HL Deb 06 August 1980 vol 412 cc1492-510

3.9 p.m.

The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie)

My Lords, I beg to move that this Bill be now read a third time.

Moved accordingly, and on Question, Bill read 3ª.

The Earl of GOWRIE

My Lords, I beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—(The Earl of Gowrie.)

Lord LEE of NEWTON

My Lords, this Bill is a declaration that for a long time ahead coal is to be our principal source of energy supply and, indeed, from the reception that the Bill has received in both Houses that proposition is I think agreed on both sides of the House. However, there are a number of grounds where there are doubts in the minds of some of us as to whether parts of it are adequate to that purpose. At Second Reading, my principal objection was to the cutting off of operating grants by the end of 1983. Of course, if the necessary progress to profitability has been made, a very different situation arises. With all the doubts which must obtain, I believe it is very wrong to tie ourselves to the date of the end of 1983. Indeed, even if we have none of the geological problems which can happen, if we take Selby, one of the new sources of coal supply, it will hardly have managed to achieve its maximum production by the end of 1983.

Noble Lords will probably agree that we must think in terms of a 10-year period before we can achieve maximum production in any particular coalfield. Even if the inquiry into the Vale of Belvoir— the results of which we do not yet know —results in an agreement to mine coal there, it is quite obvious that we shall not by any means have reached the stage at which coal will be available from that particular field.

I am speaking now of the two coalfields which may well be the greatest source of increased coal supply. Therefore, to think in terms of a cut-off date at the end of 1983 for development supply is, I suggest, completely irrational. Those of us on this side of the House consider this is the greatest single doubt about the possibilities of achieving the kind of coal production, whether we think in terms of the 170 million tonnes (which was initially the target) by the end of the century or go further and think in terms which the Venice Conference talked about, of doubling our supplies in the next 10 years. It seems to me that the Government have a lot of explaining to do before they can convince, not only this side of the House and not only this nation but the EEC, that we shall be capable of producing the kind of tonnage to which we are now committed.

If I may look at another point, in the early days of my connection with the administration of the coal industry, we had engaged in it something like 650,000 people. Now we are down to fewer than a quarter of a million people. I do not know whether the noble Earl will tell us what the feeling of the Government is as to the ability of fewer than a quarter of a million people in the coal mining industry to meet the targets which we are now talk-about. I know that we are hoping for a far more capital intensive industry than ever before. I, for my part—and I know that the noble Earl agrees with me in this —want to see far greater mechanisation, maybe gasification or liquefaction, which of itself would mean that we would not need the same number of people in deep mine pits as we now have.

However, this is conjecture. We must hope that those experiments will go ahead rapidly and enable us to meet the target that we now have in mind without there being the need for a far greater number of people than we now have working in deep mine pits in the industry. This is pure speculation. Those of us who have been involved in these problems over the years know of the great setbacks which can take place. In Britain we have very expert geologists. In the main their forecasting has been excellent. How one looks at what happens 2,000 feet below the surface, I for my part have never understood. They are very fine; they are very expert.

No group of men can know of the geological faults which one encounters when actually mining for coal. I come from Lancashire and we are quite used to the fact that the coal seam suddenly disappears. It may appear 20 ft. higher or lower than one is mining. In order to find it and change one's mining methods entails many months of hard work and a huge amount of capital development in order to be able to go on with that kind of work.

Here we are in 1980. The idea that one can cut off development grants by the end of 1983 is, to me, quite impracticable—I say this without political bias; there is no party politics in this matter, for we all agree about the need for much of this Bill. I do not understand the basis upon which we can possibly say that by the end of 1983 there will be no further need for development grants. This is given the facts about two of our hopes for the future: Selby, which is now being exploited although coal production is minimal; and the Vale of Belvoir, in which we have not yet permission to mine. How we can possibly say that by the end of 1983 the coal industry will be able to function without development grants, quite frankly, I do not understand.

The noble Earl, if I may say so, made a heroic effort late in the evening when we discussed the Second Reading to convince us about this. He did not convince me and I doubt whether he convinced many others. Once one puts a limit into legislation, one becomes tied to it. I would far rather that in the Bill we are now discussing the Government had not placed a limit for the end of either 1983 or any other particular period.

