure this will go also for my noble friends—except to raise one point. May I ask the noble Lord whether these pensions are aligned to Civil Service pensions? Perhaps the noble Lord can tell us how these are worked out?

I come to one further point. I notice that these pensions are to be looked at for the next 20 years. Is inflation to last that long? I understand that inflation is beginning to come under control, yet we are looking at 20 years—up to 1995. I think. I hope that inflation is not going to last that long. Perhaps the noble Lord can answer me on that point. The third clause deals with stocks. I am not going into this. We went into the quantity of stock and the powers that the Minister of State has for the control of stocks. Perhaps he can give us some idea of the stock figures round the generating boards at the moment. I believe that before Christmas we had three months' reserve stock.

I shall not detain the House any further. We on this side of the House understand the Bill. We agree with it and we await the third part which is to come next year or next Session. Perhaps then all the Bill can be put together in one. We are grateful to the noble Lord for explaining it to us. Anything that we in this House can do to help the National Coal Board and the mining industry, we should do.

5.27 p.m.

Lord LOVELL-DAVIS

My Lords, I do not wish to detain the House for long on a Bill which can in no way be controversial, as the noble Viscount will agree; but I would stress that this is an important Bill. It is a further step in the procuring of a more competent and productive coal industry in this country and it will help, for the first time, to have a proper fuel policy, both forward-looking and flexible. The noble Viscount pointed out that we must not depend too much on oil; and I agree. Oil is a magnificent bonus for this country and we are very fortunate in having it as an additional energy resource, but we must never overlook the fact that coal is also vitally important to us and, more significantly, is a longer-term energy resource than oil.

I should like briefly to answer as best may the points that the noble Viscount has raised. T should like to join him in his fulsome praise of Mr. Gormley. As noble Lords will know, the National Union of Mineworkers National Executive Committee have reconsidered the matter of the overtime ban. I understand that the ban is to be called off immediately and that a national ballot of the membership is to be held. The noble Viscount referred to the borrowing requirements. As noble Lords will know, NCB borrowings have built up rapidly since the beginning of their financial year due to heavy capital expenditure and substantial stocking of coal at the pitheads and under deferred payment arrangements. Such a rapid build up of stocks was not anticipated earlier in the year when the legislative programme for the last Session was under consideration. In view of the present borrowing position and the expected requirements of the Board during the rest of this year, this Bill was introduced at the earliest possible moment in the Session.

Reference was made to the time scale. The new limits proposed in the Bill cover the NCB's estimated requirements for capital investment over the next two years. The longer term requirements will be dealt with in a later, more comprehensive Coal Bill, as I have already mentioned. The proposed limit does not make specific allowance for inflation but includes some small contingency allowances. Regarding pensions, I was asked whether the pension scheme was in line with the Civil Service scheme. The post-April 1975 pension scheme is broadly in line with the Civil Service scheme in that it will give a man a pension equal to half his final wage at the end of 45 years. In the Civil Service scheme, for instance, the term is 40 years. The noble Viscount also referred to the £18 million per annum which remains the same for 20 years. This is not inflation-proofed; but of course it may be increased in order to take account of pension increases and possibly future inflation. I wish I were in a position to say how long we were going to continue in an inflationary situation.

On the matter of prices, as the noble Viscount pointed out, the NCB have announced price increases averaging about 15 per cent. for industrial and carbonisation coal from 1st March, and of about 11 per cent. for domestic coal from 1st April. At the same time, the Board announced that a further domestic increase would be necessary after the summer. It is expected that coal, including that delivered to power stations, will retain its general competitive position this year. The purpose of the increases is to meet increases in miners' wages and in the cost of materials and services used by the Board. The increased revenue will also be used to assist the Board to carry through its investment plan involving the development of new mines and the expansion of capacity at existing collieries to ensure that coal can play its essential role in meeting energy needs to the end of the century and beyond.

As noble Lords will know, it is the Government's policy that the nationalised industries should at least cover their costs out of revenue. The Board have done all they can to alleviate the harsher effects of this realistic pricing of energy by holding down coal prices for as long as possible, and by weighting increases as much as possible on the coal used by industry. Coal is not included in the selective price restraint scheme; but the Coal Board have done and are doing their best to limit the impact of price increases on the domestic consumer. For their part, the Government have taken steps to cushion the impact of the fuel price increases on the poorer sections of the community by increasing retirement pensions and related benefits by 16 per cent. in April and 15 per cent. in November.

Finally, the noble Viscount raised the matter of stocking. I have the figures available, but I am sure it would meet with approval if I did not detain your Lordships in taking time to go through the figures. If the noble Viscount will allow me to do so, I will gladly write to him and set out the current stock levels. My Lords, I hope I have summed up all the points raised by the noble Viscount. I wish to say no more except that in a sense this Bill makes the background against which the Board is working clearer and more tidy. It is part of a larger, overall plan and, as such, I hope it will be well received by your Lordships. I beg to move.

On Question, Bill read 2a: Committee negatived.