§ 5.35 p.m.
§ Lord Hardy of Wath
rose to call attention to the future of the coal industry and related coal engineering industries; and to move for Papers.
The noble Lord said: My Lords, I am grateful for the opportunity to raise the position of the coal and coal engineering industries, not least because this debate takes place at an extremely critical time both for the industry and for the future arrangements for the energy requirements of our country.
I think that it is best if I begin by asking my noble friend a number of questions. I hope that they will receive relevant responses. I shall then say a few words about my anxiety with regard to the various issues to which those questions refer.
First, do the Government accept that much coal will continue to be required by the United Kingdom for rather a long time?
Secondly, do the Government accept that it would be wise for the United Kingdom to retain a coal engineering industry, not only to maintain its commendable export record but also because the world will continue to need coal and other minerals as people penetrate deeper into the earth's crust for those resources? At the same time, people may soon cry out for a clean coal combustion capacity, to which our industry could con tribute provided it has the home base which it will need if it is to survive.
Thirdly —this is 'elated to my previous point—even if our coal industry disappears there will still be a huge international "coal burn" for a long time. The destruction of our industry will have remarkably little effect on that total consumption.
258 Fourthly, if we do not burn coal, how will it be replaced? Perhaps my noble friend can tell us the scale of our gas reserves. I understand that the current record suggests proven gas reserves of perhaps no more than eight years-worth. More will be discovered, but probably in smaller fields which will be difficult and expensive to harvest.
Fifthly, is it sensible for us to sustain a belief in cheap, subsidised exports when our industry could soon be on the verge of disappearing?
Sixthly, Poland now aspires to be a member of the EU. It is obliged to act as a responsible part of the EU. It is in principle not supposed to dump within the EU and yet Polish coal is being sold in Britain today at a price of £1.10 per gigajoule, which is way below the cost of production. When one adds the substantial cost of transporting that coal, one realises that that importation is almost indefensible.
Seventhly, has the Department of Trade and Industry considered the implications of the recent purchase of Ferrybridge, Fiddler's Ferry, Drax and Eggborough, for which a price of almost £1.5 billion has been paid? That suggests that people from abroad are quite prepared to import large quantities of coal into the United Kingdom while our industry disappears.
Eighthly, have the Government disregarded the fact that, excluding Russia, Europe has only some 3.6 per cent of the world's gas and one-eighth of the world's coal, and that we shall be increasingly dependent on gas and coal from areas of the world which are certainly not particularly stable or likely to be favourable in their attitude to the United Kingdom's needs?
Ninthly, is it reasonable to pursue a course which will see the end of British deep mining when it is currently demonstrating an enormous capacity in a successful and safe operation, providing that base which the engineering industry requires?
Tenthly, do the Government intend to maintain their present approach given that £14.5 billion was devoted to the subsidy of the coal industries of Germany, Spain and, to some extent, France, while our own industry not only is not subsidised but bears charges and costs which are not applicable to our European neighbours' industries?
Eleventhly, do the Government recognise that the United Kingdom has been successful? If one looks at the rates of productivity in Europe, one finds, for example, that, measured in kilogrammes per man hour, Spain produces 400, Germany 650 and the United Kingdom, on the latest figures, well in excess of 1,600. We are far, far more effective than our European competitors, whose industries are being retained.
Lastly, do the Government recall that they promised the coal industry no favours but fairness, wisdom and a level playing field? In that case, how can one defend the fact that our industry is facing a very adverse slope?
Those are the questions. I shall now express why I am concerned. When I became a Member of the House of Commons in 1970, I had 12 collieries in my 259 constituency and more than 20 within five miles of its boundaries. Thousands of my constituents worked in the industry. In the village in which I lived, close to Wath upon Dearne, 57 per cent of the men worked in the pit. There are two or three industrial gypsies now, working for contractors at long distances.
Before that, I was a local councillor. In my ward was Manvers colliery, where my father was over man, and the headquarters of the South Yorkshire area, which then consisted of 19 collieries. Only one of those remains—Maltby, which has vast reserves—on which £200 million was invested. It should have a long life; it employs only 400 men. It was not even on the list that Mr Heseltine produced in the earlier Parliament.
Silverwood was on that list. I am pleased to see that the noble Lords, Lord Ezra and Lord Haslam, are in their places. I shall listen to their speeches with interest and respect. They may recall that Silverwood was one of the most profitable, record-breaking pits in the country over a long period. At this moment, vast sums of money are being expended in reclaiming the site of that very successful former colliery. I shall listen to other noble Lords' contributions with great interest. I hope that they will be helpful in assisting the Government's view.
It is all very well to say that there will be help for the areas affected, but most of the pits in the constituency that I represented closed in the 1980s, about 12 years ago. A lot of money has been spent since, but the gap between the problem and the remedy, or attempted remedy, has been a long one—12 years. There was enormous concern about the devastation of employment which then occurred. Many spoke about that. Some spoke also about the social corrosion of the changes which took place and which may have placed our areas at a particular disadvantage.
The debate comes at a critical time. Will the United Kingdom be able to withstand international forces which we may not at this stage be properly able to assess? Will we sacrifice energy security? We seem to be hell-bent along that road. Do the Government recognise that if the deep-mine industry, as successful as it is, is wiped out, that will inevitably destroy our mining engineering industry, which requires a home base, at least for demonstration purposes? We need to be very careful about that.
There is much talk about green issues. My noble friends who have known me for a long time will recognise that I have been a conservationist, a very green politician, for a long time. It is certainly well over 25 years since I first spoke about the need to burn coal cleanly and said that there is no need for the filth which pours into our atmosphere so remorselessly and unrelentingly, and which has been scarcely adequately challenged internationally. I support our commitments in Kyoto; I wish only that other advanced countries—particularly the United States—would take the same approach. We have to recognise that, although we have achieved much, a great part of that bill is borne by the mining communities.
260 We should not be too glib when we talk about alternatives. We talk about solar power. Many parts of the world have greater access to that source of energy than we have in the United Kingdom, even with global warming. Wind power is not as attractive as many people imagine, although it may have a contribution to make— as have other renewables, although some of them will be frightfully expensive. I recall that in 1970 I had a briefing from the electricity industry. I can see now how we were presented with the nuclear future through very rose-tinted spectacles.
As this century ends, the newspapers are full of photographs providing images of the past 100 years. Some will stick in our minds for a very long time—the pictures of the closed collieries; of the pit wheels marking where the collieries stood— but, as I have said before, the one that will long linger in my mind is of standing beside the sarcophagus at Chernobyl. That may be some evidence that man's ingenuity is not quite matched by man's wisdom.
The world will continue to need coal for a long time. We ought to be contributing to a capacity to burn it cleanly.
§ Lord Islwyn
My Lords, I thank my noble friend for giving way. I appreciate his long-term interest in the mining industry, particularly in the welfare of miners. We have both contributed to debates about compensation and the delay in payment of compensation to miners who have been affected by breathing and chest diseases as a result of working for long periods in coal mines. There have been reports recently in the press that some of the compensation for these people will come from the miners' pension fund. I can tell my noble friend that in South Wales that has gone down like a lead balloon. Does he have any observations to make about that?
§ Baroness Ramsay of Cartvale
My Lords, I remind your Lordships that this is a timed debate. It is undesirable that noble Lords should interrupt at any length during timed speeches.
§ Lord Hardy of Wath
My Lords, I am well aware that the Government are taking rather a lot of money out of the miners' pension fund. I am quite sure that my noble friend Lord Varley, who is very knowledgeable about these matters and experienced in energy matters, may wish to comment.
