§ 8.11 p.m.
The Earl of GOWRIE
My Lords, I beg to move that this Bill be now read a second time. It gives me very much pleasure to do this in view of the importance of this Bill, which, as was said in another place, is an expression of the Government's confidence in the future of coal and in those people, both management and men, who work in the coal industry. Over the past seven years most of us—in all parties—have completely altered our views about the future of the British coal industry. In the late 1960s it was fashionable to write coal off. The NCB was doing a good job—of running the 1133 industry down. In the financial year 1967–68, for instance, 62 pits closed and the labour force fell by 45,000. It was the same all over Europe. As late as 1973 the European Commission felt that coal would not be a significant factor in the future energy supplies of the Community. As the Middle East oil poured out of the ground faster and faster, it seemed to almost everyone that the age of coal was over.
Fortunately, there were people who took a far-sighted view of energy supplies, and I think there were more of them in Britain than in most other countries. In 1973—under a Conservative Government—the National Coal Board drew up its Plan for Coal. This plan was for nothing less than the complete reconstruction of the industry; for its transformation from a declining industry struggling with worn out, uneconomic capacity to an altogether modern industry operating with high efficiency and allowing its employees improved working conditions, and with great potential for general expansion. By the time Plan for Coal came up for Government approval—in 1974—we had all been rudely shaken from our complacency about unlimited cheap oil supplies. The Labour Administration of the day gave the go-ahead. We on these Benches, then in Opposition, affirmed our support, and the new investment built up. It is now standing at record levels—around £800 million per year in today's prices—and the recent public expenditure White Paper shows that this rate is continuing.
Although lead times are long in this industry, the signs of the new investment are now coming through. I am not thinking merely of the super-pits such as Selby—the first time a new coalfield has ever been developed in a fully planned and integrated manner, with full regard for the local environment—but I am thinking also of the many pits which are being reconstructed all over the country to give increased productivity and extended life. Overall, there are encouraging signs that the long decline in deep-mined output has been reversed, and last year there was a useful improvement in output per man-shift which combined with a decline in absenteeism to give an improvement in output per man-year of some 4½ per cent. This is in an industry, as I have said before, which has few criticisms of the Chancellor's 1134 direct tax cuts. Plan for Coal is well on the way. The delays that have occurred were not, so far as I know, the result of any Government's actions. In any case, they should now be disappearing and the plan should be more or less completed by later in the present decade.
The demand side, too, is important, and progress is continuing there. In the past few years the proportion of our public supply electricity that is generated from coal has increased—from 57 per cent. in 1974 to 71 per cent. in 1979. At the end of June there took place the economic summit in Venice, attended by my right honourable friend the Prime Minister and my noble friend the Foreign Secretary as well as my right honourable friend the Secretary of State for Energy. In the communiqué issued at the end of that summit the countries represented together committed themselves to a doubling of coal production and use during the next 10 years. For many of these countries, their part in this commitment will consist of the kind of actions that we in the United Kingdom have been taking consistently since 1973. Thanks to the foresight of Governments of both parties and the enterprise of the management and labour force of the NCB, we have come a long way.
We start further down the road than most of the other Venice powers. For example, I mentioned a moment ago that over 70 per cent. of our public supply electricity is generated from coal. The next highest figures are 55 per cent. for West Germany and just under 50 per cent. for the United States. The other four countries are way behind these levels. In terms of overall primary energy supplies, the contribution of coal was, in 1978—the most recent year for which comparable figures are available—33 per cent. for the United Kingdom, 27 per cent. for West Germany, 19 per cent. for the United States and only 14 per cent. for Japan. In registering my pleasure at that lead, I do not, of course, find any cause for complacency, but it is at least a symbol of the affirmation that we in Britain have already made—long before most other countries —that coal must be developed. If we can get our investment and productivity and output right, as I confidently believe we shall, the large sums of public money involved will have been justified.
1135 The Bill aims to consolidate this lead and put the coal industry on a firm basis for further expansion. It is the Government's view that the potential of British coal can be realised fully only if the industry is operating in a competitive and financially viable manner. On taking office, the present Government found that the NCB's finances were in a disquieting state. For two or three years the industry's reliance on Government grants had been growing. For the financial year 1979–80 alone they total over £250 million; of this, about £60 million is social grants whose purpose is to help meet the burdens which arise from the past run-down of the industry and to assist in meeting the problems of transition from old industry to new. We expect to continue with these. But the remaining £190 million relate to operational grants which effectively make up losses incurred on various aspects of the Board's commercial operations. For 1980–81 this total is expected to be about the same. But following an extensive review of financial prospects with the NCB we believe that the Board should be able to achieve at least a break-even position by 1983–84. In the years to 1983–84 there should be a tapering provision for operational grants and from 1983–84 onwards the Board should not need any more operational grants, although, as I have said, we expect to continue the social grants.
Accordingly, the Bill has three main objectives. First, it increases the Board's borrowing powers to allow the tempo of their investment to be maintained. Second, it makes provision for operating grants to continue up to and including the year 1982–83. Third, in relation to the social grants the Bill extends the time limit to 1983–84, widens the range of these grants and increases the financial limit to accommodate such changes.
In detail, first, the borrowing powers. The National Coal Board's present borrowing limit is £2,600 million, which is the maximum under the 1977 Act. This level is expected to be reached during the winter, and with NCB investment running at £800 million a year an increase is clearly necessary. The Bill increases the limit to £3,400 million, with provision for further increases by order up to a maximum of £4,200 million. Bearing in mind the extent of grants to the NCB and an in- 1136 creasing proportion of funds generated internally, these increases should last the Board until some time in 1983, at which time a further parliamentary review of the board's progress would be appropriate.
§ Lord WYNNE-JONES
My Lords, I thank the noble Earl for giving way. I wanted to ask him about the differentiation between the operating grant and the social grant. Is the operating grant purely for normal operations and the social grant for situations where there are special, severe losses? What is the meaning of the social grant as differentiated from the operating grant?
The Earl of GOWRIE: My Lords, I think that my brief is clear on this, and if the noble Lord will be patient I shall come to it. Briefly, we must distinguish, as in all industries, between monies provided for daily operation, which, as we say, we expect increasingly the board to be able to generate itself, and monies for capital investment, which is the bulk of the big increases that I have mentioned, and what I call social grants, which are to ameliorate the effects on individuals and communities of the structural alterations in the industry as a whole. I think that the brief will cover this.
Clause 2 of the Bill permits the Secretary of State to make loans to the board on terms which allow the payment of interest to be deferred for a number of years. This provision will give the board additional flexibility in its finances by allowing major projects with a long lead time to be financed over a timescale which matches more closely their revenue earning capability. But there is no element of subsidy in this provision—interest is deferred, not forgone.
Next, to deal with the second main objective of the Bill: Clauses 3 and 4 make provision for the operating grant payments to 1982–83. Clause 3 of the Bill introduces a new concept: the deficit grant which it is intended will form the bulk of such payments to the board. Formerly the board have taken the Government grants as constituting part of their revenues before arriving at their profit or loss, and we think this is wrong. But the Government have now given a direction to the board to present its accounts in such a way that the deficits grant is shown explicitly for what it is: as 1137 a Government grant to make up losses. The change is purely one of presentation but we think this is the right way to present the accounts; it will enable the industry's progress towards financial viability to be seen clearly by the taxpayers.
Clause 4 sets an aggregate limit for deficit grant and the other operating grants introduced by previous Acts—coking coal subsidy, stocking aid, assisted coal-burn, and the like—over the period 1979–80 to 1982–83; after that time, as I have already said, the operating grants should no longer be required. Within this aggregate limit the Government have in fact agreed with the NCB annual limits for operating grants. In 1979 survey prices these are £135 million for 1980–81, £109 million for 1981–82, and £28 million— a severe tapering—for 1982–83. Payments can be made up to these limits adjusted for inflation—so that in 1980–81 we expect to pay out over £170 million, which represents the £135 million I have just mentioned with an appropriate adjustment for inflation. Incidentally, that should be a good indicator to anyone attending to these things of exactly the kinds of problems which inflation causes, and how urgent it is therefore to take drastic steps to reduce it.
Clause 5 repeals the power to pay regional grants. These grants were originally introduced by a Conservative Government to deal with the problems of a contracting industry, and are no longer needed under the new régime.
