Coal Privatisation: Expenditure (Hansard, 17 May 1995)

The Minister of State, Department of Trade and Industry (Earl Ferrers)
My Lords, expenditure on the privatisation of the coal industry from 1991–92 to 1994–95 amounted to approximately £36.8 million. A further 557 £4.3 million, including VAT, has been provided for 1995–96. Details of payments to individual consultants are commercially confidential.

§ Lord Dormand of Easington
My Lords, will the Minister confirm that the cost so far to the taxpayer of privatising the coal industry is £700 million? Have any further payments of any kind yet to be made? In addition, why has it been necessary for the National Audit Office to publicise two things: first, that £1.6 billion was used to write off debts in anticipation of the privatisation of the mines; and that NM Rothschild has been given a bonus of £2 million, in addition to its fee of £5.5 million, for its work in privatising the industry? The Minister said that those are not matters for public comment. I suggest that they are. In any case, are not the last two matters I mentioned serious enough for public debate or debate in this House or another place?

Earl Ferrers
My Lords, the noble Lord asked a number of questions. He asked whether the cost to the taxpayer was £700 million. The cost to the taxpayer is in fact the £36.8 million plus the £4.3 million, which amounts to about 3.5 per cent. of the gross receipts. If the noble Lord were to sell his house through the services offered by an estate agent, he would find that by the time he had paid the estate agent's fees and the legal fees he would be running jolly close to 3 per cent., and presumably selling off coalmines is rather more complicated than selling his house. He asked whether there are any payments still to be made. The answer is yes, there are some still to be made, but they were included in the contract. He asked about Rothschild. Rothschild was chosen by competitive tender: eight people were asked to compete for the tender; five tendered; and three were called to interview. The interviews were carried out by officials of the Department of Energy and the Treasury and the accounting officer of the Department of Energy. As a result of those three interviews, a recommendation was made. My right honourable friend the Secretary of State accepted the recommendation. I believe that that is perfectly clear.

§ Lord Boardman
My Lords, will my noble friend confirm that the costs of privatisation were a mere fraction of the total costs of British Coal and the losses borne by the British taxpayer in the years before privatisation?

Earl Ferrers
My Lords, my noble friend is, of course, entirely correct. In 1979 the operating profit was admittedly £45 million. In 1984–85 alone the loss was £9.7 billion. To get the industry privatised and working efficiently was in the interests of the coal industry, the country as a whole, and the taxpayer.

§ Lord Richard
My Lords, will the Minister confirm the two figures put to him by my noble friend—the £5.5 million to Rothschild and the extra £2 million by way of a bonus?

Earl Ferrers
My Lords, no, I am not prepared to confirm that, for the very good reason that these matters are confidential. As I explained in answer to the noble Lord, the work was done as a result of a competitive 558 tender. If what everyone receives for their tender is known, it will increase the opportunities for others to make larger offers in the future.

§ Lord Ezra
My Lords, in view of the fact that rather more than had been expected was realised from the sale of the mines on privatisation, and that the international price of coal has subsequently risen substantially, does the Minister agree that the Government may have been ill-advised to allow the coal industry to be run down at such a rate before privatisation?

Earl Ferrers
My Lords, I could not disagree more with the noble Lord. The fact is that coal is not used in the way that it was at the end of 1945. In those days 718,000 people were employed to produce about 200 million tonnes of coal. Now, 7,000 people are employed and they produce 86 million tonnes. That means that about 10 per cent. of the manpower is now required to produce about 45 per cent. of what was produced earlier. It is not a question of running down the industry; it is a question of making it efficient, and that is what we have sought to do.

§ Lord Mason of Barnsley
My Lords, will the Minister take the opportunity to clear the air concerning Richard Budge who bought the coal industry? The Minister will remember—will he not?—that just before the purchase, the AF Budge Group was put into administrative receivership, which cast a shadow over the group and, in particular, Richard Budge who was a director at the time. Have all the DTI's inquiries into the AF Budge Group ceased? Is the DTI now satisfied that Richard Budge is a fit and proper person to run the coal industry?

