The Coal Industry (Hansard, 19 October 1992)

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield)
My Lords, with the leave of the House, I should like now to repeat a Statement being made in another place by the President of the Board of Trade. The Statement is as follows:
"With permission, Madam Speaker, I would like to make a Statement about the coal industry.
"Last week I agreed that British Coal should announce that it would cease production at 31 pits over the course of the next five months with the loss of up to 30,000 jobs. I very much regretted that British Coal had had to reach this decision but I accepted its advice that these steps were necessary in order to bring supply closer into line with demand. I then announced myself the outline of a package of redundancy and special assistance measures, the further details of which I am now able to give the House.
"Originally I intended to announce details of the new coal contracts with the electricity supply industry and the future employment prospects for British Coal to the House before the Summer Recess. This timetable was not achieved. I would have liked to have made the announcement to the House today. But the electricity industry has still not agreed contracts for coal after 1st April 1993. In the meantime pressure on British Coal, fuelled by reported leaks, intensified and I therefore agreed to allow it to proceed. I regret this discourtesy to the House.
616" I accept full responsibility for that decision as I do for the consequent events.
"Madam Speaker, remorseless changes in circumstances have been reducing demand and employment in the coal industry for the last 80 years. The fastest rate of decline was in the 1960s when 300,000 jobs were lost in a decade, including 186,000 under the Labour Governments of 1964 to 1970. At present, British Coal is producing 88 million tonnes, with 65 million tonnes going to the electricity generators. It is most unlikely that British Coal will be able to sell more than 40 million tonnes to the generators as from next April. The economic case for a substantial reduction in capacity therefore remains compelling.
"Nevertheless the Government recognise the concern at the speed of the run-down and about the very great difficulties it would cause to the communities involved. We have therefore concluded that, for the time being, British Coal should be allowed to proceed with the closure of only 10 pits which it has told me are currently loss making and have no prospect of viability in the foreseeable future. The pits which fall into this category are Vane Tempest, Grimethorpe and Houghton Main, Markham Main, Trentham, Parkside, Cotgrave, Silverhill, Betws and Taff Merthyr.
"Nevertheless it is clearly important that British Coal demonstrably meets its statutory duties to consult and notify and take account of the result of consultation. No closure will therefore take place until after the statutory consultation period has been completed.
"In the case of all other closures and redundancies, I have asked British Coal to introduce a moratorium until early in the New Year except for those which may be agreed by the workforce at the pits concerned. This will provide time for negotiations to continue, and hopefully to be concluded, on the new coal contracts. During this period there will be no compulsory redundancies, although voluntary redundancies will be allowed to proceed under the terms announced by British Coal last week.
"During this moratorium the Government and British Coal will set out the full case for the closures which British Coal planned and to which I agreed. The Government will also provide an opportunity for honourable Members to debate the issues. In addition, we will carry out widespread consultation with all those concerned over the next three months. We will then announce our conclusions following these consultations to Parliament in the New Year. If, following this process, the Government and British Coal's judgment is confirmed then British Coal will proceed with a phased programme of colliery closures aimed at reducing surplus capacity as soon as possible.
"Madam Speaker, it is clear that many coalfield communities will continue to suffer significant job losses. I am now able to give the House more details about the package of measures to assist those communities.
617 In the short term people will need immediate help to find jobs, to retrain and to construct a new future for themselves. In the longer term these areas will need help with infrastructure to attract new industries and business.
"My right honourable friend the Secretary of State for Employment has written to the Chairman of the Employment Select Committee with details of a package of measures worth approximately £75 million over two years. A copy of the letter has been placed in the Library.
"The training and enterprise councils in the areas concerned will have a major part to play. They will want to ensure that all those affected are offered help from the relevant agencies including British Coal Enterprise and Government departments. My right honourable friend the Secretary of State for Wales will be taking similar action in Wales.
"One of the best ways of attracting new industries and long term investment is the creation of enterprise zones. The Government intend to introduce new enterprise zones, in the areas where they would be most effective.
"Last week I said that we would ask English Estates to advise on a programme of property and sites provision. On the basis of preliminary discussions with English Estates, the Government have decided to make available to the corporation—and in due course to the Urban Regeneration Agency—£75 million of additional money over the next three years. In addition the corporation will in this year spend around £10 million in these areas.
"My right honourable friend the Secretary of State for the Environment is also making nearly £2 million available today to the Tyne and Wear Development Corporation. This will enable it to make an early start on the further extension of the Sunderland Enterprise Park and the new Viking Industrial Park in South Tyneside.
"We have already announced that three areas—Doncaster, Barnsley and Mansfield—will get enhanced status when the new assisted area map is announced in the New Year. More areas will be upgraded in the review. This will ensure that firms interested in investing there are eligible for grant assistance. We will continue to look at other areas.
"These major initiatives will be underpinned by further smaller regeneration measures. I intend to extend the coverage of regional enterprise grants to all coal closure areas. This will help small businesses there with investment and innovation projects. I will strengthen inward investment efforts in these areas. I will see that additional resources are available to local development agencies.
"My right honourable friend the Secretary of State for the Environment is also acting immediately to alleviate the effects of the closures. He is today setting up a coalfield areas fund. Up to £5 million will be made available for expenditure in this financial year and next. My right honourable friend is writing to all the local authorities in the affected areas asking them urgently for proposals on how this money can best be spent to help those 618 made redundant. My right honourable friend the Secretary of State for Wales will be making a separate announcement on resources in Wales.
"I am aware that these closures will have a serious impact on coal industry suppliers and we are already discussing with them ways to assist diversification and the identification of new markets.
"These measures will all bring new money to the affected areas. We are talking about £165 million altogether. I know that this will make a major impact in transforming the economies of these areas.
"These programmes will be carried out by a number of separate agencies, each with established expertise and a track record of achievement in its field. But it will be important to ensure that the programmes mesh properly together, leaving neither wasteful overlaps nor damaging gaps. For this reason I have decided to appoint a distinguished national figure, who will be an adviser in my department, to act as co-ordinator and facilitator at the national level. He will also assist my right honourable friend the Secretary of State for Wales.
"I am pleased to tell the House that the noble Lord, Lord Walker, has agreed to accept this important responsibility.
"The decisions which I have announced today have been difficult. I understand the anguish that will be caused for the coalfields concerned but there is no economic alternative. The Government will now proceed to work for the long term future of all those concerned.
"I have arranged for copies of this Statement to be made available in the Vote Office".