The final part of the provisions of the Bill is concerned with social grants. I gave a quick indicator about these to the noble Lord, Lord Wynne-Jones, a few moments ago. We expect the need for these grants to continue for it is only right that the Government should continue to help the coal industry in its unique circumstances to deal with the burdens of the past and to cope with the strains of transferring itself from an old worn-out and declining industry to a new and vigorous and expanding one, and to assist individuals who would otherwise bear an unfairly large share of these transitional pains.
The Bill proposes a number of improvements in the social grants. First, when a pit has to close it is often possible to find work at a nearby colliery for most of the 1138 men. Clause 6 will widen the basis of the Government contribution to include the costs of the disturbance allowance and the retention money which the board will be paying to encourage the men to stay in work at the new job. Increasingly, also, trained and experienced men will be needed to man up the new faces and new pits that are being constructed. I think we had mention of training issues in the coal industry at Question Time this very afternoon. So it is in everybody's interest that any such men who have been made redundant—perhaps at a pit a long way from the new developments—should be given sufficient financial inducement to move rather than to remain unemployed. I hope that this is an aspect of mobility that will find favour with noble Lords opposite. The board will therefore offer a disturbance allowance of £2,000, generous removal allowances and also retention payments. Clause 6 will enable these payments to rank as "relevant expenditure" so that they can qualify for Government grant. The board believe that these additional transfer payments will be attractive enough to bring skilled and experienced men to the new pits.
Furthermore, Clause 7 extends the scope of the Redundant Mineworkers Payments Scheme to men employed at coke ovens and coking plants, and so ends an anomaly, whereby men who mine coking coal, who are declared redundant, receive handsome payments partially financed by Government, but those who work at the board's coke ovens and are equally affected by the decline in demand for coke receive no Government contribution. Clauses 6 and 7 also extend the time limits on grants set in previous Acts, and raise the financial limit to accommodate the changes and allow existing schemes to continue to 1983–84, although there is no intention that the social grants should cease then if they are needed.
Finally, the purpose of Clause 8 is to go some way to remedy an anomaly that has long worried the Coal Board and the mining unions. When the coal industry pneumoconiosis compensation scheme was agreed in 1975, because records of pneumoconiosis victims who had died before 1970 had been destroyed, only small flat rate sums were allocated for their widows. Clause 8 provides an extra £7 million to enable the Coal Board 1139 to pay additional lump sums to these widows to bring them up to a more reasonable standard.
Let me conclude by saying that the Bill aims to create the conditions for a successful industry, looking to the future rather than the past, and building on the achievements already made. The Government have every confidence that the industry will respond and make good use of the opportunities that the taxpayer has given it. My Lords, I beg to move that the Bill be now read a second time.
§ Moved, That the Billl be now read 2ª.—(The Earl of Gowrie.)
§ 8.30 p.m.
§ Lord LEE of NEWTON
My Lords, the noble Earl gave a little of the background to the problems the industry had some years ago. He recalled my past. I was in the middle of all that, and the great change in the fortunes of the coal industry since that period have been quite dramatic. We lived through a period in which we saw the industrial, domestic and export markets for British coal contracting rapidly, with the result that a great many pits had to be closed. In those days, as the noble Earl said, there grew up a strong belief that the day of coal as a major supplier of the nation's fuel was almost over.
The decline to which the noble Earl referred, however, did not begin in the late 1960s. It began in the 1950s, and between 1957 and 1959 coal consumption fell by 33 million tons, the NCB cut back its production by 28 million tons, manpower fell by nearly 120,000, and despite all those things, stocks increased to some 36 million tons. That sort of cutback continued in the early 1960s, and by the time I first arrived at the Ministry of Power, which was in October 1964, the industry was in need of immediate short-term assistance. I persuaded the electricity and gas industries to increase their requirements by about 5 million tons, and I persuaded my Government colleagues to give a 5 per cent. preference to coal over oil in the buildings which were under their control. That was the short-term remedy one had to apply as soon as one could.
So far as longer-term policy was concerned, we looked at the Coal Board's 1140 capital debt—I will not go into the details of that at this late hour—and wrote off some £415 million of it, which was worth in interest rates alone well over £30 million a year, which was of appreciable assistance to the board in their period of very great distress. In addition, we produced the 1965 White Paper in which we tried to look ahead by five years, and we outlined the estimates for the coal industry in 1970 as something like 180 million tons.
The noble Earl will notice that when I was estimating in 1965 for the 1970 output, I was some 50 million tons above that which they are now producing, so amid the scenes of people believing that the coal industry was in decline, I was certainly not one of them; and if my 1965 White Paper had been allowed to go to fruition, instead of the rather negative policies which followed, I think that many of the problems of the coal industry we are discussing tonight would never have arisen. The figures which came afterwards—to be explicit, in the 1967 White Paper—reduced coal output to well below that which was consumed in 1970; 162 million tons was, I think, the consumption of coal in 1970, whereas the 1967 White Paper got it down to between 130 million and 140 million tons, a rather ridiculous figure.
I will hurry because of the lateness of the hour, but I have given that brief sketch of the history of the industry in the last 20 or so years in order that we may appreciate the very dramatic change of outlook now as against that of a comparatively few years ago. The position in that period was well stated by the present Secretary of State for Energy early in his speech on Second Reading of the Bill, when he said:It must be recognised that in the past there was undoubtedly a feeling that the coal industry was no more than a survival doomed to irreversible decline and early extinction".That put it very well; the feeling was there. As I said, it was an opinion I did not share, and one did what one could to prove it to be utter rubbish.
The noble Earl spoke about the desire to keep a coal-intensive economy, and again I am all for that. Indeed, in that period, despite all the closures and problems, we were by far the most coal-intensive economy in Europe, and I 1141 rejoice to think that we are still probably in that same position. It was heartening to hear the noble Earl say that deep-mined output is now on the increase and that output per man year and per man shift is showing a significant improvement. Undoubtedly he was right in telling us that these results reflect the value of the quite huge capital programmes since Plan for Coal was introduced, and the figures now certainly justify the large increase; £600 million to £800 million a year over the next four years is what we are talking about in the Bill.
The increased borrowing powers in Clause 1 are obviously very necessary and right. The deferred interest loans under Clause 2 are of course a most vital element in the package, but a great deal will depend on the manner in which the Secretary of State and the Treasury handle their demands for repayment of interest as the financial problems which are bound to arise in a huge programme of this type begin to develop. A too strict demand on such repayment at difficult periods in the development programme could prejudice the whole of the NCB's programme, and that would be most disheartening indeed.
I believe the most contentious issue in the Bill is the financial objective of setting the NCB to become profitable by 1983–84, by which time the operating grant will be discontinued. The pace of the decline in every step is considerable: 1980–81, £135 million; 1981–82, £109 million; and 1982–83, down abruptly to £28 million. Again, to quote the Secretary of State in his Second Reading speech:It is completely right that the Government should help the industry in its unique circumstances to cope with the strain of changing from an old industry to a new and expanding one".I wonder whether we could be told on what type of analysis they conducted their examination of the speed at which that transformation from an old to a new industry could take place? I can quite understand an estimate of the speed and cost of new faces in old pits cut to replace old seams—a process that is routine in any extractive industry; and I can well understand that one can get a fair estimate of the cost of that sort of development. But who can say what expensive setbacks involving geological problems can arise in such new, huge undertakings as Selby, on which there has 1142 already been vast expenditure, and on which much more money will have to be spent?
As yet we have not had the results of the inquiry into mining in the Vale of Belvoir, and even if the result is favourable there will be no coal to offset expenditure for many years—certainly not by 1984. Judging from experience one cannot hope to obtain a high level of coal supply from a new pit for at least 10 years. Yet here we are talking in terms of a cut-off date of 1984.
If the Venice conference is to be taken seriously, we are committed to trying to double our output in 10 years. I know that it has been argued that in this country we are not so committed. Perhaps the noble Earl can tell us about this. It is very vague indeed. It is said that the Americans, with their great seams, are going to be involved in this. To what are we committed as a result of the Venice conference? In the EEC compilations we are now talking about an increase from 170 million tonnes to 200 million tonnes by the end of the century. We shall have to make huge increases in the next few years if we are to stand any chance at all of attaining the lower figure, 170 million tonnes. I hope to goodness we do! We shall have a long way to go to reach the figure of 170 million tonnes, and even much further to go if we are to reach a figure anywhere near 200 million tonnes by the end of the century.