I notice that last Monday, in a Written Answer to a Question in another place the Chancellor of the Exchequer—and I hope that he had this Bill in mind—seemed to be saying that there could be a more flexible approach to the limits of borrowing by the nationalised industries. His Answer is in the second edition of Hansard for 4th August. There were certain eventualities which happened in another place which caused the second edition of Hansard to be published. One of the reasons why I did not put down any amendment to this Third Reading was that we have been defeating the Government with such monotonous regularity in your Lordships' House; so I did not wish to put down even a probing amendment for fear that my noble friends wanted to press it to a Division and we could have lost the Bill. The Chancellor of the Exchequer said, at col. 41 of the Written Answers of the Commons Hansard for 4th August: On finance, we have agreed on a more flexible approach to the determination of the terms on which industries may borrow from the National Loans Fund (NLF). The rules governing the maturity period for such borrowing have been changed so that they are determined by an agreed view between each industry, the Treasury and the sponsor Department as to what is an appropriate maturity pattern for the industry's liabilities, rather than by the present arrangement under which the majority of borrowing is for a maturity period linked directly to the asset life of the industry". I would ask the noble Earl whether that widening of the loan provisions of nationalised industries now applies to this particular Bill. I am sure many people outside this House who are vitally concerned with the future of the coal industry would, with me, be far happier if they felt that the limits imposed by this Bill would be subject to the new dispensation as announced on Monday by the Chancellor of the Exchequer. Indeed, an assurance that this will apply to this Bill when it becomes an Act would be very helpful to many of us. I am sorry I could not give the noble Earl notice that I would raise this, but I hope he will be able to give us some kind of answer on it.

A further complication must be expected, in that, if we are able to increase supplies of coal in the manner which we are all hoping for, we may find that the market is unable to keep pace with the supply of coal for a limited period of time. I am sure that your Lordships will agree with me that some of our industries will require considerable time and also considerable capital investment to turn over from the use of oil to that of coal; while in the domestic market—a market which I am pleased to see is now expanding —many of our housing estates as well as private houses have now been built without chimneys and they will need a considerable amount of adaptation before they can begin to avail themselves of the increased amounts of coal which will be available. There may well be—I think it is probably impossible to avoid it—a hiatus between the increased supply of coal and the ability of both industry and the domestic market to use that coal. During that period, inevitably I would have thought, the stocking of coal would increase considerably.

I mentioned on Second Reading that at one period we reached a stage where, despite the fact that 120,000 jobs were lost in coal and despite the fact that the NCB cut back its production by some 28 million tons, coal stocks increased to 36 million tons. I do not know what the cost of that is these days but in my time at the Ministry of Power it cost something like £1 per ton to lay down stocks and pick them up again. It could well be there is no particular relationship between our ability to produce or increase our production of coal and the ability of the markets, both industrial and domestic, to consume that coal until they have changed from the present situation. As I say, during that hiatus coal stocks could well build up to enormous proportions. I hope that will not mean that people will feel we are wrong to increase the production of coal but I hope the Government will be prepared to look at the enormous cost of stocking coal in the quantities I have just mentioned.

One of the problems we are all faced with in discussing this Bill is that we are debating it without any complete picture of the total requirements of coal equivalent needed. During my days at the Ministry of Power, one can see, if one looks at the 1965 White Paper that I produced, that we gave coal as a portion of the total coal equivalent that the nation would require. If I may say so with modesty, we were right: in looking forward five years, we got the coal equivalent right and we got the coal burn almost right. Therefore we are looking at this problem of coal itself without any idea of what the Government have in mind as our total coal equivalent requirement in a few years from now.

It could be that we would have been better advised to have an energy debate in which we looked at the whole picture before we embarked on discussion of this Bill. Nevertheless, we are completely in the dark as to the Government's ideas of the requirement of coal equivalent and the contribution that coal will make to that equivalent during the next few years. We are all hoping and believing that the future of British industry is to be broadly a far more capital-intensive type of industry than we have had in the past. I would remind your Lordships that the more one builds up a capital-intensive industrial base, the higher is the consumption of energy. I do not know whether the noble Earl can assist us today in saying what the Government's reaction is to that kind of problem but. quite certainly, without some kind of analysis and some kind of approach as to what we intend to do about that, it is very difficult indeed for any of us to comment constructively on the content of this Bill.