§ Lord Donoughue
My Lords, I thank the Minister for repeating the Statement, copies of which we were handed a few minutes ago. No doubt the last-minute U turn which it contains reflects not only the total disorder which appears to exist in central government but also the horror and indignation—and nothing less than that—which has been felt across the nation and the political spectrum, as Government Whips well know, against the proposals to butcher the coal industry through brutal and ill-considered closures.
Those last minute concessions may perhaps satisfy some Conservative Back-Benchers in another place—we shall soon learn. However, I cannot believe that they will bring lasting comfort to the 100,000 workers in the coal and related industries who remain threatened, because the moratorium prolongs uncertainty. The moratorium of three months continues the uncertainty and prolongs the agony for all those who work in the coal industry and related industries. Therefore, it blights the industry and destroys confidence in its future.
The proposals should be dropped. But if they are reconsidered that should not be done through the consultations that have been mentioned—we heard about the full consultations which were conducted 619 previously—but through an independent inquiry. Otherwise the same Ministers will continue to find the argument for closure compelling. That was reaffirmed by the Secretary of State yesterday on television and it is written into this Statement.
The human tragedy involved in the 31 closures is too awful to contemplate. Whether there are 10 or 31 closures, why are the Government still contemplating them? Why have they not abandoned them? There are no compensating economic advantages in these callous measures. However many closures—whether 10 or 31—they hurt Britain, economic growth, the balance of payments and public borrowing. They are economic lunacy; why are they occurring?
The Minister repeated in the Statement the tired assertions that the closures are the remorseless logic of the free market because there is no market or there is an insufficient market for coal. Will the Minister not now admit that that is nonsense? Is she not aware that there is no free market for UK energy? The customers in electricity are quasi-monopolistic. Coal's competitors in gas and in nuclear have privileged access to the market. Therefore, the Government still do not have and have not presented to this House an argument for the closures which stands up to scrutiny.
More particularly, I wish to ask the Minister certain questions which are fundamental to exposing the economic and social lunacy of what is still being considered; that is, the 31 closures. I hope that she will answer them because the Government have not yet published any cost-benefit analysis of their proposals. We have had no White Paper, although I asked for one in our debate in the summer. Why have we not had published a cost-benefit analysis for 10,20 or 31 closures? Will such an analysis be published before the so-called moratorium ends? Will there be a White Paper?
Will the Minister address today the questions which such an analysis would bring? What will be the total number of people unemployed as a result of these proposals—whether there are 10 or 31 closures—including indirect unemployment from related industries? Does the Minister accept the widely propounded figure of more than 100,000? What will be the cut in GDP resulting over one to three years? Does the Minister accept that it will be a reduction of 0.5 per cent. per annum, which will more than eliminate recent benefits of interest rate cuts? What are the true costs of the closures? Will the Government publish those relevant figures, including the indirect costs, the liabilities and the balance sheet write-offs? Do they accept that the total costs have been estimated at £7 billion? In relation to that, what would be the true cost of keeping all 31 mines open? Does the Minister accept that it is approximately £1 billion; only half the cost of closing them during the first three years?
In relation to the aid package, how much extra will there be for local authorities in the blighted areas which will carry the burden? As British Coal Enterprise will have a major role, who will be responsible for that after privatisation? Will the Minister not accept that this package is totally 620 inadequate when compared with the scale of the tragedy which is contemplated? As regards a national energy policy, do the Government put no value—no value at all—on having long-term security in domestic energy supplies, including coal?
If the House receives full and accurate answers to those questions, it will be clear that there is no logic behind the proposed closures, whether there are 10 or 31. There is no economic logic, no social logic, no energy logic and above all no human logic. The moratorium does not alter that; it simply prolongs the uncertainty. Will the Minister suggest to her Secretary of State that this House, like the whole nation, wants the proposed closures totally abandoned? Will the Government come forward with a rational energy strategy, including a future for the coal industry? When will they do that?