The figures in the Bill may seem reasonable enough, given the problems as we know them, but in the experience of many of us who have looked at this industry for years, no set of geologists has a monopoly of knowledge of coal measures that are as yet untapped, and to speculate on a date as near as 1984 is as much a gamble as George Orwell took on the same year. I shall not speculate on which of the two will prove the more accurate.
I support and applaud the contents of Clauses 6,7 and 8, dealing with increased grants in connection with the problems caused by pit closures. Indeed, I have a recollection of starting proposals of this kind a long time ago. The increased grants in connection with the pneumoconiosis compensation scheme are doubly welcome. The noble Earl outlines the 1143 anomalies in this regard, and I thoroughly agree with him. There is also the question of the redundant mineworkers' arrangements. If one visits some of the coalfields in the area of my noble friend Lord Taylor of Mansfield, or even some of the more southern coalfields, one finds a great many Geordie and Scottish accents, and this is a reflection of the fact that arrangements regarding redundancy were started many years ago; and they were highly successful in many respects.
I do not want to delay the House for much longer. For the future, the costs of the changeover to gasification and liquefaction, which will be the modern methods of using our coal, must yet be speculative, and there must be no stultifying of progress in these fields that would hold back the industry's huge modernisation programme.
There are parts of the Bill of which I obviously approve. However, I am greatly worried about the cut-off date. I believe that the Government are placing the NCB in a financial straitjacket. Geological faults can cause months and months of delay and involve millions of pounds of extra expenditure beyond what was anticipated. Bearing in mind our experience of the steel industry, and the way in which a financial straitjacket made such an awful mess of it, I hope that the Government will think again on the question of a cut-off by 1983–84.
§ 8.45 p.m.
§ Lord TANLAW
My Lords, we on these Benches wish to give a general welcome to the Bill, which should be an essential step forward in the implementation of a capital investment programme to safeguard the future of the British coal industry. The spirit of the Bill reflects the views of the Community that were expressed at the Summit in Venice. These were that coal not only has a future, but must have a future as part of the Community energy policy and for the national energy programme that exists within it.
As noble Lords are aware, the Bill has been very fully debated in another place, and the seven sittings of Standing Committee B have covered virtually all aspects of the Bill, leaving this House with 1144 what is more of a depillaring exercise, rather than a deep extraction operation, in my view. However despite all that has been said about the Bill, it would be most helpful if the Government could define some of the monetary terms of the Bill and their implications.
We must accept that it is the Government's objective to make the industry profitable and be subject to competition and market forces, but are these terms really meaningful in the British coal industry? As the noble Earl is aware, I have raised this point on a previous occasion with regard to the gas industry, and I again wish to ask Her Majesty's Government about some of these matters.
Let us consider for a minute the term "market forces" in relation to the coal industry and look at the Coal Board's main market areas. As everyone knows they are the CEGB, which absorbs most of the production from British coalfields, and the British Steel Corporation; and indirectly linked to these markets is British Rail, which undertakes the delivery of coal from the pitheads. Each of these entities is Government-controlled and is in a virtual monopoly situation. Therefore, market forces in the context of the coal industry must mean negotiable costs with other related nationalised industries. This is a completely different picture from what is generally accepted as market forces in the private sector or in any world business context. Perhaps the Government can explain the term with reference to the Bill, and give an indication of whether they are prepared to make a distinction between genuine market forces and the in-house market arrangements that can best describe the marketing policy of British nationalised industries.
The same reasoning can be made for the term "profitability", which is the main objective in the presentation of the Bill, according to the speech of the right honourable Minister for Energy in another place. I believe that the term "profitability" also needs clearer definition in relation to the coal industry, if it is to mean anything, and should be related to efficiency of operation, which is perhaps what the Minister really has in mind. There must be a difference between commercial profitability and the in-house surpluses of the nationalised industries, of which the coal industry is one.
1145 I consider that to be particularly relevant when the Government are considering the closure of what are called unprofitable operations by the Coal Board. This is not just an academic point when the future of miners' jobs and families is at stake. This afternoon in the Peers' Lobby I met a deputation from the Chamber of Coal Traders who approached me about the anthracite mines in South Wales. They accept in the industry that these mines are unprofitable; at least two of the six of them are unprofitable. On the other hand, if these mines do not function and do not produce anthracite, consumers, both industrial and domestic, using anthracite boilers, will have to resort to imports. As the noble Lord, Lord Lee of Newton, said, there are also geological structural problems with anthracite mines. So if the yardstick of profitablity is to be used in the anthracite section, I ask the noble Earl to confirm whether these other considerations have been looked at; for instance, that part of the industry would have to run imports for the future.
Now I should like to come to the main objective of the Bill, which is the financing of capital investment for the coal industry's future investment programme. If the limits on the aggregate amount of borrowing by the board and their wholly-owned subsidiaries are to mean anything, can the Minister indicate at what rate the discounted cash flow for these programmes has been measured? I would hope the Minister has used the method of the discounted cash flow in these investment programmes, which is quite a usual form of assessment in the world of commerce. For those noble Lords who are perhaps not entirely clear as to what I mean, I could describe the discounted cash flow method as a conventional means of measuring the profitability of capital projects which involves the discounting of capital outlays and future cash flows at various rates of interest. The interest rate which, when applied at the discounted rate to future earnings, gives a present value which is equal to the present value of the capital outlay discounted at the same rate of interest, is the measure of profitability of the project.
The point I am making is simply that if profitability is to be the yardstick of the Government's investment programme in 1146 the coal industry, how is it measured? The rate of discounted cash flow would give the House a clear guidance as to what the borrowing figures contained in this Bill actually mean; and if the Government are unable to give the discounted cash flow rate it means that the interest rate on the borrowings contained in this Bill may not have been determined, and therefore could even call into question the validity of the capital borrowing figures contained in the Bill.
There is a further point which has not been touched on in any of the debates so far with regard to the future of the National Coal Board's investment programme. This is covered in Clause 1 of the Bill, which says in line 9 on page 1:… but the Secretary of State may with the approval of the Treasury… ",and so on. This phrase is repeated at various intervals throughout the Bill, and I am sure it is intended as a conventional protection that the Coal Board's borrowings do not upset he finances of the central Exchequer. However, all too often in the past, as we know, it has been the intervention of the Treasury, exercising these very same powers asked for in the Bill which is before us this evening, which has postponed or interrupted the implementation of capital programmes which are part of the nationalised industries. Whatever the reasons for this may have been at the time, in our view one thing is certain, and that is that the net cost to the taxpayer at the end of the day has been greatly increased due to these interruptions or postponements of capital programmes proposed by the nationalised industries. Therefore, what is Her Majesty's Government's response to the plea that was made yesterday by the chairman of the Coal Board, that investment in his industry should not be included in the public spending borrowing requirement?
In this period of recession, such interventions by the central Exchequer would not only add to the net expense of these investments to the taxpayer but aggravate rather than alleviate the critical unemployment situation that faces the country today. If I can take a hypothetical case, suppose a small company has perhaps pared its costs to the minimum in order to obtain a contract from, let us say, the Coal Board to supply goods as part of the capital programme 1147 that is before us. Having won the order against strong competition, the company will take this along to the bank manager to obtain finance for tooling and for stocking in order that he can fulfil it. The company may also have to take on more men to complete the work in the time.
If the delivery of this order, and therefore the payment for it, is postponed for 12 or 18 months, a small company is in these circumstances faced with almost certain liquidation. The reasons for this are obvious, in that it cannot afford, with the current high interest rates, to keep extra men idle for this period of time, or to retain these stocks without receiving payment for them. When the Treasury eventually agrees to the onward release of the funds for the investment programme, the Coal Board may have to find another company to supply the goods, at almost certainly greater cost due to inflation.