I can illustrate one of the issues I have in mind by looking at, for instance, the gas industry, which is of course a vital cog in the wheel of energy production. I speak of a period during which I had some responsibility for this. When gas was produced simply by carbonising coal, the whole gas industry was in danger of going out of existence through pretty crass inefficiency. It was saved by going over to oil as a feedstock, and after huge capital investment it was then organised more on the lines of the electricity industry, with a national grid, and so on. In other words, we produced in national terms instead of depending on purely local supplies from rather inefficient local gas industries. But when it went over to oil it expanded rapidly at some 11 per cent. per annum for a great number of years. Indeed, it took an ever-increasing share of energy demand, especially in the space heating of housing, industry and so on. That was a huge revolution and of course it cost a great deal of money; but within a very short space of time of that revolution taking place the industry ceased even to make gas at all. It simply became a distributor of North Sea gas.

I do not think the gas industry has ever received the credit notices it deserved for the way it accomplished that very remarkable revolution. As I say, it became simply a distributor rather than a producer either by coal or by oil—what we called then the ICI method—which was very efficient but took a huge amount of capital in order to produce it. We are now anticipating the time when that process will need to be completely reversed. I know that it will not happen overnight, but as North Sea methane declines there will need to be preparations to go back to making gas from coal, which seems to me to be where we began. That will happen at a time when there will be an expanding overseas market for coal.

In all parts of the House we are extremely worried about the way in which British manufacturing industry is practically being decimated. What is to take its place in the export markets? How are we to get to a position in which we can break even on our balance of payments? I should have thought that if, indeed, the coal industry is to take the place of much of our manufacturing industry, we had better attune ourselves to the fact that it will have to enlarge its scope in the overseas markets of the world.

I am sorry to keep harking back, but I want to say again that at one period our exports of coal were decimated by the fact that Poland was dumping its coal supplies in Scandinavia, and our export markets in Scandinavia went down at an awful pace. If primary production—and we are all agreed that coal is now to take a huge part in that—is to take the place in the export markets of a great deal of that upon which we have relied from the manufacturing industries, then we had better attune ourselves to that fact. It is a great problem. I do not criticise anybody; I am only asking that we begin to look ahead to the point at which that position will arise.

Then there comes the problem of shortages of certain types of coal, such as anthracite. I think it was the noble Lord, Lord Tanlaw, who at Second Reading remarked that the South Wales coalfield is now in grave trouble with geological problems. Indeed, we depend heavily upon that coalfield for much of our anthracite. What are we going to do to find substitutes for that kind of coal? It is not purely a question of whether we produce 170 million tonnes or 200 million tonnes by the end of the century; it is a question of the types of coal which we are able to produce. I am told that the Phurnacite plant which provides a suitable alternative to anthracite is now reaching the end of its life.

I have been talking to members of the Chamber of Coal Trades, and naturally they are most concerned about this. They tell me that an alternative is available in the ANCIT process. They would welcome the building of an ANCIT plant, but apparently the NCB are now unable to fund the plant and they are quite unable to convince the Government of the need for an expenditure of some £30 million on that plant. I do not know whether the noble Lord can comment today on what I believe is a very vital issue.

There is now nothing that divides us about the future of coal, as there was in the 'fifties and 'sixties. We are all convinced that a great deal of the future of our ability not only in the domestic market but, indeed, in the industrial market depends on our capacity vastly to increase our supplies of coal. That is common to all of us. I want to feel, and I hope noble Lords agree, that we will now supply the tools to do that job. I want to feel that in the new coalfields we can train the necessary manpower to meet our targets. I want to feel that in the older parts of the coalfields new faces can replace old. I know that where one has an extractive industry—from coal to dentistry—the time comes when there is nothing left to extract; and I myself am suffering from that problem at the moment. Nevertheless, I know there is now a common ground between all the parties, and indeed the Cross-Benches, that a very great deal of the future of this great nation depends upon our capacity to find the energy to drive our new industries. My criticism of this Bill is that it does very little to assure us that that energy can be found. For that reason, I hope the noble Earl will be able to assure us in what he says today.

3.36 p.m.

