§ Lord Richard rose to move to resolve, That this House deplores the proposals contained in the White Paper Prospects for Coal: Conclusions of the Government's Coal Review (Cm 2235), providing as it does for the cessation of production of 18 pits, and condemns Her Majesty's Government for their failure to develop a long-term strategy for meeting Britain's future energy requirements.
§ The noble Lord said: My Lords, I beg leave to move the Motion standing in my name on the Order Paper.
§ The origin of the debate today is of course the announcement by the Government and British Coal last October of the closure of no fewer than 31 pits and the consequent direct redundancy of some 32,000 miners. The indirect unemployment thereby to be caused was estimated to be approximately 100,000.
§ The House will remember the quite extraordinary public reaction to this proposal. Miners marching through London were greeted by the ladies of Kensington and Chelsea in a display of solidarity which I, at least, found particularly heart-warming. Even in rural Cheltenham the proposals caused 893 uproar. The main result of that spontaneous eruption was that the Government undertook to initiate a major review of their policy to see whether their proposals for the closure of 31 pits would stand up to re-examination. The period of gestation was no less than five months and the baby having been born and examined, albeit only over a period of five days, the fact of the matter is that for all practical purposes we are now in precisely the same position as we were last October.
§ The Government have now decided that with the aid of a subsidy—the precise amount of which is at present unknown and, indeed, is probably unknowable—12 of the 31 pits may (I emphasise the word "may") have a temporary reprieve. Precisely how long the stay of execution is to be is not known, although over the weekend British Coal seems successfully to have dispelled any lingering hopes that it might have proved to be a permanent reprieve.
§ There is no proposal in the White Paper for an increased market for coal of even one extra tonne. Nor is there any suggestion that is other than temporary. We are therefore bound to ask whether the White Paper has been produced, not in order to alleviate the brutal measures proposed last October but in order to give the impression that the Government are actively doing something. Perhaps the truth is, as was claimed in the debate last Monday in another place, that the Government are anxious to clear the decks for privatisation.
It is illuminating that paragraph 2.37 of the White Paper uses the following terms:
Over the medium term, the industry is likely to be able to reduce its cost to an extent which will enable electricity produced from United Kingdom coal to compete on price with electricity produced from imported coal. This will require effective management and substantial changes in working practices which will need the commitment of the workforce. The Government believes that the coal industry will be best placed to make these changes when it has been fully returned to the private sector".
I ask the question: why? Why do the Government believe that the industry will be best placed to make these changes only when it has been fully returned to the private sector? What is the evidence for this extraordinary assertion in the White Paper itself? Certainly there is not a scrap of evidence produced in the White Paper or elsewhere, or in the debate in another place this week, to justify an assertion as sweeping as that.
§ However, the second motive behind the White Paper may be rather more unworthy and rather more political. Clearly, the Government have to do sufficient to subdue any prospective revolt from its own Back-Benchers. Rushing the White Paper debate through in another place, before the implications were perhaps fully appreciated and understood, clearly helps them in this regard. I believe that it is for this House to look at the problem and the Government's proposals in the White Paper in perhaps a more objective and measured way. We have, after all, had another 48 hours in which to read the documents.
§ The starting point has to be to look at the figures. In October, the Government announced the decision to close 31 pits. Now, five months later, we are being told that precisely the same tonnage of coal being 894 supplied to the electricity industry would or could save 12 of those pits. The argument the Government make is that by providing British Coal with a subsidy which brings down the price of coal at the pits concerned to that of imported coal, the Government would be able or the industry would be able to replace imports with the output of those pits.
§ Let us examine those proposals and ask ourselves the question, which we clearly must do in terms of the White Paper: do these 12 pits that the Government have talked about in the White Paper have a future? A closer examination of the Government's proposals suggests, I am afraid, that they do not. Mr. Heseltine's arithmetic simply does not add up. I see noble Lords on the other side of the House shaking their heads at that proposition. I hope that they will bear with me on the argument and figures. I hope to be able to convince them that whatever motives may be ascribed to the President of the Board of Trade, his skill as a mathematician in this respect is clearly flawed and greatly erroneous. Under the Government's proposal, if one analyses it, in fact there would he a short-term future but only a short-term future for merely seven of the 12 pits at the most.
The press statement issued by British Coal on 25th March gives a clearer picture of the proposals for the 12 pits. It said:
The Corporation felt the circumstances merited maintaining 12 of those collieries in full production while it carried out the market testing which would determine the volume of extra sales which could be secured".
That is how British Coal at least sees this great rescue operation so far as the 12 pits are concerned—a period of market testing to determine the volume of extra sales which could be secured. The 12 pits are not being saved in any permanent way. They are to be reprieved temporarily to see whether a market can be found for their coal. To facilitate finding that market the Government propose to offer the subsidy to which I have already referred. Again, it is important to remember that that subsidy will reduce progressively over the period to privatisation, which the Government intend to achieve at the earliest practical opportunity.
§ The value of the subsidy will be based on the difference between the cost of British Coal's production and the world price. Armed with that subsidy, the extent of which is, as I said, as yet unknown and perhaps unknowable, the 12 pits are then expected to seek out markets additional to the base contracts already agreed with the electricity industry; namely 40 million tonnes in 1993–94, and 30 million tonnes a year thereafter. Those base contracts we know—the Government have told us so, and British Coal said so as long ago as last October—will be supplied by the 19 pits originally scheduled to stay open in the October announcement.
§ As a result of the subsidy, the Government assume and anticipate that the generators of electricity will choose to import less coal than they would otherwise have chosen to, allowing more pits to stay open. Whether the 12 pits have a future therefore depends on whether the potential additional market, particularly from import displacement, is sufficiently large to absorb all their production.895
§ It is also important to remember that the Government's proposals, as embodied in the White Paper—contrary to the proposals of the Select Committee, whereby no fewer than 37 propositions were put forward—provide no scope for reducing the contribution of several rivals to coal from British Coal's deep mines. Specifically, there are no proposals to reduce the contribution of nuclear power. The Government do not intend to slow down the "dash for gas". Indeed, the President of the Board of Trade announced approvals for three more gas-fired stations on, I believe, the very day that the White Paper was published. There will be no attempt to curtail imports of electricity via the French link. I have a word or two to say about that later. The continued use of orimulsion is anticipated and will be allowed. The Government have not reached an agreement with the generators to reduce the extent of de-stocking. Finally, there is to be no new constraint on the volume of opencast coal production. Within that framework—the one in which the Government set the proposals—British Coal is now expected, with the aid of the subsidy, to produce extra markets by reducing coal imports.
§ Let us look at the extent of coal imports and at the production of the 12 pits to see whether the mathematics makes any sense at all. The figure of coal imports is anticipated by British Coal to be 9 million tonnes in England and Wales. That figure, plus another 1 million tonnes imported to Scotland and Northern Ireland, sets a ceiling on the additional market, even if everything the Government advocate goes well. We are talking about a total figure of 9 million tonnes.
§ In practice, however, I believe there will continue to be some imports. Existing contracts mean that National Power and PowerGen are likely to take some 2 million tonnes of imported coal. They may wish to take a little more to keep some of their options open. So in reality we are talking about an import substitution possibility of some 7 million tonnes at the absolute maximum.
§ What about the production at those 12 pits? Annual production in 1992–93, according to British Coal, is 12.8 million tonnes. Annual production in 1995–96, according to the American mining engineers and consultants J. T. Boyd will be 14.2 million tonnes. That is on the basis that all the recommendations regarding working practices, and so on, are introduced and carried out. According to those figures, an additional market for coal of 7 million tonnes, won as a result of the Heseltine subsidy—even if conceivably it could be, which I doubt—would be sufficient to keep just the top seven pits in operation in 1993–94, and perhaps even fewer by 1995–96. On that basis, the following pits can be expected to close in the very near future, despite the reprieve announced last week: Bilsthorpe; Calverton; Kiveton; Rufford; and Markham. In that respect, it is a tribute to the Government's policy towards the coal industry that they have succeeded in getting the Union of Democratic Mineworkers to hold a ballot on whether 896 it should take industrial action—a remarkable achievement given the history of that union and its relation to the National Union of Mineworkers.
§ The only conclusion that one can reach on the figures is that the apparent reprieve of the 12 pits announced by the President of the Board of Trade is illusory and a sham. The changes in the market as outlined in the White Paper, and the proposed subsidy, do not provide even a short-term future for more than seven of the reprieved pits. Even that figure assumes that the generators take full opportunity of subsidised coal to displace the maximum volume of imports. That, as we all know, is very far from certain.
§ Finally, the survival of such a small number of pits takes no account of medium to longer term considerations, such as the withdrawal of the subsidy when privatisation occurs. That points to a further reduction in the number of survivors.
§ The truth of the matter is that the market for British coal is now, as a result of government policy in the past 10 years, inextricably linked to the generation of electricity, in respect of which the Government have conspicuously and publicly washed their hands. After the three years of the 30 million-tonne contract nothing is certain. To provide that tonnage it is certainly not necessary to keep open any of the 31 pits.
§ Why has that position been allowed to arise and what, if anything, can the Government and the country do about it? I start with a basic proposition; namely, that British coal is a major national asset. It deserves to be used and treated as such. Of course it is only fuel, but it is our fuel. Not only is it our fuel, indigenous to these islands, but we have a very large quantity of it. Our European partners cannot understand a situation in which, with a national asset of that magnitude and that importance, the Government close pits and cut production to such an extent. It seems to me to be utter folly to pursue an energy policy totally based on market forces, particularly when the market is rigged in such a way that coal cannot properly compete. Why was it necessary for the Government to encourage the dash for gas? Why could the electricity generators not be steered more in the direction of coal? What indeed was wrong with the previous position when coal provided far and away the major element needed to produce our electricity?
§ As for nuclear power, how can the figures be directly comparable when nuclear energy already receives a massive subsidy from the state? Again, how can electricity supply via the interconnector agreement with France be said to be fair when the very electricity the French produce and sell to us is heavily subsidised? I find it very difficult to believe that, if the situation were reversed, a French government would cheerfully close French pits and throw French miners out of work while at the same time they accepted British subsidised electricity. I do not believe that that would happen. I have to say to the Government frankly that the present position does not make sense.
§ I do not believe that a Labour government in this situation would have submitted in the humiliating way that the President of the Board of Trade did, prostrating himself before market forces on the basis 897 that he had no power whatever to influence them. We would have tried to curb the dash for gas. We would have looked at the subsidy for a nuclear industry in this country, or taken it into consideration in determining whether market forces were being used fairly or not. I am perfectly certain that we would by now have been in active negotiations with the French Government over the interconnector agreement.
I was frankly appalled to hear the answer given by the Minister, the noble Baroness, Lady Denton, to a question I put on Tuesday 25th March. I asked whether the Government had even approached the Commission to see whether the interconnector agreement was something that they would consider investigating. She replied:
My Lords, no, but I shall repeat what I said previously. The Government would take action to ensure that the French Government met their Community obligations if we had to, and we should expect the French Government to do the sarne".—[Official Report, 25/3/93; col. 466.]
My goodness, what a slap on the wrist for Paris.
I believe in fact that the Minister of State responsible for energy was sent to Paris recently to talk to the French and explore the problem. He gave a press conference. The first and apparently the main point that he made to the French was to say:
I made it clear that the Government recognised that it was not legally possible to prevent the importation of French generated electricity via the linkage".
To ladle away at the very outset of the negotiations the precise point that he was sent to try to achieve seems an extraordinary way to negotiate, particularly with the French.
§ Finally, I come to the Select Committee's report. It proposed a stable market and a permanent future for at least a number of the pits. In another place the President of the Board of Trade said that he accepted the general thrust of the Select Committee's report. To ignore almost all its major recommendations, as the White Paper does, is a strange way to accept the report. The Select Committee believed that the future would depend upon action being taken to guarantee additional sales to the electricity generation market. The Government have singularly failed to do that.
§ We are not discussing today the social effects of redundancy. One cannot help but deplore the fact that those 18 pits ceasing production immediately will mean no fewer than 18,300 miners losing their jobs. I am not here today to give the coal industry a decent burial. We are here to attempt to guarantee its future. I must tell the Government that on their present policy the future is not guaranteed. There is no sign in the White Paper that they are about to change that approach.
Perhaps I may conclude with a quotation on the duties of government which I came across recently. It said:
Responsible government has a duty to recognise the international circumstances which make a mockery of open competition … intelligent politicians should stop pretending that industrial support is a doctrinal intrusion into the workings of the market place".
I agree very much with that. I echo those words. Would that they had been applied to the mining industry. They were written by no less a person than
the President of the Board of Trade himself in his book Challenging Europe: Heseltine 1989. Would that: he had lived up to them.
§ In our view this Government deserve to be condemned: first, for the misleading sham of a White Paper that they have produced; and, secondly, because, read it as one may, the one thing that is hugely absent is any coherent, long-term energy strategy for this country. On both those grounds the Government deserve our national censure. I commend the Motion to your Lordships.
§ Moved, to resolve, That this House deplores the proposals contained in the White Paper Prospects for Coal: Conclusions of the Government's Coal Review (Cm 2235), providing as it does for the cessation of production of 18 pits, and condemns Her Majesty's Government for their failure to develop a long-term strategy for meeting Britain's future energy requirements.—(Lord Richard.)
§ 3.15 p.m.
§ The Lord Privy Seal (Lord Wakeham)
My Lords, the House will be grateful to the noble Lord the Leader of the Opposition for giving the House the opportunity for an early debate on the coal White Paper today. The White Paper was debated and approved in another place on Monday.
I am conscious of the number of speeches and time limits. Therefore I propose briefly to outline the main conclusions of the review and to set the Government's policy in context. My noble friend Lady Denton of Wakefield will, I know, wish to elaborate on that and respond in detail to the points raised by your Lordships.
I do not need to remind your Lordships of the circumstances which led to the coal review. The House debated those issues fully on 20th October and the Government took careful note of the views then expressed by your Lordships. In the intervening period the Government have carried out a full review; they have considered a wide range of evidence; they have drawn on the work of a number of independent consultants; and they have benefited from the inquiry undertaken by the Trade and Industry Select Committee of another place. This has been a major undertaking.
Perhaps at this stage it might assist the House if I summarise the key conclusions of the review. First, we propose that British pits should have the opportunity to sell as much coal as the market will take, with financial support from the Government to enable extra output to be sold at world market related prices. This proposal offers the chance for more pits to secure a market. It gives the industry a further breathing space in which to reduce its costs and to achieve commercial viability. On the basis of that, British Coal has announced that 12 of the 21 pits included in the review will continue to produce coal. It plans to put another—Maltby—into development. That should enable it to become a world class pit for the next century.
Secondly, we shall press ahead with our plans to privatise the industry. British Coal's chairman has confirmed that no pit will close without first being 899 offered to the private sector. There is, of course, no question of lowering safety standards in this process. The Government are determined to ensure, with the Health and Safety Commission, that the existing high standards in the industry are maintained or improved.
Thirdly, the Government will not intervene to cut back generation from nuclear sources or from gas. As the Select Committee made clear, it would make no sense to deprive consumers of the benefits of the electricity they produce.
I wonder whether at this stage I could respond to points made by the noble Lord about the French interconnector. It seems to me that there is some misunderstanding about it. As the noble Lord well knows, its history goes back a long way. My right honourable friend the President of the Board of Trade set out the position on imports of French electricity at some length in his Statement last Thursday. He made it clear, and has published a summary of the legal evidence that he received, that any governmental measure to restrict imports across the interconnector with France would run counter to Article 30 of the Treaty of Rome.
Further, the Government would be at financial risk under the indemnity given at the time of electricity privatisation to the National Grid Company. Electricité de France's non-leviable status could not be removed without giving Electricité de France the benefit of the levy payments. Far from reducing imports from France, that would reinforce their position and our consumers would end up paying more for their electricity.
The noble Lord also made reference to French electricity being subsidised. He has extensive and distinguished experience of Community matters. The Government have no knowledge of any subsidies given to Electricité de France. Indeed, following the remarks made by noble Lords last Thursday, Electricité de France's UK agents have repeated assurances made to the Trade and Industry Select Committee of another place that Electricité de France's capital and operating programmes are financed entirely through funds generated from its day-to-day operations and from commercial borrowings. If the noble Lord or anybody else has any evidence we should very much like to see it because it would be something that we could deal with. But we cannot act without any evidence and we certainly have none.
Fourthly, the Government have responded to concern about the social and economic effects of pit closures on local communities. We have put in place a wide-ranging package of regeneration measures to help those areas and intend to locate the headquarters of the new coal authority in Nottingham. The value of the package has now been increased to £200 million, with a separate package for Wales.
But the central question which the review had to address was the competitiveness of coal in the energy market. The noble Lord, Lord Marsh, reminded the House when we debated these matters in October that the market for coal has been contracting continuously over the past 70 years. No government have been able 900 to avoid the pit closures which have inevitably followed. Nor is this something which has been confined to Britain. Throughout Western Europe national coal industries have been in decline for many years, with governments of all political complexions having no alternative but to close mines.
In 1955 the coal industries of the 12 member states of the European Community employed 1.86 million people. By 1991 that had fallen to 260,000. Production fell from nearly 500 million tonnes annually at the end of the 1950s to 184 million tonnes in 1992. The last Belgian mine closed in 1992. France has closed its northern coal fields and plans to close all its remaining mines by 2005. Even in Germany, where there are very large subsidies paid to the coal industry, manpower in the industry has fallen from over 600,000 in the late 1950s to about 125,000 today, with a further 40,000 coal job losses planned.
But the real competition for British Coal is not from within Europe. Much more important is competition from further afield. At the end of 1992 the electricity generators in England and Wales were able to import coal into the Thames-side power stations at a delivered cost of £1.15 to £1.30 a gigajoule. The average delivered cost of coal sold by British Coal was £2 per gigajoule or more. Some of that price difference arises from the large deposits of cheap opencast coal in Australia, the USA and other exporting countries. But it also reflects big differences in the productivity of their deep mines.
British Coal has more than doubled its productivity over the past seven years. This is a major achievement. Over the past few months it has done even better. But further improvement is essential. British Coal's productivity is still only 20 to 35 per cent. of productivity in American and Australian mines. Its deep mine costs are two to three times higher.
The new five-year contracts now agreed between British Coal and the generators reflect a significant reduction in the price of coal. That has been possible because of British Coal's productivity improvements. The Government's proposals are intended to enable British Coal to maintain and enhance its productivity gains and to give it the opportunity to become fully competitive.
Many of your Lordships were concerned in October that the Government should put forward a clear energy policy. I believe that the White Paper spells out very clearly the Government's approach. Let me remind the House that in October I said,It is the nature of a market that diversified decision-making replaces central economic planning. A competitive market ensures the greatest possible downward pressures on price. It is the Government's conviction that it is the competitive market which provides the best prospects for providing the cheapest possible sustainable electricity prices for customers." —[Official Report, 20/10/92; col. 670.]That was the policy in October and it remains the policy now. Security, diversity and sustainability of energy supplies were and remain the keynotes of our policy. We believe that the market provides the best mechanism for achieving those goals. The benefits of this policy to customers are there for all to see.
In gas, industrial prices have fallen by 28 per cent. in real terms in the past five years and prices to the 901 domestic consumer by 11 per cent. Since privatisation industrial prices have gone down by about 36 per cent. and for domestic consumers by 16 per cent. And in electricity, prices to industry were on average 8.6 per cent. lower in real terms in 1992 than in 1989, before privatisation. For domestic consumers many regional electricity companies have now announced reductions in prices for 1993–94. Others have announced price freezes, which of course mean reductions in real terms.
It would be idle of me to pretend to your Lordships that it has been either quick or easy, for we had to move away from bureaucratic centralised planning in the energy sector towards an increasingly competitive structure in which markets, not politicians, make decisions about fuel use and the allocation of resources. We always recognised that the transition would take time. It is not complete and it has not been painless. But it is necessary and it has brought considerable benefits to the consumer and taxpayer.
Coal remains the largest element in the United Kingdom's diverse range of fuels in electricity generation. In the White Paper the Government have put forward proposals to enable the coal industry to complete its own transition to the competitive market place. These offer the industry the chance to achieve a viable long-term future. The base contracts now agreed with the generators are an important first step. It is now up to the industry to take advantage of the. Government's subsidy to go out into the market to win additional tonnages.
§ Lord Clinton-Davis
My Lords, perhaps the noble Lord will give way. He is talking about the implications for generators. But is there a word in the White Paper regarding the implications for British Rail freight as a result of the Government's proposals? Does not the Minister think it is worth saying something about the effect on employment in British Rail as well?
§ Lord Wakeham
My Lords, there is considerable restraint in the amount of time we are allowed. I know that I have already overrun the time I was allocated. I have only one more sentence of my speech. However, the one thing that seems to me to be self-evidently obvious from what I have indicated so far is that if British Coal is able to reduce its prices so that it is competitive in world terms, that means a greater use of British Coal and, I would have thought, a greater amount of British Coal being carried on British Rail. That would be to the advantage of British Coal, British Rail and hopefully also of the consumers. I do not believe that there is any dichotomy between an efficient coal industry and the best prospects for an efficient British Rail.