I mention this as an example because it is not often known how many companies go out of business by trying to assist in supplying for a nationalised industry's capital programme, and I am very hopeful that the noble Lord will be able to give confirmation that, in spite of these words saying that the Secretary of State has to wait for the approval of the Treasury before these programmes are implemented, interruptions of the kind I have described will not affect small company suppliers to the coal industry's programme. I just think that this will be a reassurance, especially to many companies on Clydeside who have tried to participate in capital programmes, both of the coal industry and of the shipbuilding industry, and have either gone into liquidation or been seriously embarrassed by interruptions from the Treasury by their not allowing these programmes to be implemented in time.
§ 8.55 p.m.
§ Lord DAVIES of LEEK
My Lords, first of all, I am grateful to the noble Lord, Lord Tanlaw, who was courteous enough to tell the Minister that he had to go, and courteous enough to tell me, also; so I understand fully the reasons why the noble Lord, and maybe some others, have to go. We have had a long and busy week.
1148 This is a fascinating Bill; and I think that when the opportunity of the Committee stage comes, or if we get the opportunity at some other stage—the Third Reading, perhaps—we might, at not so late an hour in the day, go into it in a little depth, because I am rather worried. Did I pick the Minister up correctly? He is a very careful and able Minister. Did he say that there is no element of subsidy at all in existence? I thought he said it, or it has been said with an aplomb and in a sort of gasconading way, saying, "Thank goodness there is no such element!".
The Earl of GOWRIE
My Lords, if the noble Lord would be kind enough to give way, I could clear up that point. The point I was making is that in the elements of deferred interest there was not a subsidy. The interest would have to be paid back.
§ Lord DAVIES of LEEK
I thank the noble Earl for clarifying that; but I worry a bit about Clause 2. Again, I will not go into this in depth because I do not propose to speak for more than about nine or 10 minutes. Whatever agreements come, in the last analysis, as never before,The approval of the Treasury shall be required for any direction given by the Secretary of State for the purposes of Section 2 above".I should like to deal with that in depth. In other words, decisions about the movement of cash and about the movement of aid will, in the last analysis, depend upon the Treasury's decision. What expert advice about mining will the Treasury have?
Then, when we are talking about subsidies, we should tell the British public. I wish the miners' union would use the television and pay for an advert, because 99 per cent. of the British public seem to have no idea whatsoever about foreign coal which is imported into this country and is making the British miner redundant. How is it brought in? Government support in Britain for a tonne of coal (and we are now using the Common Market word "tonne") is already as little as £1 a tonne, compared with £24 a tonne subsidy in Belgium, £14.5 a tonne in France and £11.9 a tonne in West Germany.
That brings me to Venice. There is a publication—I want to get it in the 1149 Library—called The World Conference on Coal Production. What was agreed at Venice? Was Britain moving into an agreement in Europe, where we are looking at the tonnage or production of the whole of Europe? And, even if we drop the tonnage of production in Britain, were we saying, "We can import European coal", which, we pretend, is being cut cheaper than British coal, or at least is getting bigger subsidies than British coal? The British public do not appreciate the fact that these vast sums of subsidy per tonne of coal are being paid out in France, in Germany and in other parts of Europe, and in the United States and Australia. And they pretend that this is private enterprise!
The real truth is this. We are trying to throw water in the face of facts. When Mr. Hill introduced the penny post at the height of British power and industrial progress in the Industrial Revolution it was a brilliant concept. What we lost on the envelopes delivering to Welsh farms we gained on delivering across the road in Fleet Street in penny letters. In other words, always under private enterprise the penny post was a success because what you lost on farmhouse and country and rural deliveries you gained in the business world, in the city and in the towns. So, when you say that a pit is not economic and therefore it should be shut, you should look at the pits as you looked at the penny stamp 50 or 60 years ago, when for the purpose of providing an efficient service to the public, a letter was dropped into a farmhouse telling the farmer of the price of pigs at the market; and although the delivery cost may have been a shilling, the letter went for a penny. For Heaven's sake, remember that I or anyone can make any pit uneconomic by loading it with expensive machinery! Let us look at this question of economic and uneconomic pits with wider eyes.
The other fact that emerges—and I am cutting 90 per cent. of a good speech —is that Mr. Howell, the Minister—Bless his heart!—quietly (because there will be trouble) has given himself an opening. Mr. Howell, said Robert Taylor in an article in the Sunday Observer of 22nd June 1980,has given himself an escape route from his monetary targets by suggesting that 'exceptional circumstances' could change the size of operating grants to the industry. But the overall impression, 1150 both in the NUM and in the Cabinet, has taken a political decision to bring the mighty miners to heel".That is the general impression. Nevertheless, shot into the speech was the fact that if things go wrong they can make a U-turn. Of course, they will have to! The policy is changed. The policy before Venice was for a target of coal. The policy now—and the noble Lord, Lord Tanlaw, played about with it; and, after all, we are all beaten by the clock—is profitability. Profitability is the target that is being put first.
Without going into masses of figures, we are assured that our coal resources are about 200 billion tons, 45 billion tons of which can be mined by normal methods. When we were making this target, what conferences took place with the electricity board to give guarantees that they would not import foreign coal and thereby undermine the strength of British coal? What discussions took place at Venice, before Venice or since Venice, with the Minister of Defence?
This House talks sometimes in Cloud Cuckoo-land about being strong with military equipment and cruise weapons. If we have not energy, if we are depending on coal from Europe, we cannot last. We won the last war because we were able to have a greater industrial base than Germany; we won the last war because we had energy. You cannot play about with economic tricks or the vagaries of Friedmanism or monetarism with a valid product like coal which is absolutely essential in defence policy. This Government have not discussed the issue in depth with the defence departments, either before or since Venice. I have mentioned this before in this House. How can you expect to make a strong Britain when you are waffling about importing coal from Australia, from America and from Europe to keep your furnaces and other things going, because you pretend that you cannot get Welsh coking coal or other coal of quality?
Let me ask another question. In a Government that is in charge of itself—and this Government is; the Minister is not an unintelligent woman, she is able, lacking wisdom occasionally but very able—what do the Government think of using money from oil income to support exploration and further improvements in 1151 research in the mining industry? The noble Earl, Lord Gowrie, always presents an excellent brief; and I welcome the social grants. I know what he means by social grants, having myself introduced a Bill on pneumoconiosis when I was a Minister. I am delighted with that. It would be bumbling of me and lumpen not to welcome the social build-up on this side. Of course, I do. I beg the Government to look at the income at the moment from oil, income that will not be here always, to subsidise the other energy assets we have in this country.
Another question and a nasty question! If coal is successful, is it to be put in a straitjacket so that the gurus of private enterprise, monetarism, Friedmanism, Hayekism and all the other "isms" shall be enabled to say "We will hive off the profitable pits, leave the unprofitable bits of coal digging to the National Coal Board and give private enterprise the successful new pits which in 10 years or so will be working"? The sad thing about this is that we have a three-year limit. Anyone who knows anything about pits and about coal knows that you cannot get a pit producing profitable coal in three years. Why is this limitation of three years here? It will tumble as sure as rain and hail tumbles.
I have dealt with the burden. I have paid an honest tribute to the Minister and the Government for thinking of the social side. What about movement of this great increase in coal? When we get another opportunity I will quote from the book on WOCOI. With the "Beechingisation" of our railways—the daftest piece of economic work imaginable in a society that waated to keep alive—we shall want new ports, railway sidings, huge railway buildings and more economic waggons for the use of coal. Seventy-five per cent. of our coal is still moved up and down on our railways. In certain areas where we know that coal is going to be developed we should keep the juggernauts off the roads and build railways to get that coal to the ports and stockpile it. My Lords, those are a number of constructive points. The night is late; I am enjoying myself; you are obviously tired; but thank you for listening.
§ 9.9 p.m.
§ The Earl of LAUDERDALE
My 1152 Lords, it is always a pleasure to follow the noble Lord, Lord Davies of Leek, who has spared us his anxiety about acronyms on this occasion. What he has given us and what has been noticeable about several speeches that we have heard already, is a relatively consensus approach to a national—even an international—problem where the lead times are not less than 10 years, which means that they cover at least three general elections. That is the reality. The fact that this debate takes place in this mood on this subject when 10 or 15 years ago there would have been cries about blood on the coal, and goodness knows what, is a mark of great advance.