Lord DAVIES of LEEK

My Lords, before the noble Earl replies, I should like to make a few remarks. I shall be very brief and will try not to repeat what has already been said, but I do beg the House to take notice of some of the points I wish to spike down. A great world conference on coal was organised by the Institute of Technology at Massachusetts. They have just produced a learned tome on their conclusions, called, The Bridge to the Future. Professor Wilson was the marshal of that conference. I hope that we can get the book in the Library. I have asked for it, and instead of talking about it—this is an intelligent audience—I hope noble Lords will take the opportunity of dipping into this. We have also had the Venice conference on coal and the Tokyo conference on coal, but to me they have been pillars of cloud.

On three occasions in this noble House I have mentioned the fundamental importance of coal to the destiny of this nation. I have one question straight away about the mighty pit at Margam.

That pit is absolutely necessary to get some of the best coking coal in the world. Is it going to receive some finance apart from that which my noble friend has been talking about—the finance that is being given for three years? In dealing with the coal industry it would be a tragedy to say there will be finance for three years and leave it at that. Other coalfields are being opened; for instance, there is one in Staffordshire. It will take 10 years from the day the sod is cut to produce the coal. The point I want to make is that we need trained men. I was told that we are getting more than we need, but not real trained, skilled miners. Despite the transition period, opportunities should be subsidised for the training of the miner.

Now comes the last point of my short speech. In this House we have noble Lords who are distinguished, gallant Lords, with military ranks as high as field marshal. They have spoken in this knowledgeable House. I am damned if I understand why this nation talks about coal and forgets to link it to the Ministry of Defence. We should draw in with defence the issue of coal. How on earth do we expect to live? I do not want a war—neither does anybody else—but one should not think that nuclear power would take one through a period when one had no coal even in an age when some people are daft enough to talk about nuclear war. Why are there not conferences about coal with the Ministry of Defence, and why cannot some of the defence expenditure help to subsidise the coal industry?

I am president of a mining museum. We have a pit 700 ft. deep and we have had about 35,000 people down it these last few months. I love to see some of the young boys from the fifth and sixth forms going down this pit to the coal face to encourage them to look into this man's job. Some may aim at being mining engineers; others may aim at being shotsmen or firemen. I should like to see the encouragement of that type of museum. It is worthy of some help from either the defence budget or from the coal budget.

I beg of this House to realise that they should not let the railway system disappear because it can move the bulk coal. Are we going to depend upon the juggernauts which will ruin the beauty of this country? Are we going to make acres and acres of concrete out of our fields and farms? Let us get back, for God's sake… I heard today that, when somebody looked at new railways laid in Britain, he saw one rail piece of steel which was produced by Krupps. Here is Britain, one of the biggest railway engineers in the world, and we are importing steel railways when we could be making them. To allow the British steel industry to disappear is a sin against the Holy Ghost.

I come to the last point, noble Lords will be delighted to hear. I want to ask whether Mr. MacGregor is going to be allowed to "Beechingise" the British coal industry as we "Beechingised" the railways of Britain. If that is an answer, any damn fool could give that kind of answer. We want a constructive answer to the industries that mean power. We should return to that old-fashioned phrase —the Ministry of Power. Power means that it could be linked with defence and the movement of Britain's goods.

3.42 p.m.

Lord SHINWELL

My Lords, my noble friend in an eloquent speech that he described as brief—it was brief, succinct and incisive—conjoined the subject of coal with that of defence. Naturally I am tempted to intervene because, as it happens purely fortuitously, I was associated with both. I am not quite clear whether my noble friend Lord Davies sought to reduce defence expenditure and devote the surplus to subsidising the development of our coal industry, or whether he thought that the coal industry would develop according to his forecast, although not the forecast of my noble friend Lord Lee of Newton in his very eloquent and knowledgeable speech, and we could subsidise the defence requirements by using the profits derived from the production of coal. But this is not the occasion for a debate on either subject. Whether we prognosticate about the future of coal or whether we decide one way or the other about the propriety, desirability and ability to provide adequate expenditure in order to promote our security, this is not the occasion for a debate on either subject.

Our purpose, so far as I can gather, is to summarise the beneficient effect of the Coal Industry Bill, the Government's legislation. Whatever we do, let us not indulge in too much forecasting. After all, I had to forecast a long time ago. Here I enter, as did my noble friend Lord Lee of Newton, the subject of administration. I began to administer in the legislative field long before he did; that was purely accidental, a matter of accident of birth. I had to forecast when I was Secretary for Mines in the first Labour Government. There were problems then. There have been problems ever since and I add, for what it may be worth, despite this piece of legislation and the euphoria about the production of coal reaching its target or nearly reaching its target, I would not care to indulge in optimistic forecasts about the future of the coal industry.