I commend the White Paper to the House and urge the House to reject the Motion moved by the noble Lord the Leader of the Opposition.
§ 3.27 p.m.
§ Lord Ezra
My Lords, I should like to remind the House that I am chairman of a group of companies covering a wide range of energy activities. I am glad to be able to participate in this debate in view of my long past association with the coal industry. I recognize 902 that the Government, for whatever reason—we do not want to go into the origins of the problem—have had a difficult time. I found the White Paper, which I read with great care, full of information relevant to anyone operating within the energy industry. However, my one regret is that the White Paper does not deal with future strategy. It is that gap with which I should like to deal.
The Government place a great deal of emphasis, as did the noble Lord the Leader of the House, on market forces. They believe that competition is in the interests of the consumer. It is therefore perhaps desirable first to see to what extent market forces freely operate in the energy sector. In my opinion it is of a qualified nature. We can go through the different elements of the energy sector starting with nuclear. We know that that has remained state owned. In England and Wales it is financially supported through the levy system and in Scotland with long-term contracts. The Government have said that they will review that situation earlier than proposed. Nonetheless, it would have been a good idea for the White Paper to indicate the kind of broad energy strategy against which that review was to take place.
When we turn to the gas and electricity sectors we see that they are not free market sectors; they are regulated. They are both dominated by large enterprises. Indeed, in the case of gas there is now an inquiry by the Monopolies and Mergers Commission as to whether or not it should continue in that form, and we know that in the case of electricity, particularly in England and Wales, it is dominated by the two big generating companies. During the course of the debate on the Electricity Bill, many of us strongly recommended that there should be more electricity generating companies than just the two, but the Government decided against that.
Oil, certainly in its downstream operations, is the nearest approach to a free market situation, but when one looks upstream, and particularly to the North Sea operations, it is subject to stringent licensing and to a variable fiscal policy which was changed in the recent budget. That will certainly have some impact on the amount of exploration carried out. So we are faced, when looking at those four elements of the energy market, with something that is a very qualified free market situation. It is in this market that coal has to operate. It is against that test that I examine the proposals in the White Paper.
There are effectively two proposals in the White Paper. One is of a short-term nature, with the offer of substantial but unquantified additional, resources to enable coal to try to make further contracts with the electricity companies. The other is a speeding up of the process of privatisation. Privatisation, apparently, is to take the form of the sale of individual pits, or possibly groups of pits. That is what is proposed. I am not absolutely sure that this arrangement will safeguard the future of coal and therefore safeguard the future of the very substantial energy reserves represented by it. Indeed, I have the feeling that under those arrangements coal could be squeezed out. I shall explain why.
903 In the first place I feel that the White Paper would have gained considerably if the additional contract, not just the base contract, could have been negotiated. Without the active support of government the two major generating companies will be reluctant, having regard to their stock position and their contracts elsewhere, to commit themselves to more than the base tonnage. Indeed, the negotiations over the base tonnage have taken a very long time and have only just been completed. I would have been much happier if the Government had been able to see that the extra tonnages were negotiated and had put that in the White Paper. That not having been done, I hope, nonetheless, that we shall be told that they will be doing their very best to see that there is an effective outcome to these further negotiations.
But it is the issue of the form that privatisation will take that concerns me most. If, as indicated in the White Paper, privatisation is likely to take the form of individual pits being sold off, or perhaps in small groups, I very much fear that we could be getting back to the situation that existed in the 1930s. Some of your Lordships may recall that situation. There was internecine competition between the coal companies, and the governments of the day had to intervene to set up district selling schemes. When I joined the coal industry in 1947 that was very much in the memory of those who came into it. One of the justifications for nationalisation, quite apart from the political arguments advanced by the then government, was the fact that we got away from that fragmented situation in which the coal sector was doing a great deal of harm to itself.
In a way the situation which could arise under the proposed apparent fragmentation of the industry and the selling of individual pits could be worse this time because the last time round in the 1930s there was a large variety of purchasers. On this occasion the market will be dominated by two purchasers. How will it work in practice? As the pits are sold off, the marketing manager of a pit will presumably rush off to the generating companies and try to sign a contract. I suppose that it could be very much first come first served. The first three, four, or five might be successful, but what will happen to the remainder? I therefore strongly recommend to the Government that they have a look at that situation.
After all, we have had a lot of experience in the coal mining industry in this country. It goes back centuries. Indeed, I was a little worried about the reason for the present inquiry because, if we had had no other experience in coal since the war, we had at least experience in closing pits. I was rather worried about the way in which it was proposed to carry out the closures then. I do not want to labour that point but I do want to say that we need to think again about how coal will be marketed under the new arrangements. We have had the example of the 1930s. We have an energy market which, at any rate for the moment, is certainly far removed from a free market—a market in which there are some very big players indeed. If coal is to be organised on the basis of a multiplicity of small companies representing one, or 904 possibly two or three pits, I do not think that their chances of survival in that kind of situation could be rated as very high. I should like to put that view strongly to government.
The third aspect that I should like to raise in the short time left to me is the question of technological development. I was pleased to note in the White Paper that the Government are paying some regard to this matter. They are providing support for the Coal Research Establishment and they attach importance to clean coal technologies. However, they disappointed me somewhat in, for the moment at any rate, not being prepared to support development projects. We ought to be doing what some other countries are doing and be financing one or two development projects on technologies which have already reached that stage. Some of these technologies have been tested fully—I give as an example the British Gas coal gasification process—and could now be developed.
Furthermore, let us remind ourselves—we cannot deal with coal without going back in history—that coal was the original feedstock for chemicals. The day could well come again when we need to use coal as a feedstock. We already know that we can convert coal to gas and that we can convert coal into many other forms of other chemical feedstocks. That could be something for the future. That could be something to which we continue to pay attention. But none of these things can be done if we allow the industry to wither away. Therefore, I feel that the priority is to consider how coal will fare under the proposed privatisation measures and whether it will be enabled to compete effectively with the other large groups in the remainder of the energy sector.
§ 3.36 p.m.
§ Lord Marsh
My Lords, I apologise in advance if some of my remarks tend to be somewhat repetitive since I take what I recognise is regarded in some places as an extreme view on this issue. I expected that nothing very much would change in the five months which have elapsed—and in my view nothing has changed at all in the five months which have elapsed. I believe that the basic problem will govern this issue, and the White Paper is just one of a series which cannot be read other than against the background of previous history.
The noble Lord, Lord Richard, is an experienced advocate with very great skill in making the best of any case. Had he lived much earlier I would have backed Dr. Crippen to escape. He has great experience in dealing with any kind of case and he has taken the White Paper and dissected it with the skill one would expect. Not surprisingly, he reaches the conclusion that British Coal is a national asset, which it clearly is, though a declining one, and that it should therefore be able in some way or other to ignore market forces. In a way that is what the White Paper sets out to prove—that if one pumps enough money into the coal industry one can reverse the trend.
The problem of course is that all Oppositions have reached exactly the same conclusion as the noble Lord, Lord Richard, on every one of the very many occasions over the past 30 years when this subject has 905 been debated. On every occasion they have been wrong. There is absolutely nothing to lead anyone to believe that there has been any change in the basic facts presented at this time which have determined the negative outcome of every previous attempt to halt the decline of the British Coal industry. I do not think it makes sense in every debate of this type to look at a carefully written 'White Paper, designed to prove a particular case, and ignore the realities which have faced a generation and more.
This is a very unusual debate on the coal industry because it is not really a debate about fuel policy. The debate arises out of last October's public relations disaster, and all of us who have been in politics had some sympathy—which we managed to hide from the Government—for the predicament in which they found themselves. It was that PR problem which led to the discussion of how somehow or other we could produce yet another initiative. As we would all expect, Mr. Heseltine has pulled out all the stops in an effort to defuse a dangerous political situation. All the emotions have been aroused, which I understand, particularly in the case of the Labour Party. I say that quite seriously because there is a deep emotional, historical and, even today, political involvement with the coal-mining industry. It is a part of the Labour movement and that explains a degree of romanticism which owes more to "Love on the Dole" than it does to the realities or modern coal-mining and energy policy.
§ Lord Marsh
My Lords, with great respect, as this is a limited debate, I do not believe that it would be right to take up other people's time. I apologise for that.
With the help of no fewer than four internationally-known consulting firms and with the considerable resources of several government departments, including the Treasury, the Minister has produced a 150-page document which will enable him to ride out this political storm. I have no doubt that the Government will survive; the storm is over now. But that will have no effect whatsoever on the long-term future of the coal industry. I make no complaint about that because I do not believe that there is anything that this or any other government can do which will stop, much less reverse, the decline of the coal industry in this country down to a handful of pits.
One of the most significant factors in this debate is the date, because today, as your Lordships know, is 31st March. The date of the previous debate was 20th October. Those two dates are significant because this story began at the start of a typical British winter, cold and wet with long dark nights. Today, five months later, we are at the beginning of spring and from now on the days will get longer and the weather milder. The winter is over and the summer stretches before us for the next six months or so. What is the significance of that? My Lords, we leave the winter months and move into the summer season with stocks of 45 million tonnes of unsold coal on the ground.
906 That must lead one to the conclusion that if one starts the summer with stocks of millions of tonnes of coal on the ground which are going to rise through the summer, it is not a problem which can be dealt with by tinkering away with exports or imports. It is a fundamental problem. The whole thrust of the current debate suggests a very understandable concern for the miners and their families. I regret deeply the occasions in debates of this kind when people suggest that they have a monopoly of compassion and concern in issues such as this. They produce it like a blinding new contribution to the debate. All of us have concern for those who are involved, but a combination of that concern and further financial support will not solve this problem. In all fairness, neither the White Paper nor the Minister in his speech actually suggests that it will. It is simply a palliative to get by for a couple of years.
The figures have to be repeated over and over again. Output and manpower in the coal industry have been reduced in every single decade over the past 60 years. In the previous debate I referred to the disappointments of the 1967 White Paper. I was particularly disappointed because it was the last White Paper on this subject which I believed in. It went wrong. So in 1974 the Government tried again. They committed £1.4 billion of new investment over 10 years, designed to increase sales from 133 million tonnes to 150 million tonnes by 1985. In the event the market did not go up from 133 million tonnes to 150 million tonnes; it continued to fall to 118 million tonnes. The final bill, however, was not £1.4 billion but £5.7 billion. How many times do we have to go round this ride before it begins to sink in that, try as we may, care as we do, divert scarce financial resources on the scale which we have done, it does not work.
Today coal production is down to around 80 million tonnes and still falling. That is despite the fact that vast financial resources have been diverted—I keep saying "diverted" because these are funds which could be used elsewhere. If those funds were diverted with a scintilla of belief that that may be just wasting money, that would be outrageous. Tens of billions of pounds have been spent trying to halt the decline. Between 1979 and 1992 we poured nearly £18 billion into the industry by way of direct grants and another £3 billion over the past three years by way of subsidy from the generators.
This White Paper suggests that, with still more financial support, an increased market can be created of 10 million to 12 million tonnes. It is estimated that a typical pit produces about 1.5 million tonnes a year and employs about 700 men. At the most optimistic, it might produce work for eight pits and 8,500 men, together with massive stocks of still unsold coal. Suggestions have been made that coal imports could be drastically reduced, but 8.5 million tonnes of imported coal go primarily to the steel industry. The White Paper points out that the potential for displacing imports of metallurgical coal is severely limited. Very little coking coal is produced by British mines and what there is is unsuitable for metallurgical purposes.
907 As regards exports, the White Paper states at page 91:Exports of British coal represent only a small proportion"—these are the opinions of independent consultants—of total production in the United Kingdom, running at some 2 million tonnes a year, in recent years, declining to 1.4 million tones".The White Paper goes on to say:This analysis supports that in British Coal's evidence, which makes clear that there is no prospect of exports increasing without massive subsidies".That is the situation as regards exports. It is inconceivable that foreign governments would allow us blatantly to dump coal on their shores when they suffer exactly the same problems as we are suffering at the present time. The solution proposed involves very large sums of public money being diverted from other needs in order to keep several thousand men digging coal which we do not need for a couple of years longer than would otherwise be the case.
It makes no sort of economic sense. Given the fact that this debate takes place against increasing concern about the very real problems of seeking to maintain, let alone improve, levels of social expenditure in areas such as health, education and housing, and given that since the last debate tens of thousands of other workers have been declared redundant on terms which bear no comparison with those available to the mining industry, the suggestion that we should divert still more money into this bottomless pit is in my view morally indefensible and I suspect that it will not prove politically attractive either.
§ 3.49 p.m.
§ Lord Varley
My Lords, when we debated this matter last October I had the opportunity of following the noble Lord, Lord Marsh, on that occasion also and I was able to take up some of the points that he made which I believed were fallacious. That, however, was an open debate which was unlimited in time whereas today we have a time-limited debate, so I am afraid that I cannot take up all of his points. I once heard the noble Lord say that one of his great worries about Milton Friedman was that he was a "closet Left-winger". The noble Lord has today proved why he has that anxiety. I am sure that, on reflection, he will realise that the situation today is in no way comparable to the situation that existed in 1967 or, for that matter, in 1974.
We are now dealing with collieries which, by definition, are the most efficient in the history of British Coal, but I do not want to go over that ground again and nor do I want to rehearse the points that were covered so adequately by my noble friend Lord Richard. There is little point in repeating all the arguments about why or how a substantial market for UK coal ought to be created, retained and secured. We did that last October. Since then we have had the report from the Select Committee on Trade and Industry, the advice and recommendations of which have been largely ignored.
What is on offer now from the Government, if the White Paper is anything to go by, is transitory and limited assistance. The vote in another place on 908 Monday and the collapse of the Tory Back-Bench rebellion makes it quite clear that the scale of the pit closures is going to be drastic, carried through as rapidly as possible, and have a devastating impact on the mining communities in Britain—that is, those that are left. I believe that the Government are making a profound mistake in their attitude to the UK coal industry and I sincerely believe that future generations will come to regret and condemn those responsible.
I do not believe that any one of our European Community partners would take the action that our Government are taking bearing in mind how successful and efficient our industry is in European terms. The noble Lord the Lord Privy Seal spoke about the other coal industries in Europe, and about Germany in particular. German coal is very expensive. It is three times more expensive than British coal. Germany's transitory arrangements apply over a much longer period. The Germans would never contemplate doing the kind of thing that we are doing here.
I believe that the Government think that they are safe for the time being at least. They are still at the beginning of their parliamentary term and Ministers believe that there is no longer any fear from the so-called "coal lobby" or from their Back-Benchers. And as a student of party politics, I think that they are right. I do not think that there will be any more trouble from their Back-Benchers so they are safe. However, I hope that Ministers were not rejoicing too much on Tuesday morning after the vote, which I think that they will come to regret at some stage.
There is one other matter to which I want to refer before I turn to how the Government should face up to the awesome social consequences of their mistaken policy—and that is the attitude of British Coal's top management. I have worked for British Coal, I have been a Minister with some responsibility for the coal industry or I have had a business relationship with the chairmen and some of the senior board members since 1951 when I first went into the mining industry as a raw recruit. It has been my privilege to know all of them and to work with them over the years.
However, I have had the impression for more than a year now that those currently in charge of British Coal at the highest level have no enthusiasm for a larger coal industry than the one which was originally proposed last October and which they supported at the time. There was only one British Coal director fighting for a larger coal market, and that was the commercial director, Mr. Malcolm Edward;, and he was sacked by the chairman and the Secretary of State for his trouble. He has gone away. He was the only one standing up for the industry at that time. I cannot imagine any previous chairmen of British Coal being so pusillanimous or supine in the face of such an attack on the future of the industry. It would not have happened in the days of the noble Lord, Lord Ezra, who has made a coherent case for coal today. It would not have happened under Sir Norman Siddall who would have fought for the industry and nor, I believe, under the chairmanship of the noble Lord, Lord 909 Haslam who, unfortunately, (I do not know for what reason) is not specking in today's debate. But that, as they say, is water under the bridge.
So the Government and their supporters have taken a decision to close a huge chunk of the industry down and they now have to face the consequences of their action. I do not say that they are heartless people —of course, they are not. I would never ascribe that to them. However, tens of thousands of fine young men who, over the past few years, have broken productivity records are due to be thrown out of work in a very short space of time and on to a labour market which is the most difficult and distressing since the 1930s. In 1969 unemployment hardly existed and inflation was pretty low, as was the case in 1974 also. And all the redundancies that are coming to the fore will occur in areas where the male unemployment rate is well over the national average and, in some cases, nearly twice the national average. The current mining workforce is the youngest in the industry's history. They have young families and large financial commitments. Those immediately affected are desperate and in despair. The only thing that they want to do now is to see how far they can win back their self-respect and eventually get a worthwhile job.
So, the question on the lips of those young unwanted mineworkers is: what are Ministers going to do to help? The White Paper presented to Parliament by the President of the Board of Trade runs into 152 pages, and just about one page is devoted to the "Assistance Package" to create new jobs. The noble Lord the Lord Privy Seal said that an additional £200 million will he made available. I do not want to be churlish and that amount is welcome. It is all very good and a fine start, but I fear that it will be inadequate. It will be the assistance that the Government now give to help to create the climate for new jobs and to give new hope to these thousands of redundant mineworkers on which they will be judged. If Ministers were rejoicing on Tuesday morning after the vote in the House of Commons, I am not so sure that they will be so sanguine or that they will be rejoicing in two or three years' time when we find that whole communities are still without work. The Government will also be judged on the way in which they go about this task of creating jobs and on the vigour with which they do it.
The noble Lord, Lord Walker, has been mentioned as the co-ordinator of the regeneration measures. I wish him well. He was described in one of yesterday's newspapers as a "one-man development agency". The noble Lord undertook much good work as the Secretary of State for Wales and I believe that he genuinely cares about the awful problems of unemployment and industrial decline. To my mind, he has the added advantage of being a one-nation Conservative which contrasts so much with the hard-faced men who currently grace the Cabinet Room. At least he has that in his favour.
There are incipient signs of a modest upturn in economic activity throughout the country. I have been greatly impressed by the training and enterprise councils which got off to a chequered start but which I believe are now operating very effectively in the 910 regions of Britain. The partnership schemes which embrace the training and enterprise councils, the chambers of commerce, the local authorities and other local business organisations are anxious to help to ameliorate the impact of the proposed pit closures. There is a great deal of good will from all sections of the community, but only a well thought-out and co-ordinated approach to the regeneration of those communities, backed up with adequate financial resources, will have any real impact.
The Government have decided to cut the coal industry back and they say that they have won the backing of another place, which is the only thing that matters. I hope that they are not being complacent about that. It will therefore be very difficult and, I suspect, practically impossible to get the Government to change their mind about securing a larger share of the coal industry. I should like to see them have a change of mind, but I do not think that they will. Judging by the tone of the speeches made by the President of the Board of Trade and today by the noble Lord the Lord Privy Seal. I think that they are stuck on this course at least for another four years. The real test for Ministers now is how quickly they can get those whose lives have been so devastated and who are now in despair, back to work. That will be the real test; that is how we shall judge them.
§ 4 p.m.
§ Lord Boyd-Carpenter
My Lords, the last two speeches have been very much in contrast. The noble Lord, Lord Marsh, I thought, brought your Lordships' House back to reality; to the practical realities of the position of the British coal industry; of its uneconomic position; of the fact that for years it has been in slow decline. But the noble Lord, Lord Varley, appeared to ignore all that. He was full, understandably—I sympathise with him—of sympathy for those who were going to lose their jobs and with communities that were going to lose the economic base of their operation, a sympathy which, obviously, all of your Lordships feel. But it is no use just expending sympathy on such an issue. One has to face, as the noble Lord, Lord Marsh, did, the realities of the situation.
The reality, I am afraid, is plainly this: the British coal industry is and has for quite a time been unable to produce coal at anything like a competitive price. It has failed to compete. The extraordinary position is that for years it has been cheaper to import deep mined coal 12,000 miles from Australia than to buy it from pits in Nottingham or the North of England. That is a fact. I can endorse it by a very real personal experience.
Some years ago a company of which I was chairman, and which was a big coal user, bought a good deal of British coal. But it bought it in a deal with the National Coal Board under which the price that we paid was to be the price that would have been paid for the same quantity of Australian coal. Apart from such devices, which suited us and suited the National Coal Board, the industry is not competitive.
It is no use moaning and groaning; it is no use expressing sympathy, sorrow or regret if one is not 911 prepared to face that fact. All the facts have been pointing that way for years. The reasons of course are varied. To some extent it is a question of efficiency; to some extent, a question of productivity. And if I may be allowed to tread on admittedly dangerous ground, one reason has been that wage levels, resulting from the British coal industry having one of the most powerful trade unions in our history, have been forced up to uneconomic levels—well above those of the ordinary industrial worker. Those are the facts. The facts have now caught up with the industry, and the industry is now uneconomic.
What should the Government do? I have a good deal of sympathy for what the noble Lord, Lord Marsh, said in pointing out that large payments—I understand that we are talking in the order of £200 million a year—of taxpayers' money, which could well have been used in present circumstances for other, perhaps more rewarding, purposes, is to be used merely to keep the rump of the British coal industry going. I find it astonishing that the Labour Party seeks to attack the Government for what they are doing in respect of the coal industry. If I were to venture to criticise my noble friends, I would criticise the Government for being over-generous. I would suggest to them, in all seriousness, that in the present state of our economy, £200 million could do more good in other directions than sustaining the basically uneconomic activities of the pits.
