Coal Industry Bill

HL Deb 09 February 1990 vol 515 cc1034-63

11.35 a.m.

Viscount Ullswater

My Lords, I beg to move that the Coal Industry Bill be now read a second time.

The heart of this Bill involves the capital reconstruction of British Coal and it may be helpful if I set out the background before describing in more detail how the reconstruction will be achieved. Much of British Coal's present financial problems originate in the Plan for Coal agreed in the mid-1970s. This envisaged a massive investment programme estimated in 1976 at over £3 billion to build up output to 135 million tonnes by 1985, with productivity growth of 4 per cent. a year. The borrowings to finance this investment raised British Coal's debt from around £1 billion in 1978 to over £4 billion by 1984. However, the promised productivity growth failed to come through and increasing losses were incurred from 1979 onwards. From 1980 up until 1987, this Government extinguished the losses year by year by means of deficit grant, and this kept the debt at broadly the £4 billion level throughout the period. Altogether, taking into account restructuring and other social grants, this Government have provided £10 billion grant for the coal industry since 1979.

Your Lordships will be well aware of the tremendous productivity surge of over 75 per cent. since the 1985 strike. This has reduced costs by nearly 30 per cent. in real terms, and I pay tribute to what the corporation's management has achieved. But the financial benefit of this has been more than offset by the collapse in energy prices in 1986. Oil prices halved and international coal prices followed suit. This has led to a steady decline in British Coal's prices, which are now 25 per cent. lower in real terms than five years ago.

It was hoped that British Coal would break even in the second half of 1987–88 and for the full year 1988–89. In fact, because of the squeeze on margins and the accelerated restructuring programme that resulted, the losses for this period were around £500 million, and a further loss of the same magnitude is expected for the current year. To finance this British Coal has had to increase its borrowings to over £5 billion.

In addition, under SSAP 24 —a new accounting standard dealing with pensions and similar entitlements—British Coal is expected this year for the first time to provide in its accounts for its concessionary coal liabilities, primarily to ex-employees, instead of charging them on a pay-as-you-go basis. These will amount to between £1.5 and £2 billion. The corporation has also made provisions of around £0.5 billion in respect of ex-employees' industrial deafness claims.

Finally, falling energy prices since 1986 have shortened the economic life of many collieries and severely depressed the cash flow of others. It has been increasingly clear for some time that the book value of the corporation's collieries has been well in excess of their true earnings potential, and indeed the auditors have qualified British Coal's accounts on this point since 1984. And in the highly-capitalised Selby coalfield prospects have been seriously diminished by persistently adverse geology.

A majority of collieries are now likely to show a negative cash flow over their remaining lives, and others will show projected earnings well below their current book value. Much more work remains to be done in this area, but it seems likely that this will lead to the write-off of at least half the industry's £4 billion fixed assets and perhaps a good deal more. However this write-down, which is in line with standard accounting practice (SSAP 12), is essential if the auditors' qualification of British Coal's accounts is to be lifted.

The Government welcome the improved transparency that these changes will bring. For the same reason the Government also welcome the corporation's recent agreement to end the arrangement whereby each colliery is attributed with a share of the average proceeds nationally. From the beginning of next year each coalfield will be credited with the actual proceeds from its own disposals. These two steps will allow a much truer and fairer value to be established for each colliery and for the corporation as a whole.

However, the financial effect is large. The unrelieved losses of the last two years, the provisions for concessionary coal and deafness claims, and the asset write-down, will result in a deficiency of over £5 billion and possibly up to £7 billion in the corporation's March 1990 balance sheet. This puts the Government, as the industry's banker, in a quandary. With such a growing deficiency in the balance sheet there would be no way that the corporation could be expected to service and repay its borrowings, and thus no way in which the Government could legitimately continue to lend the day-to-day funds which the corporation will continue to require.

Clause 1 addresses the problem by giving the Government power to deal with the accumulated losses by means of a deficiency grant; but it also achieves two other objectives. The first is that the injection of grant will enable the corporation to repay an equivalent amount of its existing borrowings, which will bring its debt into closer alignment with the true value of the fixed assets to which they relate and will of course substantially reduce the corporation's interest burden. The second is that the grant, which is expected to be taxable on receipt, will greatly reduce the enormous tax losses and allowances of over £3 billion which the corporation has accumulated.

The Government's intention is to pay a substantial sum in deficiency grant immediately upon Royal Assent to this Bill, but the grant does of course constitute a state aid and payment is therefore subject to the prior approval of the European Coal and Steel Community, which we are urgently seeking. Further sums will be paid once British Coal's 1989–90 accounts have been finalised, while grant in respect of concessionary coal and industrial deafness claims will be phased over several years to match British Coal's own settlement of these claims.

The capital reconstruction is very good news for the coal industry because it very largely removes from the corporation the losses and liabilities of the past. The outline contract with the generators announced in December is also excellent news. It gives them a period of three years in which to adjust their costs and restructure the industry into a strong competitive position for the longer term.

Clause 2 provides for a continuing government contribution towards the cost of this restructuring. It increases the limit on restructuring grant from £750 million to £1,500 million and extends its availability by one year to March 1993. This is a broad-brush figure. Obviously, as in any business, the corporation will wish to look closely at those operations and segments of business which are not expected to generate a positive cash flow; but the extent and timing of the restructuring are matters for British Coal to assess.

Following the capital reconstruction we expect the corporation to achieve growing profitability. There will therefore be no requirement for any further government financial support to the corporation other than the restructuring grant that I have mentioned. We also expect the corporation within a year or two to have made sufficient progress towards its self-financing that it can start to reduce the outstanding borrowings which will remain after the capital reconstruction.

There will, however, be a need for continuing day-to-day borrowings. Clause 3 of the Bill is designed to facilitate that. It is a technical provision which ensures that temporary deposits from British Coal will not have to be paid into the Consolidated Fund but can instead be withdrawn when required. In other words, it will allow the Secretary of State to offer revolving credit facilities as well as term loans.

Clause 4 of the Bill provides for an increase in the limits on licensed mining and other consequential changes. The present limits —30 men underground in the case of deep mines and 25,000 tonnes in the case of opencast mines —have not changed since they were set in the 1940s and 1950s, in spite of the enormous changes in mining technology over the past 50 years. The smaller British Coal mine today employs between 200 and 250 men underground, and only a small number of the corporation's opencast sites are below 250,000 tonnes.

This Bill proposes an increase in the underground limit to 150 men —and I should like to confirm that this means 150 underground men on books rather than 150 men underground on any one shift —and an increase in the opencast limit of 250,000 tonnes. In other words, the largest licensed deep mine will still be smaller than virtually all British Coal mines.

Some have suggested that British Coal's operations should be hived off from its licensing role. The Government strongly agree with this in principle. This will be the essence of a coal privatisation Bill in the next Parliament. But it is technically complex legislation and would require wide consultation beforehand. It could not realistically be brought forward in the current Parliament.

Our modest purpose in this Bill is to open up economic reserves, particularly of special quality coals, such as anthracite, which are too extensive or deep to be worked under the existing limits but too small to be considered by British Coal. Much of the extra tonnage will directly displace imports. It will also create more mining jobs in depressed communities. Larger-scale operations will encourage investment in more efficient machines and working practices, which will not only cut costs but also greatly improve the safety of licensed deep mines and the environmental impact of opencast mines.

Your Lordships' House is agreed, I am sure, that safety must be the paramount concern in mining operations. There is no dispute that the recent safety record of licensed mines has been worse than that of British Coal's mines. But there is a difference of view about the safety implications of raising the 30-man limit. Some argue that this will simply expose more men to the dangers of old-fashioned mining. Our view is that potential licensees will look hard at the possibilities of investing in mechanisation to take advantage of the multi-shifting and larger throughput that the higher limit will allow; and that mechanisation will lead to the same reduction in accident rates as British Coal saw when it mechanised 30 or 40 years ago. The Government's firm view is that there can be no justification for condemning licensees to use older and inherently riskier mining techniques where, but for the manpower restriction, they would have been able and willing to mechanise and automate.

The key responsibility for enforcing mining regulations of course falls to the Mines Inspectorate which is able to, and actually does, close down mines which fall seriously short of acceptable safety standards. In addition, British Coal requires to be satisfied as to the technical capability of the applicant to carry out the operations safely; and it also requires to know the name of the manager and that he is suitably qualified. Finally, the insurance companies which insure licensed mines have taken a more proactive role over the past year in sending their own mining inspectors to all mines to identify safety risks and in advising on mine planning.