Some years ago, when Mr MacGregor was chairman of British Coal, I went to a large exhibition at the National Exhibition Centre which was presented by the British mining engineering industry. Mr MacGregor spoke at that exhibition bringing in the new criterion that no reserves could be counted unless they could be mined currently and profitably. That wiped out about 150 years of Britain's SS coal reserves. I wonder whether the Government have done a calculation of the effect of the massive increases in productivity in the past decade, under British Coal as well as under Mr Budge. I believe that, in economic terms, they have clawed back at least half of the period that Mr MacGregor wrote off. 261 Will the same criteria apply to the small gas fields which will be very expensively harvested? That should be considered.
I am nearing the end of my speaking time. I became very angry occasionally during debates on coal in the previous Parliament because all we used to get from the other side were references to Mr Scargill and the miners' leadership, with the very clear implication that the mining communities were the enemies within. I found that utterly offensive. The record of those communities in Britain has been very substantial. We heard no words about the "enemy within" when the nation called for coal, and there were no such words when men were suffering from pneumoconiosis and other such diseases against which my noble friend Lord Lofthouse has waged such an active campaign. It is good that the Government are now implementing the provisions introduced, albeit half-heartedly, by the previous administration. However, this is a national burden—and it ought to be.
Miners' health is also one of the reasons why I welcome the priority given to safety by British Coal—now our national coal board—and by Mr Budge. While I opposed the privatisation of coal, I was reassured by the priority given to health and safety by Mr Budge, and I believe that the men and management at Tower colliery, at Long Gannet and those in Mr Budge's pits deserve commendations on their efforts to ensure that strides forward in productivity are matched by concerns for safety and health. Because of that, perhaps future miners will not suffer such disadvantages. At this time we need wisdom and I only hope that Her Majesty's Government will show it. My Lords, I beg to move for Papers.
§ 5.51 p.m.
§ Lord Haslam
My Lords, first, I should like to express my appreciation to the noble Lord, Lord Hardy, for introducing this debate, because yet again the coal industry and its related industries are clearly at another important crossroads. I hope that noble Lords will bear with me if I reflect briefly on an earlier period of British Coal when I was directly involved as its chairman during the period after the miners' strike until the end of 990. I believe it contains some important lessons for the present situation.
First, we should remember that the trigger for the strike was the threat by my predecessor, Sir Ian MacGregor, to close six collieries. In the five years following the strike we were to close over 100 uneconomic pits, leaving 69. Manpower was reduced by 140,000, but total output was only marginally reduced. Thus, productivity was doubled, equivalent to an improvement of 14 per cent per annum. I do not take any great pride in those statistics, but if that had not been done, I do not believe that we would even have the coal industry that we have today.
Surprisingly, Mr Scargill survived at the end of the strike, but was suffering from the illusion that the strike had been a real success. Thus, he was as confrontational as ever and opposed to the closure of 262 every colliery. However, most of the miners had come to recognize—I pay tribute to them for this—the economic realities and we were able to work around Mr Scargill. That was only made possible because during that period we had no enforced redundancies. Every miner was offered either a transfer to a lower cost pit or the generous redundancy terms that we were permitted to offer by the then Conservative government. I must also pay tribute to the outstanding British Coal management skills in carrying through this daunting task. It was quite the most difficult one I had experienced in my long and varied industrial career. I should also like to endorse the tribute of the noble Lord, Lord Hardy, to the officials of the miners themselves, who in the end did extremely well to help to bring about that particular achievement.
My successors were able to pursue these policies with equal vigour right up to privatisation in 1994. It had been my belief that the "fighting weight" of the industry would be based on about 35 to 40 large, low-cost collieries, the number being predicated on the belief that they would provide future access to most of the remaining workable reserves in the UK without incurring the prohibitive costs of sinking new mines. However, that was not to be.
There were a number of other parallel issues on which we focused our attention. These were as follows: first, the dumping in the UK of cheap coal from Poland, Russia, Colombia and China; secondly, the import of highly subsidised nuclear energy from France through the inter connector link, which originally was intended primarily to export cheap coal energy to France. Those dumped imports were equivalent to the output of six large collieries. Thirdly, government subsidies to British Coal were being phased out, but massive subsidies continued to be paid to the coal industries of Germany, Spain and France. In Germany, the subsidy was between £3 and £4 billion per annum. The outcome of this was that the UK bore the brunt of absorbing all the cheap imports that were available around the world.
Furthermore, there was a need for urgent government support in the development of clean coal technologies, which could improve generation costs by 25–30 per cent and reduce by a similar amount the emission of greenhouse gases. One of the greatest contributions that the UK could have made to reducing world CO2 emissions would have been to develop and demonstrate advanced clean coal technology. Undoubtedly, that technology would have been widely adopted in the developing world.
All these topics were pursued with vigour by the then government and also with the European Commission. But even then the limited support we received could only be described as lukewarm. As a result, all the topics have today a familiar ring because they are still not solved and continue to be subject to rhetoric rather than determined and meaningful action.
Current world coal consumption is about 4 billion tonnes per annum. Reputable international energy agencies estimate that that figure will rise to about 263 6.4 billion tonnes by 2020, primarily because of growing demand from the developing countries, in particular China and India. For example, China's need for coal is growing at the rate of about 100 million tonnes per year. Surprisingly, demand is also growing from the USA as it cuts back its nuclear capacity. At present, no further nuclear plants are planned for the USA, and by 2020 half the existing units will have been closed down. That represents almost 10 per cent of US energy consumption. What will replace it? It will be coal and gas, and most probably mainly coal. Those figures also reflect that there are an estimated 200 years' worth of coal reserves in the world, whereas the comparable figure for oil and gas is 50 years. It has often been said that we shall find new reserves of gas. However, having visited the Falkland Islands recently and seen the drilling operations off the islands, I believe that we might be coming to the bottom of the barrel.
A worrying feature is that the countries I have just mentioned are not showing any signs of supporting the Kyoto targets. By 2020, even if the UK and EU targets are met, they will have a minimal impact on the world outcome. The achievement of any Kyoto targets for reducing the world production of greenhouse gases from coal-burning are far removed from reality.
There is no doubt that in the late 1980s the German Government heavily supported their coal industry because they failed to face up to the problems of restructuring, as we did. However, now they have a more valid reason as they face a real problem: they are dependent upon Russia, the Middle East and Algeria for their supplies of natural gas. As the noble Lord, Lord Hardy, has already indicated, those countries are not the most reliable suppliers. They also face added pressure from their influential Green Party to phase out their nuclear industry, which represents 30 per cent of their electricity supply. Against that background, the German Government are most unlikely to allow their coal industry to disappear.
On the evidence that I have, our own natural gas reserves are currently estimated at 12 to 14 years, although the noble Lord, Lord Hardy, quoted a lower figure. But, surprisingly, we shall be supplying gas, through the new inter connector, to the Germans, for example, in the interests of so-called EU competition, thus further reducing the life of our own reserves. In addition, the Magnox nuclear reactors will be phased out by 2010 and the AGR reactors will be past their anticipated life, eventually leaving only the Sizewell B reactor active. Therefore, we could then find that we are in the same position as the Germans, dependent upon imported gas from Russia and the Middle East and our growing renewable energy sources which, while making encouraging progress, will not in any way fill the gap.
Against that background, are we willing to allow the remaining vestiges of our coal industry to disappear, along with the future access they provide to some of our valuable coal reserves, without having a much clearer vision of how we will meet our energy needs post 2020?
§ 6 P.m.
§ Lord Varley
My Lords, it is always a great pleasure to speak after the noble Lord, Lord Haslam, in debates of this kind. His comments were certainly interesting and the points he made about the world situation were devastating. I was particularly interested in his comments about the Falkland Islands and his visit there. I was the chairman of the Falkland Islands Company for about five years. Along with others, I would be absolutely astonished if oil were discovered in the Falkland Islands in the quantity that is regarded as commercial, although I hope fervently that that will be the case.