That seems to be somewhat pessimistic, but we have to take account of the possibility, indeed, the probability which is likely to be factual, of the production of coal in other coal-producing countries. In the United States of America they have hardly touched the fringe of their capacity to produce coal. They are still operating on the surface; they have not as yet gone deep down. In the vast steppes of Russia, Siberia and elsewhere, there is an abundance of coal deposits. There is a great deal still in Poland, and, indeed, in other parts of the world. Even in the African countries the sphere of coal production has never been explored or exploited.

I leave that aspect of this subject to come to the point. My noble friend Lord Lee of Newton made a significant observation; if I may say so with respect, it was perhaps the most important observation in the course of his speech. He said that we are very much in the dark and that the Government were leaving us very much in the dark because they were only prepared to forecast as far as 1983. That is not so far ahead; as one gets older probably it is far ahead, but for those who are younger it is only a matter of months or so. By that time what is to happen? New coal seams are being developed and surveyed in other places. That is not where the vast expenditure is entailed. Of course, there is vast expenditure, but does it reach the highest level of expenditure? In any event most of the money for capital development is borrowed, and rightly so. That always was the case even when the industry was privately owned. Many pits went out of existence because they became bankrupt. There was no money available and the banks would not provide it. Therefore, what is to be done?

The most important consideration for our national coal industry—I emphasise the term "national coal industry", because so far it seems to be the only nationalised industry or service which is being retained by the Government; the others are being rapidly disposed of—is what may happen in the future, and that is difficult to say. Some parts of it may be hived off. Who can tell? One would not care to forecast about that. But what is important is that we should seek to develop rapidly, without any false, mistaken hesitation, and with the utmost ability—scientific, technical and technological—at our command, the processing of coal in order to produce a vast array of commodities.

My noble friends both spoke of oil production. That is a mere bagatelle. In any event, we may not need it. We may have nuclear energy at our disposal. But we need it for the purpose of producing those commodities which are in the pharmaceutical market—even the humble aspirin—and perhaps foodstuffs. Who can tell what may be derived from the processing of coal? It is in the technological field that we can hope for great developments, and there we can indulge in some optimism. Otherwise, I am not so sure.

We do not want long speeches on the subject, so I think I can conclude by saying that this is perhaps the only Coal Bill that I can remember which has not aroused much controversy. There have been all the other Coal Bills ever since 1924, when I was Secretary for Mines in the first Labour Government, and had to negotiate on the subject of wages as between the Miners' Federation and the coal owners. I successfully managed to persuade the coal owners to grant an increase of 13 per cent. which they did, not because of my persuasion but because our coal market in exports to France had accelerated and there were some profits available. The following year, it was otherwise. So much so that Mr. Baldwin, the Prime Minister, intervened by pro- viding out of the Exchequer £25 million which was not even enough to prevent trouble, as a result of which we had the General Strike a year later in 1926.

Therefore, let us use our energies in every possible aspect, in every possible direction—technical, scientific and technological—and in every field which is available to us, in order to produce a vast array of those commodities which we can either use internally or export to other markets. But let us always keep in mind the possibility, as we spend more money on the development of our coal seams in the United Kingdom, that the United States may compete with us, as will the Soviet Union, and there may be other countries. So we must be prepared for an eventuality of that kind.

I hope that those observations in which I have indulged will not be regarded as too pessimistic, but they are not intended to be optimistic either. They are factual, in my judgment, and on that basis, and on the assumption that the Government meant well, and mean well, and do not intend to intervene in the nationalised coal industry as they have done in other aspects of nationalised industry, we accept the Bill for what it may be worth.

3.54 p.m.

The Earl of GOWRIE

My Lords, when I begged to move that the Bill be read a third time, I tried to do so in the most uncontroversial manner possible, because I thought that I might head off debate. But, of course, it would be an innocent Minister who expected that an important Coal Bill would not receive comment on Third Reading, in spite of our having had a fairly good run with it on Second Reading. I must say, such is the importance that we attach to the industry and, indeed, to the Bill, that no one could resent the fact that it has caused a certain amount of comment. I shall try to answer, in as expeditious a way as possible, the comments which have been made.