The environmental aspects of opencasting are just as emotive as the safety issue is for deep mines. But here too the Government believe the proposal to raise the licence limit will bring benefits. At present where there is a deposit of, say, 100,000 tonnes being worked by a licensee the 25,000-tonne limit means that the site tends to get worked in a piecemeal fashion. Moreover, there is simply not room to deploy modern efficient machines, so the extraction of each licensed area takes longer than it needs to.

Thirdly, the economics and the confined layout of a small 25,000-tonne site may prevent the extraction of the deeper seams. This is a waste of a national resource and it can leave the nagging worry for the local community that the site may be reworked at a later date. And finally, the lack of space to store excavated spoil can limit the scope for imaginative landscaping when the site is restored. We believe that raising the limit to 250,000 tonnes will go some way to overcoming these concerns about piecemealing, and this is a view which is shared by the local authorities. Raising the limits should lead to fewer but larger licensed sites, more quickly worked out and more sensitively restored.

Opencast coal is an immensely valuable national energy resource. Its costs are low —on average 30 per cent. less than deep-mined coal —and its quality, in terms of low ash content and low chlorine, is in high and growing demand. There are very large national benefits from more opencastirig. But against these national benefits there has to be set the disbenefits to the local environment.

A balance has to be drawn, and the Government believe it has to be drawn on a site-by-site basis through the planning system. In 1988, in response to rising environmental expectations, the Secretary of State for the Environment issued new mineral planning guidelines which set out much more fully and tightly than before the environmental considerations that have to be taken into account in striking this balance, including the arrangements for restoration. These guidelines apply to all opencast coal applications, and nothing in this present Bill detracts in any way from the planning regime as it applies to licensed mines.

The Secretary of State has also since 1988 required applicants for planning permission for opencast sites above 50 hectares —that is, about 120 acres —to prepare a full environmental impact assessment which examines all aspects of how the proposed workings will affect the environment. Assessments will be required for virtually all the larger licensed sites allowed by this Bill.

I want finally to refer to subsidence. The Government recognise that the present statutory arrangements governing subsidence are not fully satisfactory and they are committed to bring forward early legislation to put improvements in place. But the legislation is not straightforward because it needs to consolidate the two existing Acts that bear on subsidence as well as introducing new features. It would not be practical to tack subsidence provisions on to the present Bill, which has financial provisions that urgently need to be in place by the end of this financial year. I shall of course take careful note of the points made about this today.

The capital reconstruction of British Coal that this Bill proposes reflects two things: this Government's willingness to face up squarely to the hard financial realities and their unwavering support for British Coal's own efforts to become a viable and competitive business. This Bill recognises that further reconstruction will be required before this goal is achieved, but it offers a real basis for confidence in the industry's long-term future. I beg to move.

Moved, That the Bill be now read a second time. —(Viscount Ullswater.)

11.54 a.m.

Lord Graham of Edmonton

My Lords, on behalf of the whole House I begin by thanking the Minister for what quite clearly is the great deal of preparation that he has undertaken in order to give the House a full and lucid explanation of what the Bill is about. I say to him and the House that for many of us, especially those behind me on these Benches, the coal industry is more than just a subject for a piece of legislation.

When we look at the coal industry we do not see just columns of figures, balance sheets, profit and loss accounts, subsidies or prices; we do not just see preambles, clauses or schedules, but flesh and blood. I see sitting behind me my noble friend Lord Mason of Barnsley. I can recall, more than 20 years ago, the noble Lord, Lord Mason, going to see a play in London. I saw the same play in Newcastle-upon-Tyne at the Playhouse. That play was about the Northumberland and Durham coalfield. It was put together by three remarkable people. One was named Syd Chaplin, who produced the stories; another was Alan Plater, who produced the stage play, and the third was Alec Glasgow.

Together they produced a gripping story about the life and times of the mining communities of the North-East. The play told about the injustice and struggle and the fact that they were still continuing. It was called "Close the Coalhouse Door". I wonder whether my noble friend Lord Mason remembers the first line of each of the first three verses. They are: Close the coalhouse door, boys, there's blood inside. Close the coalhouse door, boys, there're bones inside. Close the coalhouse door, boys, there's skin inside". When we speak of the coal industry we are talking about men as well as money. The raison d'etre for this Bill, as the Minister has said, is to see it as a restructuring of the finances of British Coal. The Minister does not need to spend much time on convincing the House that the accounts need restructuring. No other company in the world shares British Coal's accounting structure, which imposes unnecessary and unfair historical costs on current performance.

It would have been far better to take the advice and the plan of the TUC, especially when one sees that last year's operating profit rose to a 20-year high of £498 million, making British Coal one of the most profitable coal companies in the world. Yet, despite a 90 per cent. growth in productivity since 1985 and a real operating profit of £1.4 million, it was not allowed to raise coal prices in line with inflation as most other UK companies have done, and that real profit of £ 1.4 million was transformed into a bottom line loss of £203 million.

The Minister knows that the principal reasons for that were the obligatory cost of servicing the corporation's debt to government, terminal depreciation costs, net restructuring costs and the ludicrously high cost of loans. That means that for every £1 million invested by British Coal it will pay out £1 million in interest charges. I support restructuring which has the following aims: steps to be taken so that the British electricity supply industry sustains a sufficiently high and predictable demand for British coal to provide the basis for the long-term development of Britain's coal industry; investment in the coal industry sufficient to ensure that British coal supplies are available at an economically competitive price; more resources to be provided for the development of new, clean coal technologies; and imports of coal, especially dumped coal, not to be increased to the detriment of British coal.

These proposals form a financial restructuring and are designed to secure the future of a publicly-owned coal industry which I believe is fundamental to energy policy as a whole. It is a far better recipe for the industry than the slim-it-down, fatten-it-up and flog-it-off policy which is contained in this mercenary Bill. Whatever the case put forward in Committee to expand opencast coal mining, the Minister knows that it will be against the views of the Energy Committee report of another place made in 1987 concerning the coal industry. The report states: Opencast mining is one of the most environmentally destructive processes being carried out in the UK". I invite the Minister to cut out all the rhetoric about the Government being the Green Party in drag, being environmentally pure and being prepared to make the polluter pay. What is the Government's record on overseeing environmental obligations on opencast operators? I suggest that at the moment it is abysmal. The Council for the Protection of Rural England is in no doubt that the Bill requires safeguards for protecting our countryside, our habitat and our heritage. There should be an environmental duty attached to the award of all licences for working coal in both the deep-mine and opencast sectors. Where is the framework within which licences for coal working, searching and boring can be granted? Where is the care, the concern and the responsible attitude?

There are many reasons why opencast mining is to be avoided if at all possible. Yet, when the Secretary of State spoke on the Bill at Second Reading in another place, the only case that he made out was on technical grounds as a result of which more coal could be mined than hitherto. What about the visual impact? There was not a word. What about noise? There was not a word. What about blasting, ground vibration and air blast waves? There was not a word. What about dust, overburden and transporting the coal? There was not a word. What about the effect on watercourses, leaching and pollution? There was not a word. What about agricultural use, nature conservation and forestry'? There was not a word. What about our natural heritage and extraction impact on listed buildings? There was not a word.

The Government's attitude in that respect is scandalous, cynical and mercenary. It has nothing to do with the national interest; it has everything to do with money and greed. To extend open-cast mining flies in the face of the Flowers Committee, which said: We strongly recommend that as older, more unprofitable and less environmentally acceptable deep mines are closed and more efficient and profitable operations take place, the volume of opencast mining should be allowed to decline. In the meantime there should be no increase in the present target of 15 million tonnes per year. The unique sensitive character of the British countryside and the high population density in much of the country would not be able to accommodate, without unwarrantable damage, a target in excess of that level". Perhaps I may introduce what I hope the Minister will accept is a constructive note; it is certainly intended to be so. I have been involved over many years in encouraging the utilisation of minestone in a range of civil engineering outlets. That sector can utilise many millions of tonnes per year. I followed the debate on coal and the environment under the chairmanship of the noble Lord, Lord Flowers, in which evidence was given by the then National Coal Board's Minestone Executive. I am pleased to see that the noble Lord, Lord Ezra, is here as he played a major part in creating the Minestone Executive with a view to doing what it could to treat chemically and make environmentally useful what one would call the waste or slag from mines. Evidence was given by the executive in the report of the noble Lord, Lord Flowers and it was commended on its efforts to encourage the commercial use of minestone.