I join the noble Lord, Lord Haslam, in his tribute to British mining engineers. I expect that the noble Lord, Lord Ezra, will join in that tribute. Until a few years ago we had—I do not know whether they still exist in the quantities required—the finest coal mining engineers in the world. They contributed immensely to the terrific productivity records of British Coal not only under the chairmanship of the noble Lord, Lord Ezra, but under the chairmanship of the noble Lord, Lord Haslam, too. It is a pleasure to follow such a distinguished industrialist as the noble Lord, Lord Haslam.
It is also a pleasure to support my noble friend Lord Hardy of Wath. I thank him for initiating the debate. I congratulate him on making such a powerful speech in support of the coal industry and the related engineering industries.
It appears to me that the country is now in a make-or-break situation as far as concerns the coal industry. That sounds dramatic, but I believe that we are exactly in that position. With British mined coal at a production level of around 25 million tonnes a year, employment at about 7,000 people, and faced, as we are, by imported coal, some of it at dumped prices, we are presented with close to a crisis in the industry. The fact that the coal industries of our European neighbours receive massive state subsidies from their governments only highlights the problems we face here in Britain. Either we take whatever steps are needed to protect our industry at roughly its present level or we give up the ghost and face the consequences.
I cannot pretend—I hope that the Government do not pretend—that a few fine words and cheap platitudes will save the industry. There are many people now who secretly believe that the coal industry is a fringe industry and an embarrassment; an industry that ought to be got rid of as quickly and as quietly as possible. I noticed that in a debate in another place on 10th November, Mrs Helen Liddell, the Minister for Energy and Competitiveness in Europe—what a wonderful title that is—said in her peroration that,coal has a future".Addressing the mining communities directly, she went on to say:from the bottom of my heart,…wemeaning the Government—will not turn our back on them".—[Official Report, Commons, 10/11/99; col. 1065.]265 I hope that those fine words will not come to haunt Mrs Liddell in the future. I have read very carefully what she said in the debate on 10th November and I could not detect anything in her remarks which encourages me to believe that the industry will not decline further, and probably quite rapidly, in the next year or two. Unless action is taken quickly and effectively, what is left of the industry will be gone in a short space of time. It will then become a real fringe industry.
I hold no brief for the company, RJB, which owns the bulk of the coal industry. But if the fine words of hope and heartfelt concern of the Minister for Energy mean anything at all, they mean that she will have to work out with RJB what is needed to secure the industry's future at the current level of production; and she will have to do it very urgently. That may mean direct financial assistance, either in the form of direct subsidy to the producers, similar in scale to that which is made by governments in Germany, France and Spain, a point made by the noble Lord, Lord Haslam, or a subsidy to the electricity generators to burn coal. If the Government do not take action soon, the honeyed and comforting words will be seen and taken as empty gestures.
Some may say that it is perfectly reasonable— some would even say desirable—to let the coal industry die. I have heard those arguments put time and again. That is not my view yet; I think that the industry can still be saved. It is not the declared policy of the Government—yet. But unless the Government take action soon, the industry will die quite quickly and more misery will be inflicted on the mining communities, adding to the massive misery imposed on the miners by the previous Conservative government and from which they are still suffering.
We hear a great deal about the deprivations of the inner cities. I do not doubt for a second the privation and acute hardship that exist in parts of our great conurbations. But those hardships are shared by former mineworkers and their families in small mining communities throughout Britain. The throwing out of work of miners by the previous government in the early part of this decade created wretched conditions in those areas. It will take many, many years to eliminate those conditions.
The Markham Valley in north Derbyshire, where I worked as a very young man nearly 50 years ago, had five collieries within about two-and-a-half miles. Markham Valley is well known to the noble Lord, Lord Ezra, and probably to the noble Lord, Lord Haslam, too. I know that the noble Lord, Lord Ezra, visited the area on many occasions during his stewardship of the National Coal Board. At the peak of performance, those five pits employed about 5,000 men. The villages which surrounded those pits have suffered a plight which will take decades to eliminate. I have in my hand a photograph of the existing site. The head stocks of those pits have gone, the surface buildings have been removed, and this vast site has 266 been bulldozed. It looks like a lunar landscape. I shall show the photograph to my noble friend Lord Harris of Haringey—
§ Lord Varley
My Lords, I beg my noble friend's pardon. I shall show the photograph to my noble friend Lord McIntosh of Haringey at the end of the debate.
The local authorities which cover the area are doing what they can to create what they euphemistically call a "growth zone", but they lack the financial incentives and the money to do it at the pace that is required. A few months ago the Deputy Prime Minister launched a task force to implement money through what is called the Coalfield Regeneration Trust. The money allocated to the regeneration trust is a pathetic amount of £10 million. To be charitable, that £10 million regeneration trust could be described as a step in the right direction—a small deposit towards what is really required. But the Markham Valley site alone—the lunar landscape to which I have just referred—will cost £37 million for site reclamation, development, proper roads, a motorway junction for access and servicing, and environmental services. There are dozens of comparable sites throughout Britain.
The coal industry and the industries associated with it have shed something like 250,000 jobs since 1984. I do not believe that any industry, over the same period, has experienced job losses on such a scale in such concentrated areas.
Fortunately, former mineworkers have a pension scheme. In fact, they have two: a mineworkers' pension scheme and a staff scheme. Here I must declare an interest. I am a beneficiary of the pension scheme, for service going back to the early 1960s. I receive 28p a week from the scheme, on which I pay 40 per cent tax. However, I make no complaint about my personal position. Given that the service took place a very long time ago, 28p represents good value. Fortunately, I receive bigger and better rewards from pension schemes linked to later employment.
Mineworkers' pension schemes are very wealthy and successful. That success reflects great credit on the schemes' trustees and the fund managers. The pension schemes have generated huge surpluses. I do not want to go into all the detail, but because the Government became the guarantor of the pension scheme—that is what the men in the pits voted for when the pits were privatised—the Government are legally and properly entitled to a proportion of the pension surplus. To date, that entitlement adds up to £3.4 billion. The Government have not taken that amount so far; I believe they have taken around £250 million a year. The surplus money is still accumulating interest and profit. It is conservatively estimated that it will soon exceed £4 billion.
The Government deserve to be rewarded for the risk that they took in guaranteeing the pension. But as the present day beneficiaries grow older, the numbers will decline and the risk will diminish. It seems to me that 267 some of that colossal pension fund surplus could be used to enhance the benefits of pensioners, but also some of the Government's proportion could be channelled into helping to regenerate former coalfield areas.
I want to mention another matter which may be considered relatively minor in terms of this debate. However, it is not minor to the men concerned. All I ask is that my noble friend should refer to it in his reply or promise to write to me. It is the question of miners' concessionary fuel. I have been told that the Department of Trade and Industry, which takes responsibility for the concessionary fuel scheme, has it in mind from April next year to offer to those who benefit from the scheme not only UK-produced fuel but manufactured briquettes made abroad, including Chinese anthracite. All of this may be a great slander on the Department of Trade and Industry and I shall be very pleased to hear my noble friend say that it is not true. Perhaps he will look into the matter and comment on it in due course.
It seems to me that the coal industry is at a critical turning-point. I re-emphasise what I said at the beginning of my remarks. The Government must either take a bold policy decision soon to hold the current level of production and protect the coal industry's market at around £25 million tonnes a year, or they must openly and honestly declare that the industry must face the full force of the market as it pertains in this country, and that it must do so without help.
If the Government choose to support the coal industry, they will have to say that they are doing it on energy policy grounds and strategic grounds. It will mean facing up to the environmental questions referred to by my noble friend Lord Hardy and investing in clean coal technology. It will mean subsidising the private coal producers or the private electricity generating companies which burn coal. I know that it will stick in the gullet of many Members of the House of Commons, but it would be barmy to renationalise the coal industry, as some suggested in another place on 10th November—even though the market capitalisation of RJB is only £45 million. RJB bought the English coalfields from the Government at a cost of £814 million and they are now worth only some 6 per cent of the original price.