The noble Lord, Lord Lee of Newton, was anxious about the degree to which the Government were committing the industry to forecasts or targets. In fact, we do not believe in setting our policies in terms of targets to be achieved regardless of other circumstances. We believe in creating the conditions in which the efforts of individual industries can be rewarded with success, and then in leaving specific decisions and actions within this framework to those people who are qualified to take them; that is to say, within the industries themselves. That is the whole reasoning behind the present Bill and, indeed, it is no more than the reasoning behind our policies, particularly policies towards the public sector trading industries generally.

In the Second Reading debate, the noble Lord, Lord Lee of Newton, told us—most interestingly, if I may say so—of some of the issues that he grappled with as Minister of Power. Your Lordships will be aware that when I go to obtain my briefing on these subjects, I pass a photograph of the noble Lord in Millbank and it gazes down upon me—I hope benignly. I think it is common ground between us that not all the decisions taken since the time when the noble Lord was in office, or indeed at other times when my own party has been in power, have altogether been proved right by events, but some decisions have been proved right and I am sure that the noble Lord is associated with many of these.

In particular, in the 1960s, by and large, the course was rejected of using oil as the principal fuel for our power stations. When we plug coal, we must not forget that as early as 1961 this country took the view that it should not be mono-dependent on oil. Indeed, a Conservative Government first introduced a tax on heavy fuel oil in that year. It is now clear that those who seemed at the time to be, and were often accused of, hankering after past ages were in fact far-sighted. As a result of their actions we find ourselves in this country in the relatively fortunate position which I mentioned in Second Reading, in that over 70 per cent. of our public supply electricity is generated from coal. Indeed, the use of coal in power stations has risen from 53 million tonnes in 1960 to 89 million tonnes in 1979. While we have enjoyed some growth in that period, the disparity with the natural growth rate is still fairly substantial.

An inevitable consequence of these decisions earlier is that there is rather less scope for some of the kind of progress which has been urged upon me now.

Indeed, in the long term we expect nuclear power to play an increasing role in electricity generation. I have always been glad to remark that your Lordships are a somewhat pro-nuclear House, taken across the board. Though coal is expected to continue to be the dominant fuel in this area for many years yet, we must nevertheless look to the time when coal may be too valuable in other areas—for liquefaction, in which I know the noble Lord, Lord Strabolgi, is very interested—to burn in power stations. It is in this sense that the nuclear programme is surely complementary to, rather than competitive with, coal. At the same time, the NCB is energetically pursuing a programme of research and development on these new uses of coal, which will become more and more vital as oil and gas become even more scarce and expensive. There is some ground between ourselves and the noble Lord on this.

It is this re-entry of coal into not so much new markets as markets which it dominated not very many years ago—general industrial markets, domestic, gas, transport—that is the really exciting prospect for the industry in the years ahead. It is exciting, but also challenging. Though progress is being made, many of the technical difficulties are still considerable. In areas of research and development, we have a leading position and we hope that British industry, as a whole, will grasp the opportunities that this offers.

So far, I have been talking long term and, indeed, our strategy for coal looks to the long term. But the noble Lord, Lord Lee, has accused our provisions of being short-term and has pointed out, rightly, that the Bill covers only the period up to 1983–84. I do not think that this really need be a considerable difficulty. The reason for the limitation is very simply that the coal industry is so important to this economy that it needs full review by Parliament. That framework of time up to 1983–84 is a framework not of the development of the industry as a whole but of the parliamentary review and scrutiny of that industry. As I said at Second Reading, I am delighted, with the assumption, which the noble Lord makes, that I myself will be making this scrutiny subsequent to 1984.

May I turn quickly to some other specific points which were raised by the noble Lord, Lord Lee of Newton. On his comments about the times before grants finish, may I say that the programme for phasing out operational grants was agreed with the National Coal Board, following wide discussions. However, as I said earlier, social grants will continue and the Bill provides for the maintenance of NCB investment. On the NCB's borrowing structure, which the noble Lord, Lord Lee of Newton, cited, the Bill does not lay down any particular maturity structure for NCB borrowing. The present structure follows the recommendations of the 1978 White Paper on nationalised industry finance and should therefore, I think. be non-controversial between us. As the noble Lord said, the Government are keeping the position on nationalised industries' forecasting and accounting generally under review.