Of course, humanity and good sense must be shown in the way, and the speed with which, the pits are closed. I regret very much the dramatic announcement last year of large numbers of closures. It is a fact, as your Lordships will be aware, that pits have been closed every two or three weeks for years, going right back to the days of the Labour Government. The decision to make that over-dramatic announcement last autumn stirred up all the kindly, good-natured feeling of most people in this country, along with, because of its political connections, the emotions and antagonism of the Labour Party.
If I were to criticise the Government it would not be because they are being hard on the industry. On the contrary, it would be because they are being too soft with the industry. It is necessary to face the fact that further pits will have to close. They will have to close before long, anyhow. No industry can go on subsidising an uneconomic industry like this indefinitely. No doubt the subsidy will help to cushion the shock; no doubt it will help to ensure that changes take place as painlessly as possible and that other employment is found. I very much sympathise. The noble Lord, Lord Varley, referred to all the young miners starting their careers in the mines and for whom the present situation is a terribly sad and serious one. No doubt the subsidy will enable them, as soon as they possible can, to get in touch with other jobs and to move out of a declining industry which will be unable to sustain them over the coming years.
It is no kindness to the miners or the mining communities to create or support the delusion that by government manipulation it will be possible to 912 maintain a large coal industry in this country. That is not the case. It is no kindness, and it is not a wise thing, to try to create that impression.
It is always sad to witness the decline of an industry, especially one which has been the centre of the life of a good many of our fellow countrymen. I should hate any of your Lordships to feel that I, or anyone else on this side of the House, or anywhere, was insensitive to that situation. However, when one is dealing with industries upon which this country lives, one has to confine one's activity and expansion to the areas in which they can compete. Mercifully, those are many. Mercifully, there are many of the newer industries which, as we get through the present depression, will yield increasing employment and prosperity and help to earn this country's living. But it is a delusion to believe that the coal industry will help in that respect.
I hope therefore that when my noble friend replies at the end of the debate she will be able to say that, while the Government's action, generously intended, is designed to soften the blow, to soothe feelings and to ease the position temporarily, they will not connive in the deception that a major coal industry will continue in this country. It will not, and it is no kindness to those who work in it to pretend that that is so.
§ 4.10 p.m.
§ Lord Elis-Thomas
My Lords, I speak from these Cross-Benches in support of the Opposition's Motion. I wish to emphasise the latter part of the Motion; that is, the failure to develop a long-term strategy for meeting future energy requirements. The noble Lord, Lord Boyd-Carpenter, spoke a great deal about a sense of reality and competitiveness. I wish to argue that relying on a short-term mechanism of market forces to determine the long-term issues of energy policy is most unreal in the extreme.
In the White Paper and in other statements on energy policy we have from the Government a narrow focusing on a short-term concept of consumer interest, a reliance on a market as a delivery mechanism for energy policy and a failure both to address the essential issues of environmental protection and long-term sustainability. Indeed, what we heard from the Minister today is what we have heard so many times from governments; that is, a use of the rhetoric of environmental policy totally empty of context and content.
The Minister used the word "sustainability", but clearly he was using it in a sense different from that in which those of us who are conversant with environmental policy would use it. Sustainability is all about the planning of natural resources in such a way that they are not wrongly depleted for future generations. That hardly seems to me to be the basis of the present Government's policy. There is, therefore, no natural resource management within the government strategy and certainly no allocation of economic resources in relation to the long-term needs of consumers for guaranteed energy supply.
For all those reasons, therefore, we must underline that the so-called "market" in energy services which the Government talk about emphasises entirely a 913 short-term view of competitive market forces. It does not look at the supply of energy services as a whole and concentrates only on the short-term alleged economic viability of fossil fuels in electricity supply. It does not address itself to the longer-term issues. I join the call that has already been made in the debate for a serious energy strategy which is related to the long-term needs of consumers within a sound environmental framework. We do not have such a strategy at present. It is one which the European Community is struggling to establish but, I submit, it is receiving little support in that direction from the Government.
The Government have failed to address other issues relating to energy policy; for example, efficient technology, user habits and, perhaps the most clear and blatant contradiction of their policy, the non-fossil fuel obligation and the real market costs of nuclear power. That failure shows quite clearly that the Government's market approach is confined solely to the coal industry.
What would be the elements of a long-term comprehensive energy strategy? Clearly, it would address the tough challenge of the ever-increasing demand for energy and the limitation in the supply of fossil fuels. It would address the reality that world reserves of oil are estimated to last for another 40 years and natural gas for perhaps 60 years. However, the proven world reserves of coal are likely to last for at least 200 years at the present rate of consumption.
But a long-term energy strategy needs also to address the major issues of pollution, whether by acid rain, greenhouse gases or nuclear waste. It must also address the challenges faced by environmental policy and the challenge of social disruption as a result of changes in energy policy. They apply not only to the coalfield communities and the coal industry; they apply equally to the nuclear power industry.
The area of North-West Wales where I have lived and which I represented in another place for the past 20 years is heavily dependent on the generation of electricity by both nuclear and hydro-power. At Trawsfynydd we are faced with the difficult issue of the potential extension of the life of that Magnox station. If for safety reasons the advice from the Nuclear Installations Inspectorate to the Government is that the station should not be extended, clearly the area will be faced with the major economic issue of the loss in direct employment of some 500 jobs and in indirect employment of a further 500 jobs. That area of economic activity in mid-Wales clearly requires urgent new investment if those jobs are to be replaced. The issue applies riot only to the coalfield communities but to all communities dependent on electricity supply and energy generation as a means of employment.
If we are to look at the longer-term issues of energy policy we need to look in particular at the most efficient use of our different forms of fuel. It may well be that in the short term gas, oil and coal may be competitive on a different timescale. However, in the longer term it is important to use the most efficient fuel for the most efficient purpose; for example, burning gas to provide direct space heating is twice as efficient as burning gas for the generation of electricity. Yet the 914 whole emphasis of the Government's policy in their dash for gas is to use gas for the generation of electricity.
The only argument which I can find in favour of gas-fired power stations is their low capital cost in the short term. We need to look at the long-term utility of our different fuels if we are to have a clear and rational energy policy. In particular, we need to look at the essential role of renewables. In our debates on energy policy we emphasised the role of renewables. Yet it appears that in the Government's strategy renewables have a low priority. It has been estimated by the group which has researched the area of renewable energy sources that some 20 per cent. of the UK's energy needs could be supplied by renewables by the year 2005. That should be a realistic target for energy policy.
In the context of the Welsh economy and the environment in particular we have recently seen the expansion in capacity of wind generation. Although there has been a great deal of discussion among landscape environmentalists about the environmental impact of wind farms and wind power generation, I believe that the wind farms that now grace the hills of mid-Wales are greatly preferable to the gaunt concrete outlines of our nuclear power stations. They are "green" and they are environmentally friendly. I am told that there is some anxiety among the sheep farmers that they may cause a little too much noise for the sheep. But the energy generated from those power stations is green and user-friendly and provides a much-needed additional boost to the income of the hill farmers. That is an area in which the Government need to pursue a balanced policy which uses the potential from renewables as part of the strategy.
But the Government also need to take a view of the development of energy policy which balances between the short-term interest of the price mechanism as it currently operates and the longer-term position of energy supply, security of supply and balanced use of resources. What is economic in the short term may be uneconomic, and undoubtedly is uneconomic, in the longer-term timescale. Renewable sources of energy do not become depleted in the way that fossil fuels and other forms of fuel have become depleted. Therefore, there is no tendency for their prices to rise as a result of increasing scarcity or increasing difficulty in extracting reserves. Yet that very economic approach, which may benefit renewables in the longer term, is used as a short-term argument against the development and maintenance of the coal industry as a fossil fuel source.
I am arguing that our whole approach to the Government's present coal closure programme must be put in the context of a long-term energy policy. I argue that within that context it is essential to maintain the possibility of deep-mining coal as a fossil fuel not only for its use in the electricity industry but, as we have heard in the debate, for its use as a base for the development of chemicals. Research in that area in the UK is far behind that in other countries; for example, the United States has emphasised the use of 915 coal as a source of chemicals. Although we have had a long-term scientific interest in coal convertibility, that has not taken off as it should have.
So for all those reasons I believe that the Government are taking a short-term view of our energy industry and of our coalfield communities. For those reasons I wish to support the Motion.
§ 4.20 p.m.
§ Lord Sefton of Garston
My Lords, when the Statement was repeated last week I took it upon myself to obtain a copy of the White Paper. I went to the other place to listen to the debate because I thought that any misconception that I had about the White Paper might be removed by the person responsible for it; namely, the President of the Board of Trade. I thought that on such an occasion compliments would be paid to the efforts which the miners had put in to this country's welfare, particularly during the last war after they had suffered the privations and terrible conditions in the 1930s to which the noble Lord, Lord Ezra, referred. I expected that but I certainly did not get it. What did I get? I heard one of the most deplorable speeches upon a serious subject that I have ever heard in my 50-odd years of political life. I thought that the President of the Board of Trade would give a reasoned speech in favour of the White Paper's proposals. I thought he would give us a remedy for the present problems of the coal industry and would give us an energy policy. There was nothing of that.
I should like to concentrate on the latter part of the Motion before us today; that is, the need to have a comprehensive energy policy. After the speech, we turn to the White Paper. In the speech, energy policy was mentioned. What do we find in the White Paper? Anybody who reads it can see that the energy policy is to consist of privatisation and competition. After that comes a little footnote that we are to have an annual energy report. Therefore, we shall be told what is to happen in the field of energy.
On 25th March I asked the noble Baroness whether she would tell us how the data and the information are to be produced in the field of energy so that they can be compiled into a report and presented to this House and the other place. The implication of her answer was that it would be rather a cheek to expect private enterprise to produce figures about its own business so that an annual energy report could be produced on behalf of the Government. It may be a cheek but I know of no other way of producing a sensible, rational energy policy without first finding out from the people responsible what is to be the future investment.
Coal is only a small part of our energy problems. Several questions come to mind when one thinks about energy in this country. During the last war it was realised very quickly, when the private coal-mine owners closed mines because we lost markets in France, that the Government should step in. Even Winston Churchill was on my side in that regard. We stepped in because during the war energy was the main effort in conducting the war.
916 We are about to enter, if we are not already in it, a war that will be considerably tougher in some ways than the military warfare of 1939 to 1945 because we are ranged against the whole world. The use of energy will perhaps be the dominant factor in deciding who will win that war. The first thing that we must do is to make sure that we know what is to happen.
The President of the Board of Trade went on to talk about our present problems. One got the impression that all that the president would have to do would be to go to the generators, give them a nudge and a wink and perhaps they would agree to buy more coal for a few years in order to resolve the present difficult problems. What happened? We heard statement after statement from Conservative politicians saying that the position would be resolved in a few months. It is now five months later. Nobody must tell me that the President of the Board of Trade has not been in touch with the generators. Nobody must tell me that he has not explored the possibilities of the generators increasing their purchase of coal. What happened? The generators politely told him to get lost and they went on in their own sweet way. As my noble friend Lord Richard pointed out, the figures remain the same. There has been no change.
In this House four months ago in the debate on large energy users of electricity I said that the Government had lost control of anything that they could do with regard to benefits for the large users in industry in order to preserve ICI and other large energy users of this country. That was disputed from the Benches opposite. They said that of course they had control, and if necessary they would introduce legislation in order to give them control. That legislation may have to be introduced in order to give us control over the electricity industry. It does not seem to me that there is much control at the moment.
We cannot divorce coal from energy and we cannot divorce the control of coal and energy from any other major part of our economy. What will happen if one of the generators decides to take an interest in a foreign coal-mine? Generators may decide that if they invest in a coal-mine in, for example, Colombia, they could make a nice quick buck. Will the Government ensure that no generator will be able to do that? I ask a question and I should like a reply to it but I know that the Government will not reply. They will not say that they will take those steps because they are firmly committed to free enterprise. Free enterprise knows no national boundaries. Somebody in the Bank of England said—I cannot remember who—"I know that it is unpatriotic to sell sterling but it is damn good business". The leopard does not change its spots. If the boardroom decides that it would be better to invest the money elsewhere, then that is what will be done. The Government will not do anything about that.
The first thing that we need is a comprehensive energy policy because that is the main part of our economic structure. However, we are not going to have such a policy. We shall not have an energy policy which relates to the railways and all the energy that is 917 needed to power a modern state. We shall not have that policy because the Government are committed firmly to private enterprise and competition.
The noble Lord, Lord Ezra, described the effect of competition on the coal-mining industry. That can be reproduced. Much the same happened in the building industry, and in the 1930s it happened all over the country in all aspects of our industry. I say to the noble Lord who was once the chairman of British Rail that perhaps all the fault cannot be laid at the door of the coal-mining industry. Perhaps the fault is not just because the coal-mining industry is running short of unexhausted coal. Had the noble Lord at that time seen the wisdom of relating coal to an energy policy for the whole nation the situation might have been better.
We must look at the fundamental problems. The coal issue merely unearths those problems. What will happen if the generators decide to buy French electricity? I do not know. Will the Government put an embargo on such action? Will they say that that cannot and must not be done, or will they merely go along, as Mr. Heseltine did, and ask the generators to help? Mr. Heseltine asked the generators to buy more coal. They replied that they would think about it, but they came up with the same answer. Will the Government do anything about this? Are they in control of our nation or are they slowly but surely and perceptibly passing it over to the boardrooms of this country and, worse still, to the boardrooms of international companies which see only pounds, shillings and pence and dollars and marks? They do not see Great Britain as something to worry about. All they worry about is the return to the shareholder.
As other noble Lords have pointed out, coal can be used in other ways than for the immediate generation of electricity and power. It may be that with modern, advanced technology, within three, four or five years we shall discover a way to turn coal into petrol which is cheaper than the present supplies of petrol. By then this Government will have destroyed any possibility of doing that because they will have ensured by their policies that we shall not be able to get to that coal. Coal is an indigenous asset that we should not waste or throw away, but we shall not be able to achieve that until we have a government who place the interests of this nation, and not private property, first.
A nation which surrenders the control of its own power ceases to be a nation. It merely becomes a place where other people play snakes and ladders with bonds, stocks and securities.
§ 4.31 p.m.
§ Lord Boardman
My Lords, as the speech of the noble Lord, Lord Sefton of Garston, made clear, coal is and always has been a highly emotive subject. For decades, or probably for generations, it has mesmerised politicians. The spell was broken only by my noble friend Lady Thatcher in 1984–85 in that sad industrial strike. Since that time the rundown of the mines —sadly, necessary—has been dramatic, but peaceful. The reduction has been from 169 collieries at 918 the end of the strike down to some 50 collieries in October when the President of the Board of Trade made his statement.
I regret seeing the coal industry or any other industry reduced. It has been necessary in the steel industry, textiles and indeed a whole range of activities, thus creating unemployment. I suppose in fact that more unemployment is being created this year in banking, an industry I had something to do with, than through all the closures of pits we are debating. I have not done the sums, but we must put these matters into a proper sense of proportion.
If the Government or employers try to retain jobs in order to win employment for people to produce things for which there is no market, that is a recipe for disaster. One has only to look at the communist USSR and many other countries, which practised that approach. The consequences were ghastly.
The noble Lord, Lord Varley, implied that we have a capacity and should therefore go on producing coal. If there is no market for that coal at an economic price, can it make any sense to go on producing it, sad as it may be? That must be the lesson for textiles, for steel, for men's hats and clogs and anything you like. There must be change.
I find that miners are particularly understanding. The noble Lord, Lord Ezra, was chairman of the National Coal Board at a time when I had some ministerial responsibility for coal. He and I produced a 24 point plan to deal with the consultation that would take place if it was necessary to have pit closures. As far as I am aware from my limited experience, that operated peacefully and well. Miners are very understanding. They realise when exhaustion is approaching and when the market is not there. For some reason that consultation did not seem to be fully complied with in October: it is unfortunate that the procedure was perhaps bypassed. But due amends have been made since. A range of Select Committees, commentators, and both Houses of Parliament have given their attention to the whole policy of coal, so there has been no lack of consideration.
I suggest that the noble Lords, Lord Richard and Lord Varley, were doing quite a lot of second guessing in their speeches as to what might be happening. As the noble Lord, Lord Marsh, pointed out, historically the projections, the so called strategy plans, have always been shown to be a complete failure and have come to nothing at the end of the day. So while I am fascinated by the plans and projections that people make, I believe that we should direct our minds to two particular aspects of the loss of market which I believe are the most relevant.
First, we must deal with the rundown and the problems created in areas where a large number of miners become unemployed. Secondly, we must see that the closures and the method of trying to soften the blow for them do not have damaging effects upon other industries.
There is need for compassionate treatment of the mining areas. The industry has extremely generous redundancy, pension and retirement plans. The White Paper refers to the creation of enterprise zones. It also refers to the setting up of regeneration measures 919 costing £200 million. Those are helpful methods of dealing with the problem. But perhaps the greatest asset in finding fresh employment is the miners themselves. In my experience, they are tremendously good employees. They can adapt. History shows that hundreds of thousands of miners have been forced to change from mining into other industries. They have managed to adapt in a way which is a credit to them. I believe that the miners who become unemployed will have the will and the skills to do that.
The steel workers were of a similar mould. The White Paper refers to examples of how they found fresh and valuable employment in places like Corby, not far from where I live. There are 11,000 of them now employed there.
Mine managers are some of the best trained managers in industry. All credit goes to the coal board and to the noble Lord, Lord Ezra, his predecessor and successors. A mine manager switched to another occupation has a management ability which I have always found—and I have had experience of many of them—absolutely first class. We should not look upon the miners as being thrown on the scrap heap. Many are young people of talent, ability and adaptability, and they have good management skills. With the generous treatment provided by the Government, there should be the ability to attract industry and for those people to make a valuable contribution to the national economy.
As to the impact on other industries, there have been suggestions, some from the other side of the House today, that more should be charged for the product and that more coal should be produced to enable the mines to remain viable. The cost of energy is vital to so many industries, and any action that is taken to save the jobs of miners by putting up the cost of energy can put out of work people in other industries.
I have been concerned with refractories. The cost of energy for those was some 40 per cent. At one stage it was quite impossible to compete with France because in France energy is much cheaper. My noble friend the Leader of the House is not here, but he referred to having satisfied himself recently that there is no subsidy. It is correct that the French have the advantage of the on-going cost of the nuclear programme and hydro-electric schemes. They were able to show that they were producing the electricity more cheaply. The inevitable consequence of that was that the refractory industry in this country largely had to close. The alternative of subsidising would merely have deferred the day of reckoning.
So in looking at how we treat these problems of not being able to produce coal at a price that is competitive, we must consider the effect it will have on other industries if we try to give price support to soften the blow. The cost of energy is a vital consideration. It is no good robbing Peter—and by "Peter" I mean the consuming energy industry —to pay Paul, (in other words, the miners). That cannot be. We must avoid that whatever happens.
The White Paper refers to the French interconnector. I personally congratulate the Labour Government 920 of the day which was much criticised for negotiating the French interconnector. They provided a competitive form of energy and one for which we should be grateful. Sad as it is, we cannot always match that price. It is always sad when the result is a drop in the demand for coal in a declining industry.
In the case of mining, men have worked underground in dangerous and, in many cases, very unpalatable conditions. We should derive some pleasure from the fact that many of them will be relieved from those tasks. We should concentrate on the two roles that I believe we have: first, we should ensure that we deal compassionately and helpfully with the problems created; and, secondly, in so doing, we should ensure that we do not cause any damage to the other industries which depend so much upon energy.
I believe that the White Paper provides a compassionate and sound economic policy. I share the reservations that have been expressed elsewhere about how far forecasts can wisely be made and how much reliance should be placed upon them. But, subject to that reservation, I support the White Paper.
§ 4.42 p.m.
§ Lord Cooke of Islandreagh
My Lords, the White Paper that we are debating this afternoon is a useful document. It provides much information which has not been available before and sets out some of the problems in power generation. I think that it will solve the public relations disaster described by the noble Lord, Lord Marsh; it will get the Government over that hurdle. But in my view it does not really solve anything. Until we develop a long-term energy strategy for the nation I do not believe that any of the proposals will make sense.
The noble Lord, Lord Ezra, has already pointed out how market forces are in themselves a most inadequate method of picking and choosing sources for energy. I shall not go any further into that aspect. At present we are using up our national capital in energy at a very rapid rate. The White Paper suggests that the reserves of gas are perhaps 40 years or 50 years. It suggests that the coal-mines have about 30 or 40 years. What use is that for our children, grandchildren and their great grandchildren? Until we look at the matter in the longer term and work out how we should use the available resources in the most economic way—and that is not always the cheapest way for the day—I do not think that we shall get any sense into the issue at all.