To the noble Lord's point about hiving off the best "goodies" of the coal industry to private enterprise I shall come back later on. If there were time tonight—but there is not—I should like to take him up on his worries about the Venice meeting and the relationship between our energy policy and defence. I can only say that in my own personal and private contacts with Ministers in the Department of Energy over the past six or seven months, I have been repeatedly struck by their great concern with the security aspects, and their approach to the energy problem in terms of national defence.
This Bill is to be welcomed for its attitude to facts and to the flavour of a changing society and a changing economic environment, indeed a changing awareness abroad in the country at large, an awareness as to the governing facts, both inflation on the one hand and productivity on the other. My attention was caught by the words of Mr. Peter Baxenden, the Chairman of Shell Transport and Trading, a few weeks ago, who said:One word alone characterises world coal business for the next 50 years, and that is the word' growth'".He went on:Coal is the only energy source available in quantities sufficient to satisfy the growth in energy demand predicted to the end of the century".I notice also that the World Coal Study forecasts that coal used in generating electricity will at least double in the OECD countries by the end of the century and that industrial demand will expand by a factor of no less than two and possibly a factor of four over that period. The forecasts are that coal production within 1153 the European Community at 250 million tonnes a year at the end of the century is likely to be somewhere between 150 million tonnes and 350 million tonnes below demand. This of course is something to which the noble Lord has called attention more than once and so have I in Select Committee hearings and at other times.
The fact is that obviously the European Community will have scope for importing perhaps five times as much coal as at the present time. This is an issue which we shall have to explore on another occasion because it raises in the noble Lord's mind issues of dumping which I am sure are there though I wonder whether the dumping element is quite so serious and quite so decisive as he alleges.
What is however true about the present situation is that the doubling of oil prices over the past year has dragged other fuel prices with it. Thus the expectation is that world trade in coal could be expected to multiply between two and a half and three times by AD 2000, and steam coal could be traded then at 10 to 15 times its present volume.
That is the context in which I am delighted to see the NCB trading profit trebled over the period 1975 to 1979. We saw a trading profit rising from £40 million to £120 million on a turnover that only doubled. Those two figures speak a great deal for themselves. But what about the productivity schemes so bitterly attacked on political and emotional grounds—and irrational grounds—not so very long ago? The fact is that they have borne fruit and the output in the first three months of this year as compared with the same three months last year is up 5 per cent., and this at a time when manufacturing output slumped. Last year saw tonnage losses from disputes halved. This is a fabulous accomplishment; a drastic change-around. Absenteeism was the lowest for more than 20 years. These are fabulous changes, and while I believe it would be wrong and, indeed, out of place, to inject Tory politics into debate on a matter which I hope is becoming de-politicised, it is just worth pointing out that the productivity schemes were greatly assisted by cutting tax. This is a reality: we may like it or not, but let us accept if for the results that it has accomplished.
1154 Let us look at the position of coal in relation to other energy sources. The coal price per therm, taking oil as the marker, was about 80 per cent. of oil in January last. But six months later, oil having risen, it is now only 65 per cent. That is a measure of the advantage which coal is gaining all the time over other sources. This seems to lead to two strands of development. There is the plan for coal—itself a massive investment plan supported by both sides of British politics. It has its origins, as my noble friend was good enough to remind us, in studies under the Tories. It was carried on by the other side. We have honoured it and welcomed it and we are now as a nation benefiting from it. Then there has been an enormous improvement in output per man shift. As I wanted to say just now in another connection, while manufacturing output actually fell something like 2 or 3 per cent. over the first three months of this year as compared with last year, coal output rose 9 per cent. Productivity itself went up something like 5 per cent. These are such great achievements that they provide a proper context for the Bill. Now that the 1974 Plan for Coal is running its course and one might say has almost run its course, in that we are now getting the benefit of that heavy investment, the question is: what next?
Certainly the key to success cannot be everlasting subsidies. In an inflationary world they simply add to inflation anyway and as a form of printed money they simply disguise the situation. Now is the time for a return to reality of thinking. It is called for all the way round and I think it is already evident (if I may say so with respect to those who know the industry much better than I do) among the younger miners. It was only today that my noble friend pointed out to this House that trying to get into the pits nowadays is about as hard as it is to get into your Lordships' House. The queue for jobs for miners is getting longer and longer, because they are jolly good jobs. The day must come—and I look forward to it—when only those with a degree in science will be allowed underground. That, after all, is the condition that we would like to see eventually.
For the moment, the critical political purpose must be to allow the industry to be rescued from the maw of Government control and influence. It has been 1155 said more than once from the other side tonight that this recourse to the Treasury over and over again cannot be healthy, and it is not something that any of us really wants. But the only real way to sell coal—or indeed anything else—is to beat competitors on delivery, price and quality; and whatever the subsidy element may be on the Polish, Australian or South African coal, it does all carry a heavy oncost of freight, which is sometimes forgotten.
What is of course commonly not recognised, and which must be faced too, is that something like 50 per cent. of the NCB's running costs are in wages. I am not for underpaying the miners, because I believe that the better they are paid the better they work. We have seen that over the past year and therefore I am not decrying the miners or their claims; but honestly, their wages have to be kept in balance with the result and of course the fact is that the output per man varies by a factor of two as between the best and the worst regions, and by a factor of a good deal more than two between the good and bad pits.
In the simplest terms, this really is the case for closing the uneconomic collieries. I am not suggesting that it is easy to define what is an economic pit, because there are so many inter-relationships. But it is worth recalling that, at a cost of 200,000 jobs, something like 249 pits were closed—never mind by whom—between 1964 and 1970. My own view about colliery closures is that they offer a magnificent opportunity for the application of underground gasification, and I believe that this is an area which the Coal Board are beginning to appreciate and respect more seriously than hitherto. I believe that it has been clouded by political prejudice and we were told all kinds of stories about British coal being too tarry or too sticky to lend itself to this process, known commonly as UGC. The answer to that is to ask Humphreys and Glasgow, who conducted the Newman Spinney experiments in the 'sixties and brought out a very different answer.
Surely the future lies in the steady upgrading of mining skills. It also lies in the immense opportunities beneath the North Sea. There underground gasification is the only intelligible means of extraction that is now foreseen. It is being increasingly 1156 studied by private enterprise and it seems to me that this is an area where private enterprise must come into the picture, without any attempt to scoop up the goodies and the cream from the best resources that are already available to the Coal Board.
The prospectus, the programme and the philosophy from now on should be fewer targets but more realism as to price. We should consolidate the gains, modernise the mood and continue to give this Government and their approach to energy a warm welcome from a heart instinct with the principle of consensus.
§ 9.22 p.m.
§ Lord TAYLOR of MANSFIELD
My Lords, it is always a pleasure to follow the noble Earl, Lord Lauderdale, because we all know of his great knowledge in the sphere of energy, particularly as regards coal. Today has seen the publication of the 1979–80 annual report of the National Coal Board, and I feel that I cannot refrain from reading this line from a press report this morning:Old King Coal strikes again".So far as that goes, he has never finished striking and some of us have had more confidence in the importance of coal over the years than many other people who should have known better.
I have seen some ups and downs in the mining industry, because I have been connected with it in one way or another for many years. But this morning when I read those words, I thought that it would not be a bad thing to intimate to your Lordships tonight what the press is saying. The report went on:King Coal has had a royally successful year. Deep-mined output was up by nearly 4 million tons which was the first increase since 1963".My observation on that is that the colossal investment in the mining industry is now beginning to pay off. I can remember that in 1913—and I made a contribution to it—the global output of coal in this country was 287 million tons. There were no machines. It was all done by brawn. However, as the noble Earl indicated to us just now, output is up by 5 per cent. Fatal accidents were the lowest ever.
The first thing I have to say tonight will be about the human factor—that is, safety in the pits. It is true that this is 1157 not directly mentioned in the Bill but, believe me, my Lords, safety in our pits is an integral part of the operations of the coal industry. It always has been in some degree, and it still is. It is my belief that there is now a greater safety consciousness than at any time in the long history of the mining industry. And may this continue. So long as ever it is necessary to extract nature's treasures from thousands and thousands of feet below the earth's surface, I feel it is right—I make no apologies—that the question of safety in the pits should be mentioned in your Lordships' House. As I hope to show, it is worthy of a place on the record.