Looking again towards the future, the noble Lord, Lord Lee of Newton, asked me about energy supply and demand prospects and how these could be tailored to the projections in the Bill. The Department's most recently published energy projections suggest that after incorporation of allowances for conservation, which approximate in our view to a reduction of some 20 per cent. or so in demand, total primary fuel requirements in the year 2000 could be 445 to 510 million tonnes of coal equivalent, depending on our rate of economic growth. As the noble Lord himself said, obviously we are involved in conjecture here and we must make sensible guesses and estimates. The potential indigenous supply by the end of the century is estimated in the range of 390 to 410 million tonnes of coal equivalent. This includes a possible installed nuclear capacity of up to 40 gigawatts—approximately a fourfold increase on capacity already installed or under construction. The upper estimates of coal and nuclear power will not of course be reached without great efforts by us all.

The noble Lord, Lord Shinwell, is correct in drawing attention to the great potential for increased coal production which exists in some of our competitor countries—in the United States, in the USSR and, indeed, in Australia within the Commonwealth. The market price level for coal will be set by the production levels which these countries achieve. For our coal industry to be viable, it must continue to compete and it is at getting it in the shape for successful competition that this Bill is primarily directed.

The noble Lord, Lord Lee of Newton, I think it was—and the noble Lord, Lord Wynne-Jones, raised this at Second Reading—asked me about Phurnacite. The Government have explored with the NCB the possibility of special financial assistance on non-commercial terms to enable the Coal Board to replace the two oldest of the six batteries at the Phurnacite plants by the Ancit process, which is owned by National Smokeless Fuels Limited, a wholly-owned subsidiary of the NCB. The cost might he some £36 million, of which £5.5 million might be met by regional development grants. After the most careful consideration we have decided against giving special assistance, but we are bearing in mind that there are other ways of securing the continued production of Phurnacite. If this continued production is not possible by these means, we shall of course review the position. What we want to do is to see how we can best continue production while minimising environmental problems.

Much of what we have talked about this afternoon relates to conjecture and to the future. An example of the Bill's provisions which is related to the longer-term needs of the coal industry is contained in Clause 2, which empowers the Secretary of State to make loans to the Coal Board, with interest deferred. As was stated in Committee in another place we expect to make such loans for a period of up to 25 years, with payment of interest deferred for up to 10 years; but the terms of each loan will depend on the project to which it is related, which is only sound commercial sense. This measure will give the Government a valuable measure of flexibility in assisting the Coal Board to finance projects within a long lead term while yet maintaining sufficient disciplines upon the Coal Board to make the whole project worth while.

Finally, in all this discussion we must not forget that the coal mining industry depends overwhelmingly on the people who work in it, and it will go on doing so for many years yet, whatever the technological improvements that exist.

There have been huge strides in mechanisation. These have allowed great improvements in productivity and, as important at least, have led to improved and safer working conditions underground. But I think that the day of the totally automated pit is a very long way off. We cannot foresee underground gasification geing a major factor in Britain in the foreseeable future, although as my noble friend Lord Lauderdale said at Second Reading it could be the only way of exploiting the huge reserves of coal which have been found in the course of drilling for oil under the North Sea. I think that my point is clear: that for the rest of this century at least and for most of our lifetimes the winning of British coal will depend on the skill and the rewards of the British miner. It is with this in mind that the Bill extends the social grants in duration and scope, and I welcome the close attention which has been paid to this aspect at all stages of the consideration of the Bill.

May I say how valuable we on this side of the House, and our colleagues in another place, have found the contributions to the debate and the discussions which have come from all sides of the industry as well as from Parliament during the past weeks. The Bill has attracted a lot of interest but also, I think I may say, a lot of support, and this reflects the level of concern that we all feel for the future of the coal industry.

Lord DAVIES of LEEK

My Lords, before the noble Earl sits down, I hope that he is not going to ignore the importance of the entire issue of energy and power production to defence. I asked a simple question: Are there ever any discussions between the noble Earl's Ministry and defence? If there are not, there should be.

The Earl of GOWRIE

My Lords, I apologise to the noble Lord, but I felt that I had dealt with this at Second Reading. It is impossible to design, as the noble Lord intimates, a coherent defence policy without relation to energy policy and issues of energy supply, and the coal industry is very important in this area. So these things are quite continuous.

On Question, Bill passed.