If the Government say that it is no part of their business to keep the industry intact, it will wither away quite quickly. We shall have to face up to the need for a massive realistic programme of financial assistance to regenerate the areas concerned. That would need to be done quickly and with great sincerity. I mean a worthwhile programme of financial assistance, not the fiddling, paltry £10 million regeneration scheme that our loveable Deputy Prime Minister was put up to announce some weeks ago. There was a strange juxtaposition in this House earlier when the House debated the pressures on housing in the south-east and what is likely to happen early in the next century. If we 268 do nothing about the coal mining areas, miners' children and grandchildren will drift south and exacerbate the problems that exist in those areas.
The Government must face up to the crisis. It is no good Ministers looking to officials in their departments to bring forward schemes to soften the impact and put off the evil day. Officials will always do a good job. They will always find some short-term palliative to get over the immediately difficulty, as I have seen happen on dozens of occasions. Ministers will say that that is wonderful. They will be Micawberish, hoping that something will turn up. It is "make up your mind time" for Ministers. It is time for them to be brave and bold. I hope that they will be.
§ 6.16 p.m.
§ Lord Lucas
My Lords, I am grateful to the noble Lord, Lord Hardy of Wath, for introducing the debate and am honoured to take part in it. I suspect that I am the least well-informed speaker on this subject. I did go down a deep coal mine in my youth, when the National Coal Board seemed to take the view that there were not enough Etonians under ground. I suspect that that view is shared by other people for other reasons! I greatly enjoyed the experience, but cannot say that I have had any great involvement with the coal industry since then.
There are a number of very good reasons why the Government should continue to support the coal industry. It is something that only the Government can do, because it requires a long-term strategic view on what is right for this country. Looking ahead, we are clearly in for some rough times in the energy market as fossil fuels run out. As has been said by other speakers, many of the reserves of those fuels lie in parts of the world that are not naturally stable or particularly friendly towards this country. We are therefore likely to see some sharp fluctuations in prices and availability.
There is a great deal to be said for making sure that in this country we continue, for the sake of the stability and long-term health of our economy, to have a diverse set of available energy sources; and that, where possible, those sources are indigenous. I welcome the Government's efforts in relation to alternative sources of energy, and hope that they will continue to build over the years, but they would come nowhere near to replacing the coal industry, or indeed the nuclear industry. We are faced in the short term with price pressures from dumping and subsidies overseas, and from short-term economies in relation to gas-fired power stations—short-term in relation to our life-span, if not those of our children.
Industry, given the chance, may take a five-year view on what is the best fuel to use and the best strategy for generating power. Being speculative, it might even stretch it to 10. The Government must think in terms of 50 years. They must think in terms of contingencies about which the ordinary industrialist may not have to think. The Government must see it as their responsibility to reduce the risk of catastrophe that the country is running in the long term—at the 269 acknowledged cost of some greater price, an insurance premium, as it were, that we all must pay on electricity in the mean time.
We cannot expect the Government to do anything about the subsidies that Germany gives its coal industry. There is remarkably little evidence that this Government will be effective, even in dealing with monstrous illegalities like the French beef ban. The German subsidy on coal has been running for a long time. We managed to do nothing about it; this Government have made no dent in it. It will continue. There is therefore a cost to the Government in supporting the coal industry which comes from the failure to deal with subsidies elsewhere. The Government must bear that cost. It is a consequence of failures and of the decisions that they have taken and it is not right that they should impose the costs of those decisions on the coal mining industry.
When it comes to coal, particularly deep coal where the main reserves lie, the Government need to consider the desirability of keeping the industry going in a manner that will enable it to respond, when the time comes that coal is needed again in large quantities.
It is clear that a large proportion of the world's fossil fuel reserves is in the form of coal. It is also clear to us all that when push comes to shove and there is a lack of fossil fuel and alternative energies remain, as they will, substantially more expensive than fossil fuel—Kyoto or no Kyoto; global warming or no global warming—we will use those fossil fuels.
The coal industry has a good, long future world-wide. We should not, for reasons of short-term economic circumstances, put our participation in that industry—a substantial and successful industry—at risk, particularly when so many of the factors disturbing the industry are essentially down to the Government, one way or another, in terms of the decisions they take about the structure of the energy industry in this country and the extent to which they allow subsidised coal imports to displace our domestic production.
I do not suppose that I have made myself popular with my Front Bench in saying that. I do not believe that either Front Bench will be pleased with any of the speeches today, but I hope that we shall hear something of comfort from the noble Lord, Lord McIntosh. At least his party has an historic association with the coal industry. I hope it still means something to them.
§ 6.21 p.m.
§ Lord Dormand of Easington
My Lords, it is inevitable that, as the fifth speaker in the debate, I shall repeat some of the points made by previous speakers. I make no apology for it. In any case, repetition will serve to emphasise what I, like others, believe are important points. I was delighted to hear that the noble Lord, Lord Lucas, enjoyed his visit down the pit on one occasion. I am sure that his enjoyment depended largely on the fact that he knew that he did not have to spend the rest of his life down there.
270 The coal industry is once again facing problems. In the many years of my connection with it, there have always been problems. However, today I believe that some of the problems are rather different. With sympathy and determination from the present Labour Government, they can be solved or considerably alleviated—I say "immediately". The Government have shown sympathy with the difficulties now being experienced.
It would be helpful if the Minister would make the Government's attitude towards the coal industry clear and unequivocal. The Government could and, in my view, should say that for the foreseeable future this country needs a coal industry. The direct employment in the industry of about 15,000 people—reduced though it has become in recent years—is still of great importance. Indirect employment in the coalfield areas and the jobs in the mining equipment companies are equally important. There are other considerations, some of which have already been mentioned, such as the saving on imports.
Some of us have heard from the British mining companies group that if the UK mining industry ceases to be an equal fuel supplier, there will be a loss of up to 8,000 of their companies' engineering jobs and over 50 companies will follow. I fear that those figures are reasonably accurate. We may hear more about them later.
I interpose one little point here. The Minister may be able to say something about the position of Ellington colliery in Northumberland. We are all aware of it, some of the Ellington miners were in the House of Commons yesterday and I had the opportunity to talk to them. I need hardly say how deeply concerned they are.
Much of my speech will be taken up by asking direct questions to which, frankly, we seem to receive either no answers or indirect responses which evade the questions. My first query concerns state aid to the German, French and Spanish coal industries. That has already been mentioned, but it has to be repeated. There is no doubt that those countries receive about £3 billion in assistance. Are the payments contrary to EU law? One answer given is "yes". Another answer is "no"; that the British Government can choose not to provide such help. In the event, we know that the British Government have done that. I want to know what the position is because we need clarification on it. Polish coal is entering this country at prices which do not reflect the true costs of its production and transportation. In other words, according to the usual definition, the coal is being "dumped" in this country. Is that, too, contrary to EU law? Is it likely to be stopped? I should like that question answered.
In the case of Spain, there is the discriminating application of limits on the sulphur content of coal from different ECSC sources. My right honourable friend Helen Liddell, the Minister in another place, has said that the UK has received assurances that UK coal will be treated on the same basis as Spanish coal. Again, my question is: When will we know when that becomes effective? 271 In Germany, state aid has led to a distortion in the anthracite market (not mentioned so far) in the ECSC and particularly in the UK. Again, has any practical action been taken on that? I believe that the British Government have raised some or all of those matters with the European Union. However, my main concern now is—and I underline this—to ask: When will something be done about them? To some extent that reflects the concern which my noble friend Lord Varley emphasised in his contribution.
Before too long, the Government will have completed three years in power. We seem to be achieving little, or not that much. On the same principle, it is tempting to refer to the beef crisis, but let us stick to the coal industry for the moment.