§ Lord Ezra
My Lords, I wish to associate myself with the anxiety expressed by the noble Lord, Lord Donoughue, about the way in which the original proposals were made. During a long period in the coal industry I never experienced an announcement of closures made in such a way; I refer to the closure of 31 pits in five months. The Minister referred to the number of closures and redundancies which occurred during the 1960s and her numbers were correct. However, as she will no doubt recall, the circumstances were then quite different. First, there was almost continuous consultation. Indeed, I spent most of my time in meetings with union representatives discussing charts and details of all the pits. Secondly, that was a period of continuous full employment and therefore alternative jobs were readily available. The distinction is that on this occasion there has been no consultation and there are no alternative jobs.
The Government have now come forward with modified proposals which are more satisfactory. However, I should have preferred the postponement of all the closures during the moratorium, and I ask the Minister to consider that. There is argument about the viability of some of the pits on the list which she has mentioned. No doubt that will arise in the normal consultation procedure which she has assured us will be restored. However, I am anxious in particular about the point referred to by the noble Lord, Lord Donoughue, that the inquiry will not be independent. The Government conducted an inquiry when formulating their plans for privatisation. I do not believe that this House or another place will be satisfied with yet another inquiry conducted by the Government.
So many issues are unresolved. No one is clear about the relative competitiveness of the existing coal-fired stations, which have long since had their capital costs written off as compared with the gas-fired stations. There is argument about whether the gas-fired stations would be competitive at the original gas price. But would they be competitive at the higher gas price? There are arguments about the proper position of nuclear power. Indeed, because electricity is generated by virtually every kind of primary energy 621 that we have at our disposal, the electricity industry raises the major issue of an energy policy. It cannot be escaped.
Therefore, I put it to the Minister that the Government should give serious thought to establishing an independent high-powered body which would look at the whole question of energy policy. That should report by the end of the year and the inquiries presently being conducted by the Director-General of Electricity Supply, which he said will not be available until some time towards the end of next year, should be speeded up so that we know the impact of the contracts for electricity supply being conducted by the regional electricity companies.
In the meantime, I should have thought that the closures should be conducted on the normal basis, as they were previously. No pre-ordained list of pits should be closed and only when the inquiry has been completed, submitted to the nation and to both Houses and fully debated, should we decide what should be done. I hope that the Minister will give us a view on that issue.