What good is there in making this rush for gas and using it all up if we do not have any in 40 years? What will we do then? Will we reopen the coal-mines, or what? Will we increase nuclear? It is a very complicated issue and one which needs a lot of work. I do not understand why as a nation we have not already started to develop a long-term energy strategy. Last year the energy use in the UK was approximately £50 billion. It was just about the same amount as the nation spent on food. But without energy we could not even provide the food. Without the energy 60 million people could not live in the United Kingdom. Yet we do not give a thought to the long-term energy 921 considerations for the nation. If we start to look at that seriously, I think that the position of coal will become much clearer; namely, that it has a place in the longer term. The place for it will also become clearer and we will not be talking in this—I think—quite ridiculous way about how quickly we can close down this pit or the other.
As regards a long-term strategy, it does not take much thought to realise that coal has a place. We need the energy. Of course nuclear also has a place. However, all that needs to be well thought out. The Government must lead the debate, but there certainly should be contributions from the able people in this country who are experts in technology and business. It is very much in the interests of every person in the country that we have a sensible, long-term energy strategy on how we use our resources and use them economically.
I believe that that energy strategy should have two parts. The first, and obviously the most important, is how we generate the energy that we require and where we get it from, together with all the other aspects involved—for example, how much can be renewables, what is the discharge of undesirable effluents and so on. All those considerations must be put into the equation. But after we have considered the generation of the energy we should then think about how it should or can be used.
Here I must declare an interest because my company manufactures insulation. The insulation used in the United Kingdom is less per head than in any other country in Northern Europe. Indeed, I received a piece of useless information some time ago which stated that a higher proportion of people's disposable income in the UK is spent on heating their homes than in other countries in Northern Europe. That seems to me to be crazy. The answer is well known: we are doing nothing about it. We have building regulations, but the standards are way below those of other countries. A consultative paper for fresh regulations has just been issued. The alterations in it are minor. An improvement of 25 per cent. is forecast. But, having personally looked at them, I do not believe that they will show effective improvements of 25 per cent.
In my business I am, of course, interested in the use of insulation. We have built many homes which have now been in use for some time. The energy used in one of these houses is 25 per cent. of that which is used in a house built according to current regulations. That is quite a staggering figure if applied nationwide. As regards the nation as a whole, when you take out the energy used for transport, something like 40 per cent. is used for heating of homes, of offices or of something else. If a positive policy for improvement in insulation and structures was carried out, there is no doubt that in a matter of 20 years there would be something like a 20 per cent. reduction in energy use for heating. That is the issue. We would need to build fewer power stations and then the energy from fossil fuels would last longer.
Why do we not look at what is going on in other countries? The Danes have reduced their domestic energy consumption by about 20 per cent. over the 922 past 15 years. Japan has had a very successful programme for the reduction of energy consumption. Moreover, in America, which is supposedly the country which is unregulated, they have a statutory specification for refrigerators. It is calculated that if the 125 million refrigerators and freezers in the US were to the new standard, 30 fewer power stations would be required than now. In addition, in America a reduction in demand for new power stations following campaigns now being undertaken would release 10 per cent. of the capital available for industrial investment from power stations for use in other businesses and capital projects.
Those are all measures which are available around the world but to which this country pays no regard. We do nothing about it. I hope that the Government will commence work on a long-term energy strategy for the good of the nation.
§ 4.50 p.m.
§ Lord Ewing of Kirkford
My Lords, against the background of the speech of the noble Lord, Lord Cooke of Islandreagh, it is worth inserting for the record that it was not the present Government but their predecessor who ended home insulation grants in this country. That had a devastating effect on the industry in which the noble Lord is involved on the one hand and the heating of homes and fuel consumption on the other.
I should like to open my comments by assuring the noble Lord, Lord Boyd-Carpenter, and the noble Lord, Lord Marsh, that I fully accept that no noble Lord has a monopoly of concern for the miners in their present situation. I say as gently as I can to the noble Lord, Lord Boyd-Carpenter, in his presence, and to the noble Lord, Lord Marsh, in his absence, that having heard them express their sympathy for the miners I hope that I never hear them speak against the background of their having turned against the miners.
I was interested in the certainty with which the noble Lord, Lord Marsh, addressed your Lordships' House. I had hoped that he would remain so that he could defend himself. But I can remember that in 1968, when he had responsibility for these matters, the noble Lord told the nation that if we did not close the pits included in the closure programme which was projected at that time we would be stockpiling coal in Trafalgar Square. That was the certainty with which the noble Lord addressed the nation at that time. A year later we were begging the miners to give up the five-day week and work seven days a week in order to supply the coal needs of this country. If anything is certain about the White Paper it is that nothing is certain. That is why the speech of the noble Lord, Lord Cooke, is so important.
The import of the speeches of the noble Lords, Lord Boyd-Carpenter, Lord Marsh and Lord Boardman, is to close the industry down completely. The import of those three speeches is that we can operate an energy policy in this country without the coal industry being part of it. History proves that not to be the case. All the forecasts that have been made on behalf of the coal industry in this country have 923 been shown to be wildly wrong. It worries me deeply that the Government can talk with such certainty in 1993 about what will take place in 1996 and beyond.
The significant point for me is that before the White Paper was even published the coal-burn agreements with the generating boards had already been signed, sealed and delivered, determining the exact amount of coal that the generating boards would purchase until the year 1996. Therefore, anything that was said in the White Paper was already pre-empted by the fact that the coal-burn agreements had already been signed, sealed and delivered.
I have been astonished at the reaction to the White Paper. Anybody in this country who thought for a single minute that the President of the Board of Trade would be the author of a White Paper which set out to show that he was wrong in October last year does not even begin to understand that Mr. Heseltine lacks humility. There was never any possibility of a White Paper being published by the President of the Board of Trade which showed that he was wrong in his assumptions of October 1992. Anyone who expected a White Paper which the president produced to show that he was wrong does not understand the nature of the President of the Board of Trade.
There are one or two aspects of the White Paper which I should like to raise in a Scottish context. The first is the question of the two remaining pits in Scotland. One is the Longannet complex which is owned by British Coal. The other is the privately owned Monktonhall colliery in Midlothian. Because I am a simple chap and I believe what people tell me I believe the Secretary of State for Scotland when he says publicly that the future of Longannet is secure. If the Secretary of State for Scotland goes back on his word he will have to answer for that. However, I believe what people tell me and therefore I believe that Longannet is secure.
I hope that the noble Baroness who is to reply to the debate will take my important point relating to the Monktonhall colliery to the Scottish Office. The colliery was opened up, after being closed down by British Coal, by 160 miners who each invested £10,000 of their redundancy money in order to open the pit as a private going concern. I take the view that they were misguided and I do not back away from that view. I believe that they were misled in the advice which they were given. However, that is not the point. The point is that they are now in the position of having a cash shortfall, which is minuscule compared with the amount of money we have been talking about in relation to the White Paper.
Monktonhall has an order for £40 million worth of coal. In order to get that coal out of the pit, deliver it, sell it and receive payment for it the pit needs money. It has a short-term cash problem which £½ million would bridge. I plead with the Minister to impress upon her colleagues in the Scottish Office the importance of acting in one of two ways on behalf of Monktonhall colliery: either to make a grant of the £0.5 million or, if that is unacceptable, at least to 924 underwrite a borrowing of £0.5 million on behalf of the Monktonhall pit. I honestly believe that that would be a good investment.
I notice that the Minister for industry in the Scottish Office, Mr. Allan Stewart, said on television that the Scottish Office would consider the situation sympathetically. We need the situation considered both sympathetically and speedily because time is fast running out for the men at Monktonhall. The difficulties that the Monktonhall miners have had in reopening a pit that has already been closed should serve as a salutary lesson to anyone who believes that once one has closed down a coal-mine it is easy to reopen it. It is not. If the President of the Board of Trade has that idea in his head, someone should get it out of his head as quickly as possible.
With regard to the White Paper, the Government have a psychological barrier. The noble Lord, Lord Boyd-Carpenter, stumbled on it by accident, and the noble Lord, Lord Marsh, deliberately. The Government believe that they are intervening on behalf of the miners. But they are not. They are intervening on behalf of the nation and they do not seem to understand that. The issue is much wider than miners and their jobs, important though they are.
There are promises of advance factories. When people tell me that they are building advance factories I always ask the question: in advance of what? I can take Ministers to advance factories which were built 15 years ago. They are still standing empty, never having had a tenant. The Government hold out a false hope when they say that they will build advance factories.
The country is littered with enterprise zones. The history of enterprise zones is that they do not attract new industry but steal industry from other parts of the country; and that is not the answer to the problem.
I conclude on another note regarding the President of the Board of Trade. Every time I watch him in full flow, with those golden locks wafting in the breeze, I am always reminded of the old music hall magician illusionist. He would come on stage and perform two or three tricks. He would then come forward to the edge of the stage and ask some man for a loan of his gold watch. There was always someone in the audience willing to give a gold watch. I suspect that he was planted there for that purpose. The magician would take the gold watch, put it on the table, cover it with his handkerchief, lift a hammer and smash the watch to smithereens. He would then come forward to the edge of the stage, hold his hands up in despair and apologise to the audience saying, "I'm sorry but I have forgotten the rest of the trick". I have visions that in two years' time the President of the Board of Trade, with locks not nearly so golden, will come forward to the edge of the stage holding his hands up in despair to the people of this country and say in relation to an integrated energy policy, "I'm sorry but I have forgotten the rest of the trick".
§ 5.2 p.m.
§ Lord Gray of Contin
My Lords, in discussing The Prospects for Coal: Conclusions of the Government's Coal Review, it could be said that if we were to choose, 925 we would not necessarily start at this point. However, since it is not our role to do the choosing we have to assess the situation as it exists.
I have one criticism of the Government. Perhaps I may be accused of allowing sentiment to sway my thinking but I voiced my opinion at the time and therefore have no feeling of guilt. I believe that it was a great mistake to incorporate the Department of Energy as a division of the Department of Trade and Industry prior to the privatisation of coal. I am convinced that had that not occurred, and Ministers had been able to give their undivided attention to energy matters, and in particular to the activities of the National Coal Board, we might have been able to avoid the embarrassment which that body brought upon the Government. The policy was correct, and is still correct. It was not the policy as such which antagonised the public. It was the inept way in which it came about. It was the suspicion, indeed the belief, that the miners were being treated unfairly that annoyed so many people. Recognised procedures had not been followed. Some of the usual conventions had been ignored and the issue, it appeared to the public, was being bulldozed forward with indecent haste. Much of the resulting trauma might so easily have been avoided.
However, that is now behind us and I must congratulate my right honourable friend the President of the Board of Trade for devising what in the circumstances seems to me to be a very reasonable compromise to the original proposal. Some of the pits, after all, were coming towards the end of their natural life. Some could not be operated either on a profitable or a competitive basis by the National Coal Board. But all suffered due to a lack of demand for their product.
The Government in my view have provided a realistic, if diminishing subsidy—too generous, some would argue; indeed, my noble friend Lord Boyd-Carpenter made a strong case to that effect today—designed to give British Coal the chance to benefit from the creation of a wider market while pressing ahead with the privatisation of the industry.
If there is any future ahead for coal, it must be in the private sector. It would be folly to embark upon a prolonged period of subsidisation of an industry which has already displayed an appetite of horrendous proportions for taxpayers' money. Privatised mines may succeed, operated either by large concerns, as would be the choice of the noble Lord, Lord Ezra, or in some cases by individual management buy-outs or similar groupings, which obviously would not be the choice of the noble Lord, Lord Ewing. In any event, if any of those small groupings participate, it is a benefit, whatever the noble Lord may feel, if a high proportion of the workforce has a financial interest in the enterprise.
Life is not easy in business, and I feel strong sympathy for those miners to whom the noble Lord, Lord Ewing of Kirkford, has referred today. But when major investment is made in such a project, there is a risk element. Those miners must have known that when they made the investment. If they can be helped, I would be delighted. But I believe that it is only fair 926 that the position regarding investment should be pointed out to any others who might feel similarly inclined, as the noble Lord rightly did.
Production has improved enormously in recent months but too late to save the National Coal Board. For too long the industry has been crippled by pathetically low production which in turn has led to uncompetitiveness. Coal privatisation must move to the top of the priority list.
What is certain is that that is the only way forward and if the record of previous privatisations can be called in aid of the argument, we can only judge by results. Profits go up, efficiency improves, management skills improve. Workforces prosper. I know of no demand for a return to nationalised status from any source which has been privatised. One never hears of disquiet among workforces. One never reads of rallies involving industries wishing once more to be nationalised. But probably the greatest advantage which all those companies which have been privatised have experienced is freedom from Treasury control and Government interference. They now make their own decisions and stand or fall by them.
I suggest that the Government need pay scant attention to the criticisms from Members on the Benches opposite. The record of the Labour Party in allegedly defending the coal industry is truly abysmal. If anyone is in any doubt, all he needs to do is to ask the honourable Member for Bolsover, Mr. Skinner. Like me, I have no doubt that the noble Lord, Lord Ewing, recalls some of the honourable Member's speeches when he was never slow to criticise the performance of his own party in government, in particular regarding the closure of pits. He used to reel those pits off by name. I do not know how many he could name but he certainly knew what he was talking about and he was extremely critical.
In addition, the Labour Government were not impressive in other ways in which they dealt with the coal industry. The noble Lord, Lord Marsh, gave us figures today which indicate just how poorly the investment rate compared with that of succeeding Conservative governments. Indeed, in the House on Monday, the President of the Board of Trade gave further figures. I shall not weary the House with them. The figures are in the record of Hansard if anyone cares to look them up.
I deplore the redundancies which may take place as a result of closures but I applaud the measures already announced by the Government to draw together the various aid packages from within different government departments and to be co-ordinated by my noble friend Lord Walker. I welcome also the fact that the redundancy terms on offer to the unfortunate miners are probably the best available in any industry in the country. It makes infinitely more sense to spend money in the communities which suffer closures than to pour further moneys into the National Coal Board.
However, we must look to the future and that, in my view, does not mean looking towards an energy policy. The noble Lord, Lord Cooke, made an interesting speech, but the implication of it was that we should have an integrated energy policy. He—or it may have been the noble Lord, Lord Ewing—said that 927 that had to be led by the Government. I believe that that is the last place where we want to see government. It would be a return to government intervention with decisions being made for all the wrong reasons.
The energy industries have largely escaped from the inhibitions of government control and this is not the time to reverse such measures. We are fortunate that we are an energy rich country. We can make choices and those choices will be governed by availability, price and environmental acceptability. Power generation, dominated at present by coal, will move in stages towards gas and further nuclear power and, in due course, an increasing contribution from alternative sources, such as wind and wave power, where the most valuable contribution the Government can make is in research and development.
All those energy sources are job providers. The gas industry, along with oil—with which it is closely related —provides 30,000 jobs offshore and a further 300,000 onshore. Present estimates indicate that we have gas reserves which will last for 40 years, but sooner or later we shall deplete all our resources of fossil fuels, by which time alternative energy sources will have been perfected in technique and fully developed.
However, there will still be a large gap which, in my view, can only be accommodated by nuclear power. In that area, we have a splendid safety record in this country—a highly skilled workforce. Governments of the future must show a positive and supportive attitude to an industry which holds the key to so much of our future prosperity. The White Paper highlights at paragraph 7.114 that on an avoidable cost basis, generation from existing nuclear plant is cheaper than either coal or gas.
Nuclear Electric, a company with which I am associated as a consultant, enjoys rapidly improving performance figures in output, costs and productivity. The day may not be far distant when it, too, may be able to share in the benefits of privatisation.
§ 5.13 p.m.
§ Lord Stoddart of Swindon
My Lords, it gives me great pleasure to support the Motion so ably moved by my noble friend Lord Richard, particularly as regards its reference to the need for a long-term strategy for our energy industries.
The Government's policy is bound to be wrong because it is one of a series of short-term fixes. There is no reason to believe that this policy will be any better than previous policies that have been pursued. Indeed, it is likely to be far worse, since it comes close to destroying the only secure and long-term source of indigenous fuels that we have.
The noble Lord, Lord Marsh, referred to the thousands of millions of pounds in subsidies which had been invested in the coal industry. If he were here, I could tell him that much of the millions of pounds went not to improving the coal industry but to closing it down. In so far as the subsidies were used to improve the industry, we now have the paradox that just when productivity is coming good, the Government introduce their pit closure policy. 928 Therefore, the Government themselves are wasting the money that has been invested in the coal industry over a long time.
I worked in the electricity supply industry. I remember in 1966, when the noble Lord, Lord Marsh, was the Minister of Power, being told about and discussing in our local advisory committee a policy to switch from coal to oil on the basis that one could get oil at a few pence per barrel. So presumably, under the noble Lord's guidance, we stopped building coal-fired stations and started building oil-fired stations. We continued apace with the oil-fired stations. I remember the chaps—the boiler operators, the turbine drivers—saying to our management, "But what if we have trouble in the Middle East and we can't get the oil?" Management said, "You needn't worry about that, boys, everything will be all right. We have had uninterrupted supplies so far and there is no reason to believe that we shall not do so in the future". That, of course, was until 1973 when there was an interruption in oil supplies and prices rocketed until they reached their peak of 38 dollars per barrel—not a few cents.
What happened then? The building programme for the oil-fired stations had to stop. Not only that, but we had to mothball the oil-fired stations that we had built at the cost of thousands of millions of pounds. The policy became disastrous at that time.
Then, of course, in the 1980s we had a great new idea: nuclear power. That was the power that would put the miners in their place. The Government, under the leadership of the noble Baroness, Lady Thatcher —Margaret Thatcher as she was then—decided that they would increase the take of nuclear power. Indeed, we had a double-whammy at that time. Not only did we increase nuclear power, but we also changed from AGR generation, just when it was becoming successful, to PWR, at enormous cost. So the country was faced with that double-whammy.
If we are talking about subsidies, we had better refer to them here. That was achieved by the use of enormous subsidies paid to the nuclear industry over a long time. The noble Lord, Lord Gray of Contin, knows that. Not only did we pay the nuclear industry thousands of millions of pounds in subsidies in the past but we are continuing to do so through the nuclear levy. Thus, we have been subsidising the industry for a long time. We were doing it on false information, false figures which were provided by the nuclear industry, not only to the Government but also to the Select Committee. As a member of that Select Committee, I remember trying to get to the truth about the cost of nuclear power. Many times I have asked, "Are we taking all the costs into account? Are we taking the decommissioning costs into account?" "Oh, yes", was the reply, "Of course we are". That was until the Government decided to privatise it. Then the real costs became available and, far from being competitive with coal, as we are now told that gas is competitive with coal, we found that the real nuclear generation costs were twice as high as the coal generation costs. That is the kind of history of energy policy with which we have had to deal so far.
Now gas is the new fashion. We are told that it will be cheaper, although we know that it will not be. The 929 Government have decided to commission and allow to be built 14,200 megawatts of gas-fired station. That is an enormous amount. It is one-quarter of our total generating capacity. It means that that amount of coal capacity is bound to be closed down, and no doubt more will go. But there is every reason to believe that gas generation is already dearer than coal generation and will become dearer as demand for gas rises and supplies diminish. We are told that gas is more environmentally friendly. That may well be the case —although sometimes I begin to wonder when I see conflicting reports about acid rain and the effects of CO2, emissions.
I conclude on the question of security of supply which is far more important than people give credit for at the present time. The Government and many other people seem to believe that gas and oil supplies are completely secure. I do not believe that to be the truth. It is believed that we shall not have any wars in Europe —although we have a war going on at the present time which may very well escalate—and nobody foresees any problems over landing oil and gas or getting future gas supplies through a variety of countries with different political situations. They do not see the difficulties that might arise in getting gas and oil from the Middle East. Yet such things could happen. In the past it has not mattered so much because we have had coal to fall back on. But by the time the Government have finished, there will be no coal to fall back on.
Let me put another point. We have heard about the high level of coal stocks at power stations. Margaret Thatcher was glad to have those coal stocks there in 1985, was she not? Where are the gas stocks at power stations? Can anybody show me the gas holders at those gas-powered stations? Of course not. They are remote supplies which can be cut off by the suppliers, perhaps through union action—I hope not, but it could happen. In reality, gas supplies could be in great danger from a variety of forces. That seems to be a point which the Government have not fully taken into account in formulating their so-called policy. I urge them to think again. Coal is our best and most secure supply of indigenous fuel. There are some hundreds of years of supply left and we ought not to destroy the ability to reach that reserve of coal because of a new fashion in generation which may prove to be not quite so good as the Government think it is.
§ 5.24 p.m.
§ Lord Wade of Chorlton
My Lords, I welcome the Coal Review. I very much welcome its realisation that the best energy policy is a free market for energy so far as that is possible. I welcome its appreciation that the independence of the coal industry and its movement towards privatisation will take big steps forward in making energy available at the right prices in this country. I welcome above all the fact that it appreciates that one cannot have an energy policy dependent upon one source of energy, and that future energy will relate to a range of energy options within the country—not just to coal, which is given a level of support within the White Paper, but also to other sources of energy.
I should particularly like to refer to combined heat 930 and power—I declare an interest as I happen to be president of the Combined Heat and Power Association—waste-to-energy activities, and nuclear energy, which was referred to by my noble friend Lord Gray. I agree very much with what the noble Lord, Lord Ezra, said; namely, that we can never have a completely free market in energy because of the constraints of environment, social and fiscal policy and other matters. But within those limits it is right that the market should be as free as possible.