For only a few moments may I ask for your Lordships' indulgence so as to put the matter of safety in the pits in its proper perspective. I quote now from the annual report of the National Coal Board for 1978–79. Since 1950—it gives me great pleasure and a feeling of pride to make this statement—there has been a progressive decline in the casualties at the pits. For 100,000 man shifts worked—this may be, after all, the best guide in ascertaining the progress that has been made—in 1950, 30 years ago, there were almost 140 casualties. In the year 1978, that figure had been reduced to 94.6.
On the question of fatal accidents, they were fewer than ever in the year that has just passed. But in 1950—think of this astronomical figure in terms of the sacrifice of men's lives in extracting this previous treasure of nature from the bowels of the earth—there were 476 fatal accidents; and I remember the time when there were more than 1,000 a year. In the years 1977, 1978 and 1979, the numbers of fatal accidents were 38, 48 and 72 respectively. The reason why the figure was bigger in 1979 than in 1978 or 1977 was that there were two nasty accidents, one at the Bentley colliery in Yorkshire and the other at Golborne in Lancashire. It is true—I might be reminded of this—that in 1950 the manpower was much greater—690,000. Now it is about 235,000, but, even so, in the best of the last three years there is a welcome improvement and this also applies not only to fatal accidents but to serious reportable accidents. During the last 30 years there has been a welcome progressive improvement in this sphere of safety in the pits.
Without saying anything more about 1158 statistics, as one who has been connected with the mining industry for many years I want, in your Lordships' House, to pay my tribute most sincerely for the thoughtful diligence and care that has been exercised in this field, by both the National Coal Board and the National Union of Mineworkers. Right from pit level upwards this spirit of engendering the maximum amount of safety in the pits of Britain has been present. It must have been a very costly business: sometimes all that we do is to talk about output and money and what is it going to cost? Will there be a profit in it? But what has been taking place in the last thirty years in regard to safety has cost a lot of money, not only in the prevention of accidents but also in the provision of treatment when an accident has taken place or a life has been lost or a limb has been sacrificed. These improvements have taken the form of medical centres at the pit, professionally staffed, plus all the apparatus for immediate treatment at the pit and even in the pit, it may be two miles or more inby, and this excellent progress should be on the record.
I say this as one who knew very different circumstances. At one time we used to have to carry our own first aid box, and where we used to put a dead body after an accident in the old days is really nobody's business. Having gone through that and having seen it, for one, pay my tribute to all in the industry who have contributed so much. I trust that on that point I have said sufficient to indicate the real progress that has been made in making the pits safer and with fewer accidents.
I have used up nearly all my time in ventilating that particular topic but I should like to say just a few words about the Bill. It is an important Bill and the noble Earl, Lord Gowrie, explained it to us very well indeed. He made what is a difficult thing—namely, reading the Bill—quite simple and easy to understand, but I do want to give him my thinking on it. This Bill can be likened unto the proverbial curate's egg: it is good in parts and not so good in other parts. If I were to go through all the clauses (which I do not propose to do) I think I could prove that beyond any shadow of doubt.
As the noble Earl said, Clause 1 deals with increasing the borrowing powers of 1159 the Coal Board. That is a "must". The money that was voted under the Act of 1977 to invest, so far as the Coal Board was concerned, is almost at an end. The Board, with its commitments to make progress at existing collieries, and for the future provision of capacity, have to have more money to keep up the tempo that the noble Earl, Lord Lauderdale, spoke of in his speech. The two examples are these, Selby and the future of Beauvoir.
I just want to ask the noble Earl, Lord Gowrie, two questions, if I might. Has he any knowledge with regard to the inquiry concerning Beauvoir? Will the proposals soon be known, the views of the inspector? What is going to happen so far as Beauvoir is concerned? We all know what the Duke of Rutland is expecting to happen, and we all know what he threatened to do in the event that what he expected to happen did not happen. Perhaps I may ask the noble Earl this. I have seen some figures regarding the inquiry into Beauvoir which suggest that it has cost the National Coal Board £2 million. Just imagine what we are doing, spending £2 million in order to guarantee the future supply of fuel for producing energy which the country so much needs.
I was going to say something about Clauses 3 and 4. In my opinion these are the unsatisfactory clauses in the Bill. I have discussed this matter with the National Union of Mineworkers and their representatives, and it has been put to me that Clauses 3 and 4 of this Bill are a charter for the closing of certain pits. I should like to have expanded upon that, but the time is not opportune. Perhaps the noble Earl will have something to say about it. The social grants and the operating grants I will leave, but may I make just one observation about Clause 8.
The Earl of GOWRIE: My Lords, I am most grateful to the noble Lord for allowing me to intervene. I missed the second point that he wanted me to comment on. I got the point about Beauvoir but I did not hear the second point he wanted me to comment on.
§ Lord TAYLOR of MANSFIELD
My Lords, I said that there is a reaction to Clauses 3 and 4 in some NUM circles that they provide a charter for the closing down 1160 of certain collieries. May I close with a reference to Clause 8. I am happy to see that a further £7 million will be added to the £100 million that was given by the last Government particularly for the widows of pneumoconiotics who have died. The story of this chest disease is a very interesting one. It was only in 1928 that silicosis (as it was called then) became a prescribed disease for which compensation was payable. You had to prove that there was a percentage of silica in the rock before compensation could be claimed. Then we got the story in 1943 of pneumoconiosis and so on. I am delighted, and I welcome the proposal in Clause 8 that the widows of pneumoconiosis sufferers who died before 1970 are going to be beneficiaries under this Bill.
§ 9.40 p.m.
§ Lord HALE
My Lords, this has been a very remarkable debate. I see that the noble Earl, Lord Lauderdale, is compelled to leave—indeed, I do not ask him to stay because I can make my comment while he is moving away. I wish to congratulate him on the speech which he made. I know that he has been saying these things for many years and he has been one of the first apostles of these matters. As a matter of fact I have brought with me a photostat copy of a debate opened in 1977 by my noble friend Lord Wynne-Jones, in which the noble Earl, Lord Lauderdale, took part. In that debate he urged further development of deep coal mining and so on. I do not think that there is a word which he has said which I did not appreciate. However, do not let me detain him at this time of night.
I confess to some guilt in this matter. I heard the announcement from Venice and the way in which it was put with very real apprehension. It was put in a rather remarkable way. It came, so far as I was concerned, with some considerable surprise. I found it extremely difficult to understand. One matter which went through not only my mind, but quite clearly the minds of Members of another place when discussing this matter, was why it should be announced in this way. Why do they say that Britain is not going to mine any more coal, in spite of all that we have said? In presenting this historic announcement, why was it said that our present plans are sufficient for the time being? Is it really a question of the 1161 provision of alternative supplies? I was wrong about that and I am satisfied that I am wrong.
However, a question remains. The Minister was singularly forthcoming in the course of the debate in another place. He quite obviously knew what he was talking about and was obviously known to the many miner members of the committee. He spoke as a man of considerable knowledge. It is curious that throughout the discussion no particulars were given as to any clearly planned participation on our part in the Venice agreement which, of course, was presented almost as a major contribution to the Schacht Report, politics or development politics—a major form of expansion of production.
There is another matter which the noble Earl failed to make quite clear. I know that at this time of night it may be very difficult, but I see that the Motion on the Order Paper is to try to get rid of the Committee stage. The noble Earl is putting those of us who are not accustomed to speaking late at night at some disadvantage. So, in the circumstances I shall certainly not raise a finger to oppose the Motion.
I should like to speak with real pleasure of almost all the speeches which have been made in the debate, but particularly so of the speech of my noble friend Lord Taylor of Mansfield, whom I have known for 40 years. He worked underground for some years in the North Derbyshire coalfield. He worked through the difficult periods as a trade union officer in the time of the Spencer Union and the Proprietors' Union. He lived, as I did, through two miners' strikes, and he lived in a mining village; he saw the quite dreadful things that happened. He was probably principally engaged at that time on industrial diseases and other matters arising out of work underground. He had visited many of the coalfields; he had to take part in witnessing the consequences of one substantial mining tragedy in Stoke-on-Trent.