I also followed with great interest the evidence given to Sir Ralph Verney's committee, which ultimately produced the report, Aggregates: The Way Ahead. It recommended, first, that the Government, in conjunction with the construction industry, should study the implications of requiring tenderers for highway works to reveal the general source of material that they use with a view to permitting a full assessment of the costs and benefits of using different sources of imported fill. It recommended, secondly, that the Government should lay major and urgent emphasis on the studies already in hand and those that it had recommended with a view to maximising the contribution of waste materials to the supply of aggregates.

Those recommendations clearly show the enthusiastic support for the use of minestone in civil engineering and related projects. It has been clearly illustrated that the disposal of minestone is in the interests of the corporation itself; of the community generally from the point of view of conservation of scarcer, more costly alternative aggregates; and of the enhancement of the environment, by reducing the number of colliery spoil tips and reducing other quarrying activities.

I met the then Transport Minister, Mr. Peter Bottomley, in 1987, when he agreed to nominate an official contact for the Minestone Executive for major road schemes with potential for use of minestone. I am now advised that no official has been nominated to encourage the use of minestone in major road schemes. Will the Minister tell the House why that has not come about?

As noble Lords are aware, in addition to highway schemes, there are some large land reclamation and development schemes under the jurisdiction of government departments which could utilise massive amounts of minestone. For instance, the Committee stage of the Cardiff Bay Barrage Bill has taken place in the House this very week. I am sure that there is a possibility there for the use of minestone.

It is sometimes argued that it is difficult to transport minestone over long distances, but that argument cannot apply in Cardiff because Wales must have millions, if not billions, of tonnes of minestone lying around. Minestone is a wasting asset which should be tackled because the arguments in favour of its use are very strong. The cost of disposal of colliery waste is high and puts an additional burden on the profitability and competitiveness of coal production. Therefore, any means of reducing that cost must be seriously considered. The use of minestone conserves the supply of quality aggregate for more appropriate uses. If more minestone was used, there would be a reduction in the number of new applications to quarry and the number of borrow pits along the route of a new road would be reduced. The utilisation of minestone would reduce the cost of a major civil engineering project. Is the Minister able to reply helpfully, and, I hope, encouragingly to those points?

In his final words, the Minister touched on a matter which affects many thousands of people. Subsidence is a major issue in relation to the coal industry at this time, yet the Bill fails to deal with it. I acknowledge what the Minister said. Although there had earlier been an intention to include it in the Bill, it has now been found best not to do so. However, the Minister has a major responsibility to use the opportunity today to tell people outside the House when legislation is likely to come forward. I have received representations from mining and environmental interests. I never thought that I would stand up to speak on behalf of the Country Landowners Association, but I speak on its behalf today. It tells me that hundreds of its members have been waiting a long time to have their claims settled. Will the Minister tell the House why, in 1989, the number of claims that were rejected increased from 39 per cent. to 46 per cent? What is the major reason for the rejection of those claims?

The Minister knows that the Government created the Waddilove Committee, which laid down fairly easy, straightforward, acceptable demands, first, for British Coal to reinstate and compensate for loss of market value; secondly, for claimants to appoint contractors of their choice; thirdly, for British Coal to accept the onus of proof that damage does not result from mining subsidence; and fourthly, to establish local arbitration panels to handle small claims. I hope that the Minister will help us on those points. We certainly intend to table amendments at Committee stage to give him the opportunity to do so.

Over the past 10 years we have had short-term solutions to problems which cried out for long-term answers. Never before has Britain been able to tease out those answers against the stupendous benefits of billions of pounds brought to us by the bonanza of North Sea oil. When the history of the last decade is examined, it will be found that, instead of carefully ensuring that we did not waste a drop, we have witnessed a criminal lack of investment in research to find more and better techniques to burn our coal resources more efficiently, that our environment has paid and that we shall continue to pay for that.

A report produced for Durham council by the County Planning Officers' Society drew attention to a number of privately operated sites where planning conditions have been breached and restoration commitments not fulfilled. How can the Minister tell us that, if the present limit of 25,000 tonnes is multiplied 10 times, the breaches which have existed for the past few years will not continue in the future? The Minister must attach to those licences meaningful conditions for reinstatement and observation.

What are we to make of the proposal to increase from 30 to 150 the numbers who can work in a private mine? That simply puts five times the number of miners at graver risk in private mines than is the position at present. How can we approve an extension of private mines if we are putting miners at greater risk than we need to? The Minister knows, as does the House —and, indeed, the nation should be grateful for this —that British Coal has the best safety record in the world. In fact it is better than in Germany, it is better than in America and it is 10 times better than in South Africa and Russia.

Why then are the Government slicing away at the present high standard of safety procedures? Surely we should be pressing for higher and not lower safety standards. Colliery deputies will no longer be required to hold a first-aid certificate. There is a reduction in safety training centres of on/off the job training. Moreover, underground supervisors will in future supervise all elements in pits with fewer than 15 workers. We intend to put down amendments to bring that safety aspect before the House.

In conclusion, we on these Benches will seek to improve the Bill so that it leaves this Chamber in a more acceptable form than when we received it. That should not prove to be too difficult a task. The improvements are modest and justified: first, to bring financial sense into the energy policy of the Government; secondly, to limit an expansion of private mining which brings with it danger for an increasing number of miners; thirdly, to arrest severely the spread of opencast mining with its damage to the environment; and, fourthly, to speed the process of compensation for those who suffer loss as a result of subsidence due to coal working.

We shall not oppose the Bill because it brings many benefits to miners and mining communities; but we shall articulate on behalf of many who will suffer hurt in one way or another unless the Bill is improved.

12.11 p.m.

Lord Ezra

My Lords, I should first like to associate myself with the opening remarks of the noble Lord, Lord Graham of Edmonton, by expressing appreciation of the very clear way in which the noble Viscount introduced the Second Reading of this Bill. It is a most important Bill and for anyone connected with the coal industry it ranks among some of the most important developments in the industry's history since the last war. The noble Lord, Lord Graham, also made some moving comments about the human aspects of mining. I hope that I shall be forgiven due to my long past association with the industry if I also talk a little about the past before talking about the present and the future.

The sums involved in this capital reconstruction are very considerable. I should like to suggest that the sums which the coal industry in its post-war period contributed to the benefit of the country were even more considerable. I happened to join the coal industry in 1947. At that time there was what was known as a gentlemen's agreement between the Government and the coal owners which had held the price of coal during the war-time period. That agreement was continued by the new coal board under Lord Hyndley. For approximately 10 years coal was sold on the home market at something like £2 a tonne less than the world price. I know that for a fact because I was concerned in its export.

We were being attacked by the United Nations for practising what was known as dual pricing. That process consisted of selling coal cheaper at home and exporting it abroad at a dearer price. During that period some 2 billion tonnes of coal were produced —that is, 200 million tonnes a year, which represents roughly £4 billion. That was willingly contributed by the coal industry to the consumer and the taxpayer. I should remind your Lordships that £4 billion in 1950 prices would in today's values be about 15 times that amount. I merely mention that fact because, although these are large sums, I think that historically one needs to put them into context. Even in financial terms, let alone in social and human terms, the coal industry has made very big contributions to this country.

I believe that this capital reconstruction is necessary and very important. I was going to add that it was also timely, but it is a fact that during my time in the coal industry I tried very hard to get a similar capital reconstruction brought in. However, I am delighted that this one is now being brought into being. As the noble Viscount and the noble Lord, Lord Graham, pointed out, the coal industry has performed remarkably over the past few years as shown by the massive increase in productivity which it has achieved. It is right that that should be recognised by removing from the shoulders of the industry this great burden of debt which is largely inherited from the past. Therefore, I welcome the concept of reconstruction. I think that it will give the industry a great opportunity to move forward.

Of course this is to be a once and for all settlement of the problem so far as concerns the Government. We cannot argue about that fact. It is a sound way to set about the matter. But in regard to the question of the revaluation of assets, the noble Viscount said that this was being carefully looked into. I should like to ask him what progress has been made in this respect in the discussions which are taking place among the Government, the coal industry and the auditors. It is extremely important that that revaluation should be effectively and speedily carried out so that everything will start on a proper basis.