The White Paper on the review makes clear that the Government will now have a fresh look at the non-fossil fuel obligation with a view to creating a third tranche which would take that obligation further than 1998, as has now been agreed. That would have a big impact, certainly on nuclear electric power, and on CHP, of which I am a particularly keen supporter, believing that combined heat and power can make an enormous contribution to energy saving, and needs the full support of government to ensure that that happens.
There are a number of minor difficulties, such as defining what is a site so that inter-trading can be allowed between related businesses on a site. That aspect needs to be looked at much more closely by government. But the fact that the review indicates that the Government now tend to bring their best efforts to bear on agreeing with the European Community on extension is certainly a very positive way forward. I hope that the DTI will now push that through and help the development of CHP. I believe that such a move would help the Government to achieve their target of doubling UK CHP by the year 2000 and would enable the private sector further to develop its role in the field of waste disposal. The waste disposal side seems to me to offer an enormous opportunity. I am grateful that the review refers to it.
The Coal Review has held up a number of very important initiatives in the waste-to-energy sector. Now that it is over, and the non-fossil fuel obligation will move into its third tranche, I think that we can expect to see some 20,000 jobs generated over the next three years within that particular industry, with an investment potential of over £1 billion. That will do a great deal to give opportunities to those who are now involved in one energy to transfer and have the opportunities in another.
The White Paper mentions a target figure of some 1,500 megawatts for renewables, and waste-to-energy is expected to generate about one-third of that. It also has the enormous advantage that it creates great opportunities in new technology which, as the noble Lord, Lord Ezra, also mentioned, will be of enormous benefit to the nation in its energy supplies.
The other area to which I want to refer is nuclear electricity, on which my noble friend Lord Gray made an important contribution. I, like him, believe that nuclear energy will provide a great source of electricity in the years ahead. Those who have witnessed the enormous technological breakthrough that has taken place in recent years in that particular technology—I had the privilege of going round the THORP reprocessing plant only two weeks ago and saw many of the activities that take place at Sellafield—are 931 enormously impressed by the great control and efficiency of that energy and the enormous breakthroughs which are now taking place. It will be a tragedy if this nation does not take up fully the opportunities presented by that very advanced technology and ability. It will be of benefit to everybody, including those employed in the coal industry.
I also welcome the £200 million that the Government are now prepared to invest in alternative opportunities for those involved in the coal mining industry. Like my noble friend Lord Boyd-Carpenter, I am not one of those people who believe that the Government should spend our money on unnecessary activities. But I am very much interested in the rural economy. In the knowledge that most of the mines, particularly those which will become uneconomic, are in the rural areas, I welcome the extra contribution. It will go a long way toward providing alternative employment. I urge the Government to think very carefully when they invest that money and to invest it in such a way that the communities within those rural areas can use it; they ought not to spend the money a long way away in the hope that the miners will travel to the employment it generates. The key to using the money will be in the introduction of new investment and new job opportunities in the new technologies. It should be used to make sure that it keeps the communities in the rural areas alive and effective.
I welcome the review. As many noble Lords have stated, the coal industry has moved on, just as many other industries have done. Since the 1930s the world has been using less coal. Coal mining has been a declining industry in all countries since that time. Coal is not wanted by the consumers to the extent that it once was.
The oil industry has also peaked on a world basis. The use of oil is not increasing. The use of gas is rising because consumers want to use it. As in all markets, if one does not consider what the consumer wants, trade and business will die. We have now to look ahead and discover what our consumers want. We must consider not what the present generation of consumers want but what the next generation has in mind. We must consider where that energy must come from, in what form it is wanted and how much the consumer is prepared to pay for it.
The review is a step forward in obtaining and managing our energy for the future. I hope that noble Lords will support it.
§ 5.32 p.m.
§ Lord Jay
My Lords, having studied the White Paper and a number of ministerial speeches in the past couple of weeks, I find it hard to believe that the White Paper is much more than a somewhat cynical smoke-screen. Of the pits that we were told would be saved, according to the Minister's latest Statement:Twelve of the remaining 13 pits will continue to produce while British Coal, with Government financial backing, looks for additional sales at world related prices".That is not so much a reprieve as a stay of execution. So far as I can see, when privatisation gets going, it will be perfectly possible for a private company to buy 932 a pit cheaply, run down the machinery, take the subsidy and the profit and close it down in 18 months' or two years' time.
The Government's attempt to justify the policy is contained in one sentence from the Minister in the other place:It is central to the Government's energy policy to help create competitive energy markets within which consumers can obtain electricity from a diversity of sources at competitive prices".But the situation created is a caricature of a fair, competitive market. It is far from perfect competition or even fair competition. The domestic consumer has no choice at all of whom to buy from and the distribution companies are merely faced with two duopoly generators whose interest lies in keeping prices high and ensuring, as they have done, higher profits and dividends. Meanwhile, in order to compete, our own nuclear industry, of which we are all in favour (there is no controversy about that), is given a subsidy of about £1 billion a year to cover decommissioning costs before it can be competitive.
On top of that, British Coal, as we have heard today, has to face competition from French nuclear electricity, which must be subsidised. It is inconceivable that French nuclear fuel bears the decommissioning costs when it costs the British Government around £1 billion a year to subsidise our own industry. Instead of weakly saying that they have no evidence, the Government should have investigated and asked for evidence that there was no subsidy since prima facie it must be so. The other most important cost of nuclear electricity is the rate of interest applied. Does anyone believe that the French authority charged a purely market rate of interest many years ago when it set up and organised its industry?
Moreover, I understand that the French electricity supplies qualify for nuclear subsidy. I do not believe that the Minister told us the whole truth this afternoon. It is perfectly true that subsidy is not paid to Electricité de France. But is it not a fact that a subsidy is paid to the purchaser of electricity who can then pay a higher price to Electricité de France? Anyway, we ought to know the facts about that.
It is not a fair competitive field for British Coal. It is a market rigged against British Coal by the privatisation of electricity which handed market power and effective control over national energy policy not to the Government but to a privately owned generating duopoly, which naturally seeks short-term profits. It is a market not merely rigged against British Coal but rigged by the British Government against British Coal.
In addition, a comparison of future costs for British coal and for imported fuel depends to some extent on the future of the sterling exchange rate. No one has pointed out that fact this afternoon. The White Paper mentions the exchange rate but gives estimates—the Minister quoted them today from page 21 of the White Paper—of comparative costs in sterling of British coal and imported coal, without stating the exchange rate for sterling that was assumed. But since the sterling exchange rate will almost certainly decline another 15 per cent or more over the next five or 10 933 years —if it does not do so we shall never correct our balance of trade—the cost comparison between British and imported coal will be greatly altered. As everyone agrees, British Coal is the most efficient and low cost producer of coal in Europe at the present time.
The same applies to French electricity. Moreover, since the world price of oil is calculated in dollars, it must also apply to a great extent to our oil and gas supplies. How foolish we shall all look if, 10 years hence (rather, as my noble friend explained, as happened with the 1974 oil crisis), when we have largely destroyed our coal industry, and indeed our mining equipment industry, we find that an exchange rate swing had made British production costs much lower than its imported competitors. Incidentally, we are now making judgments in the depths of a depression. Unless one believes that there will not ever he a recovery, it is likely that the total demand for fuel will increase over the next few years. That also is a relevant consideration.
Another fatal flaw in the Government's policy is its appalling short-termism. Both the noble Lords, Lord Boyd-Carpenter and Lord Marsh, appeared somewhat simple minded in totally ignoring the future. Even in deep depression, the United Kingdom suffers from a large, persistent and structural balance of payments deficit which cannot be allowed to continue indefinitely. That will only be resolved when we have a government with a balance of payments policy which influences every major sector of the economy to fit in with it. Yet under this Government, after a long period in which the UK has been self-sufficient in energy, or nearly so, we are now to become largely dependent on imported fuels.
In defence terms—nobody has mentioned that area —the Government's policy seems to be equally reckless. This country only just survived two world wars. It did so because our home produced coal industry supplied the greater part of our fuel supplies, including virtually all our electricity output. In future we are to be dependent on oil and gas, when oil rigs and 200,000 oil and gas tankers must be about the easiest target to be found anywhere in a modern war. After all, we live in a world when we do not know what kind of government Russia will have next month, let alone next year.
I cannot help reflecting how infinitely more far-sighted was Winston Churchill when in 1913 he bought the shares of the Anglo-Persian oil company in order to ensure the future oil supplies of the British navy. A wise government today would ensure against all those hazards by spreading risk, which is a valuable principle not merely for investment but also for many other things.
What would the French have done if they had possessed the largest and most efficient coal industry in Europe? They would have decided to make it one of the key elements in long-term national policy, equipped it with all the capital it needed and supported it diplomatically and politically. Indeed, it is largely because of that that France today has no balance of trade deficit and we have an extremely dangerous one.
934 The Government's review over the past six months is little more than an attempt to conceal their failure to devise either a long-term energy strategy or a fair market for coal, or anything like it. I am afraid that that failure may cost us dear in the future.
§ 5.41 p.m.
§ Viscount Hood
My Lords, the problems of arriving at an effective energy policy, which my right honourable friend the President of the Board of Trade is manfully attempting, including the prospects for coal, have been complicated not so much by the privatisation of the electrical industry, but by the method of privatisation. If vertical integration, as some of us advocated at the time, had been adopted it is likely that the consumption of coal would have been greater. The regional companies would then have had a direct interest in coal generation.
But that is not the case today. In England and Wales we have 14 independent companies, 12 regional distributors and two very large generators. The regional companies—apart from nuclear power—have no other source of energy but the duopoly; large, powerful, no doubt totally independent of each other but nevertheless dominating. It seems to me totally natural therefore that they looked for some independent source of power. That led to the move into gas. It is common ground that gas generation is the only practical way for regional companies to enter into contracts for electric power.
The problem has been compounded by the fact that, in order for the regional companies or the new independent companies to come into existence, to obtain the necessary finance they were required to work almost continually at an enormous rate of output. As a result, combined with the problems of recession and an improvement in the output of the nuclear companies, coal has had to bear the brunt. The ups and downs of the day of power requirements —the downs in particular—have gone against coal.
Those are the facts of life. The Government and the President of the Board of Trade dealt with them admirably in the White Paper. On reading the White Paper I do not see how it is possible to say that there is no government policy; there is a policy. Their main requirement is cheap power. It is essential to industry in particular that power should be cheap. They have wisely continued to take power from France where the power is cheap. It may be subsidised; they may not be providing in full for the eventual close-down of their nuclear stations; but for us it is cheap power. Likewise, gas is cheap power and, above all, nuclear power is cheap.
The cost of nuclear power, as your Lordships are well aware, is two-thirds of the capital required to produce the power. The plants are built, and that is equally true of Sizewell B. The plant is either paid for or committed. The marginal or avoidable costs of nuclear power are extremely cheap. The Government have therefore put cheap power as their first priority. They continue to rely on alternative sources of power, which again is a wise policy as was certainly proved in the coal strike. They have developed a policy which 935 will do as well as any policy to maintain such production of coal as can be sold. Sales are of the essence.
To my mind therefore the Government have a policy, and one which I entirely support. However, I have two further points. Under Section 36 of the Electricity Act 1989 the President of the Board of Trade has power to authorise the construction of a power station. The need of a generating station, its capacity, its choice of fuel and type of plant are commercial matters for the applicant. So far so good. But that does not take account of the possibility of too many plants being built. I feel that if all the projects for gas stations are completed, there will be a surplus of generating capacity in this country. That is an unwise use of capital. For those reasons I hope that my right honourable friend the President of the Board of Trade will use due wisdom and discrimination in future approvals for the building of gas stations.
My second point is that the problems have been increased by the size of the generating company. Is it entirely excluded that some method should be used so that private generating companies in this country should number four rather than two? There are a number of cases in industrial history both here and in America, where, despite whatever objections were made at the time, great success was achieved by dividing companies which were too large. One could start with the Standard Oil Company a long time ago, the American Telephone Company much more recently, and ICI, which is in the process of dividing itself at the moment.
With those thoughts and my acceptance of the policy in the White Paper, I fully support the Government.
§ 5.48 p.m.
My Lords, the noble Viscount mentioned vertical integration and chose not to pursue it in the debate. I am grateful because I intend to do just that. I do not know whether he is right when he says that it would increase the demand for coal. It would surely improve mining productivity.
We are well aware that the main use for UK mined coal is in electricity generation. Among other sources of energy for electricity are gas, oil, nuclear, electricity imports and also imported coal. There is a debate in regard to the economics of those competing energy sources. Many noble Lords spoke in favour of UK deep mined coal. The noble Lord, Lord Ezra, referred to the market. But the Government say that there is no market for all the UK coal that is being mined, and perhaps there is not. There is certainly not a perfect market.
There are only three customers for UK coal—National Power, PowerGen and the other minor users. The other users are relatively insignificant. There is only one major supplier—British Coal. In the supply side of the market there is only one management philosophy and, indeed, only one shareholder.
The coal varies in quality in terms of calorific value. The sulphur content can also vary greatly and this has 936 environmental considerations. A low sulphur fuel can be burnt without flue gas desulphurisation. The transport costs are a major factor, and whereas imported fuel can be economically used near a port, that is not necessarily the case for inland power stations. I recently read a report that some generators were even considering using more road haulage rather than rail. That is very alarming, but it does not say a lot about the economics of the railways for freight. That is a subject for another debate.
Electricity, on the other hand, is a very homogeneous commodity. It is transient so you cannot load 100 megawatt hours of electricity into a railway wagon. But you can transmit it very long distances on the grid system and the marginal cost of transmission is very low in environmental terms. You can contract with a generator—a power station —to have a certain amount of power capacity on line and define the rate per megawatt hour. There are not many quality considerations. Even if the power station "broke down", it would not matter as the national grid has always acted as an insurance system. That was indeed one of the reasons for having the system in the first place. Power station pollution is a quality consideration which can be and is addressed by regulating the amount of pollutant per megawatt hour for the amount of electricity produced.
The current energy market is populated by a few very big players. The Minister will point out that there is a pool system, with individual power stations bidding to supply against each other even within the same company. The two main generators' answer is simply to decommission, but not sell off, older marginal power stations. And who can blame them?
I apologise for using that perfectly developed art, or even science, called hindsight. Supposing that instead of the current arrangement we had a vertically integrated electricity industry, a system where there were many concerns consisting of one or possibly more power stations and their associated collieries working as one business. The Drax power stations and associated collieries of this world would be owned by very large corporations. The capital cost and efficiency would be high and that kind of combine would specialise in base load.
A power station nearing the end of its life combined with a colliery with a modest output would lend itself to an MBO or a workers' co-operative supplying peak demands. The capital costs would have been written off years ago and there would not have to be a large financial risk for the participants. It would also be possible to have a hybrid package with some facilities nearing the end of their useful lives combined with some with more modern plant. The noble Lord, Lord Marsh, referred to pithead stocks. These small electricity generating packets would not overstock pithead stocks. They would stock only to suit their individual business needs. Perhaps I may say that I agree with nearly everything the noble Lord said. There would be no need for RECs to have their own power stations as there would be so many suppliers that it would be unlikely that they could generate as efficiently. I have not addressed the question of the 937 grid or the RECs as that is a matter for a debate on the electricity supply industry and we are debating the coal and energy industry.
With vertical integration the market would operate as a real market with some short-term contracts and other very long-term contracts. For instance, the ICI business would want to contract for five to 10 years ahead. The competing energy sources would find their correct position in the market. The real market would decide whether a colliery was economic and not British Coal's accountants or even government policy. It would be interesting for the House if the Minister would say whether vertical integration was considered. If there were contra-indications, what were they?
Some noble Lords have complained about opencast mining. The question that I have is this: is the purpose of the coal industry to provide energy for our homes and factories or is it to provide employment for underground miners? If it is the latter then we should consider underground mining for gravel and other minerals. The reason is that underground mining of coal is very hazardous because of the flammable gases that naturally escape into the mine. The geological conditions are not conducive to modern mining techniques. With opencast mining all these problems are overcome. Fortunately for the miners, opencast coal deposits are not necessarily in the right places; and even if they are the opencast process may not be appropriate in that location for environmental reasons.
§ 5.55 p.m.
§ Lord Eatwell
My Lords, Chapter 3 of the White Paper is entitled The Government's Energy Policy. In this chapter the Government present the overall principles which they claim have guided their decisions on the future of the coal mining industry. These principles will, presumably, inform the nuclear review next year as well and it is this policy framework which will determine the future pattern of energy production and use in this country stretching into the next century. I shall argue that this framework is not only seriously flawed to an extent that seriously endangers the long-term energy future of British industry and of the British people, but also that the way in which the Government have applied this framework has resulted in short-term decisions with respect to the mining industry which are wrong in principle and wrong in practice.
The Government assert:The market is the most effective and efficient means for meeting energy needs, both nationally and internationally".That is their energy policy. The market will decide. It is also, apparently, the energy policy of the noble Lord, Lord Marsh. His argument, as far as I understood it, was that the coal industry has declined for 50 years and so it should be left to decline further. Well, the British economy has declined for 100 years. Perhaps the British economy should be left to decline further. That, after all, is the policy of Her Majesty's Government.
938 The application of this market principle to the choice between energy from different sources will, we are told, be efficient if,consumers pay the full cost of the energy resources they consume".I agree completely. It must be the core of any rational economic policy that prices paid for goods should represent their true economic cost. What is extraordinary is that the Government have not applied that principle in the case of the mining industry. To assess the real economic cost of the pit closures we must compare the loss in national product from closing the pits with the gain in national product from relocating men and machines from the mining industry to the production of other goods and services. In other words, the real cost of keeping the pits open are the things that we could have if the men and machines did not produce coal but produced something else. But when there are 3 million people looking for work, when we know that most of the miners who will lose their jobs will simply be added to the ranks of the unemployed, then the real economic cost of keeping the pits working is in fact negligible.
We would not be giving up anything by keeping all the pits open because the resources released from the mining industry will simply be wasted in the dole queues. Indeed, in these circumstances, to ensure that the consumer pays the full economic cost, the Government should be using the same subsidy techniques which have been used in the nuclear industry and expanding the market for coal with considerable benefit perhaps for the balance of payments as well. But instead, they have totally refused to apply their own declared policy, based on an estimate of the true economic cost of the pit closure programme. Indeed, the Government even refuse to calculate the Exchequer costs of the unemployment that will be created by the measures they are taking. The Department of Employment has stated:the Government does not itself make Exchequer cost calculations and would not regard any calculations made by others as a useful aid to decision making".So there we have it. The Government raise taxes in their recent Budget to pay for the Exchequer costs of past mistakes; they are preparing to cut public services to reduce Exchequer costs yet when it comes to their own economic idiocies, they suddenly do not believe in Exchequer costs any more; they are not relevant any more.
It is clear that all the Government's boasts about economic rationality are a sham and all the talk of opportunity offered to British Coal, is akin to the opportunity to swim offered to those who walk the plank. The failure to make economically sound decisions in the short run is compounded by the damage which the Government's approach to energy policy will inflict in the longer term.
The White Paper claims that the great virtue of the Government's free market energy policy is that,It is within competitive markets that prices are best determined. … Competition gives businesses the strongest incentives to meet the needs of their customers".There is one word left out of that paean of praise to market efficiency. It is the word "today". Markets determine prices today. They give businessmen strong incentives to meet the needs of customers today. 939 Markets are essentially short term. They are highly inefficient at determining the long-term structure of industry when time lags are very long and when future prices are highly uncertain. Yet long-term time lags and a very uncertain future, are exactly the characteristics of the energy market. The exploitation of energy resources is by its nature a long-term project fraught with uncertainty.
My noble friend Lord Stoddart has reminded your Lordships that the oil price increases of 1973 and 1979 and, perhaps I may add, the collapse of the oil price in 1986, were all totally unpredicted both by governments and by the markets. The time lags associated with huge, lumpy investment projects and the great uncertainty about future market conditions, necessitate the creation of a framework for the energy industry which has maximum flexibility in order to absorb such shocks. That there will be such shocks is the only thing which we can predict with confidence.
But the Government's simplistic free market policy increases the instability which uncertainty creates. With the future being so uncertain, it is rational for producers to act on a very short-term horizon, pushing to maximise returns wherever they appear, with little concern for the long-term implications. It is that short-termism of the market as much as the fact that the market was rigged, which explains the dash for gas.
In particular, given the enormous uncertainty over gas prices which must exist when 20 per cent. of Western Europe's gas is supplied through the Yurengoi pipeline from the former Soviet Union, it is rational for the individual producer to rush into gas now and junk all the other capacity. Make the profits now when the opportunity exists. So the dash for gas, which will waste a substantial proportion of this country's energy resources, was the rational response to the irrational policy of this Government.
The main point is that a free market in the presence of considerable uncertainty will lead to large swings in investment patterns as individual producers try to reap the profits of short-term opportunities. It makes for a highly unstable and highly inefficient energy industry. It certainly does not achieve the Government's stated objectives of secure and diverse sources of supply.