As a politician my noble friend had real reason to deplore the dreadful failure to renew our country. He became aware of this in fighting an election as a Liberal in 1929 under the Lloyd-George programme of coal and power, a programme 1162 of development and expansion of roads: I do not suppose for a moment that he could have put them all into force. I am not suggesting that it was necessary or readily practical; but we neglected this great country. In that long period of neglect we neglected our best and most useful workers. We neglected their health and we twisted them. We set up a system of law which is a bitter farce.
The first time I entered this House was to hear your Lordships' Divisional Committee deciding, on appeal, that a 13-year old lad, who had been crippled for life with osteomyelitis working with a pit pony, had no right to any benefit because he had failed to give notice of the accident during a period in which he was confined, immovable in hospital. I apologise; one should not divert to as long ago as that and I had not intended to do so, but I am so moved. My old friend who holds universal esteem in this House, who I think has not made an enemy anywhere, and whose task in life is to serve others, should now at least be able to see something which fills all of us with real anticipation.
There is one question that I should like to ask the noble Earl. It is quite a simple one. The noble Earl says that we have come to the conclusion we can do this, we can do that. Obviously by comparison with some things in the past, it sounds a difficult programme. Has the National Coal Board accepted that the scheme of development, with the diminishing revenues and diminishing contributions, is, in its view, practicable? Has it accepted the mission to carry out its task, saying that it believes that it can be done and hopes that it can be done? I do not ask for multiple overconfidence; we had warnings given about that. We do want to see this done. We do not want to say a word which would cast any unnecessary criticism on these proposals. These are hard times, and I myself have said that I accept the Government's proposition that the defeat of inflation is the first task of any Government today. In carrying out that task they ought to have the support of the country. So long as they can convince themselves and convince a substantial number of citizens that they have reasonable hopes of success, I will not stand in the way.
In conclusion, I want to recall some- 1163 thing from a Committee stage which occupied seven mornings in another place. At one stage the Members came to the question of the 1975 widows and the rectification of this matter. There was no doubt about the welcome this was given. In the course of an interchange of personal reminiscences, one Member in another place recalled one little claim that might have been missed or one oversight in the wording. The Minister said, "Well, let's get round the table some time. We don't have to alter the Bill. We know there are always 1164 little oversights. Let's put them right, and let's get round a table to do it". As I read that, although I have not checked what happened, I believe it was accepted as something to be done. That was, I hope, at least an indication of a new spirit and a new understanding in a great industry that has contributed so many great men to our political life, that had a homogeneity quite characteristic and distinctive in itself and which may now be given the chance of leading us back to what might be one of the best chances for an industrial future.
§ 9.54 p.m.
§ Lord WYNNE-JONES
My Lords, this debate has produced some fascinating speeches. It has produced a very human speech from my noble friend Lord Taylor of Mansfield; we all heard it with great interest and regard. It has also been a debate which I think the noble Earl, Lord Gowrie, will feel has been a very valuable one and one which perhaps I may say has been comforting to him because there has been such general agreement. In particular, I should like, as my noble friend Lord Hale has done, to say how much we all appreciate the way in which the noble Earl, Lord Lauderdale, has shown over a number of years a clear determination to try to get every Government to appreciate the need for a continuing long-term policy for the coal industry.
It is just on this one point of the continuing long-term policy that I still should like to press the Government a bit further. I appreciate that the Government have shown that they intend to have the coal industry developed. I appreciate that they regard this Bill as an important contribution towards this. Yet, when one looks at the Bill, one cannot be altogether satisfied that the Bill gives the guarantees which many of us would like to see. It says a number of things, but they are practically all conditional.
It is important, when we are dealing with an industry like the coal industry, a vital industry for this country, and when we are dealing with its long-term future, that we should drop conditions, because it is not by conditional promises that we shall ever get the coal industry to continue in its proper development. Many of us feel—and in fact several of us said so in the debate two or three years ago—that the target of 150 million tonnes by the end of the century was too low; that 170 million tonnes was the least one should be aiming at; and many of us felt that we should go further towards 200 million tonnes. One would like to see a greater resolve on the part of the Government to increase the target.
It is also important to bear in mind that the coal industry goes far beyond just the mining of coal. I have some figures here which deal with the distribu- 1166 tion of coal and everything concerned with it. It may surprise noble Lords to learn that the NCB itself employs 24,000 people in the distribution of coal and in the associated industries; that independent producers employ 10,000; that the distributive trade employs 50,000; that appliance manufacturers employ 6,000. British Rail, road haulage, et cetera, employ 10,000, making a total of roughly 100,000 people dependent incidentally—not directly—upon the coal industry.
This is an extremely important matter. There must be some clear guarantee that we have a proper assurance for the coal industry, especially in the critical years after the period covered by this Bill, which runs up to 1983, for, as I think the noble Earl knows only too well, the period after that from the middle of the 1980s to the end of the 1980s is generally regarded as a critical one for the coal industry.
In fact, certain experts—I do not agree with them—have predicted that the use of coal may slump to something like 50 million tonnes a year instead of the present about 110 million tonnes a year. If such a thing happened it would be catastrophic. If it happened at the very time when, according to this Bill, the grants will have dwindled away to zero, then indeed we could be faced with a serious position. I would ask the noble Earl in reply to pay attention to this question of guarantees for the coal industry.
I do not want to delay your Lordships any longer, but there is one other point to which I want to call attention. There is a small industry in South Wales called the Phurnacite industry. It produces the material, Phurnacite, which, as noble Lords know very well, is used in many domestic furnaces and is an excellent fuel of the smokeless variety. The battery of ovens for producing it is just about run down. A Question was asked in another place earlier this month and, in a Written Answer, Mr. John Moore said:The NCB have explored with the Government the possibility of special assistance to enable them to replace the two oldest of the six batteries. The cost might be some £36 million. The Government have decided against giving special assistance".1167 That means that those batteries will be closed down, in which case I am given to understand that the employment of about 1,000 people will disappear and that, in addition, as anthracite, owing to the difficulty of winning it, is virtually being priced out of the market, there will have to be imported into the country material to substitute for Phurnacite.
When the Government on the one hand say they are prepared to pay employers to keep people at work unremuneratively, and on the other say they will not give money to rebuild these furnaces for producing Phurnacite, they are being extraordinarily inconsistent. It is essential that they pay attention to the vital need for keeping something like that going. It is not irrelevant to the coal industry: is closely connected with it and a vital part of it. I do not wish to detain the House longer, and in conclusion would merely assure the noble Earl that while I am not antipathetic but sympathetic towards the Bill, I am still not satisfied that it gives the assurances that are required.
§ 10.3 p.m.
The Earl of GOWRIE
My Lords, the noble Lord, Lord Taylor of Mansfield, in a notable and moving speech, broadly welcomed the Bill, like most of your Lordships, but described it as a bit of a curate's egg. If the Bill is that, then I suppose my right honourable friend the Secretary of State is cast in the role of the curate, and that puts me in the rather improbable role of the choir boy. I intend to sing rather rapidly this evening because it is bad luck on the Bill that it fell after a longer economic debate than we anticipated, not only late in the evening but late in the year, because I agree with your Lordships that it is a very important Bill of far-reaching consequence to the industry and our economy, to our defence, as noble Lords have said, and to many other matters. Because it is so important, I greatly welcome, curate's egg or no, the broad response it has received from the House tonight: that is very gratifying to the Government and will be gratifying to the coal industry as a whole.
The noble Lord, Lord Lee of Newton, asked a number of questions. It is a great pleasure to debate this issue with a former Minister of Power, as the office 1168 was then called—I am not sure if I do not prefer the word "power" to "energy"; it has quite a thump to it—and he asked me what analysis of speed of transition underlies the Government's decision. The starting point was a review in considerable detail of the prospects of the NCB as regards production, the market, investment and, of course, their financial position. The Ministers responsible went to considerable pains to satisfy themselves that these figures were both robust and realistic, but naturally, as with all forward budgeting, some conjecture is inevitably built in.
I should add one point. The noble Lord, Lord Lee, expressed some surprise at the speed of transition. I could sympathise with that view had we been starting from scratch, but we must not forget that we are building on substantial progress since 1974, and I pay tribute to the noble Lords on the other side and to their right honourable and honourable friends for achieving that progress. There is a simple figure that can illustrate this point better than words. In 1973–74 the board's assets amounted to £384 million. In 1978–79 they amounted to £1,336 million. It is this investment which is now coming on stream which enables us to look forward to so marked a financial improvement. It was the noble Lord, Lord Taylor of Mansfield, who reminded us that the investment was beginning to pay off; and may I say to the noble Lord that that applies to investment in safety as well.