The other aspect of the capital reconstruction of the mining industry is its ability to sell the product. As the noble Lord, Lord Graham, properly mentioned, the electricity market is the overwhelmingly largest market for coal. There have been reports of contracts being made with the new electricity generating companies which will give some degree of security to coal over the next three years. Perhaps the noble Viscount would like to tell us a little more about that aspect. Quite clearly, as important as capital reconstruction is, if because of the way in which market developments are likely to take place due to changes in other industries, such as that in the electricity industry which is now being privatised, the coal industry is impeded in its efforts to sell coal, many of the benefits from the capital reconstruction could be lost. Therefore, some degree of security in that major market is clearly required. However, has that been achieved?

The question of the licensed mines and the opencast mines and the increased levels at which both can be developed raise major issues which have been mentioned by the noble Viscount and the noble Lord, Lord Graham. I am much concerned about safety. When I was at the Coal Board carrying on the tradition set by my predecessor, Lord Robens, and other previous chairmen, safety in the mines was given the highest priority. Every time there was a fatal accident in the industry —and I am glad to say they diminished in number —it was immediately reported to the full board and all details were studied in order to make absolutely sure that an eventuality that had occurred in a particular case could not conceivably happen again if human intervention could possibly avoid it.

We knew all along that the safety standards of the licensed mines were much lower than ours. But of course we had no influence over them. The noble Viscount has told us that his impression is that if the size of licensed mines is increased, then there would be more possibility of introducing mechanised systems of mining and that that should automatically reduce the incidence of accidents. I am not sure that that follows.

We found that mechanisation itself brought new risks and they had to be dealt with. We had to devote a very great deal of effort to solving the problem. I am glad to say that there was total agreement within the industry as regards the mining unions, the men, the managers and everyone else involved, including the mining machinery manufacturers. Indeed, there was total consensus on the need to keep our mining industry as safe as possible. Moreover, we achieved the record to which the noble Lord, Lord Graham, referred. Therefore I wish to ask the noble Viscount, first, whether he has in mind any ways in which the Bill could be strengthened in this respect so that we can be assured that, if the provision for increasing the size of licensed mines goes ahead, as firm an obligation as that which rests on the main mining industry —at present publicly owned —should rest on the private licensed mine owners.

Secondly, in the case of open cast mines, one of our major priorities was to ensure the best ways of open-casting the sites and of restoring them afterwards, in conformity with the best environmental standards. Here, too, the coal industry achieved an enviable record which was referred to in many parts of the world. I remember that we were asked to send a delegation to the United States to indicate to them how we handle the matter. It was equally well known in this case that the private open cast operators failed to achieve the standards which were set and achieved by the coal board in those days. I am sure that has continued to be the case.

The private operators had no doubt fewer resources to call on, but often they left sites not in the condition in which they were committed to leave them; they just walked away. Perhaps the companies were not of such a size that anything could be done about it.

Two standards developed as in the case of safety in licensed mines: the standard applied by the coal board and that applied by the licensed operators. Again I wish to see some strengthening of the Bill in this regard. We must not allow our standards of safety and of environmental conformity, so strongly fought for in the coal mining industry, to be debased in any way. On the contrary, those standards must be strengthened if we can think of any ways of doing so.

Subsidence has been mentioned and we have heard that the Government have thoughts about how it could be dealt with. They have decided that it would be inopportune for them to cover it in the present Bill, but they have committed themselves to coming forward with a Bill on the subject before long. Like the noble Lord, Lord Graham, I wish to hear a little more about this because it is a matter of major concern not only within the mining industry but for those affected by mining. Those of us who are involved in or connected with the industry will be aware of many serious instances of subsidence where people have suffered seriously and not been able to obtain the compensation to which one would normally feel they were entitled. We wish to hear more about that.

Finally, I am delighted that the noble Lord, Lord Graham of Edmonton, referred to minestone. Minestone is the residual product from coal mining. Over the centuries it has tended to be built into the slag heaps that have been a well-known sign of the industrial Midlands and north of our country. During the period in which I was involved in the mining industry, we tried to turn these to good and positive use. We found that by grading and analysing the minestone, we could use it for the purposes to which the noble Lord referred —namely, road infill, foundations and for converting into aggregate of various kinds in certain cases. We built up quite an organisation to do that.

I think that it would be helpful if the noble Viscount could respond to the questions put to him in this regard by the noble Lord, Lord Graham, and tell us whether the Government have in mind in any way stimulating and facilitating the expansion of the operation. There are many obstacles in the way of building this up. I was startled to learn when we began the operation that if a slag heap, a pit heap, were left totally idle, it was not rateable. However as soon as one started improving the environment by taking the stuff away and making some use of it, it became highly rateable. We had many arguments with local authorities about this because in some cases we found that the level of rates being levied was higher than anything we could have earned by taking the stuff away. That seemed to me to be rather peculiar.

Under the new system, with the changes in the rating of industrial activities and operations, perhaps the noble Viscount could explain to us what the rating position will be. Will it be regarded —as in my opinion it should be —as a positive asset to the environment and therefore not rated at all? Or if it is to be rated, will regard be given to these wider issues?

To sum up, I welcome the Bill because of the major capital reconstruction which it brings to the industry and which has been so long required. I wish the industry every possible success as a result of the reconstruction. There are aspects of the Bill which have been touched on both by the noble Lord, Lord Graham, and myself to which we will wish to return at Report stage. I believe that our great mining industry, with its great past and massive contribution to our country's affairs, will be able to contribute even more in the future in its present condition with much greater efficiency, now assisted with the capital reconstruction.

12.26 p.m.

Baroness Stedman

My Lords, I too wish to thank the Minister for the clear way in which he introduced the Bill this morning and also for sending out copies of his Notes on Clauses which have been most useful to me. I have been making a second venture into matters to do with coal, my first being some 40 years ago. For a brief period at the same time as the noble Lord, Lord Ezra, I was a member of the national coal consumers' council. However I speak purely as a lay person today, without any great knowledge of the industry or what is going on.

I welcome the proposals for the restructuring of the coal board's accounts. However I am concerned about the same two matters as regards which previous speakers expressed concern. I refer, first, to the system of compensation for subsidence which the Minister has said needs separate legislation; and secondly, to the open cast mining which needs much stronger conditions on the environmental side.

The Waddilove Report in 1984 made a number of recommendations to improve the compensation procedure. The Government accepted the need for future legislation to take account of these recommendations. Therefore while the Bill is primarily concerned about British Coal's finances, I am disappointed that it has not been used as a vehicle to settle the compensation liabilities which will not cease if and when British Coal is privatised.

I also speak today as one of the vice-presidents of the Association of District Councils. In several district council areas there has been serious damage by subsidence. I wish to see the Bill provide an opportunity to ease the plight of the residents in those districts. There was a conference at Mansfield in November 1989 attended by a range of speakers from the Country Landowners' Association to the British Property Federation and from most of the local authorities in the East Midlands and the South Yorkshire area.

That conference unanimously urged the Secretary of State for Energy to introduce a Bill based on the recommendations of the Waddilove Report. The first request was to amend existing legislation by publishing information as to future coal mine workings and give information about past workings; and where it was reasonable to do so, about the repairs that had been carried out or compensation that had been paid in respect of individual properties. The second request was to carry out thorough repairs and the payment of adequate compensation in respect of surface damage caused by coal mining without the constraints of the present six-year rule. That same conference last year asked the Secretary of State to consider incorporating into legislation a simple, inexpensive system of truly independent local arbitration or adjudication to resolve disputes between British Coal and claimants more quickly as regards repairs and compensation for subsidence damage.

In rereading the Waddilove Report and the Government's response I was reminded of my visit to West Cumbria on other matters during the previous election campaign. I also visited a housing estate in Egremont. Many of the tenants had purchased their council houses and they had spent a lot more money on modernisation and improvements. Then the subsidence began. Those who had not bought their houses were being rehoused by their district council and their existing estate houses were boarded up. However, those who had invested their life savings in their homes could obtain no redress. The council could not repurchase their homes, even at the price the tenants had paid for them. The houses could not be sold on the open market because no one wanted to buy them as there were holes in the roads and paths and the six-year rule applied. There must be many similar cases of hardship throughout the coalfield area.