The way to tackle both short-term and long-term energy problems in this country is to harness the power of the market within a framework which ensures that the long-term diversity of the sources of supply is maintained. That could be done, for example, by setting broad limits to the proportions of energy which are to be produced from any one source. In the pursuit of all their objectives in energy policy, industrial policy and environmental policy, the Government should use the tools at their disposal to maintain long-term flexibility by ensuring that a balanced mix of energy sources, including coal, is maintained. The market simply will not do that.
That might seem to result in short-term inefficiencies but the down-side risks associated with long-term uncertainty are so great that maintaining balance, and therefore maintaining a substantial market for coal, is 940 the only rational long-term policy. The energy policy outlined in this White Paper is damaging in the short run and will do substantial damage to this country's future prosperity. It is an irrational policy. It should be rejected.
§ 6.6 p.m.
The Earl of Lindsay
My Lords, I am grateful to the noble Lord the Leader of the Opposition for raising the subject of the Government's coal review. However, I am not convinced that its resolve to address some pit closures is deplorable; nor am I convinced that a long-term strategy is lacking. A dispassionate study of what the strategic requirements are for a long-term energy policy underpins the broad thrust of the White Paper's proposals. The difficulties, such as pit closures, which this White Paper tackles, and the solutions it proposes, are candid recognition of fundamental and far-reaching changes which we now face.
We are not alone in this. I draw the noble Lord's attention, as my noble friend the Leader of the House did, to the Netherlands and Belgium which have closed all their mines; to Germany where coal production has been halved to 38 million tonnes, with job losses of between 20,000 and 40,000; and to coal production trends in countries such as France and Spain.
The short-term repercussions of a changing energy market can attract controversy, as we have seen, but the wider issues should be self-evident, whatever one's politics. It is from that standpoint a year ago, when this House debated energy matters, that I questioned whether government policy properly acknowledged what lay ahead. It is from that same standpoint that I now welcome the Coal Review.
The White Paper faces fair and square the strategic, long-term issues involved in an efficient, secure and environmentally sensitive energy policy. It recognises that the extent to which we have traditionally relied on our own deep mined, high sulphur coal for power generation must evolve to meet the needs of the customer, the taxpayer and the environment. Simultaneously, however, the White Paper is sensitive to the problems being faced by British Coal and it is constructive in the opportunities that it intends creating for British Coal. Hence the encouragement which is being given in terms of tapering subsidies, private sector licences, incentives to seek increased sales, increased support for clean coal technology research and the coal task force. Hence also the prospect of full privatisation with its attendant benefits which that could bring.
In insisting that our coal industry can and will evolve towards an economically and environmentally viable product, the White Paper anticipates that it will continue to play a significant role in power generation and in the security and diversity of our energy supplies. The reduction in the level of coal-fired power from domestic sources has well publicised and emotive repercussions for some mining-based communities and this has earned them both sympathy and a substantial package of counter-measures.
941 What Chapter 5 of the White Paper proposes is far in excess of that which is offered to equally hard-working people in other walks of life. I have personal experience of the generosity of Chapter 5 because of the five or six people whom I have had to make redundant since 1989.
The most welcome feature, without doubt, of this review is the honest appraisal of the economic and environmental issues. I would add that not only are those two issues inextricably linked because of the added capital and running costs that increasingly attach to environmental impact, but that it is unrealistic, wherever one sits in the House, to dispute their huge relevance.
I am sure that I will be corrected, but from my recollection the noble Lord the Leader of the Opposition failed to mention the environment once in his opening remarks. There are a number of unavoidable realities that the British coal industry is having to face. The first is that much of our coal is deep-mined and is therefore comparatively expensive to bring to the surface. The second is that coal-fired power stations, which comprise the only major market for our coal, emit more than twice as much carbon dioxide as gas-fired power stations. The third reality is acid rain and its two principal ingredients, nitrous oxide and sulphur dioxide. Coal-fired power, using domestic coal supplies, emits six times more nitrous oxide and 28 times more sulphur dioxide than gas-fired power.
Despite the very visible damage inflicted by acid rain, and the increasingly well-documented damage to the atmosphere caused by carbon dioxide emissions, we have in the past been somewhat cavalier about their ill effects. This is now changing. Not only are we currently bound by treaty obligations on all such emissions, but target reductions are likely to tighten during periodic reviews, and the perception of acceptable national and international practices is increasingly based on "the polluter-pays" principle.
Fitting flue gas desulphurisation equipment and low NOx burners to coal-fired power stations is clearly a vital step forwards but it is an expensive exercise in more ways than one. Retrofitted FGDs cost around £200,000 per megawatt of installed power. They require huge quantities of limestone which have first to be quarried (sometimes from areas of scenic beauty) and then hauled to the power stations, and they give rise to gypsum which then has to be hauled away.
But most salient is that, having invested in all these costs, (and Environmental Data Services estimates that it could take £2.5 billion to sort out our 12 largest coal-fired power stations), the output of the two acid rain ingredients remains three times greater than gas-fired power, and the net output of carbon dioxide actually rises while electricity output decreases. If one also nets in the impact of quarrying and two-way haulage, with all the noxious emissions that the transport industry produces, it reminds us that while FGDs remain an important technical advance, they offer only a partial solution to coal-burning.
The White Paper recognises the unavoidable fact that environmental pressures are already operating against coal, that any expansion in the market for coal 942 has to be reconcile with its environmental impact, and that such pressures, and the costs and obligations they prompt, are bound to increase. Both Brussels and Washington, for instance, are exploring the possibility of carbon taxes. This could have a serious impact on coal-burning with its very high release of carbon as compared with gas-burning which has the lowest carbon emission of all fossil fuels.
As with sulphur and nitrogen emissions, we are already committed to UN and EC obligations for curbing carbon dioxide emissions, and I welcome the fact that the White Paper has been able both to reaffirm these commitments and to create the means by which an expansion in the coal market could be possible.
Such a balancing act is to be commended. Underlying its importance is the fact that, because of our current CO2 obligations, the more coal that we burn the more stringent will be the measures to curb CO2 emissions in other sectors such as transport.
I also commend the White Paper's emphasis on energy efficiency; its announcement of an increase in government funding of research and development into coal utilisation from £3 million per annum to £7 million per annum; its recognition of the £1 billion of public sector and EC funds committed over the past 10 years to clean coal technologies; and the current DTI commitment of £24 million to 56 related projects.
We all look forward to seeing clean coal technology which is not only going to be technically viable in terms of the scale of its application but which is also going to be economically viable in terms of the add-on costs to generators and users. Perhaps the most critical initiative, however, is energy efficiency and I hope that the Government's current commitment is merely a prelude to yet greater efforts.
A further aspect of the overall power generating balance (and one which is often forgotten by critics of the White Paper) is that subsidising jobs in the coal industry is simply robbing jobs and investment from other industries such as gas, with both its onshore and offshore commitment, nuclear and renewables. The latter—renewables—is of crucial long-term importance and it is encouraging that the Government have increased their target generating capacity by 50 per cent. by the year 2000. Ignoring or discounting the environmental costs of other forms of power generation simply slows the pace at which renewable and other cleaner technologies are likely to develop.
In this context, I regret that orimulsion imports even enter the equation given their extraordinarily high sulphur emissions. However, I take some heart from the last Budget that extended hydrocarbon duties to include orimulsion and from the assurances given by the Venezuelans that imports will remain low. I would encourage Her Majesty's Inspectorate of Pollution to study with great care the likely need for FGDs on orimulsion plants.
I have one query relating to the seeming contradiction between policy and practice as regards to Section 36 consents. On the one hand, government 943 policy is that the future structure of the energy market is to be driven by market forces. I quote from page 17 which states:The Government firmly rejects either a return to central planning or handing over policy responsibilities to a body independent of Government".On the other hand, private sector applications for Section 36 consents can be subject to all sorts of delays. If a private sector enterprise identifies what it feels to be a commercial opportunity for power generation and it complies with the appropriate planning and environmental regulations, I would ask my noble friend the Minister on what grounds such an application, driven by market forces, might be delayed or refused. If there is a danger of oversupply, surely this is a commercial risk and it is not for the Government to interfere.
In conclusion, I firmly believe that the Government have adopted the right strategy in the White Paper. One might argue over some of the details, such as orimulsion or the extent of the commitment to energy efficiency, but to argue against the overall direction is short-sighted and makes nonsense of both medium and longer-term realities. It makes clear that for the consumer and the taxpayer to subsidise artificially high levels of coal-fired power at great expense is economic and environmental madness. But, as the White Paper acknowledges, there is a realistic and sustainable way forward for the coal industry. There are opportunities that it can exploit and there is an important national role for it to perform. All of these are dependent on its ability to evolve, and this the White Paper seeks to encourage in a manner that is economically and environmentally viable.
§ 6.16 p.m.
The Lord Bishop of Liverpool
My Lords, your Lordships are very patient with contributions from these Benches. I believe our attempts to offer a Christian and religious dimension to great human issues is valued by many of your Lordships. So what particular concern should the churches bring to a debate about coal and wider energy policies? The first is a belief in stewardship of God-given resources of the earth and of human skills; secondly, a reminder of long-term insights about the effect decisions made for short-term gains may have on future generations, and, thirdly, a concern for the whole—for the whole community and for the whole person, body, mind and spirit, affected by the erratic demands of the market.
I recognise the undoubted strength of the market, but it does not have a benign hand when it is unbridled. Come to that, the Government do not leave the market altogether free in their commitment to environmental protection, for example, which sets targets, and they shelter nuclear fuel from the free forces of the market. The noble Lord, Lord Ezra, spoke about a very qualified market, far removed from the free market.
We naturally begin there, with the cost in human terms to the well-being of individuals, families and communities. In our own diocese, the closure of Parkside will mean the end of the Lancashire coalfield. I was talking this week to the vicar of Golborne where 944 the pit was closed a few years ago. The long-term effect on the shops and the community is as great as that on the miners themselves—with no redundancy payments, for example, to shopkeepers whose businesses have gone.
That concern for the whole raises questions about democracy —about accountability. The government White Paper makes far-reaching proposals about a complex issue in which the whole nation has taken anxious interest. To leave three days from the publishing of the White Paper to decision-making in another place shows a most disturbing indifference to democracy and public accountability.
Energy policy highlights in an acute form what is now one of the most difficult problems facing modern industrial democracies: how to reach decisions on matters which are technically sophisticated and complex, and which yet deeply affect entire populations over whole generations. In this respect our political processes have failed to keep pace with the rapid advances of technology itself".So wrote the Council for Science and Society in 1979. Co-ordination between energy supply policy and energy saving calls for a body which can keep an eye on the whole scene.
I very much regret that the White Paper ignores the proposal of the House of Commons Select Committee on Trade and Industry to establish an energy commission. When he spoke of long-term strategy, the noble Lord the Leader of the House showed us his faith in the market. One might from these Benches almost say fide sola (faith alone). I know that the Government are sceptical about anyone's ability to plan ahead, or even to predict, so they say that it is better to leave it to market forces to determine the mix of energy sources and the supply and pricing of energy. But market forces do not take care of the whole. They do not even calculate the obvious cost to the country in turning earners and taxpayers into receivers of benefit and patients in hospital. They say that that is none of their business.
Market forces will not protect the environment. The Government—thank God—have committed themselves to sustainable growth and environmental protection. It is hard to see how that can be achieved without overall planning.
Decisions about methods of generation cannot be made on economic grounds alone. There are complex political issues involved; for example, over the future of British Coal and coal imports, national and European standards for control of pollution; and for the development of alternative "clean" ways of producing energy. Since others are talking about their favourite alternative methods, I must of course mention the Mersey barrage which, once the capital exists, will provide clean and cheap fuel.
If the Government took democracy seriously, they would have encouraged the widest period for response to the White Paper. I believe that that is not a detail but a matter of serious principle.
Looking at the long term and the effects of energy policy on other generations must call in question the blind faith of relying on market forces. Different sectors pursue policies on calculations of their own 945 narrow and relatively short-term commercial objectives. They seem to have little or no consideration of the overall and long-term national interest. Indeed, they would often say that that is not their concern.
I hope that the Government will think again about the Select Committee's sane and measured proposal to set up an energy commission. The National Grid Company's seven-year statements, as it acknowledges itself, are based upon information from the industry and not upon independent research. Much of the information essential to objective planning is regarded as privileged, or only released too late to be any use in forecasting.
When we come to look at coal itself, the crux of the matter, as noble Lords have been rightly saying, is the size of the market for coal. The Select Committee offered a balanced and well-reasoned case for increasing that market. The White Paper ignores that. It offers short-term subsidies to the reprieved collieries so that they can improve productivity to produce coal at world market prices. But that will do nothing to increase the market for coal. Efficiency gains could lead merely to overproduction, as we have seen in agriculture.
For the sake of selling off the coal industry, the Government may create an artificial market for coal which benefits the miners and the electricity consumers in the short term; however, if there is not new investment, there will be a longer-term shortage of plant capacity. It is difficult to see how long-term investment policies for the coal industry can be developed on the basis of three or five-year contracts. Gas has been granted 15-year contracts.
As I finish, I return to the concern for stewardship of resources. I recognise the Government's scepticism about forecasts and plans and their proper openness to the possibilities of new technologies. But those are only pipe dreams at present. We need to be realistic now about recoverable resources. Within future planning, space can be built in for new discoveries; but given the long lead time required to develop new energy sources, it is irresponsible to write off reserves.
"Letting the market decide" would seem to be wasting God-given deposits of coal and, no less important, miners' skills and mining engineers' expertise. With the rapid depletion of North Sea gas, Britain's energy self-sufficiency will probably end early in the next century. We shall be subject increasingly to worldwide energy pressures. How can we then take a lead towards sustainable growth and environmental protection?
§ 6.24 p.m.
§ Lord Marlesford
My Lords, perhaps we can all agree that a large part of politics in a democracy is about managing change. That is the skill of politics. The changes needed in this country have been dramatic, and traumatic for those affected by them. Nowhere is that more true than in coal. Looking over the long term, I believe that the changes have been well managed, but I must admit that I was a little startled when the noble Lord, Lord Jay, suddenly gave as an example the introduction of oil into the Royal Navy by Winston Churchill through the buying of the 946 Anglo-Turkish, as I think it was, oil company. Had I thought of it, I should have used that as an example (and an admirable precedent) for the switch from coal to gas, because what Winston Churchill was doing was switching the Royal Navy from coal to oil. That is the type of change that has to be faced.
Several illustrations of recent changes in the coal industry have been given. But if we look at the figures since the war they are very dramatic. In 1947, 980 pits, with 700,000 employees produced 200 million tonnes of coal. There are now perhaps 50 pits with about 54,000 employees producing some 80 million tonnes of coal. As the noble Lord, Lord Marsh, pointed out, half of that production is currently stock piled.
I talked about management of this large-scale change being, on the whole, rather well done over the period, but I must admit that perhaps last autumn the management of the change —to paraphrase the former Archbishop of Canterbury, speaking on a different subject—fell short of the ideal. One reason for that is that the NUM and British Coal have always been in cahoots. Hobart House, as I think it was called, has always been deeply impregnated by the NUM, and quite rightly too. If I were Mr. Scargill I should have seen that I knew exactly what was happening inside British Coal. Of course there is understandable apprehension in both coal unions and coal management over the prospect of the privatisation of coal. Few publicly owned industries have managements which are self-confident enough to face up to that traumatic change.
So the way those dramatic closure proposals were put forward was bound to cause a great row. The politicians should have prevented the row. My right honourable friend the President of the Board of Trade is unlikely to regard October 1992 as his happiest month.
If we are talking about change, it seems to me that the Labour Party still seeks to resist it, even when the political pressures are off its members, as they are in the mild climate of your Lordships' House. When the Motion was put before us by the Opposition, I put my yellow highlighter over the words "a long term strategy". I hoped that we should be offered a long-term strategy by the Opposition. Indeed, the noble Lord the Leader of the Opposition did put forward some points which presumably were his long-term strategy. I wrote them down. There were five of them. If I missed one, I apologise: halt de-stocking; less gas production; less imported power through the interconnector; less opencast coal; less nuclear power. In case that was not enough, his noble friend Lord Clinton-Davis jumped up to say that the Government did not appear to have taken into account the valuable role coal production could fulfil by producing freight for British Rail to carry. I was a little disappointed but I am sure that I can rely on his noble friend Lord Donoughue to reveal the real long-term strategy which is referred to in the Motion.
I believe that the overriding need is for Britain to have cheap energy. I believe that a most striking figure in the White Paper is that which demonstrates the changing place of electricity in the energy equation. In 1960 only 26 per cent. of coal consumption went to 947 electricity generation. By last year the figure was 79 per cent. Therefore, I make no apology for spending a few moments in talking about electricity. I must of course declare an interest as a non-executive director of Eastern Electricity, which is the largest of England's 12 regional electricity companies.
Perhaps we may first clarify our minds as regards the pricing policy of the electricity industry. There is a widespread myth that since privatisation there have been large increases in electricity prices, especially to small businesses and domestic customers who all depend on the RECs. Having heard the comments of the noble Lord, Lord Jay, I believe that he shares that belief. Between April 1989—that is the year before vesting so it cannot be said that the companies hoicked the prices immediately before vesting—and April 1993 prices to small businesses and domestic consumers increased by about 24 per cent. During that period the retail prices index increased by about 22 per cent. That is about a 2 per cent. increase in real prices.
In all cases the tariff for 1993–94 has been frozen or reduced. Therefore, depending on the rate of inflation during the next year electricity prices since privatisation will either have been constant in real terms or will have been slightly reduced. Now, of course, that respectable performance on prices is not due to the altruism of the regional electricity companies—they are in the business of maximising their profits, as are all private companies—but is due partly to greater efficiency, and I believe that there is more of that to come. (In a moment I wish to deal with the role of gas.) But I wish to say, first, that the tough regulation by the regulator has been crucial to achieving this success.
One of the real benefits of privatisation is, I believe, to separate the ownership of a business from its regulation. As a Burkean Conservative I believe that one of the main functions of government is to hold the ring between interest groups. And so if government own an industry I do not believe that the regulation is as effective as it is if the industry is privately-owned and the regulator is independent.
Many noble Lords will be familiar with the way in which electricity prices are regulated. However, as it is so central to the debate, I hope the House will excuse me if I spend a moment or two on it. The responsibility for regulation is that of the Director-General of Electricity Supply, Professor Stephen Littlechild, who has held the post since 1989 and has had immense experience of regulating monopolies during the past decade. The prime purpose of the system is to allow any undercharging or overcharging of customers to be recovered in the following year.
The recovery mechanism, which is known in the trade as the "K" factor, involves a price formula by which maximum tariffs can be set. It is not an exact science. Assumptions have to be made about the rate of inflation in the year ahead (the October RPI figure in the relevant year is used), about trends in the pool price, transmission and uplift of charges and about the effects of the weather and the level of economic activity, which both have a large influence on the consumption of electricity.
948 That "K" factor enables adjustments to be made in subsequent years to take account of under or over-recovery. In the case of over-recovery, which is where a company has effectively set its tariffs too high because inflation has fallen or significant savings in upstream costs have resulted, a deduction of the amount to be recovered is made, added to which is bank rate plus a premium, and that is allowed for in the revenue of the succeeding year. I believe that that works rather well.
Perhaps I may turn now to generation and the so-called dash for gas which was referred to by several noble Lords, in particular the noble Lords, Lord Eatwell and Lord Stoddart. First, gas generation is not a brand new, bright idea. The fact is that in the days of the publicly-owned CEGB Britain went on building coal-fired stations to support the coal industry—and I can understand the pressure to do so on a government who own the industry. Privatisation, which was achieved by splitting the CEGB into three companies, with nuclear remaining in the public sector, provided a limited break-up of the monopoly. More significant was the provision in the Act that the regional electricity companies could generate up to 15 per cent. of their peak supply of electricity.
The fact is that at present gas, in conjunction with combined cycle gas turbines technology, known as CCGT, is the most energy-efficient, and therefore cheapest, source of fuel for power generation. The advantages which it offers over coal-fired plant include lower construction costs, shorter construction times, lower operating costs, substantially higher thermal efficiencies and lower emission levels of sulphur dioxides and CO2. The desirability of this was referred to by other noble Lords.
The White Paper shows that 15 gas-fired stations are likely to come on stream by 1995 replacing 25 million to 30 million tonnes of British coal. Perhaps I may—I understand that there is a certain amount of spare time left in the debate—
§ Lord Marlesford
My Lords, that was indicated to me, but it appears to be incorrect. In that case, I shall rapidly conclude my speech. There remains one crucial role for the Government; it is to ensure that the scars which are caused by the closure of coal mines are healed as rapidly as possible. Last year I spent some days in Durham. In 1951 there were in that county 134 pits employing more than 100,000 miners, but now there are only two pits employing probably fewer than 2,000 miners. However, in the inland area of the county much of the loss of coal jobs has been made up by other employment and there is a relatively prosperous economy in that rural area. I believe that the Government's top priority must be to continue that healing process and I believe that my right honourable friend the President of the Board of Trade is the right person to do that.
§ 6.38 p.m.
The Earl of Halsbury
My Lords, in addressing your Lordships this evening I must first express regret that I did not listen to seven speeches owing to a 949 long-standing commitment in Committee upstairs. In speaking last I shall be brief and touch upon only a few points. I am sure that they have already been made. I agree entirely with everything said by my noble friend Lord Marsh. He knows what he is talking about and he put forward his argument most forcefully and effectively.