The noble Lord, Lord Lee, asked what had happened to the production target of 170 million tonnes by the year 2000. This target is the one originally put forward by the NCB in 1977, and which so far as I know has not received the commitment of any Government. But if I may say so, the Government do not believe that the coal industry should plan by setting a production target in vacuo. Even though the lead times for new capital development are long, the starting point of any plan must surely be an assessment of potential demand in the market place and an assessment of the industry's ability to supply that demand economically. To set a production target regardless of demand is surely a recipe for trouble.
The noble Lord, Lord Tanlaw, explained to me that he was unable to remain for the 1169 whole of the debate, and I must say that in that regard he gave me the best explanation that I have heard. So if the House will forgive me, I shall answer his questions, even though usually if a noble Lord leaves before the end of a debate, he does not receive an answer. However, these points may also be of general interest.
First, I shall deal with pricing. Realistic pricing is of course central to our energy policy. We believe that pricing must be based on the sound economic principles that I have just outlined in assessing supply and demand. It must give both consumer and producer reasonably accurate signals about the costs of energy supplies. Proper pricing not only discourages wasteful use of energy—and throughout the western economies we are all having to adjust to dear energy—but at the same time it encourages entrepreneurs and inventors to devise new methods of utilising, saving and conserving energy. We believe that there must be healthy competition among all fuels. Each fuel has characteristics which make it preferable for different tasks, and consumers need to know how they can most effectively choose their fuel mix. We should not want a mono energy policy any more than we should want a mono transport policy.
The noble Lord, Lord Tanlaw, asked me what is the rate of discounted cash flow used in the board's capital investment appraisal. The answer to this somewhat technical question is set out in the White Paper on the nationalised industries, published in 1978. This Government look to the National Coal Board, like the other nationalised industries, to secure a required rate of return of 5 per cent. in real terms in the event of the totality of its capital investment. This concept is not entirely on all fours with that of a first rate of discount, but is not less demanding, and for technical explanation I cannot do better now than refer the noble Lord to the relevant appendix to the White Paper. If he is not happy, I am sure that he will take up the point in Hansard and put down a Question for Written Answer.
The noble Lord, Lord Tanlaw, and also the noble Lord, Lord Davies of Leek, and his noble friend Lord Wynne-Jones, were concerned with what they felt was perhaps a little time-bomb of a phrase—"with the approval of the Treasury"—and the 1170 noble Lord, Lord Wynne-Jones, wanted to know what conditionally was involved in the Bill. The phrase, "with the approval of the Treasury" is, I understand, common form in financial provisions of Bills, which is no doubt why it is a rather unfamiliar phrase to your Lordships' House. The Government are of course indivisible, and the phrase is there to draw attention to a standard administrative requirement. It does not represent any attempt to infuse any additional or sinister Treasury control.
The last point put to me by the noble Lord, Lord Tanlaw, was his concern that some anthracite pits in South Wales might be in danger of closure while there is insufficient United Kingdom production to meet demand, and while high-priced imports might be required. I think that situation would clearly be absurd, and your Lordships will not be surprised to know that the real position, which my right honourable friend the Energy Secretary recently discussed with the board, is rather more complicated. Some grades of anthracite are in surplus; for others, the Coal Board and the trade have had to import to make up demand. The price difference between imports and home-produced anthracite is up to £15 per tonne in favour of the home product. Thus there is some scope for price increases. But because of the fact that only some grades are short, these must of course be on a selective basis within the overall spread of prices in the domestic market. I understand that the whole issue will be discussed with the Domestic Coal Consumers' Council, and any price increases would be introduced over a period of time. Anthracite price increases would go some way, in fact, to help some of the viability of the loss-making pits in South Wales, but even the largest increases the consumers could be expected to tolerate would, I think, fall very far short of bringing the heaviest loss-makers up to a point of break-even.
The noble Lord, Lord Davies, also mentioned coal imports. United Kingdom coal will continue to meet the bulk of demand in this country, but the Government are not in favour of artificially restricting the commercial freedom of consumers to buy coal from abroad. Imports are best countered through commercial arrangements like those between the Coal Board and its major 1171 consumers, the CEGB and British Steel. If there is a subsidy—and my noble friend Lord Lauderdale mentioned the transport element in any overseas subsidies—to some degree it is a foreign subsidy of electricity, of energy and, indeed, of the taxpayer, so one can benefit from it in certain circumstances as well. But I think I should like to point out to the noble Lord, Lord Davies, that Australian and United States coal is not subsidised, and the great bulk of our imports come from those countries. We import a modest amount of coking coal from Germany under a contract which was reached four or five years ago, and virtually none from France or Belgium—and Belgium, for social and labour reasons, as the noble Lord pointed out, is the country with the largest subsidy and the one where we would be most vulnerable.
My Lords, I very much welcome the support of my noble friend Lord Lauderdale for this Bill, and his pointing out that productivity in the coal industry was up at a time when we were in general manufacturing recession. That is encouraging, at least from the point of view of the coal industry and the future.
The noble Lord, Lord Taylor, asked me about Belvoir. I cannot comment on that as the inspector's report is awaited and the matter is still sub judice. But I must say to the noble Lord that of course we have to allow for the costs of environmental protection and of the kind of public inquiries which allay public disquiet. I think it would be wrong for the Coal Board not to do so; and, indeed, as I have seen for myself looking at retrieved open-cast pits, the Coal Board have an excellent environmental record of putting the country back in the shape in which it originally found it.
The noble Lord, Lord Taylor, also asked me about closures. I do not want to give any credence to the concept that this Bill is a recipe for closures. As with any extractive industry, reserves run out or become prohibitively expensive to exploit and, as a result, closures must inevitably occur. In recent years there has been a steady pattern of closures. For example, five collieries closed last year, nine in 1978–79, seven in 1977–78 and only three in 1976–77. That is by no stretch of the imagination an extravagant 1172 rate.It is far from the 50 or 60 pits a year which were closing in the late 1960s; and I think that pattern can be expected to continue in the future, at the lower rate. Even so, if we were dealing with a declining industry, I acknowledge that there would be cause for concern; but that is not the case and, as I have said many times, the coal industry has a bright future before it. We are easing its path into the new century; and our social grants, as I mentioned in my opening speech, of course allow aid for mobility and soften the effects on individuals of closures of that kind.
The noble Lord, Lord Hale, asked me whether the National Coal Board has accepted the financial strategy. We have never disguised in Government that the financial strategy embodied in the Bill is demanding and a challenging one, but, equally, it is realistic and achievable; and it is in that spirit that the Government have laid down a strategy and the board have accepted it. Mr. Derek Ezra gave a press conference on the strategy yesterday.
Finally, the noble Lord, Lord Wynne-Jones, asked about how we could continue to make guarantees to get the kind of stability that the industry needs. I am delighted that the noble Lord assumes that I shall be in a position to make guarantees to the Coal Board beyond 1984. I am sure that he is right in that respect, but I think that to lay down a general strategy between now and 1983 is sufficient. That will be in accordance with the general precedent and I cannot go further than that at the moment. On the matter of special assistance to a pit with the particular kind of production that he mentioned, I do not know the details of that but I assume that if the Government turn down special extra assistance, it will still be within the discretion of the board, if they thought it important enough, to provide the necessary £2 million or £3 million which will be a small amount in the totality; and it will be for them to decide what their priorities would be.
In spite of the lateness of the hour, and the fact that we had a major debate before this one, this has been a useful debate for the Government. I hope that even if it is not widely reported because of those circumstances it will be studied closely by the Coal Board and by the coal 1173 industry; because I think this House has sent out a clear message from all sides about how passionately committed to that industry we are and what a great future we all see for it.
§ On Question, Bill read 2ª, and committed to a Committee of the Whole House.
§ Then, Standing Order No. 43 having been suspended (pursuant to Resolution):
The Earl of GOWRIE
My Lords, as I understand no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee, I beg to move that the Order of Commitment be discharged.
§ Moved, That the Order of Commitment be discharged.—(The Earl of Gowrie.)
§ On Question, Motion agreed to.