Clause 4 of the Bill relates to licences for coal production and exploration. The British Coal Corporation will be able to give licences for opencast operations not likely to exceed, or greatly exceed, 250,000 tonnes. That is a tenfold increase on the present limit of 25,000 tonnes. Local councils are rightly worried about the environmental implications of opencast mining. They are worried that this clause will increase the number and the extent of opencast operations. I share the concern of the noble Lords, Lord Graham and Lord Ezra. I do not think that Clause 4 faces up to the environmental problems and concerns.

In a debate in another place on 27th October Moynihan stated: There is no Government target for coal production or opencast output. That is properly a matter for the market place to determine". —[Official Report, Commons, 27/10/89; col. 1353.] However, those statements are of concern to local authorities. They are, even now, negotiating with the opencast executive a national assessment, but this assessment explicitly excludes the contribution from the licensed sector.

Paragraph 8(1) of the draft assessment now being prepared states: During the past few years licensed opencast output has risen from 0.8 million tonnes per annum to over 1.7 million tonnes per annum. Even in the difficult marketing situation in 1986 and 1987 due to falling oil prices, this output has not reduced significantly … British Coal assume that this level of output from the licensed sector will remain at approximately this level". I ask the Minister whether that statement is true or false. If it is true, why is there such urgency to increase site licensing from 25,000 tonnes to 250,000 tonnes? What environmental protection can be assured and how will it be done?

In seeking to increase the licensable tonnage from 25,000 to 250,000 tonnes, Clause 4 simply reiterates the wording of the Coal Industry Nationalisation Act 1946. That is the Act which fixed the amount of coal which could be won from a licensed site at an amount, not likely to exceed, or greatly to exceed, 25,000 tonnes". The words, not likely to exceed, or greatly to exceed, 25,000 tonnes", might be appropriate for such a small figure. However, when such a large figure as 250,000 tonnes is in question, it would be extremely difficult for anyone to decide what amount of coal was not greatly in excess of 250,000 tonnes.

I am assured that under the present arrangements an increase of 100 per cent. has on occasions appeared to be regarded by British Coal as not greatly to exceed the licensable tonnage. That kind of latitude would be inappropriate if we are talking in terms of 250,000 tonnes.

The second cause for concern is that, having regard to the considerable increase in the likely size of licensed opencast coal sites, there is no requirement in the Bill for the licensed sector of the industry to have specific regard to environmental considerations, as is the case with British Coal proposals. Like the other speakers before me, I believe that Clause 4 should be amended to incorporate the wording comparable with that already included in Section 3 of the Opencast Coal Act 1958. That would require that as regards the licensed working of coal by opencast operations British Coal should have regard: to the desirability of preserving natural beauty, of conserving flora, fauna and geological or physiographical features of special interest, and of protecting buildings and other objects of architectural or historic interest … any effect which the proposals would have on the natural beauty of the countryside or on any such flora, fauna, features, buildings or objects". As a lay person it seems to me that the national assessment will be too biased in respect of the economic situation of British Coal and will not consider sufficiently the environmental and social costs of opencast workings. The planning system has shown that it cannot control the noise, the dust and the extra heavy traffic associated with opencast sites.

Opencast mining can place an intolerable burden on the local population. It often occurs on the edge of fairly densely populated areas which are served by substandard roads and a road infrastructure which was not built to take heavy lorries. I believe that at later stages of the Bill we shall need two amendments on the lines of my suggestions. They would ameliorate some of the potentially adverse effects of Clause 4.

12.37 p.m.

Lord Forester

My Lords, the noble Baroness, Lady Stedman, was concerned at speaking to your Lordships for the second time on this subject. My temerity in addressing your Lordships for the first time is very much greater. I must declare an interest. I also apologise for my voice, which appears likely to leave me at any stage.

Clause 4 of the Bill allows British Coal's licensees to seek, through the courts, a right to search and bore for coal. It increases the number of people allowed to work underground to 150 and the size of opencast sites to 250,000 tonnes, as we have heard. I welcome those changes if their objective is to encourage the efficient and proper working of relatively small volumes of reserves which British Coal would not work. Such workings would increase employment and, in total, they could make a substantial contribution to our overall coal supply. If such coal can be made available to the market, at prices which are competitive with the ever-increasing competition from overseas, our balance of payments will benefit significantly.

Surely nothing should be allowed to inhibit the wider development of the licensed coal mining industries permitted by this Bill, provided stringent environmental safeguards and consideration for reasonable local concerns are properly taken into account. I stress that environmental safeguards should be stringent. This environmental point was debated at length in another place. I wish to make that point as the Minister touched upon it. Planning permission is still needed for opencast mining. It is needed for any mining. The Government recently introduced new planning guidelines on opencast mining which spell out more fully and more tightly than ever before the environmental criteria which must be met. They include environmental impact assessments and reinstatement.

I am happy to think that I have some "greenness" about me. The noble Lord, Lord Graham, was concerned about "the greens". County structure plans presume against planning permission for mining unless the ground has been worked previously. However, making safe former workings and removing hazards such as mine shafts can provide a benefit to the community. In my view, private operators make an excellent job of reinstatement nowadays. I should be happy to take the noble Lord, Lord Ezra, to see what the private sector can do. There are places where private operators have done a better job than the National Coal Board has done in the past. I must stand up for myself on that point.

Apart from those environmental aspects there is an inhibiting factor in the Bill. I should like to highlight the fact that the Bill confirms the continuing powers of British Coal to decide, at its sole option, whether or not to grant licences for the right to work coal. The Coal Industry Nationalisation Act 1946 was enacted at a time of coal shortage and lack of investment. From that time until the 1960s and 1970s the coal industry developed and licences were issued by the National Coal Board to encourage numerous licensees to produce as much coal as possible. Latterly the licensed mining industry has not had so much encouragement. Tonnage quotas have been imposed by British Coal. Penal royalty rents, sometimes amounting to more than 50 per cent. of the value of the coal, and greater than any other royalties in mineral industries throughout the world, were payable to British Coal. At one time British Coal charged £16 per tonne on coal worth only £22 per tonne. Those royalty rents are still more than 30 per cent. of the value of the coal.

To make matters worse, since privatisation of the electricity industry, British Coal has negotiated a satisfactory three-year contract with National Power and PowerGen. The licensees have not been treated so generously, being allowed only 76 per cent. of that price. The noble Lord, Lord Ezra, spoke earlier of dual prices. This seems to be another case of dual prices.

That low price and the high royalties charged by British Coal are serious enough problems. A further problem is the system of allowing British Coal to license its only United Kingdom competitors on whatever terms it wishes —either unconditionally or subject to conditions. That has done nothing to encourage the private coal industry. British Coal is allowed to resist or refuse applications without giving reasons for refusal or for imposing conditions. The Bill gives licensees the right to go to court to overthrow the unreasonable refusal, or the unreasonable terms, of a landowner to grant the right to search and bore for coal. There is no similar legal right for the licensees to question, reverse, or even appeal against unreasonable terms or the refusal of British Coal to grant a licence for the extraction of coal. British Coal is judge and jury. The noble Lord, Lord Mason, used that expression with regard to mining subsidence. British Coal is also judge and jury in the granting of licences. It does not have to give reasons or show its figures. Unknown quantities, due to seam tolerances, previous workings, gob slack and so on cannot be discussed.

In Europe coal generally belongs to the state and its extraction is licensed by the state in the form of concessions. I should like to point out that the European Commission has an interest in and legal responsibility for the promotion of effective competition in the coal mining sector. The present situation might be considered by our European partners to be a restraint of trade advantageous to British Coal. As things stand, as in the case of British agriculture, licensees do not have a level playing field on which to compete in Europe.

In conclusion, it would surely be only equitable and give considerable encouragement to the licensed mining industry if the licensing of the right to work coal was undertaken by a body independent of British Coal and if royalties and wayleaves could be charged at levels more in keeping with those charged by other national and international mineral industries. We should all like to see the nettle of mining subsidence firmly grasped. Unfortunately, all those points were the subject of amendments in another place which were rejected with a suggestion that we wait for partial privatisation at some stage in the future.

I do not believe that we can wait that long, especially when British Coal is holding back on the granting of new licences and the single market is just around the corner. As an absolute minimum should not the licensed mining industry have a right of appeal against unreasonable refusal or the unreasonable terms demanded by British Coal? Without the right of appeal the benefits of Clause 4 are questionable. I urge my noble friend to consider an appeal procedure.