The Motion asks me to deplore one thing and to condemn another. I cannot do either. I cannot deplore what the Government propose because I cannot see that they have any alternative. If anyone imagines otherwise they have only to look at the pictures on television showing coal stocks piled high. It should not be forgotten that in the first year of storage coal loses 10 per cent. of its calorific value and therefore storage is wasteful. However, we have got ourselves into this position. Secondly, I cannot agree with the use of the word "condemn" unless the word "government" is put into the plural. All governments have been equally at fault in failing to keep pace with trends and events.
Businessmen's horizons stretch for 10 years ahead. Political horizons stretch as far ahead as the next general election. We need some kind of non-political executive which can think 20, 25 or 30 years ahead in terms of trends and the need to support our infrastructure. That applies particularly to new technologies. You cannot test out a nuclear power station other than by building one. It would be extremely uneconomic to look at it from a trade point of view. However, it must be kept going in order to dominate the technology involved in it. It seems that the usage of the terms "the market place" and "democracy" are over simplified from the standpoint of their application to the world of real affairs.
The key mistake was to have liberated natural gas into the field of base low-powered generation. I have said that before and I shall say it again. I have not the slightest objection in principle to the use of natural gas in peak load power stations when there is a sudden shortage of electricity which needs to be supported. Figures that I have not seen, although I must try to study them, are the percentage of power costs in those of our industries which are failing to make a positive balance of trade. I do not believe that they are significant.
The chemical industry is a case apart. In that regard I support everything said by the noble Lord, Lord Ezra. It is marvellous what you can do with coal. You can turn it into coke and Towns gas with a calorific value of 500. You can take coke, heat it up, blow air through it and you get producer gas which is a mixture of carbon monoxide and nitrogen. You can do the same using steam as well as air and you get water gas, but if you use oxygen instead of air you get synthesis gas which is the base load gas for the whole of the chemical industry. Synthesis gas is a mixture of carbon monoxide and hydrogen. By what is known as the water gas shift reaction, you can turn that into pure hydrogen and carbon dioxide which you can get rid of. With hydrogen, you can hydrogenate nitrogen and get ammonia which is the basis of our ammoniacal fertilisers. Oxidise the ammonia and you get nitrates which are the basis for our nitrate based fertilisers. You can take hydrogen, feed it into powdered coal 950 and get back to methane again. You can crack methane and make acetylene. There are few limits to what you can do starting with coal, air and water.
I cannot say very much more than that. I see that I have only taken four minutes but I have said all that I have to say and I shall sit down.
§ 6.43 p.m.
§ Baroness Seear
My Lords, if you ask the wrong question, there is not much hope of coming up with the right answer. The problem with the report is that it provides an answer of a kind to the wrong question. The wrong question was asked because of the unprecedented débâcle last October. I cannot remember any industrial relations issue being handled in so ham-fisted a way as the closure of the mines was handled in October. Can anyone recall a time at which even the most hard-faced private employer said to his labour force on the Tuesday, "Boys, you are out on Friday?" It may have happened in the 19th century, but I cannot recall such a thing happening.
As a result, it is increasingly difficult to look in a detached and rational way at what should be done as regards coal. The most unlikely people came out—Tory ladies with blue rinses—ordering their fellow parishioners in churches to write to their Conservative MPs to complain about what was happening in the mines. The result is that it has become almost impossible to have a rational argument about what should be done.
As noble Lords have said, the real question to which we need an answer is what should be the overall energy policy of this country. That is the question. It is not the question dealt with in the White Paper because it is not the question that was asked.
I hope that as a result of this debate we shall be able to return to real issues. I agree with the noble Lord, Lord Sefton, who said—nobody else has done so with anything like the same force—that the supply of energy is a vital ingredient in the whole economy of this country. The economy of this country will be facing the toughest possible competition. For reasons of sentiment or for any other reason, political or otherwise, we cannot take our eyes off the all important goal: how are we to have the most economic supply of energy to meet the appalling competition that we shall meet throughout the globe? That should be our starting point.
I greatly appreciated the speech of the noble Lord, Lord Cooke. It is extremely valuable and one of the great justifications of your Lordships' House that on the Cross-Benches we have people who know what they are talking about. Extraordinary though that may seem to politicians, it is an advantage. The professional expertise and long experience of the noble Lord, Lord Cooke, enabled him to make points which are far more valuable than most of the observations made in the report.
How are we to achieve the most efficient energy supply for this country? We need a national approach towards a national energy policy. If this debate has done anything to shift the discussion in that direction, it will have been time well spent.
951 The Government tell us that the question of energy must be left to the market. On these Benches we are quite fond of the market. We believe that it is a good servant but a rotten master. We like to use the market in ways which will produce the best possible result. However, nobody can possibly pretend that we have a market in energy or anything remotely like it in this country. The electricity industry, which dominates the purchase of coal, has nothing to do with the market. The Government deliberately created a near monopoly when they set up the electricity industry in the way that they did. Therefore, there is no market dealing with energy issues and with the price of coal. It is very much a controlled situation. When dealing with energy, you have to consider, as the noble Lord, Lord Eatwell, made so plain, long-term issues which have nothing to do with immediate market forces. One of the great weaknesses of the market is that it does not think long term. Perhaps the Conservative Government are so fond of the market because they share with it that characteristic.
When it comes to energy and producing the cheapest possible energy compatible with other considerations which must be taken into account, the market by itself will not do. I plead with the Government to think again, in terms which the Select Committee put forward, about the need for an overall energy approach and authority.
What sort of issues would it look at? As noble Lords have said, it would look at alternative sources. We do not know how good those alternative sources may be; for example, wind power, methane and so on. A defective scientific education prevents my making any sensible contribution in that regard, but I am told that alternative sources exist and I am sure that scientists can explore and develop them to see whether there is a source from which we can draw energy.
We need to consider the environmental element. I am surprised that so few green remarks have been made. It was interesting, and a point for your Lordships' House to bear in mind, that the only outstanding green speech came from someone who must, I think, without prejudice, be the youngest speaker in today's debate. The younger generation are far greener, in more ways than one, than we are. But that must be taken into account in any overall energy policy.
In this overall account we have to look into the ways in which coal can be most effectively used. There are a whole variety of different ways in which it can be used. As the debate has proceeded, many people have passed me notes telling me all the things which can be done with coal. It can be used as feedstock for chemicals. I do not know how much coal can be used as feedstock for chemicals. I do not suppose anyone knows. The noble Earl, Lord Halsbury, gave a very good lead as to the exciting things you can do with coal. I did not understand any of it. I am sure it meant that there was a great future for coal to produce all sorts of things which we have not so far thought about.
The need to have a good look at the variety of ways in which coal can be used and the methods by which 952 we can ensure that we do not waste coal or other sorts of energy are surely matters that should emerge from today's debate.
The question of combined heat and power, which the noble Lord, Lord Wade, raised, should be very much to the forefront of any energy policy, as should insulation, which the noble Lord, Lord Cooke, mentioned. But while there is obviously a need to keep coal, and there are uses for coal which we have not fully explored—we do not know the extent to which we are going to be able to use the alternative supplies of gas and oil—we must not go over the top about coal. Because of the row last autumn, people have become, if I may say so, a little sentimental about coal. If I had a son, the last place I would want to put him is in the pit. I doubt very much whether any of your Lordships is really longing to send sons or grandsons in the pit.
As I said in a previous debate, as least one eminent trade unionist, connected with the mining industry, said, "I shan't be happy till I see all my chaps down there on top in a white coat with a Bunsen burner in their hand." We must find ways of heating and supplying energy in this country which do not require people to be crawling about under the ground. I know that they do not crawl quite in the way that they used to and that it is all beautifully technological and modernised, but I would not wish to be there myself and I very much doubt whether a great many other people enjoy it all that much.
We must be extremely careful in shutting pits—when we decide we are going to shut them—about what happens to the communities and how we get new industry and new activities into those places. Money spent on the retraining and development of people coming out of the pit is surely money that should not be grudged. I am not referring just to short-term courses. I mean two-year residential training courses such as the Swedes had to help the able people who come out of the pits with many skills and qualities to do the professional and highly technical jobs which, with training, a great many of them are capable of doing.
Those are the issues which ought to be discussed, and those are the issues which, one way or the other, have come out of this debate. The message surely is: a policy for energy, an overall policy.
§ 6.55 p.m.
§ Lord Donoughue
My Lords, I note that we are running early so we still have a little time to discuss this complex question.
This has been an excellent debate which I think bears happy comparison with what we read of Monday's debate in another place. It has just been pointed out to me that this House is more representative than some people realise. It is not highly represented with ex-coal miners. In fact, we believe that there is not a single one in the House any more, though as was also pointed out we have 200 lawyers. But we will do our best to speak for the miners.
My noble friend Lord Richard set out excellently the broad lines of argument and most of the relevant 953 facts and figures which other noble Lords have weaved among with great knowledge and experience. I do not feel that at this late stage I have to repeat the detailed arguments.
I listened to the speech of the noble Lord the Leader of the House with especial interest, particularly when he said, attempting to correct my noble friend, that there was no evidence that French electricity was subsidised. I have to say that in a way I agree with that. We have virtually no evidence of the financial basis of almost any aspect of the French electricity industry, which is primarily in nuclear, because it does not publish any meaningful facts. Privatisation might flush that one out.
Of course we have always listened to the Leader of the House with great respect. He brings all the weight and the particular slant of a former Secretary of State in the energy policy area. We are aware of his wide-based ability, but this coal industry problem underlines his remarkable shrewdness. I have in mind the particular shrewdness with which he got out from under the Department of Energy just in time, before the pigeons of previous policy errors came home to roost and before it was seen that the wrong structuring of the privatised electricity industry seriously distorted the UK energy market, as the noble Lord, Lord Ezra, so cogently explained. He left just before the consequential mad short-term dash for gas by the regional electricity companies, so ably represented here by the noble Lord, Lord Marlesford, which incidentally in my view will create a ruinous overcapacity in generating before the end of the decade. He left before the full completion of the new facilities at ports to handle massive coal imports, before it emerged that the two-way conductor with France operated as one-way-only traffic importing the equivalent to the output of six British mines. And he left just before the premature announcement of coal privatisation which precipitated last October's hurried and crude package of closures, and before the complete and final collapse of the Government's economic policies into the terrible slump we now have, resulting in depressed demand for energy and too little Treasury funding available to assist the coal industry. We will watch the noble Lord's future career moves with even greater fascination.
One consequence of his last move was that Michael Heseltine was offered this extra jewel for his departmental crown with the absorption of the Department of Energy into the Department of Trade and Industry—and what a wickedly laced poisoned chalice it has proved. A conspiracy theorist, of whom this side of the House has had some in the past, might suspect it was a last act of Thatcherite revenge on her old enemy, so horrendous, such a cocktail of horrors, that often the political and public focus has turned away from the basic energy issues involved and has turned to the nail-biting question of "Would it kill the President?" It seems not to have done so, and I am not surprised. Having observed him closely for 40 years, I do not underestimate his durability or his political athleticism.
One unfortunate consequence is that the White Paper is in danger of being judged from just those 954 personal and political criteria, leading to the conclusion in some quarters that if Michael survives the policy must be right. I wish strongly to reject that view. I should point out that the Secretary of State has survived many wrong policies in the past and probably will do so again in the future. This is one of those wrong policies.
I should like to try to explain the root of my and, I believe, our—and, it is to be hoped, that of other sides of the House—dissatisfaction with the White Paper. It is not because the Government have not made great efforts. I think that the report reflects prodigious energy and great political skill. But when one has read it and studied the proposals and the arguments against other proposals, one realises that something is missing; indeed, I believe that whole dimensions are missing. I mean, for example, that the human and social dimensions are missing. I might even, with hesitation, suggest that perhaps the ethical dimension is missing. I mean that whole Christian dimension which once coloured, informed and humanised a whole strain of Conservatism in Britain —through Salisbury, Chamberlain to Butler and to many of more recent generations until the Great Reaper of Finchley dispatched many of them to live out their days in this House, which I believe is the last bastion of that humane Conservative tradition.
That tradition was actually concerned with the condition of our fellow citizens and believed in preserving a cohesive and supportive society within one nation—a word frequently used by the party Opposite. That tradition is no-where to be found here in this policy. In that context, I note the powerful contribution made by the reverend Prelate the Bishop of Liverpool.
§ Lord Donoughue
My Lords, I mean the right reverend Prelate. It is not a Church with which I have had close contact.
The policy talks only of inevitable market forces. In that respect, I thought that the contributions made by my noble friends Lord Eatwell and Lord Jay and that of the noble Lord, Lord Ezra, were very convincing in making it clear that there is in fact no free market in energy. What are the miners to do according to the policy? They are to go out and find new coal markets; in other words, to get on their bikes. Otherwise they and their families in their often isolated communities are to be written off—just another balance sheet item with all the consequences for them to which my noble friend Lord Varley referred.
It feels to me like the language of the commodity markets. It is the political and economic philosophy of the estate agent. Members of the humane tradition of Conservatism should not give it intellectual house room. We are not discussing commodities on the Chicago futures market - pork bellies, whose price is wrong, nor are the miners idle layabouts or spongers looking for handouts; they are hard working men whose product increases are higher in the British economy than any other European coal mines. They produce an indigenous fuel, the value of which was 955 well described by my noble friend Lord Sefton, which guarantees long-term security of supply not exposed to currency fluctuations. The importance of that was well argued by my noble friend Lord Stoddart of Swindon. It generates electricity in existing power plant as cheap or cheaper than their competitors which are often subsidised. They seek to work and produce competitively within a coherent fuel policy which provides properly for Britain's long-term energy future, bearing in mind the problem analysed by my noble friend Lord Eatwell that markets react in the short term but that energy plant takes a long time to develop.
That is not an unreasonable proposal, nor is it impossible to achieve. One way to achieve it was well set out in the January report of the Trade and Industry Select Committee. That was an all-party committee with a Conservative majority. It presented a package of 39 proposals to create a larger market for coal. That is what the White Paper says is required and I believe that the Select Committee set out ways of achieving that aim. It was estimated that it would secure 62 million tonnes of coal which would keep all the pits open over a sensible timescale of five years, but not beyond that time. That is a sensible timetable, taking us beyond the recession. Those pits that are not competitive after five years might reasonably be closed. Noble Lords who have read the report will be aware that it involves reviewing the duopoly in electricity generation, though that is not properly touched upon. It also involves the nuclear levy; electricity imports from France; the consents for open-cast mining; the franchising of regional distributors; and, the use of gas for peak-load rather than for base-load generation.
That broad and constructive approach, which offers a larger market for coal and a future for the coal industry, is rejected in the White Paper. The Chairman of the Select Committee made that absolutely clear on Monday in another place. The White Paper fails to find an extra single tonne of coal: 18 pits cease production and 12 have a stay of execution, but only briefly. British Coal, independent commentators and some speakers in this afternoon's debate, make it clear that all 12 of those pits will almost certainly be shut within two years. No one this afternoon has denied that fact. The White Paper's policy is in fact short termist and will be damaging to Britain's energy requirements, to its economy and to its balance of payments for all the reasons so cogently explained by my noble friend Lord Eatwell.
The subsidy referred to in the White Paper of unspecified amount and unspecified time is not part of a strategy to secure a competitive future for coal; it is part of a public relations job as the noble Lord, Lord Marsh, honestly stated. It is skilfully presented and bundled in a mass of cellophane and ribbons. The earlier presentation disaster has been redesigned. But the reality and message inside is the same as that of last October when we had our great debate and our Vote. As my noble friend Lord Ewing so graphically argued, the message is mass unemployment for the miners with little future hope. I ask noble Lords 956 opposite and those on the Cross Benches: is what they and the House voted for last October—better packaging but the same old butchery for the miners and those in related industries? I certainly hope that that is not the case.
I believe that it is right in energy terms and in human and social terms to support the Motion. Anyone who believes that Britain should have a balanced energy strategy should vote for it. Anyone who believes that it is wrong to throw 70,000 workers on the scrap heap when it costs as much to keep them out of work as to keep them in work, should vote for the Motion. In reality, the alternative offered is a rapid, remorseless and bleak path to unemployment with all the poverty and humiliation that that involves. It is not necessary. I hope that tonight noble Lords from all Benches will show that it is a future that they do not support or wish on others.
§ 7.9 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield)
My Lords, I begin by thanking all noble Lords who have taken part in today's debate. It has been a fascinating debate. We have learnt much today from the contributions of the Members of your Lordships' House, among whom there is much knowledge which has been freely shared.
I had not expected to hear in the opening remarks of the noble Lord, Lord Donoughue, a précis of the book he plans to write on the Tory Party, but I thank him for it. Nor had I expected to see the noble Lord, Lord Richard, in the image of King Canute, but I fear that I did.
I should like to correct one fact in relation to the remarks of the noble Lord, Lord Donoughue. I am pleased to tell him that there is an ex-Bevin boy in your Lordships' House. The noble Lord, Lord Rix, even as a former coal miner, queried with me why more has not been made of the fact that coal is not the greenest of fuels.
I begin my winding-up speech by saying very strongly that the aim of the Government's energy policy is to ensure secure, diverse and sustainable supplies of energy in the forms which people and businesses want at competitive prices. That is an energy strategy. Plans for that strategy are to have full regard to the impact of the energy sector on the environment, including taking measures to meet the Government's international commitments; to safeguarding health and safety (and that is an ethical standard if ever there was one); to promoting energy efficiency, which noble Lords have mentioned; and to monitoring and improving the performance of the remaining state-owned industries while minimising distortion.
During the coal review the Government have looked very closely at the economic factors underlying the October closure announcement. The consultants' reports and the other analyses confirm that the October closure decisions were soundly based given market conditions. As several noble Lords have said, those underlying conditions have not changed. Therefore, I cannot understand why the noble Lord, 957 Lord Ewing, expected my right honourable friend the President of the Board of Trade to suggest that he was wrong. The underlying conditions have not changed, but the Government have been able to put forward substantial new proposals to assist the coal industry.
The Government's White Paper offers a fresh opportunity for British pits to compete. They have the possibility of selling as much coal as the market will take, with a subsidy down to the world market-related prices. We have placed the answer in the hands of the miners and British Coal. However, there can be no guarantees. The Government proposals offer the British coal industry the chance to improve performance to levels where it can compete successfully. However, the Government cannot, in the end, secure the industry's future. The reality is that the industry itself must take advantage of the support it has been offered to improve its performance. That is why we have emphasised early privatisation. Private sector management is the only way to ensure the industry's competitiveness.
As my noble friend Lord Lindsay pointed out, the noble Lord, Lord Richard, did not mention environmental issues. Nor did he mention the regeneration package which is so important to the future of the miners. I shall return to that point later.
The noble Lord, Lord Richard, also queried the fact that the other place chose to hold a debate on Monday and felt that that was not helpful. That was also a point which the right reverend Prelate mentioned. I suggest that for the sake of miners and their families there was much to be gained from removing the sense of insecurity resulting from lack of information about the matter. If the noble Lord felt so strongly why did he not leave this debate until after the Easter Recess?
I noticed that the noble Lord's mathematics did not include sums of compensation for broken contracts. I also noted that people always refer to "our" coal resource but one never hears mention of our nuclear resource or our natural gas resource. I point out to noble Lords that we have more resources than coal alone.
I was also surprised to hear from such a European as the noble Lord, Lord Richard, easy anti-French remarks. If there is evidence of subsidy to the French industry that can be placed on the table and examined. It may be significant, but it has not come to the table.
This is not, as the noble Lord, Lord Richard, suggested a Government pit closure policy. It is a Government policy to give the coal industry an opportunity and a future and to make it competitive as a world player.
I shall try to answer most of the points which have been raised in the debate. The noble Lord, Lord Ezra, showed the depth of his knowledge. While others said that future contracts for additional coal had not been signed, the noble Lord recognised the difficulty of negotiating the base contracts, which have now been signed and on which we can build for the future.
Of course we are moving towards competition in the electricity industry as fast as possible. The market has changed since the 1930s. There can be no doubt about that. Experience has shown that in coal mining 958 the reduction in demand has never stopped, as the noble Lord, Lord Marsh, said. His realism is refreshing.
As regards expenditure on research, the noble Lord, Lord Ezra, welcomed the expenditure on clean coal technology. Perhaps I may point out that the Government are currently funding a portfolio of approximately 56 projects with a contract value of over £114 million. Many are collaborative projects in partnership with industry. The DTI's contribution to those is £24 million. In addition the Science and Engineering Research Council is supporting 18 coal research projects at 10 different universities at a total cost of £1.8 million. I am pleased to say that the European Commission is supporting a further 14 projects at eight universities at a cost of over £3 million. I know the noble Lord's concern for the future. I share it, and I am delighted to be able to report that that is an area which is not being ignored. I hope that many of those projects will lead to future demand which at present none of us can foresee.
I should also like to reply to several noble Lords, and in particular to the noble Earl, Lord Attlee, that the Government are committed to assisting the entry of renewables into the commercial electricity generating market. I can give him an assurance that that commitment will continue.