Earl Ferrers
My Lords, the noble Lord is probably referring to a programme on that individual put out on "Panorama". I believe that it is improper for television companies to do inquiries of this nature; to put out programmes about people, castigating their characters without them having any chance to reply, although there would be no point in them being involved in a reply; and doing that on the basis of entertainment. All those matters were investigated, not by the DTI but by the Insolvency Service. As a result, and with the benefit of independent legal advice, it was decided that no action should be taken. In the light of the Insolvency Service investigation, the DTI reviewed the whole of the RJB (Mining) bid and concluded that it should remain the preferred bidder.

§ Lord Peston
My Lords, I take it that the answer to the question put by my noble friend Lord Mason is that the DTI believes that Mr. Budge is a fit and proper person to run the industry. That is the only sense that I can make of the Minister's answer.
As regards the Question on the Order Paper, I do not understand the argument about commercial confidence. Is the Minister saying that if the National Audit Office wished to investigate whether these public funds were properly spent, it could not obtain the data; but that, if it did obtain the data and wished to pronounce on them, it would not be allowed to tell us what the funds were and whether they were properly spent? Is the Minister saying that it is so commercial that we cannot know or be told?

Earl Ferrers
My Lords, no. I am sure that the noble Lord, Lord Peston, knows the position perfectly well. It is that when people contract with a government department 559 for a certain job of work it is not customary to release the figures of that contract because it will bias other people and interests for the future. If it is known that one can compete at a certain level, others will compete at a different rate—

§ Lord Peston
My Lords—

Earl Ferrers
My Lords, perhaps the noble Lord will contain himself a little longer. The National Audit Office is looking into the privatisation and sale of British Coal subsidiaries. That is a perfectly natural course of action to take and it does so in respect of all privatisations. Of course, all the figures will be available to the National Audit Office.

§ Lord Molloy
My Lords, bearing in mind the number of issues that have been raised today, and considering some of the explanations that the Minister has had to give in a short time in respect of this vital industry, does he consider that the House deserves an opportunity to debate the matter in full?

Earl Ferrers
My Lords, what the House debates is a matter for the House. It is not a matter for the Government. If the noble Lord wishes to table a Question in the same way as his noble friend Lord Dormand of Easington, I shall be happy to answer it.

§ Lord Dean of Beswick
My Lords, is the Minister aware that, as regards the privatisation of electricity, events have shown that the industry was sold off at 30 per cent. less than its real value in order to make it more attractive? Will the Minister give the House an undertaking that that did not happen in respect of the disposal of British Coal?

Earl Ferrers
My Lords, the privatisation of electricity has nothing to do with the Question on the Order Paper, so I shall not follow that particular hare down the course. However, I can tell the noble Lord that £50 million per week was spent subsidising these nationalised industries and £50 million per week is now returned to the country in taxes on profits.
If the noble Lord is worried about the advantages of privatisation, perhaps I may remind him of what has happened at Tower colliery. It was bought by the employees, who are now supplying coal to Korea, Cambodia and all over Europe. This month they have signed a deal to send 100,000 tonnes of coal to France and the company is on course for an £80 million turnover this year. One of the leaders of the company said: In the bad old days of British Coal I was a really militant union man and backed strike action all the way. Now it's no longer a question of us and them; it's just us". That is a typical example of the success of privatisation, admitted by those who were involved in the coal industry.

§ Lord Richard
My Lords, on behalf of Members on this side of the House, may I congratulate the Minister on being so fulsome about a workers' co-operative?

Earl Ferrers
My Lords, it is funny because some people who were involved in the ethos of the mining industry or in certain aspects of the Labour Party cannot look to the future. Some of these people have always wanted to strike. I see that the president of the National 560 Union of Mineworkers is saying, "Let's have a strike again now". The fact is that such people cannot look to the future, just as noble Lords opposite, having abandoned Clause 4, are running around like headless chickens because they do not know whether they were in favour of Clause 4 or against it.

§ Lord Dormand of Easington
My Lords, without revealing the figures, will the Minister say whether the Rothschild tender was the lowest? As he did not answer the question I asked earlier, will he now say something about the £1.6 billion sweetener, which was given without publicity?

Earl Ferrers
My Lords, no. The arrangements with Rothschild were arrived at before the contract was agreed and they are part of the contract. The noble Lord asked whether it was the lowest tender. All I can tell him is that it was the best value for money.