12.47 p.m.

Lord Mason of Barnsley

My Lords, this Bill is an enabling Bill for the eventual privatisation of the coal mining industry. The restructuring clauses and the write-off of £5 billion are clearly indicative of that intention. British Coal will welcome those clauses, but I believe that the miners and their unions will view with apprehension and grave concern the long-term view of their industry and their jobs as set out in the Bill.

I am sorry to say that the miners' strike of 1984–85 not only paved the way for the ruthless run-down of the mining industry over the past four years and hastened pit closures. It also provided a reason for many of the measures in the Bill and gave impetus towards the privatisation of the coal industry.

That strike was an unparalleled disaster. Nothing was gained and all was lost. Twelve months of fanatical leadership exploited mineworkers' loyalty and financially ruined many thousands of miners' families. Now the National Union of Mineworkers —my union, of which I have been a member since I was 14 years of age —is powerless, industrially impotent, financially on its knees, with no strength left for collective trade union bargaining. Indeed, it is no longer a national union. The richest coalfield broke away as a result of the no-ballot strike. In its wake British Coal and this Tory Government were cock-a-hoop. With no serious collective opposition they embarked on a pit closure programme with a vengeance. They did so dictatorially, closing far more pits than would have been closed had it not been for the miners' strike.

The miners' leadership of 1984 has a lot to answer for. The result was a ruined union which gave the go-ahead for the Tory Government to punish the coalfield communities. So now in this Bill we see a five-year plan, the write-off of debts, a restructuring plan —a slimming operation in fact —and we know full well that more pits are to close and there will be thousands more job losses. Of course in this Bill provision is made for redundancies. That is to be welcomed. Many young miners —young miners this time —will soon be cast on to the industrial scrapheap with little prospect of a job, especially in the coalfield communities of South Yorkshire and the Barnsley areas where unemployment is still over twice the national average.

I am concerned about the future of our deep-mined coal industry. I must say that I have been staggered and disgusted at the cruel pace of the pit closure programme. British Coal need not now consult. It can and has with impunity closed pits, declared redundancies and ruined mining communities on a scale that was frightening. It created a wave of misery and unemployment such as we had not seen since the 1930s. Although miners received good redundancy payments, their jobs and future prospects at work vanished and, what is not fully appreciated by the Government, many supportive industries had to close also. Their employees did not receive any redundancy payments. Many lost jobs and there are no future prospects in those dying communities. That became a major knock-on effect of increasing unemployment.

I know that British Coal and the Government boast constantly about increased productivity: that is to say, we produce the same tonnage as before the strike with half the men. I concede that £2 million a day in investment in more mechanisation and new sinkings have played their part but there is no doubt whatever that massive manpower cuts made the productivity figures look impressive. I believe that the men —the miners, those still at work during this traumatic phase of industrial decline —who have achieved those results have been quite magnificent. It is those men who need our support.

Since the strike the cost in human terms in our coal communities has been colossal. Ninety pits have closed and 130,000 men have been thrown on to the dole. There has been the run-down of our mining villages and despair in many families who suffered for 12 months with no income during the strike and fed the pawnbrokers in order to survive. Then came the insensitivity of British Coal and the Government who embarked on such a callous drive to cut back on the industry and did not worry fully about the social consequences of their actions. There was no real regional policy of aid to cope with the situation. Therefore history will record that period of shameless and uncaring government.

There has been one noticeable effort made by British Coal to offset the job losses. That was the creation of British Coal Enterprise Limited. It is the only real body to assist in producing alternative new job opportunities in the traditional coal mining areas of Britain. I believe that Merrick Spanton, the chairman, Tony Hewitt, the chief executive, and their board have now shaken off the criticisms of their efforts in the early years. Their enterprise is now bearing fruit. With a variety of schemes, projects that they have launched, their managed workshop activities and some ex-employees of British Coal resettled in jobs under the job and career change scheme, they can now claim to have helped 32,000 men gain some form of employment. It is a far cry from the 130,000 miners' jobs lost plus many thousands more in allied industries and all those who suffered in the wake of that strike.

But it is not the answer to our problems. It has been a creditable achievement in its time but certainly it is only a pinprick in tackling the size of our unemployment problems in the coal field communities. Therefore I should like to ask the Minister what the Department of Trade and Industry, the Department of Energy and the European Commission are planning to do to deal with the unemployment problems in those dying coal field areas.

Prior to this Bill two things happened that bode ill for those working our deep coal mines: the passing of the Associated British Ports Bill and the contents of the leaked energy policy paper prepared by the Department of Energy for Cabinet decision. The ports Bill gave the green light to a major increase in cheap coal imports. We are already importing about 12 million tonnes of coal per year from 12 different countries. Those tonnages alone have meant the loss of between 8,000 and 10,000 miners' jobs. When the ports have expanded for business they will have the capacity to receive and deal with up to 30 million tonnes of coal imports per year. Much of that tonnage is subsidised or quarried, and in many cases the use of cheap labour is employed. I believe it to be totally unfair competition. Even it it is only £5 per tonne cheaper than deep-mined British coal, with 12 million tonnes coming in annually that represents a massive saving. But I stress that every tonne of imports put our deep-miners' jobs at risk.

Nearer home and in relation to coal imports, the leaked energy paper notes that even with the phasing in of coal imports over a five-year period, as the Secretary of State states: British Coal will require substantial further adjustment". Hence there is the restructuring in this Bill.

There is no doubt about the intention of the Government: there are to be yet more crippling job losses in the British coal industry. It is indicated in the leaked document that the privatisation of the electricity industry will result in the loss of 18,000 coal miners' jobs. Allied with the effects of cheap coal imports —a cutback in the take of British Coal to our power stations and the further substantial readjustment of the coal industry—there is the likelihood that there will be a reduction in the workforce of 30,000 jobs within the next four to five years. That is a cutback of one-third of British Coal's deep-mines workforce. Those are awesome figures and I should like the Minister to address the House on those prognostications when he winds up the debate.

This Bill contains two more unacceptable measures: a tenfold increase in opencast coal mining per site, which is a diabolical polluting activity; and an expansion in private or licensed mining activity. Again both those measures will result in a further cutback of deep-mining employment.

I cannot understand how the Government can escape the charge of being two-faced and hypocritical. How can they pretend to be bent on an environmental drive and urge the polluter pays policy when they are boosting the worst polluters in Britain? When I was Minister of Power opencast output was 7 million tonnes. It is now 16.8 million tonnes. This Bill will give the opencast executive the right to mine sites at up to 250,000 tonnes per site —a tenfold increase on present site output. The total tonnage may well rise to 20 million tonnes of opencast coal per year.

That will mean that there are thousands of people in coal mining communities (because that is where the coal is and not in the South of England) who have for generations suffered industrial pollution, noise, smoke, respiratory diseases from heavy industry, muckstacks and opencasting —indeed, the many forms of environmental pollution —will now be subject to a tenfold increase in production from each site. As we know from experience, objectors, including the local authorities, invariably have their appeals turned down by the Government. With 25,000 tonnes of output, that polluting menace could last for five years; but with 250,000 tonnes of output per site it is likely to last between seven and 10 years. That may prove to be the norm. Therefore there will be many more years of dust drifting into homes and gardens, constant noise and vibration from machinery, lorries and blasting. The landscape will be ruined for years and one cannot bring back those years.

However, one asks: what of the old folks? Their properties are devalued —blighted in the eventide of their lives. They have to suffer misery and unhappiness. Some of them die in that state during the seven to 10 year period of operations. The proposed expansion is an insensitive decision. It cares not for enhancing the quality of life. It will certainly vastly increase many forms of pollution. Therefore in my opinion these opencast vandalisers of our people and our communities should be curbed.

If the Government have adopted the principle of making the polluter pay, I ask this question. What will these polluters pay to our affected people? Every tonne of opencast coal in the past has threatened, and in the future will increasingly threaten, future job prospects in deep mining. I am aware of the profit margin and the argument of helping British Coal's survivability. However, deep mines when closed on grounds other than being worked out are a loss that can rarely ever be regained. Opencast coal can be called upon when urgency demands, and that is where it should lie —in reserve.