The noble Lord, Lord Elis-Thomas, was also concerned with the environmental issues and urged that renewables should be taken into account. I am sure that he was delighted to read in my right honourable friend's Statement on Thursday of the sour gas project at Connah's Quay in Wales. Certainly, the Welsh TUC welcomed it.
The noble Lord, Lord Sefton, said that he had heard the speech in the House of Commons on Monday by my right honourable friend the President of the Board of Trade. I am surprised that he achieved that because it was very difficult for my right honourable friend to make his speech in the House on Monday. I have always been told that where there is much noise there is usually a weak case.
Perhaps I may say this to the noble Lord, Lord Sefton. Jobs are as much a concern to this side of the House as to noble Lords in opposition. As the noble Lord, Lord Marsh, said, there is no monopoly in care and concern. It is important to everyone that we should find employment for people. Perhaps I may also reassure him when he worries, as did the right reverend Prelate, about the position of natural reserves. Only 1 per cent. of our coal reserves are at the existing pits. Therefore the majority of the United Kingdom's reserves are unaffected at present and, hopefully, new technology and new research, will enable us to access those competitively and successfully in the future.
I thank my noble friend Lord Boardman for pointing out that a substantial number of other jobs are adapting to a different situation through change. It is not a matter absolutely exclusive to the coal industry.
The noble Lord, Lord Ewing of Kirkford, raised the question of the Monktonhall colliery. We have great admiration for the determination and initiative 959 of the Monktonhall mine workers and were saddened indeed to hear of the tragic accident there last week. However, I would be wrong to give the noble Lord false hope. The Government do not consider it appropriate to use taxpayers' money to provide bridging finance for, or to rescue, companies in financial difficulties. However, it is important that future miners considering future employee buy-ins should have support. As my right honourable friend announced on Thursday, he is investing £1 million, available for consultancy to employees who are considering examining buy-ins.
§ Lord Eatwell
My Lords, the noble Baroness said that the Government do not approve of using government money to subsidise companies in difficulties. Does she therefore disapprove of the policy which the Bank of England admitted that it pursued in the early 1980s of maintaining companies in business by providing them with subsidised loans?
§ Baroness Denton of Wakefield
My Lords, the noble Lord, Lord Eatwell, did not hear me refer to taxpayers' money.
The noble Lord, Lord Attlee, raised the question of vertical integration. The Government do not share his enthusiasm for vertical integration. Where electricity suppliers have a monopoly of supplies, vertical integration can create regional power monopolies. The Government do not believe that that would be in the interests of electricity consumers. Consumers are best served by extending competition so far as possible in both generation and supply. We believe that that involves preventing the creation of monopolies and creating the conditions whereby new entrants can be encouraged to enter the market.
The noble Lord, Lord Jay, raised the question again of electricity from France. He asked for clarification of the status of French electricity in relation to the fossil fuel levy. I confirm that EdF does not receive the benefit of levy revenue because its electricity, unlike that of nuclear electrical renewables, is not purchased under a non-fossil fuel obligation. However, because EdF's electricity is non-fossil and not included within the non-fossil fuel obligation, it is exempted from the levy when its electricity is sold to customers. That confers a financial advantage on EdF. That advantage is about 0.6 pence per kilowatt hour compared with the 3.3 pence per kilowatt hour that Nuclear Electric obtains from the levy. I hope that that clarifies matters for the noble Lord.
§ Lord Jay
My Lords, if the noble Baroness will allow me to intervene, perhaps I may ask this. Does she deny that French nuclear electricity qualifies for the subsidy although it does not receive it directly? What it receives in effect is the same as a subsidy. As she said, it is exempted from the levy.
§ Baroness Denton of Wakefield
My Lords, no, it does not, because the electricity is not purchased under the non-fossil fuel obligation. I am sorry if that was not made clear.
960 The noble Viscount, Lord Hood, raised the important point of energy efficiency and energy conservation. I hope that I have made it clear that the Government see them as part of their energy policy.
As usual the noble Earl, Lord Halsbury, again brought his considerable input and knowledge to the debate.
The right reverend Prelate asked whether we were expressing due concern. Perhaps I may suggest that the effort and resource that we have put into ensuring that there is money available—£200 million in England, and a further £43 million in Wales emphasises how important it is that we should plan for the future of those people. We should work with the community and those people who are affected as well as miners to build a future. But we do not believe that subsidising one industry rather than another is giving people the future that they deserve.
My noble friend Lord Lindsay asked about power station consents. Perhaps I may stress that my right honourable friend the President of the Board of Trade made clear in his Statement that he did not intend to alter his policy towards the granting of new consents. Matters such as the need for a generating station, its capacity, choice of fuel, and type of plant will remain, as in the past, commercial matters for applicants.
The noble Lord, Lord Eatwell, asked whether the Government pretend that they can successfully predict the future. The noble Lord's argument depends on the belief in the superior wisdom of Ministers and bureaucrats. It is not a policy that we endorse.
Perhaps I may stress an issue that the noble Lord the Lord Privy Seal made quite clear in opening today's debate, and to which the noble Lord, Lord Boyd-Carpenter, drew attention. Although British Coal has made very substantial moves in increasing its productivity over the past seven years—it has doubled it—it is still only 20 per cent. to 35 per cent. of productivity in American and Australian mines. That is why we have to continue to look to the future and to give opportunities.
My noble friend raised the point that the Government should consider dividing PowerGen and National Power. We are committed to competition in the electricity industry. The Director General of Offer will consider not later than 1995 whether a reference of the major generators to the Monopolies and Mergers Commission is necessary. I believe that that gives us future examination of competition. It would be within the power of the MMC to recommend that the companies be divided. However, of course, the Government have no general power to interfere with the structure of private sector companies.
We were asked why there was to be no energy commission. The Government accept that there should be an improved level of information in the energy field. That is why the proposals in the White Paper include both a new energy advisory panel and an annual energy report. But they reject wholeheartedly a return to central planning which has failed, and we have seen it fail in the past. Handing over policy responsibilities to a body independent of government would not be this Government's policy.
961 The noble Lord, Lord Stoddart, raised the question of privatisation and nuclear energy. He said that privatisation gave him a more accurate figure of nuclear costs. Perhaps I may quote to him. He took us back in history to the time of my noble friend Lady Thatcher. Perhaps I may take him a little further back in history and quote his right honourable friend the Member for Chesterfield who said:If we look ahead at the mix of fuels which we think we shall need in this country in the year 2000, it is not possible to abstract the nuclear component without running a serious risk which no energy Minister could recommend to the House".We took note of the report of the Select Committee and plan to bring the nuclear review forward.
I also wish to cover one point which several noble Lords raised about the future for the people who will be affected by pit closures. We have to take a longer-term view and look at the skills of those people and the availability of retraining. I am delighted to re-emphasise that British Coal Enterprise has helped to create some 83,000 employment opportunities since October 1984. Eighty five per cent. of former British Coal employees actively seeking jobs have been resettled or retrained for identified jobs. I believe that that indicates the opportunities and that we care about the future of those people involved in the mining industries.
We have heard comments about the level playing field. I sometimes wonder why we do not hear that comment from other energy sources. Since 1979, £18 billion has been given to the coal industry and £1 billion in the year 1992–93. If there were any tilting, I suggest that that is a fairly heavy balance.
I also draw attention to the fact that there are jobs in other energy-producing areas. Nuclear Electric estimates that 17,000 jobs would go if Magnox stations were closed and in the oil industry 55,000 jobs would go if gas projects were stopped. Those jobs are as important to each individual as any other job.
I wish to draw attention to something which has perhaps not been discussed today as much as possible —the success of regeneration in the past. My noble friend Lord Wade drew attention to it in the rural economies. We propose to give £200 million for that. The noble Lord, Lord Varley, talked about jobs but we are talking about new jobs for people, working with training and enterprise councils and local authorities to create futures.
There is no surplus of enterprise zones, but there is ample evidence of how well they have worked. Corby was an enterprise zone; Shotton was an enterprise zone. In 1979–80, the Corby steel plants were closed with a loss of 3,500 jobs. By 1981, unemployment stood at 22.7 per cent. I am delighted to tell noble Lords that today it stands at 9.7 per cent. That is really successful regeneration—taking change, managing it and building on it for the future.
It was also suggested that we did not attract new jobs. Perhaps I may point out that the Toyota engine plant at Shotton is a whole new opportunity for the future; 10,000 new job opportunities have been created in that area.
Noble Lords opposite have at one moment been telling me that we should secure our own supplies of energy and then they look to take out gas and nuclear 962 energy. They have given me the background but they have not given me the future. The noble Lord, Lord Donoughue, said on Thursday that the question should not be about political fixes, but today I have heard about little other than political fixes from the Benches opposite.
The President of the Board of Trade has faced difficult problems. He has arranged a most thorough review of energy in the country by world class experts. With that knowledge, he has produced a solution which allows British Coal the time to become a competitive player. Today, listening to noble Lords opposite, we would think that they were talking about burial. I have to assure the House that a lifeline is being offered to British Coal. If one wants a future which consists of preserving the past and not recognising and managing change, one may feel sympathetic towards the views expressed by the noble Lord, Lord Richard, in opening the debate. But if one wants to see British industry having the resource of a competitive, diverse supply of energy which allows us to grow and our children to have jobs and their children to have work and which allows this country to be a major player on the world stage, then I ask noble Lords to reject the Motion.
§ 7.37 p.m.
§ Lord Richard
My Lords, I listened with interest and fascination to the noble Baroness winding up the debate for the Government. I also noted what she did not say. Noble Lords who were present at the beginning of the debate will remember that I put to the Government the proposition that even if the White Paper were accepted and even if the subsidies were granted, that can, on the arithmetic, save only seven pits out of the 12. Therefore, five are to go. There was not a word from the Government about that in reply.
I am sorry that the noble Lord, Lord Marsh, is not here. I was going to say something nice about him. He painted a gloomy, apocalyptic view of the future of the energy industry: it was bound to decline; coal was bound to go down; there was no way out; it was all inevitable. He also said—and I fully agree with him —that the White Paper was a sham, a PR exercise. He said that the position had not changed since last October and that if one went into the details in the White Paper, it was yet another limited attempt to try to preserve at least the show that the Government are interested in the preservation of the coal industry.
I am glad to see that the noble Lord, Lord Marsh, has just entered the Chamber—it was a case of Hamlet without the Prince or the feast without Banquo. Perhaps Banquo's Ghost is the best analogy. I assure the noble Lord that if ever he needs defending I should be delighted to defend him.
§ Lord Richard
At considerable cost to him, provided I do not have to rely for his defence upon his consistency and commitment. Apart from that, I should be delighted to defend him. I was about to say that so gloomy was his picture of the inevitable decline of the coal industry and so scathing was his view of the 963 White Paper that there is only one honourable thing that he can do this evening when it comes to the vote. If we look at the terms of the Motion, it states:That this House deplores the proposals contained in the White Paper".No one deplored the proposals contained in the White Paper with such gusto and venom as did the noble Lord, Lord Marsh.
Secondly, the Motion condemns Her Majesty's Government,for their failure to develop a long term strategy for meeting Britain's future energy requirements".I detected in what the noble Lord had to say at least a glimmer of support for us in the fact that there is no long-term energy strategy. His long-term energy strategy and mine may be somewhat different, at least in their detail. There is only one honourable thing that he can do; namely, to accompany us into the Lobby tonight and join in deploring the White Paper.
The noble Baroness who wound up the debate accused us of political fixes. She said that all she had heard from this side amounted to political fixes. I found that comment a bit thick, coming from a government who defend the activities of the biggest political fixer in the House of Commons, the President of the Board of Trade. Compared to "Superglue Heseltine", those of us on this side of the House are infants and tiros. With respect, the noble Baroness must do better than that.
I refer to one matter so far as the French position is concerned. The noble Baroness will know that although the original agreement was negotiated in 1978, there was a protocol which was entered into in 1981. That protocol has never been made available. It is impossible for noble Lords to form an accurate and sensible view of the details of the transaction between the French and ourselves in relation to the interconnecting link unless and until the protocol and the subsequent agreements are published. The matter was raised before the debate on Monday in another place and Madam Speaker expressed the view that it could not be seen because it was a commercial transaction and therefore the papers could not be made available. I wonder whether the Minister can give us an undertaking that at some stage we shall know what is in that protocol. Without knowing the details, I believe it is almost impossible for anyone to arrive at a sensible and objective decision as to whether or not the arrangement with the French operated by the Government makes sense or whether it does not.
In many ways the debate has been a fascinating exposure. The division lines, if I can put it that way, between various points of view and various opinions have been clearly drawn. There is no doubt, in our view, that on the other side there is an excessive obsession with the operation of market forces: it is not up to the Government to try to deal with the delicate problems in the coal industry or with the problems of electricity regeneration—save and only in so far as they can preserve the operation of the market. Damn the consequences. If miners are thrown out of work, they will do something when that happens. They will produce a package of redundancy payments, and 964 some money for regeneration in the area. This should not be a debate about the funeral of the coal industry. We are not here to bury it. We ought to try in this day and age to see whether it is possible to regenerate the coal industry, by providing it with more guaranteed markets than can be provided under the Government's market policy.
The second division line to emerge very clearly in the debate is the argument between the short-termers and the long-termers. The Government are very good at looking at the short-term advantage which may accrue in any given situation. In relation to the future of our coal industry, the people involved in it, the 30,000-odd miners who will be thrown out of work as a result of government policy and the consequent increased unemployment in those areas that are directly affected, a long-term solution is required, not the short-termism that we have seen from the Government today. I beg to move.
§ 7.44 p.m.
§ On Question, Whether the Motion shall be agreed to?
§ Their Lordships divided: Contents, 111; Not-Contents, 163.966
|Division No. 1|
|Airedale, L.||Healey, L.|
|Archer of Sandwell, L.||Hilton of Eggardon, B.|
|Ardwick, L.||Hollick, L.|
|Ashley of Stoke, L.||Hollis of Heigham, B.|
|Attlee, E.||Holme of Cheltenham, L.|
|Barnett, L.||Houghton of Sowerby, L.|
|Beaumont of Whitley, L.||Howell, L.|
|Birk, B.||Hughes, L.|
|Blackstone, B.||Hylton, L.|
|Bonham-Carter, L.||Jay, L.|
|Boston of Faversham, L.||Jay of Paddington, B.|
|Bottomley, L.||Jeger, B.|
|Broadbridge, L.||Jenkins of Hillhead, L.|
|Callaghan of Cardiff, L.||John-Mackie, L.|
|Campbell of Eskan, L.||Judd, L.|
|Carmichael of Kelvingrove, L.||Kennet, L.|
|Castle of Blackburn, B.||Kilbracken, L.|
|Cledwyn of Penrhos, L.||Kirkhill, L.|
|Clinton-Davis, L.||Liverpool, Bp.|
|Cobbold, L.||Llewelyn-Davies of Hastoe, B|
|Cocks of Hartcliffe, L.||Lockwood, B.|
|David, B.||Lovell-Davis, L.|
|Dean of Beswick, L.||Macaulay of Bragar, L.|
|Desai, L. [Teller.]||McIntosh of Haringey, L.|
|Donoughue, L.||Mackie of Benshie, L.|
|Dormand of Easington, L.||McNair, L.|
|Eatwell, L.||Mallalieu, B.|
|Elis-Thomas, L.||Mayhew, L.|
|Ewing of Kirkford, L.||Merlyn-Rees, L.|
|Ezra, L.||Molloy, L.|
|Falkender, B.||Monkswell, L.|
|Falkland, V.||Morris of Castle Morris, L.|
|Fisher of Rednal, B.||Nathan, L.|
|Fitt, L.||Nicol, B.|
|Gallacher, L.||Ogmore, L.|
|Galpern, L.||Palmer, L.|
|Geraint, L.||Perry of Walton, L.|
|Gladwyn, L.||Peston, L.|
|Glenamara, L.||Pitt of Hampstead, L.|
|Graham of Edmonton, L.[Teller.]||Plant of Highfield, L.|
|Gregson, L.||Redesdale, L.|
|Grey, E.||Richard, L.|
|Hampton, L.||Rochester, L.|
|Hamwee, B.||Rodgers of Quarry Bank, L.|
|Harris of Greenwich, L.||Russell, E.|
|Seear, B.||Tordoff, L.|
|Sefton of Garston, L.||Turner of Camden, B.|
|Serota, B.||Varley, L.|
|Shackleton, L.||Wallace of Coslany, L.|
|Stedman, B.||Warnock, B.|
|Stoddart of Swindon, L.||Whaddon, L.|
|Strabolgi, L.||White, B.|
|Taylor of Blackburn, L.||Williams of Elvel, L.|
|Taylor of Gryfe, L.||Williams of Mostyn, L.|
|Thomson of Monifieth, L.||Young of Dartington, L.|
|Aberdare, L.||Grimston of Westbury, L.|
|Aldington, L.||Hailsham of Saint Marylebone, L.|
|Alexander of Weedon, L.|
|Annaly, L.||Halsbury, E.|
|Archer of Weston-Super-Mare, L.||Hanson, L.|
|Arran, E.||Harmsworth, L.|
|Astor, V.||Harvington, L.|
|Barber, L.||Hayhoe, L.|
|Barber of Tewkesbury, L.||Hemphill, L.|
|Beloff, L.||Henley, L.|
|Belstead, L.||Hesketh, L. [Teller.]|
|Bessborough, E.||Holderness, L.|
|Biddulph, L.||HolmPatrick, L.|
|Blake, L.||Hood, V.|
|Blatch, B.||Howe, E.|
|Boardman, L.||Hylton-Foster, B.|
|Boyd-Carpenter, L.||Ironside, L.|
|Brabazon of Tara, L.||Jeffreys, L.|
|Braine of Wheatley, L.||Johnston of Rockport, L.|
|Butterworth, L.||Kimball, L.|
|Buxton of Alsa, L.||King of Wartnaby, L.|
|Byron, L.||Kinloss, Ly.|
|Cadman, L.||Kinnoull, E.|
|Caldecote, V.||Lane of Horsell, L.|
|Campbell of Alloway, L.||Lauderdale, E.|
|Campbell of Croy, L.||Lawson of Blaby, L.|
|Carnegy of Lour, B.||Leigh, L.|
|Carnock, L.||Lindsay, E.|
|Carr of Hadley, L.||Lindsey and Abingdon, E.|
|Chalker of Wallasey, B.||Liverpool, E.|
|Charteris of Amisfield, L.||Long, V.|
|Chelmsford, V.||Lucas, L.|
|Clanwilliam, E.||Lyell, L.|
|Clark of Kempston, L||McColl of Dulwich, L.|
|Clinton, L.||Mancroft, L.|
|Colnbrook, L.||Marlesford, L.|
|Constantine of Stanmore, L.||Marsh, L.|
|Cranborne, V.||Mersey, V.|
|Crickhowell, L.||Milverton, L.|
|Croham, L.||Morris, L.|
|Cullen of Ashbourne, L.||Mottistone, L.|
|Cumberlege, B.||Mountevans, L.|
|Davidson, V.||Munster, E.|
|Denton of Wakefield, B.||Murton of Lindisfarne, L.|
|Dilhorne, V.||Oppenheim-Barnes, B.|
|Donegall, M.||Orkney, E.|
|Downshire, M.||Oxfuird, V.|
|Dundee, E.||Park of Monmouth, B.|
|Eccles of Moulton, B.||Parkinson, L.|
|Elibank, L.||Pearson of Rannoch, L.|
|Ellenborough, L.||Peel, E.|
|Elliott of Morpeth, L.||Pender, L.|
|Elton, L.||Perry of Southwark, B.|
|Erroll of Hale, L.||Peyton of Yeovil, L.|
|Fairfax of Cameron, L.||Prentice, L.|
|Faithfull, B.||Prior, L.|
|Flather, B.||Pym, L.|
|Forester, L.||Quinton, L.|
|Forte, L.||Rennell, L.|
|Fraser of Carmyllie, L.||Renton, L.|
|Fraser of Kilmorack, L.||Renwick, L.|
|Geddes, L.||Rippon of Hexham, L.|
|Gilmour of Craigmillar, L.||Rodger of Earlsferry, L.|
|Glenarthur, L.||Romney, E.|
|Goschen, V.||St. Davids, V.|
|Gray of Contin, L.||St. John of Bletso, L.|
|Greenway, L.||Saltoun of Abernethy, Ly.|
|Seccombe, B.||Terrington, L.|
|Selsdon, L.||Teviot, L.|
|Sharp of Grimsdyke, L.||Thomas of Gwydir, L.|
|Sherfield, L.||Trefgarne, L.|
|Skelmersdale, L.||Trumpington, B.|
|Skidelsky, L.||Ullswater, V.|
|Soulsby of Swaffham Prior, L.||Vaux of Harrowden, L.|
|Stewartby, L.||Vivian, L.|
|Stockton, E.||Wade of Chorlton, L.|
|Stodart of Leaston, L.||Wakeham, L.|
|Strathclyde, L.||Weinstock, L.|
|Strathcona and Mount Royal, L.||Westbury, L.|
|Strathmore and Kinghorne, E. [Teller.]||Young, B.|
|Younger of Prestwick, L.|
§ Resolved in the negative, and Motion disagreed to accordingly.