The Government responded to representations made by a number of us about distortions in the electricity generating market which favoured the contribution of new gas-fired power stations. I asked the energy Minister how many consents had been given to such power stations since the present Government came to power on 1st May 1997. The answer is that 23 approvals have been made, 14 have been turned down. Those 14 would have generated four gigawatts of electricity, equivalent to 10 million tonnes of coal. I am not convinced that the Government have got the balance quite right, at least for the present. However, we should be clear that the policy of stricter consents is short term and temporary. Those are the Government's words. In the interests of security and diversity of supply, it is of the utmost importance that the Government do not terminate the arrangement prematurely. The 1998 Digest of UK Energy Statistics shows that on current use, proven probable gas reserves will only last only 14 more years.
On a separate but important point, will my noble friend say whether the Government still retain an interest in coal liquefaction? For many years some of us in another place and here raised the question of oil from coal. I am aware that, quite apart from the technical side, one of the many problems is its expense. However, I believe that some research into it by the Government is well worth the money. Perhaps my noble friend is able to comment on it. Some countries, particularly in Africa, have had liquefaction for many years and perhaps we can learn something from them. It is a sad thought that, if the difficulties of coal liquefaction can be surmounted, we in these islands are sitting on millions of tonnes of unmined coal that can be exploited for this very purpose.
The background to everything that has been said in this debate is the efficiency of the UK coal industry. There is little doubt that in recent years the industry has reduced its costs. However, I have found difficulty in obtaining figures that can be compared with those of our competitors. I keep returning to this point. One source shows that the UK industry has reduced its costs to £1.15 per gigajoule but that import prices have now been reduced to 75p per gigajoule. Another source reveals that average UK coal prices are still one-third higher than those for imported coal not supported by state aid.
272 Against that, the Confederation of UK Coal Producers calls attention to what it calls "a whole raft of on-costs" that must be absorbed in this country in reaching the final selling price, which is the lowest pithead cost in the European Community. The on-costs, some of which will be familiar to noble Lords, include: royalties paid per tonne produced; licence fees for consents to mine coal; licence or planning permission fees to local government; mineral planning regimes; and full restoration costs for open cast operations. There are other on-costs. Can my noble friend say whether or not this is a justifiable complaint? I believe that that is a crucial ingredient of the debate. If so, how can we begin to make comparisons in considering the fundamental issue of the price of coal? It will also be of assistance if my noble friend can say whether these facts and figures are reasonably accurate. I find it difficult to believe that the countries that I have named can be so much more efficient in producing coal regardless of the differing circumstances of the nature of their coal deposits.
I hope that I am correct in assuming that the Government, at least for the present, do not place emphasis on nuclear power. I believe that in this country there are two factors of which most people are aware and about which they express fear. Nuclear power carries risks, and waste storage problems are frequently brought to the attention of the public. Accidents in other parts of the world, not least the recent one in Japan, receive massive publicity. Whatever the safeguards, I am sure that people would not welcome an increase in the use of nuclear power, at least at the present time. Most nuclear stations have passed their design lives, and we can assume that some, or perhaps all, of the older stations will have to be decommissioned. We cannot depend on gas for much longer. Therefore, that is yet another reason for ensuring the continuation of our coal industry.
I turn briefly to the question of clean coal technology. I am glad that other noble Lords have referred to this matter. The value of this technology is proven and enjoys the support of most people in the coal industry. Why is progress being delayed? There is a greater need for it now than at any other time. If there is a lack of investment, is there not a case for tax or other incentives? This is a matter which I believe the Government should seriously consider. In a recent debate on the coal industry in another place, my right honourable friend the Minister responsible for energy did not mention clean coal technology, although time may have prevented her from doing so. But it would be helpful if today my noble friend could say something about it, particularly as other noble Lords have touched on it. This is one area in which substantial progress is urgently needed.
In conclusion, I can tell my noble friend that nothing I have said is a criticism, even an implied one, of the Government's policies on the coal industry. However, there is still much to be done. Those of us who come from mining families and have represented mining constituencies recall all too well the attitude and policies of the party opposite. The Government have to deal with some of those legacies. The action taken 273 since 1st May 1997 is a demonstration of the appreciation of the work and sacrifices of generations of miners in the most difficult and dangerous occupations. All who are concerned about the future of the industry know that in spite of the real difficulties that it faces, it will receive sympathy and fairness from the present Government, and I hope that we shall hear something about that in my noble friend's reply today.
§ 6.36 p.m.
§ Lord Ezra
My Lords, in listening to the speeches of the noble Lord, Lord Hardy of Wath, who so effectively introduced the debate this afternoon, and the noble Lords, Lord Haslam and Lord Varley, I thought of the number of times in the past that we had together dealt with coal affairs. I was also very impressed by the contributions of the noble Lord, Lord Lucas, and his strong support of the industry, and the noble Lord, Lord Dormand. For the record, I should declare that I have been in the energy sector for many years. I am still actively involved in it, regrettably at an age when most sensible people would long since have retired, but I cannot resist the lure of trying to promote the efficient use of energy.
I should like to think back for a moment and then move forward. We should recall that in the post-war period the coal industry has suffered the most dramatic turn-round of any industry, perhaps in our whole industrial history. After all, this was the industry which powered the Industrial Revolution and contributed a major part to the country's wealth over several centuries. Regrettably, it is now a shadow of its former self.
When I joined the newly-formed National Coal Board in 1947 there were 700,000 mineworkers on the colliery books and over 900 collieries, no doubt many of them quite small. However, they were all deep mines. That was the number with which we started. Today, there are fewer than 10,000 mineworkers on colliery books and 18 collieries. What has happened is that productivity has increased enormously, but the size of the industry has declined massively.
That is about the past, and we cannot undo it, but, as other noble Lords have said, we must now be concerned about the future. I agree with the consensus view which has emerged that at the very least we need to keep the industry at its present size; and there is a strong case for saying that it should grow further. The reason is that we shall begin to run out of indigenous gas before very long and will depend more and more on supplies from uncertain sources. Furthermore, the decommissioning of nuclear plants is beginning. That process will accelerate, and something will have to take the place of those plants.
Many suggestions have been made about what to do about it. I should like to make two practical proposals. To reassure the noble Lord, Lord McIntosh, in advance, I believe that these are very modest proposals, to which the Government could accede without much difficulty, but they would make a major difference to the future of the industry as it is now.
274 The first suggestion is this. The coal industry is having to face up to substantial imports of coal, some of which may be subsidised and some not. What has exacerbated the situation is the strength of sterling. I remember being bedevilled with that problem when I was directly involved in the coal industry. In some periods imports would be very cheap because sterling was high and transatlantic rates were low; at other times the reverse was the case. The problem was to ride the storm. I believe that we have to do that now.
Twelve million tonnes of steam coal are being introduced into this country for power station use. My inquiries have shown that out of current production and existing capacity, and drawing on stocks, it would be possible to replace 5 million of those 12 million tonnes. If that were done over a couple of years, the position of sterling and many other factors might well change and the industry could experience a major respite.
The cost would be minimal. About £5 per tonne, £25 million per annum, would secure an additional 5 million tonnes for the power station market. If they wished to pursue the idea, it would be for the Government to consider how it could be achieved. As the noble Lord, Lord Varley, pointed out, it could be done by the difference being given to the power stations, to the pits directly or in some combined way. To provide that extra tonnage, which would tide the industry over a difficult period, it seems a minimal charge compared with the massive subsidies given elsewhere.