On that last point, much the same could be said in relation to private or licensed mines. Many of them are drift mines: coal mines that are near the surface, easily mined where necessary. But again, it is another expansion, jeopardising jobs in deep mines, increasing the manpower per private pit from 30 to 150 men. I know that safety of men in these small mines does not compare with the deep mine safety record. The Minister may say that with this proposed expansion more modern machinery will be accommodated and safety will be increased.

However, the expansion introduces another element of unfair competition. There is no comparison with the massive investment of sinking and opening up a deep mine. Therefore more of the deep mine workers' jobs are at risk, especially if one bears in mind the increased annual output as a result of this manpower increase.

When the Minister winds up, perhaps he can reassure me about the problem of redundancies and that there will be no return to compulsory redundancies during this next phase of cut-backs. Perhaps he can also reassure me that the traditional concessionary fuel allowances will continue for miners, retired miners and miners' widows. Perhaps he will comment on the project in which I have a personal interest, the fluidised bed power station project. I financed its birth in 1968. There was the promise of a highly efficient environmentally clean coal generating plant. Do the Government believe that it has a future?

The Bill, typical of the curate's egg, has good and bad contents. Unfortunately, I believe that they are mostly bad and ominous for the future of Britain's deep-mined coal industry. I concede that there is continuing investment and I welcome the redundancy payments clauses and the provision for industrial deafness. However, one has to recognise that with all the other measures, if the Conservatives win the next general election it will be a simple task to privatise the coal industry. The restructuring that is planned is a major step towards preparation for privatisation. It will result in a much smaller coal industry reduced to manageable profitable units. However, I warn that even those will have to fight to survive against the fierce competition from the use of North Sea gas in power stations, the increased tonnage from the private licensed mines, the rising tonnages of cheap coal imports and opencast mining expansion.

It is an energy policy that is fraught with danger, especially on security of supply. Our indigenous deep-mined coal industry will be reduced to a skeleton as coal consumers fight in the market-place for short-term cheap supplies. I am afraid that the Bill bodes ill for our deep-mined coal industry. I visualise a cut-back in manpower to little more than 50,000 men by 1994 with fewer than 50 coal mines surviving.

With a disunited trade union opposition —sad as that may be—powerless to oppose British Coal and the Government, it is incumbent upon us, especially on this side of the House, to use all our democratic powers of persuasion to warn the Government of the serious consequences of the course that they are pursuing: that is, their intent to cripple one of our major indigenous fuel industries. If there is to be any salvation for the deep-mined coal industry it lies in the return of a Labour Government. That, above all, I believe must now be our objective, and I think that we still have time to achieve it.

1.8 p.m.

Lord Norrie

My Lords, I see this as a short and technical Bill designed to introduce new financial and licensing arrangements for the coal industry. I welcome it. However, I am sure that noble Lords will be relieved to learn that I have no intention of embarking on a learned discussion about either its technical or financial merits.

The purpose of my taking part in the debate is quite simple. It is to establish in the mind of the Minister that it is a Bill with enormous impact on the environment. I also hope that the Bill will not leave our House without some important improvements designed to minimise the adverse consequences of coal extraction —a point brought out most forcefully by the noble Lord, Lord Graham of Edmonton. He and the noble Baroness, Lady Stedman, reminded us that deep mines can cause subsidence and noise disturbance. I would add that they cause physical damage to the landscape through the construction of unsightly surface buildings and tips. We all remember the concern that was generated by the Vale of Belvoir application in the early 1980s, and there are similar anxieties about the proposed increase in mining in the South Warwickshire coalfield.

However, opencast coal extraction creates environmental problems and hazards of an altogether higher order. Whole landscapes can be altered and people's lives can be devastated. While restoration is often possible, and should always be encouraged, even the best restoration cannot replace the intimate, mature landscapes that have been swept away. I am sure that we all agree that where such operations are necessary—and of course some opencast is necessary—they should always be governed by the highest possible environmental standards, a point reinforced by the noble Lord, Lord Ezra.

My concerns about the Bill therefore are straightforward. It must provide the means to ensure that environmental considerations are given the utmost priority.

In 1986 when legislation was last passed on the issue, the amount of private sector activity in opencast coal was small. Of the 15 million tonnes of coal extracted in 1984, 95 per cent. was extracted by British Coal and less than 5 per cent. under licence by the private sector. By 1988 the percentage from licensed sites had risen to 11 per cent.

The Bill proposes to increase the limit on private sector sites tenfold; that is, from 25,000 tonnes per annum to 250,000 tonnes per annum. I welcome in principle the increase in private sector activity but it would be wrong for it to take place without also extending the environmental duties to the private sector.

In 1986 when the Housing and Planning Act was passing through the House, my noble friend Lord Ridley and the noble Baronesses, Lady Nicol and Lady David, persuaded the Government to reinstate the amenity duty on British Coal, governing its activities in the opencast coal sector. That now appears as paragraph 1 of Schedule 8 to the Housing and Planning Act. Governed by this amenity duty, British Coal has continued to improve its environmental performance and has shown itself willing to take its environmental responsibilities seriously. For example, British Coal engaged the British Trust for Conservation. Volunteers (BTCV)—of which I am president —to carry out an exciting tree planting project on a former opencast site which is now the Rother Valley country park in Yorkshire. It used BTCV's commercial arm —Conservation Practice Limited —for restoration projects at Marley Hill near Gateshead and to create a nature reserve with Northumberland Wildlife Trust at Druridge Bay.

In spite of a reassuring green speech by my noble friend Lord Forester, I am sorry to say that the private sector opencast site operators have by no means such a good record. In 1984 Durham County Council published a report by the County Planning Officers Society entitled Problems on Licensed Opencast Sites. It described sites where environmental conditions had been breached and restoration conditions had not been fulfilled. There have also been a number of cases where operations have been carried out above the legal limit of 25,000 tonnes per annum. In 1987 that matter drew criticism from the inquiry of the House of Commons Energy Committee into the coal industry. Therefore, the private sector has a long way to go before it can start emulating the fine record of British Coal.

I hope that the Minister will look sympathetically on the proposals to extend British Coal's amenity duty to the private sector which I and other noble Lords hope to air during the Committee stage. Surely we should aim to make the Bill as environmentally friendly as the Opencast Coal Act 1958 and the Housing and Planning Act 1986, building on the most recent example of the Electricity Act where new environmental duties were accepted last year.

1.10 p.m.

Viscount Ullswater

My Lords, we have had a good and wide-ranging debate on coal and I shall try to deal with as many of the points raised as I can. But let me first re-state what this Bill is seeking to do. Its primary purpose is to give British Coal a proper financial foundation on which to build and develop its business and to give the corporation a realistic prospect of future viability. To that end the Bill will go a long way to wipe the slate clean of the overhang of past losses and long-term liabilities. It will recognise the true earnings potential of the corporation's colliery assets in a competitive market; and it recognises that there will need to be further restructuring over the next three years.

All that should help to complete British Coal's transformation from a subsidised institution into a successful and free-standing business. At the same time, by liberalising the industry through increasing the limits on licensed mining, we are hoping to increase the opportunities for private sector investment in safer working methods and more modern equipment.

I should like to deal with some of the points which your Lordships have raised. The noble Lord, Lord Graham of Edmonton, rightly said that the coal industry is not just about money; it is also about men. He said that the coal industry is about flesh and blood and he drew attention to a play which was performed many years ago, as he reminded his noble friend Lord Mason, "Close the Coalhouse Door". We all understand that in the past there have been great tragedies in coal mines and the noble Lord drew attention to the dangers that affect all those men working underground.

What has received most attention during the debate is the environmental aspect of the opencast operations. The point was raised by all noble Lords who have spoken; the noble Baroness, Lady Stedman, and the noble Lords, Lord Graham, Lord Ezra, Lord Forester and Lord Mason, and my noble friend Lord Norrie. It is essential to strike a balance between the environmental impact of opencast mining and the benefits to the national economy. That is why in May 1988 the Government introduced new planning guidelines on opencast mining which were referred to by my noble friend Lord Forester. He said that the Government have insisted on full environmental impact assessments on all but the small sites.

In recent years environmental expectations have continued to rise. By general agreement the UK opencast industry now finds itself operating under the most stringent planning system in the world. Many opencast operations take place on derelict industrial land which is then restored to a high standard. That is a positive gain to local communities. The opencast industry overall has been responsible for the reclamation of 16,000 acres of dereliction during the last 20 years. Local communities often benefit from creative restoration projects; for example, sports facilities, road improvements, nature reserves, reafforestation and a wide range of other schemes which restore variety and quality to the landscape. That matter was touched upon by my noble friend Lord Norrie.