§ Baroness Denton of Wakefield
My Lords, it is precisely because the Government are anxious about the future of Britain that these difficult decisions are being taken. We want to achieve the largest economic coal industry that the market can support in the longer term. The Government aim to ensure that the nation has adequate, secure and diverse supplies of energy at competitive prices in the forms which people and businesses want. A competitive market, operating within a framework of arrangements to safeguard health and safety and the environment, provides the most effective and efficient mechanism for meeting our energy needs.
Our strategy is clear. It is to open up the energy sector and to respond to market forces so that British industry and British consumers have access to diverse sources of energy at competitive prices. We are lucky to have a number of energy sources in this country: oil, gas and coal as well as access to imports. It is right that we should seek to take advantage of all those and that the market should be able to decide to what extent it wishes to draw on them.
The Government believe that energy prices should, wherever possible, reflect their true economic cost, otherwise we should simply put up the prices of our products and lose jobs as a consequence. Since 1979 the Government have supported the coal industry to the tune of £18 billion, £8 billion of which has allowed them to modernise and mechanise. For the coal industry to survive it is important that it should concentrate on its future. At present, money is being spent on bringing coal, for which there is no market, above ground at a cost of about £100 million each time. Stocks already at the power stations and at the pit heads are in excess of what is required. It is because we wish to protect the future and because we believe that the coal industry has a part to play in energy policy, that we were faced with difficult decisions. We expect that the consultations will be with those concerned, with those with the knowledge, with those who have been running the pits and with those 622 working in the pits. I believe that that will mean that satisfactory answers will be given to noble Lords and to another place.

§ Lord Peyton of Yeovil
My Lords, does the Minister agree that part of the problem is the excessively centralised and inflexible structure of the industry? Secondly, was it not at least the source of the difficulty that the decision was made to put the cart before the horse when the privatisation of electricity preceded that of the coal industry? Thirdly, was it not nonsensical—and some of us warned about it quite clearly at the time—to put two generators in such a position of power in the name of creating competition? Will the Minister apply her mind to the role which is now being given, or which it is proposed to give, to gas in the first instance and the preference to nuclear in the second? Under that I include also the role and the contribution which will be made by Electricité de France.
The Government make much of the fact that in the past 10 to 12 years they have invested £18 billion in the industry. Do the Government now feel that it was a mistake to continue for so long with that process of investment? If they do not believe that they were in error, why did they not wait a little longer for results to come to hand?

§ Baroness Denton of Wakefield
My Lords, I thank my noble friend Lord Peyton for those questions. I agree that the flexibility of the operator is central to its efficiency. I stress also that no one could have made more efforts than my honourable friends to ensure that the electricity contracts were in place so that those matters could be discussed before the Recess. It is important that in due course the coal industry joins the privatised sector to give it the strength to negotiate.
The question of gas stations has been raised already by the noble Lord, Lord Ezra. It seems to me that the judgment has been well made by those whose task it is to supply the country with economical electricity. They have made their judgments and have invested in gas stations.
Of course, the nuclear issue will not change if we stop production. The costs arise on decommissioning. That is probably best managed on operating stations for as long as that is appropriate.
The process of investment has identified what can be achieved. The money spent has meant that the workforce and management have done much to improve the industry's position. I came from a background and a school where people considered it fortunate that by the year 2000 no one would have to go down a pit. Fortunately expenditure has been such that safety records have improved out of all proportion. By using the investment, we have identified where a competitive and profitable coal industry can be based.

§ Lord Jenkins of Hillhead
My Lords, the noble Baroness must be aware that so far in her answers she has not attempted to reply to the questions asked but has merely read out a supplementary statement 623 bearing no relationship at all to the points raised either by the noble Lord, Lord Donoughue, or by my noble friend Lord Ezra.
Will the Minister apply herself in particular to the point made most powerfully by my noble friend Lord Ezra that an independent inquiry is required? The Minister announced that the Government see no possible logic in a demand for more than 45 million tonnes of coal. That is tangled up with a curious competitive structure in relation to the electricity industry, and to some extent the gas industry, which arises out of the method of privatisation that the Government chose to pursue. Unless there is an inquiry into the whole matter to try to disentangle the position there will merely be a stay of execution without a hope of survival.