My second proposal looks to the future. Clean coal technology has already been mentioned by a number of noble Lords. If coal is to be maintained as a long-term source of energy in this country, the environmental considerations become uppermost. Unless we can devise technologies which can reliably make coal more attractive from the environmental point of view, it will be difficult to secure its long-term future. That can be done on the basis of processes collectively known as clean coal technology. We do not need more laboratory work. That has all been completed; the processes are known. What is required is a major demonstration plant. Unless we can have such a plant in this country—there are some Elsewhere—it would not be regarded as a valid way of going forward. On the basis of that demonstration plant, I believe that we could begin to build up power station capacity using that technology. Within the next 10 or 20 years when many of the nuclear stations could be decommissioned, it is not inconceivable that clean coal plants could aggregate to something like 5,000 megawatts. But in order to achieve that, we must have a demonstration plant.
What demonstration plant do we need? We are talking about a capacity of 400 megawatts. That would cost a substantial sum. But it would not be for the Government to put in that money. We would need to create the conditions under which the private sector could invest in that technology. Two years ago, I introduced a Bill to extend the non-fossil fuel arrangements—they give assistance for non-fossil fuels to be developed—to fossil fuels where there was 275 a strong case. I instanced clean coal technology. I remind your Lordships that the principle of the non-fossil fuel arrangements is that no capital is put in to stimulate those developments but that a rather higher price of electricity is guaranteed over a period. For example, if the price of electricity, as at present, is about 2.5p per kilowatt hour on the pool, some higher price would be guaranteed over a period. And on the basis of that benefit the investment, which could be substantial—we may be talking about £300 million pounds going into the plant—could be forthcoming. I am told that in this case little extra is required—something like a ½p per kilowatt hour. On that limited basis—from the Government's point of view the small amount would be spread over 15 years—there could be much interest from the private sector in investing in the demonstration plant, in the expectation that after a few years' experience of that plant no further assistance would be required and that it could well be worth while investing in ordinary-sized commercial plant.
I believe that those two proposals are modest and may represent the view emerging from our debate. I think that we should put forward practical proposals where possible. I hope that they will be considered seriously. As noble Lords have said, in particular the noble Lord, Lord Varley, it is a time for major decision. If measures similar to these modest proposals are not taken now, the mining industry will continue to decline. Of the 18 collieries I mentioned, three are up for closure. So the number is diminishing rapidly. If we are not careful, more will be up for closure simply because the markets will not be there.
Something has to be done. In the long history of the coal industry, from time to time governments have intervened because they have felt it necessary to do so. For example, the government intervened in the market schemes of the pre-war period to cut out the internecine competition between the various colliery companies; otherwise the industry would have been destroyed. From time to time governments have intervened. And this is such a time. Such intervention need not be substantial. It does not need to be anything like the level of subsidies paid in other countries. I believe that these modest proposals could spell the difference between continued decline and maintaining the industry, perhaps with possible expansion to meet the needs of the future.
§ Lord Dormand of Easington
My Lords, before the noble Lord sits down, I wish to ask a brief question. I know that it is a timed debate. Does he agree that some of his suggestions do not lie in the hands of the Government of this country? I referred to a number of matters relating to the European Union where it is difficult to get either action or satisfaction.
§ Lord Ezra
My Lords, I believe that the whole policy should be discussed with the European Union to gain its full support and agreement. For example, it might be possible for the demonstration plant to get some resources from the European Union. However, I 276 believe that the initiative must come first from the Government, and they then need to consult the European Union on that and related matters as soon as possible.
§ 6.50 p.m.
§ Lord Northbrook
My Lords, I congratulate the noble Lord, Lord Hardy of Wath, on initiating this important debate. Without doubt, the British coal industry has experienced serious problems during the past two decades. Economics and the environment were the principal reasons for pit closures in the 1980s and 1990s and now the driving forces are still environmental. As already mentioned, they include the problem of subsidies in Germany, Spain, France and Poland, which are almost certainly illegal.
The falling price of coal is a major additional factor, with the price down an astonishing 50 per cent during the past five years. It is particularly sad that Ellington is to close at a time when other employment in manufacturing in the north-east is under threat from government policies which pushed manufacturing into the recession from which it is just emerging.
In the 1980s and 1990s, the United Kingdom coal industry continued its long-term decline. In 1997, production stood at 45.8 million tonnes, down more than 11 per cent from 51.9 million tonnes in 1996. That represents less than one half of the 1987 figure of 98.7 million tonnes. In 1997, the UK imported more than a quarter of its coal. The decline in production has been apparent for some eight years. Peak output was 292 million tonnes in 1913, about one third of which was exported. Production remained fairly constant at between 170 and 190 million tonnes until 1957 when it began to decline, being replaced by oil and subsequently gas and nuclear power.
The same trend is apparent in the employment figures. In 1913, more than 1.1 million men were employed in more than 3,000 deep mines. On nationalisation in 1947, 1,500 pits employed 750,000 men. By late 1992, there were 41,000 miners in 51 British Coal pits; in late 1998, only 13,000 miners in 23 deep mines remained.
During the past 20 years or so, the industry has not been sufficiently competitive to survive against coal produced more cheaply elsewhere in the world. In order to ensure the survival of the industry in this country, it was necessary for governments of all parties to agree to close down uneconomic pits, regrettably leading to the loss of more than 200,000 jobs. The effect of that was movingly described by the noble Lord, Lord Hardy.
By the end of the previous Conservative administration, a smaller but much more viable industry had been created. When the Labour Government came to power the industry was expecting that decisions would continue to be made on its future, taking market conditions and economic viability as the main criteria. However, it did not expect to read that Labour would put further obstacles in its way.
277 In its manifesto, the Labour Party made clear that it would fight global warming through a new target of a 20 per cent reduction in CO2 emissions by 2010. The Labour Party in opposition assured the coal industry that coal mining jobs would be safe. Yet the Deputy Prime Minister has signed up to achieving an even higher target for CO2 emissions than was demanded at Kyoto. Can the noble Lord, Lord McIntosh, quantify what effect that will have on the coal industry in terms of pit closures and loss of jobs? Furthermore, can he say how the Government will reach the target to which they signed up in Kyoto?
Another major problem faced by the UK coal industry is that it is not operating on a level playing field with regard to subsidies. Our industry is unsubsidised, whereas the total subsidies to the German, French and Spanish coal industries between 1995 and 1998 were £14.5 billion. Those subsidies are highly unfair and probably illegal. Most European states outside the UK have been accused of subsidising their coal to the detriment of UK producers, although EU rules forbid giving one company an unfair advantage over a competitor.
In response to a Question asked by the noble Lord, Lord Mason of Barnsley, the Minister, the noble Lord, Lord Sainsbury, stated that,we are working with our colleagues in Europe to make certain that action is taken to reduce the subsidies".—[Official Report, 4/11/99; col. 269.]Will the Minister explain what progress has since been made on the issue?
I understand that outside the EU, Poland has been dumping cheap coal in this country. Can the Minister refer that serious problem to his colleagues in the Foreign Office? It should be suggested to Poland in clear terms that as a pre-condition of it joining the enlarged European Community, such practices must cease with immediate effect.
Returning to the UK coal industry, the Government are making a conscious effort to help by imposing a moratorium on gas-fired power stations. Thirty-six applications in the pipeline were frozen. However, as is often the case with the Government, the actuality has been different from the rhetoric. Between the announcement of a new policy in October 1998 and the end of October 1999, the Government approved 16 new gas-fired projects, most notably one of 500 megawatts in South Wales just before the Welsh Assembly elections. The 2,000 megawatts of approvals overall potentially displace 5 million tonnes of coal from the electricity market, the equivalent of two collieries.
The Conservative Front Bench believes in the ending of the gas-fired power station moratorium because it drives up the price of electricity. Even the Labour dominated Select Committee on Trade and Industry stated:We do not believe that this moratorium on Section 36 consents for new power stations will assist the coal industry in the short term … We look to the Government to ensure that the moratorium is lifted as soon as is practicable.".278 Can the noble Lord, Lord McIntosh, give the House some guidance on the timetable for lifting the moratorium?