Far from being callous, the opencast industry has shown great willingness to listen to what local communities want. We want to see opencasting, which is 30 per cent. cheaper than deep-mined coal, contributing more to our national economy, always consistent with each individual site being acceptable environmentally. That must be demonstrated rigorously through the planning system.

Lord Graham of Edmonton

My Lords, does the Minister appreciate that he is describing an aspiration and an ambition? However, as mentioned by the noble Lord, Lord Norrie, myself and others, the evidence from the Council for the Protection of Rural England and from the planning officers in Durham shows that in reality the operators of opencast coal mining are not only exceeding their licence and getting away with it but they are not fulfilling their obligations. My noble friend Lord Williams who will be dealing with the Bill in Committee is the President of the Council for the Protection of Rural Wales. He will bring to bear the evidence from Wales. Does the Minister not appreciate that there is a wide gap between what his advisers are telling him is the position in theory and what we know to be the position in reality?

Viscount Ullswater

My Lords, I agree that mistakes have been made about the reinstatement of some of the opencast sites. However, it would be wrong to judge the future from the past. As I have said, the reinstatement is controlled by one of the strictest planning regulations in the world. I draw the noble Lord's attention to the environmental impact assessments which must be undertaken in the future before the new licences are granted.

I should now like to deal with subsidence, as mentioned by the noble Lords, Lord Graham and Lord Ezra, and the noble Baroness, Lady Stedman. The Government are well aware of the widespread concern about the issue and of the human problems that arise from subsidence as well as the damage to property. The number of new claims is continuing to fall and so too is the backlog of outstanding claims. Last year there were 9,600 new claims compared with almost 13,000 in the previous year. And the backlog of claims has fallen from 37,000 in 1986–87 to around 26,000 last year.

Secondly, many of the Waddilove Committee recommendations that do not need legislation have already been implemented and the Government are continuing to see what more can be done. Finally, as my right honourable friend the Secretary of State confirmed during the Report stage of the Bill in another place, the Government are committed to introducing a Bill on subsidence at the earliest practical opportunity.

As I explained earlier in the debate, it is not practical to tack subsidence provisions onto the present Bill. However, I shall take away from this debate the clear message that your Lordships' House has attached great urgency and importance to subsidence legislation.

The noble Baroness, Lady Stedman, drew my attention to the six-year rule about subsidence. The Government recognise that, as currently applied, the rule has been strongly criticised. For that reason we are proposing that claims should be allowable six years from when the damage occurred or six years from when the claimant first had reasonable grounds for noticing the damage. The noble Baroness will appreciate that that is a great step forward.

As regards safety, for myself I feel that safety must be one of the highest priorities of future legislation and of the future of the licensed mining industry. I have to say that the accident rate in licensed mines has been greater than that of British Coal, as the noble Lord, Lord Ezra, said. However, the accident rate in licensed mines has declined over the past three years. That does not mean that the Government have become complacent: the accident rate is still higher than they would wish. However, I should like to feel that the mining inspectorate —which employed one mining inspector for every 3,195 miners employed by British Coal in 1979 and now employs one inspector for about every 2,000 miners —which is a great improvement —is now up to strength and has no vacancies.

I shall carefully note other points on safety. I appreciate what the noble Lord said. I am not trying to hide anything about the safety requirements but I repeat that I feel that the increase in the number of those involved in deep mining will allow the introduction of new and modernised equipment which will go a long way to helping in that regard.

The noble Lord, Lord Graham of Edmonton, also asked me about minestone and whether the Minestone Executive could be included more in the several engineering works which are taken on. I understand that decisions on awarding contracts for road construction are determined by the Department of Transport on the basis of competitive tendering. It seems that the Minestone Executive attempted to bid for contracts for which minestone was not entirely suitable. In 1986 the Department of Transport made that clear. The Minestone Executive should ensure that the materials that it can supply meet tender specifications. Also, where bids are acceptable the price must be competitive with alternative materials. There is scope for greater use of minestone in road construction programmes and it is up to the Minestone Executive to ensure that it submits competitive bids to the appropriate specification. I know that the noble Lord, Lord Ezra, who also spoke about the Minestone Executive will understand those requirements.

I turn to one or two points made by the noble Lord, Lord Ezra, which I have not already covered. He said in his opening remarks that the coal industry has made a great contribution to this country and I believe that all noble Lords agree with him on that. The security of supply which is now guaranteed by the new contract with the generators provides for a sale of 70 per cent. of the mining production. That is a great step forward and will ensure for the next three years, which may need some restructuring, that there is at least a security of supply.

The noble Lord also asked me a more technical question about the progress of the revaluation of assets. Our expectation is that the revaluation will be completed in time to be reflected in the corporation's accounts of 1989–90.

My noble friend Lord Forester asked me about royalties which British Coal charge. Royalties for opencast licences are indeed very high at about £11 per tonne. I believe that that is the highest paid to any coal owner in the Western world. Royalties are and will remain a matter for British Coal and the licensees, but we have made it clear to British Coal that royalties must be set at a level which will permit efficiently managed operators to develop their business profitably. Given the squeeze on operators' margins over the past 18 months I expect British Coal to look very hard at a case for a royalty reduction.

On licences, so long as British Coal owns the coal, a final decision about licences must be a matter for it. However, it has agreed to publish the criteria which it applies to licensing decisions. In particular, it has specifically promised to do its best to make any objections to a licence known to the applicant at an early stage. It has agreed to set up an internal appeals arrangement so that disputed applications can be referred to a national level.

The noble Lord, Lord Mason, with his knowledge of the industry, gave a résumé of what had happened in the past. Of course, he would understand about the need for pit closures and how necessary they sometimes are in economic terms as a result of exhaustion and restructuring, which this Bill specifically confronts.

After all, it was in the days of a Labour Government, of which the noble Lord was a Member, between 1964 and 1970 and 1974 and 1979, that 295 pits were closed down with a loss of over 190,000 jobs. I do not wish to make political capital from that but I wish to indicate that in the coal industry there have been times when restructuring has been necessary. That time was one and this is another.

The noble Lord quite rightly drew to the attention of the House the success which the British Coal enterprise had in creating a number of jobs —and I think he said 36,000. Its costs will continue to be supported by the restructuring grant in this Bill and I believe that Clause 4 will help to provide new mining jobs by raising the limits on the licensed mining sector.

The Government also welcome the European Commission's new RECHAR programme for revitalising depressed mining areas. We shall be working hard to ensure that our coalfields receive their fair share of the funds available.

Turning to another point made by the noble Lord, he asked me about an assurance that there would be no compulsory redundancies. I hope that British Coal will be able to continue with its policy of relying entirely on voluntary redundancies. Obviously, I cannot give a firm assurance on that because it is ultimately a matter for British Coal. Nothing in this Bill affects the entitlement of concessionaires. The Bill ensures that British Coal has the finance to meet the entitlements.

Also, the noble Lord asked me —and I am glad that he gave me notice of these questions —about the future of the fluidised bed project. The Government are making up to £8 million available for the next stage of the Grimethorpe project. We hope that it will prove the technique for high-efficiency coal burning to the point where it is carried forward for commercial application.

The noble Lord, Lord Mason, also drew attention to imports. I believe I have said before from this Dispatch Box that many of the imports are special requirements for industry and are not available from the supplies mined by British Coal. The Government's policy is not to restrict imports on coal. Decisions on coal purchases, whether from indigenous or imported sources, must be for the commercial judgment of those concerned on the basis of a willing buyer and a willing seller.

I think I have dealt with all the points made that I have noted, but if on reading Hansard I find that I have missed any I will write to the noble Lords concerned. I conclude by saying that this Bill is a recognition of the importance of coal to this country, while also reflecting the need to develop an increasingly competitive coal market. The dramatic gain in coal productivity of over 75 per cent. is an achievement which compares with any in Britain's industrial history. Coal has long held a special place in this country's industrial history and it remains a staple fuel. Coal-burning power stations provide three-quarters of our electricity supplies.

The Bill will lift the burden of the past from the coal industry and enable it to face the future with more certainty and continue to drive towards higher productivity and a more competitive future. It is a Bill that faces reality and offers practical help where appropriate. I commend the Bill to your Lordships.

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