§ Baroness Denton of Wakefield
My Lords, I am sorry that the noble Lord did not hear me answer the noble Lord, Lord Ezra. I said that the consultation that we propose to have with the people involved will provide the answers. The situation now is that, whether privatised or not, coal is being mined for which there is no market. In all the millions of column inches which have been written over the past month no one has come up with an answer to that problem.

§ Lord Mason of Barnsley
My Lords, last week's announcement was, and is now clearly seen to have been, a panic stricken measure. It was totally irresponsible. It was delivered in a cowardly fashion while Parliament was in Recess. It was a statement, monstrous as it is, with such serious national implications and with repercussions reverberating all around the country, that was not agreed by the Cabinet. That statement outraged the nation. One can now readily see what a callous, insensitive uncaring statement it was. Most Conservatives have been ashamed. The miners and their families are shocked and incensed. The whole nation feels aggrieved.

Noble Lords
Question!

§ Lord Mason of Barnsley
My Lords, even now, we have not yet had a reasoned presentation from the Government, who are still determined that the coal industry is virtually to die. This is only a temporary pause, is it not? Yet we import 20 million tonnes of coal annually. Why? It is foreign coal. We are importing unemployment.

Noble Lords
Question!

§ Lord Mason of Barnsley
My Lords, I am asking questions. That is equivalent to 20,000 miners' jobs. We are producing 15 million tonnes of open-cast coal. The Government's legislation will increase that to 25 million tonnes. We are importing nuclear power from France. That is equivalent to the output of five coal mines: 5,000 miners' jobs. No case for the "dash for gas" has yet been made out. Coal has to compete with heavily subsidised nuclear power and German coal. We are closing coal mines which are producing the cheapest coal in Western Europe. Do we not see a use 624 for coal? The Germans do. Do not the Government see that one of the reasons for coal being stockpiled is that government policies are removing British Coal's markets? It is obvious that there is a case for a halt and a rethink about those pit closures. Is it not vitally imperative that all the closures—and three out of the 10 which it has been announced are to close immediately are in South Yorkshire and Barnsley—

§ Lord Tordoff
My Lords, perhaps the noble Lord will forgive me. He may not be aware that 20 minutes only are allowed at this stage, and that it is customary for questions to be asked and not for prepared speeches to be made.

Noble Lords
Hear, hear!

§ Lord Mason of Barnsley
My Lords, I conclude by asking the Government to ensure that a full examination is made of all aspects of the impact of the proposed pit closures on job losses, energy costs, energy deficits in the balance of payments, the future security of supply and the cost in terms of unemployment benefit and lost tax revenue. I believe that the Government have miscalculated seriously. I urge them to present to the House the results of an examination.

§ Baroness Denton of Wakefield
My Lords, I understand the noble Lord's anxiety. He has done a great deal of work in the area from which he comes to help the change which has been relentless throughout the coal industry. The discussion we are having today is not about new policy but about the change that has taken place. Given the noble Lord's knowledge, I am surprised that he should raise the subject of imports. About 90 per cent. of the coal used in power stations comes from UK mines.

§ Lord Dormand of Easington
My Lords, why not 100 per cent.?

§ Baroness Denton of Wakefield
My Lords, is the noble Lord proposing that we should restrict imports, a policy which would mean that we were interfering with the GATT negotiations? We cannot restrict imports. By continuing to use the coal appropriate for the job—it does not always come from British mines—we are looking after our own industries.

§ The Earl of Onslow
My Lords, I congratulate the Government on doing something which I believed to be impossible—to ally the middle classes of Surrey and the rest of the South of England with Arthur Scargill and make them his fan club. But is it not true that the Government's judgment on this matter has been seen to be badly lacking? It is essential that there should be a proper inquiry into whether the market for fuel for electricity generation has been rigged, which is what appears to be the case when one reads the newspapers. To ask us to trust the Government's judgment at the moment is, I am afraid to say—I do not like saying this as a Conservative—not very pleasant.

§ Baroness Denton of Wakefield
My Lords, I am sorry that my noble friend should doubt the ability of 625 the Government, British Coal and the other people involved in the industry—those whom the proposed consultation will include.