I want to address other issues with regard to the industry. First, there is the question of the import of French electricity via the French inter connector. According to figures from the RJB mining company, that displaces 7 million tonnes of coal each year. It is astonishing that the Government continue to allow these imports from a country which has failed to liberalise its electricity market as required by EU law.
The second issue that I want to address was brought to my attention by Scottish Coal. It is the plight of Scottish coal being transported to English power stations. According to Scottish Coal, existing contracted traffic flows suffer routinely a 30 per cent reduction in rail freight availability, putting pressure on cash flows and potentially putting Scottish Coal products out of business. Currently, Scottish Coal is short of 10 to 15 trains a week, thus costing the company one-third of a million pounds while RJB is short of 50 trains a week, costing the company £1.5 million. Coal Pro has recently launched a complaint and it is hoped that if the Office of the Rail Regulator can tackle the complaint it will be given every support by the Government.
In summary, we on these Benches recognise that times are very difficult for the coal industry. However, we do not believe in state aid for coal and we wish the unfair subsidy system carried out by France, Spain and Germany to be stopped. We believe that the Government's decision to impose higher emission limits than those agreed at Kyoto will cause serious problems for the industry. We favour more gas-fired power stations being built and we strongly favour an end to the moratorium on gas-fired power stations. I have put to the noble Lord, Lord McIntosh, some questions, and I should be grateful for a reply. My final question is: when can we expect the reform of the electricity pool system, which could be of help to the industry? I look forward to the Minister's response.
§ 7 p.m.
§ Lord McIntosh of Haringey
My Lords, the Government are grateful to all noble Lords who have taken part in this well-informed debate. To have a debate on coal which is well informed and includes a noble Lord from Eton and one from Winchester is, I suppose, not bad. Above all, I congratulate my noble friend Lord Hardy on introducing the debate. He posed me 12 questions to which I shall try to reply as I go along. I shall try to sum up at the end if I can and if I need to, but I have been asked literally dozens of questions. I shall do my best, as I always do, but I shall write to noble Lords whose questions I fail to answer.
The key to understanding the fate of the coal industry and the potential future of the coal industry is to look at it in the context of energy policy as a whole. The key to energy policy is that the previous government did not have one. Indeed, they prided themselves on not having one and on saying that the market unrestricted should govern the future of 279 different fuels. The trouble with that argument was that changes in the relative prices of different fuels at various times—year by year, and sometimes even month by month—made forward planning of energy policy difficult if not impossible. Certainly, the attempt to rely only on prices at any one time as the determinant of the constitution of energy and in particular of electricity generation was a nonsense.
When representatives of the coal industry came to us in 1997 and expressed their concerns about distortions in the energy market, which they said were killing coal, they asked for "fairness, not favours", which I believe is a proper position from which to start. In our response to them in the White Paper on energy policy of October 1998, we set out objectives for the coal industry which deserve to be repeated and emphasised here. We said that the objective should be that the supply of fuel—in particular, for electricity generation—should be secure, diverse and sustainable. The combination of those three criteria should enable fuel to be obtained at competitive prices.
Looking at those objectives, it is clear that that is not in itself a proper platform for the salvation of the coal industry, but it is one on which we can see how a coal industry may survive and how distortions which have damaged the coal industry in the past could be got rid of. Everything that noble Lords have said about the decline of coal and the risks of gas is true. It is certainly the case that the coal industry has declined in the way described; it is true also that in the pits which have survived and in other pits which have not been finally decommissioned, there are long-term reserves of coal under this country. In addition, it is true that the reserves of gas available to this country are limited in their duration. In response to my noble friend Lord Hardy, it is true that Britain will be expected to be a net importer of gas by 2010. We shall have to become used to the right way of describing such figures. I believe that a century ago one said "oughty-one" and "oughty-two"; I do not know whether that is worth reviving.
In response to a direct question from my noble friend Lord Hardy, it is true also that Europe will be a net importer of gas in the not-very-distant future. In the interests of security, diversity and sustainability, we must consider the long-term future of all the fuel sources which could contribute in particular to electricity generation. I shall return at the end of my remarks to our reform programme for energy generation if I have not covered it in the rest of my speech.
It makes common sense to ensure diversity of energy supply. An acceptable level of diversity is part of energy policy, to make it flexible to be able to respond to unexpected events or situations. The contribution of coal to power generation has declined; in 1990, it provided 72 per cent of electricity generation; in 1998, it was only 30 per cent. We do not have a fixed view on what the energy mix should be, or on the proportions of different fuels needed to guarantee security of supply and diversity, but we do not want to see our 280 capacity to produce electricity competitively from coal being eroded by distortions in the market. That is why I talk so often about energy and not only about coal.
That is also why we announced a programme to reform the electricity markets so that all fuels, including coal, could compete fairly. I agree not only with my noble friend Lord Hardy, as I have said, but also with the noble Lord, Lord Ezra, that the prospect of substantial decommissioning of nuclear power stations without their replacement will affect us in the near future.
The White Paper identified lack of competition among generators as one of the distortions of the electricity market. My noble friend Lord Hardy asked about the price paid for the divestment of Ferrybridge C, Fiddlers Ferry and Drax—but I forget the first one he mentioned. That divestment was part of our policy set out in the White Paper to remove distortions in electricity generation. I have no evidence that the high price is such as to encourage the import of coal, but certainly the fact of divestment and the removal of distortions cannot be bad for coal.
The electricity market is now open to competition at all levels. Separation of supply and distribution in the electricity market will be achieved through market forces and regulation, and formalised through legislation which we intend to introduce as soon as possible.
I was asked by my noble friend Lord Dormand and the noble Lord, Lord Ezra, about electricity trading arrangements and, in particular, about the Electricity Trading Pool. We published a blueprint for those on 21st October. The utilities Bill was mentioned in the Queen's Speech; it will be brought forward as soon as possible and it is our intention that the new electricity trading arrangements will be introduced before the end of the year.
I was asked by a number of noble Lords about the stricter gas consents policy, a phrase I prefer to the term "moratorium" used by the noble Lord, Lord Northbrook, because there have been more approvals than refusals. Refusals for gas-fired plants are painful decisions to take because applications for gas-fired plants in many parts of the country are greatly supported by local people. I remember taking part in a debate on Raglan Bay in Wales last year, where the pressure from south Wales—which does not have an excess of electricity generation—for approval for the combined heat and power neighbourhood heating plant was strong. Indeed, Baglan Bay has been approved. However, I emphasise to my noble friend Lord Dormand that 4 gigawatts of capacity have been refused in the 14 refusals, which is not insignificant. It is equal to half of the whole output of RJB Mining and it constitutes significant support for the coal industry. I note what the noble Lord, Lord Northbrook, said officially on behalf of the Conservative Party: that the Conservative Party is against those stricter consents and, therefore, to that extent is against this support for coal.
With regard to how long the policy will continue, the White Paper made it clear that the policy will be relaxed as soon as the Government are advised by the 281 director-general of electricity supply that the reform programme has been undertaken and that distortions in the market have been removed. That does not mean completing every aspect of the programme but, certainly, we must have the new electricity trading arrangements in force before the consents policy can be relaxed. That does not enable me to give a strict calendar date.
I was asked by many noble Lords about subsidised coal and unfairly priced coal imports. Of course, it is true that Germany in particular, Spain and, to a lesser extent, France heavily subsidise their coal industries. Historically, that goes back to the European Coal and Steel Community, which pre-dates the European Community. The levels of subsidy which they give to their coal industries are permitted by the agreements of the European Coal and Steel Community and result from the fact that they were already at a high level from the base date of 1993. As has been pointed out, at that time we were subsidising our coal industry by only £12 million but those countries were able to give subsidies of £3 billion or more, which is still a reduction of the 1993 figure.