§ Lord Callaghan of Cardiff
My Lords, I fully understand the Minister's difficulty in answering some of these questions today. We must not confuse the message with the messenger. I shall leave for another occasion the fact that the Government's handling of this matter beggars description and has brought unnecessary disquiet, terror and fear to thousands of homes in this country.
I should like to ask the Minister one simple, straightforward question. Perhaps she will give an answer if she is able to do so. I understand that the Government are a 40 per cent. shareholder in the electricity industry. It seems clear from all that is emerging that it is the position of the regional distribution companies and generators that is imposing certain rigid constraints upon the coal industry. Will the Government therefore use their influence as a 40 per cent. shareholder in the electricity industry to ensure that that industry does not take irrevocable decisions during the period of the consultation that would prevent changes in government policy which would give coal a fairer chance? Finally, will she represent to her colleagues that in the light of what has happened many people believe that there should be an independent inquiry?

§ Baroness Denton of Wakefield
My Lords, I thank the noble Lord for his comments. I assure him that I shall represent to my right honourable friend the President to the Board of Trade every issue that has been raised today and in particular the one that he has mentioned. However, I must stress that the Government's responsibility is to make this country efficient and competitive and to ensure that it has a future.

§ Lord Callaghan of Cardiff
My Lords, that is what we want.

§ Baroness Denton of Wakefield
My Lords, to do that the supply of electricity to our industry has to be competitive. It is important to take some of the doubt out of the issues and to ensure that the contracts with the generators are signed. We have been working towards that end and will continue to do so. Our overall view must concentrate upon the future of the economy.

§ Lord Boardman
My Lords, I welcome the Statement and the changes which have been made in the pace of any closures. Will my noble friend assure me that, in the consultations which will follow, two particular points will be borne in mind? The first is the importance of the cost of energy to the whole of industry in this country. To apply an artificially high price for the social consequences could be extremely damaging to all industry and employment. That must be borne in mind.
Secondly, as regards the social consequences, can she assure me that it will not just be those consequences to the miners'? Historically they have very generous redundancy terms, pensions, and the 626 like. The social consequences to the communities in the affected areas where such support is not available should be very much in the Government's mind in such an inquiry.

§ Baroness Denton of Wakefield
My Lords, I thank my noble friend Lord Boardman for identification of the fact, which I have been trying to get over, that we shall be looking to the future of the whole economy. As the industrial scene changes we must support those with growth opportunities for employment, potential, and opportunities for our young people. That is the key. I also assure my noble friend that the social consequences to the areas and the people involved who are not just those employed in the coal mines, will be matters that we shall take very closely into account in our employment programme.

§ The Earl of Perth
My Lords, from all the questions that have been asked today the one thing that strikes me is the demand that there should be an independent inquiry. The noble Baroness has said that there will be consultation on a piecemeal basis as regards the pits and those affected. That is not an answer to the request that has been made. Will the noble Baroness seriously consider the demand which has been made on all sides—I stress on all sides—that there should be an independent inquiry to report on the whole situation?

§ Baroness Denton of Wakefield
My Lords, I have tried to indicate that we are not suggesting piecemeal consultation. I have heard the view of the House as regards an independent inquiry. I will convey that matter to my right honourable friend. However, we believe that the matter itself is well known and well traced by the people involved.

§ Lord Varley
My Lords, is it not a fact that the market for coal has been deliberately rigged over the past few years, largely as a result of the way in which the electricity supply industry was privatised? Can the noble Baroness say what kind of economic sense encourages, as the Government are doing, the building of another 43 gas power stations which, in the middle of this decade, will result in something like a 55 per cent. over-capacity in power generation. It means that the cost of that extra uneconomic generating in relation to coal will be passed to the consumer. Why are the Government resisting an independent inquiry? It is no good the Minister saying that she will make representations on the matter. Why does she not say now that the case has been made out?

§ Baroness Denton of Wakefield
My Lords, I am sure that the noble Lord, Lord Varley, knows that that is something that sounds very good but it is not a practical suggestion. Perhaps I may also say that 43 power stations may have been suggested, but that is not the number being built. If rigging the market means that a gas-fired station takes two years to build and a coal-fired station five years, I suggest that that is not government activity.