The noble Lord, Lord Lucas, believed that there was nothing to be done about that and the noble Lord, Lord Northbrook, asked me about progress on the matter. There has been some progress; for example, with regard to graded anthracite, we have complained about the unfair practices of two subsidised German anthracite producers. In 1998, the Commission requested repayment of aid by the German companies involved. With regard to Spain, our complaint to the Commission has resulted in confirmation that any UK exports to Spanish power stations will be eligible for the same subsidy as that paid for Spanish coal.
I recognise that in many respects we are constrained by our international obligations. The current ECSC agreement comes to an end in 2002. We shall have to negotiate for the most favourable replacement—if there is to be a replacement—of that agreement when the time comes. Again, with regard to the inter connector with France, that is a treaty obligation and there is nothing that we can do about it in the short term. However, so far as concerns the electricity industry in France, we are certainly pursuing the anti-competitive practices which enable France to export subsidised electricity to this country.
I was asked in particular about Polish coal. Noble Lords will want to know that Helen Liddell, the energy Minister, has recently met the Polish energy Minister. We understand that the coal industry will lodge an anti-dumping or anti-subsidy complaint with the European Commission concerning Polish coal imports. I do not believe that it is appropriate for me to intervene in their negotiations on accession to the European Union, but I cannot imagine that this is a matter which will be ignored when those discussions take place.
The important point I make about German, French and Spanish subsidies is that there is no German, French or Spanish coal imported into this country. Even if the subsidies did not exist, there would still be 282 little chance of United Kingdom coal being exported to those countries in competition with unsubsidised coal from other parts of the world. Theoretically, of course, that is enormously important but in practical terms it does not make very much difference to the UK coal industry.
§ Lord Hardy of Wath
My Lords, perhaps my noble friend will allow me to intervene. He will no doubt accept that if those countries did not subsidise their coal industries, the opportunity for those exporting to the United Kingdom would be diverted to the areas where imports are far more competitive than the expensive coal produced in those countries.
§ Lord McIntosh of Haringey
My Lords, that argument depends on an assumption of limited availability of coal from the rest of the world. I am afraid that I do not believe that to be the case. If I am wrong, I shall write to my noble friend. To put the matter into context, less than 5 per cent of UK coal imports are priced unfairly. We simply have to deal as best we can in the real world with the problem of cheaper coal from other countries which is not unfairly subsidised. When my noble friend Lord Varley challenges me to put up or shut up—in other words, to protect the coal industry unequivocally or to abandon it to its fate—I have to say to him, with due respect to his experience in government, that things do not work like that. We do the best that we can. With regard to energy policy, I have said that it is designed to produce a rational economic policy for energy and for electricity generation. One of the benefits of that should, and we hope will, be to benefit the British mining industry.
§ Lord Varley
My Lords, I shall remind my noble friend of what he has just said when the industry has gone. As sure as night follows day, unless something is done pretty quickly, this industry will go.
§ Lord McIntosh of Haringey
My Lords, I have spent a quarter of an hour describing what we have been doing and what we are doing. I know that I shall not satisfy my noble friend, but I must continue as best as I can to describe the facts as the Government see them. Those include having a rational energy policy in which coal continues to play a part. It is our view that with the objectives of security, diversity and sustainability, coal should continue to play a significant part in British energy policy.
My noble friend Lord Varley and a number of other noble Lords expressed the view that the support for coalfield communities was inadequate. My noble friend was wrong to say that the task force has only £10 million. In fact, it has £53 million. However, I acknowledge that, in view of the devastation which has been caused in coalfield communities by the decline in the mining industry, anything which we do for those areas will be inadequate. I could give your Lordships a list of a whole range of initiatives which have been taken, but my noble friend Lord Varley would tell me that they have been "put up" by civil 283 servants. The initiatives are all valuable, but I am not claiming that coalfield communities are what they were when the bulk of the population was in well-paid work in the mining industry. That cannot be so.
I was asked about the UK mining machinery industry. In the time available I can say only that we acknowledge and welcome the fact that the UK mining engineering industry is exercising its skills effectively, not only in sales to this country but particularly in exports. We are doing everything that we can to help that industry to diversify into overseas markets. We have been supporting work by the Association of British Mining Equipment Companies, and the Indo-British Coal Forum is helping us to export British mining equipment to India. There are many other worthwhile initiatives which demonstrate our support for mining engineering.
In particular, I was asked about cleaner coal technology. We value that in its own right. My answer to the noble Lord, Lord Northbrook, is that the Kyoto agreement is not a threat to the coal industry. The issue of cleaner coal technology forms an insignificant part of that agreement, and I do not believe that the noble Lord is right in saying that we are exceeding our obligations under Kyoto. However, I agree entirely with my noble friend Lord Dormand and the noble Lord, Lord Ezra, that cleaner coal technology is an important issue. We set out in Energy Paper 67 this year detailed plans for research and development, technology transfer and export promotion. We are making available £12 million for cleaner coal R&D over three years and we expect there to be more as part of the Comprehensive Spending Review. We are also undertaking more feasibility work on underground coal gasification and accessing coal-bed methane. There is no work that I know of at the moment on liquefaction but I shall write to my noble friend on that point.
We have done a study on the demonstration project for which the noble Lord, Lord Ezra, asked. It concluded that it would not be justified in terms of a direct grant or any other kind of levy. We shall look at that again within the next three years and I shall be glad to correspond with the noble Lord on that issue.
I want to respond to the points made, in particular by my noble friend Lord Varley, about coal pensions. Indeed, there are two funds. The major fund had a 20 per cent uplift in 1997. It is true also that there were very serious deficits in the earlier years after privatisation which were made up by the Treasury. But that was the agreement at that time and it is certainly true that there is a very substantial surplus at this time.
I know that mining communities have been offended by the idea that we should be hypothecating some of that Treasury money to put in to the health plans for the mining industry for dealing with vibration white finger and pneumoconiosis. I understand the offence that caused, but it speeded up the payments and has done some good. I do not believe that that is very different from my noble friend Lord Varley asking me to divert the money from the Treasury into regeneration of the coalfields. It is still hypothecation.
284 My noble friend asked me about concessionary fuel. I am sorry that I cannot answer. As we speak, DTI Ministers are taking decisions on the award of the tender. We shall make an announcement as soon as possible.
I hope that I have shown that, in seeking to reestablish rational energy policies as a whole, we are doing everything that we can to ensure that the coal industry continues to play a part in fuel and energy policy in this country to the benefit of the coal industry and of the country.
§ 7.22 p.m.
§ Lord Hardy of Wath
My Lords, it has been an extremely interesting debate and I am grateful to those noble Lords who have contributed to it and contributed on the basis of considerable knowledge and experience. The noble Lord, Lord Haslam, recognised the need for high productivity collieries during his tenure after the strike.
I certainly hope too that the Government will pay heed to the informed contribution of the noble Lord, Lord Ezra, and in particular to the two proposals which he made. They are modest but they could be of enormous significance.
I am grateful to my noble friend Lord Dormand, with his knowledge of the North East. He referred to the Ellington Colliery. My noble friend will be aware that the last colliery in Durham was closed with, I believe, 40 years of reserves. I hope his contribution will also receive attention.
My noble friend raised the question of gas consents. The Minister referred to that in his winding-up speech. The fact remains that during the last period of Conservative administration, 16 consents were given while in a similar period under the present Government, 32 consents have been granted.
I do not wish to be discourteous to the noble Lord, Lord Northbrook, but I prefer the Etonian to the Wykehamist contribution this afternoon. If we were to burn even more gas without limit, our stocks would not last until 2010. My noble friend was being extremely optimistic in that assessment.
The noble Lord, Lord Lucas, made an important point that strategic consideration cannot and should not be ignored. I agree with the assessment made by my noble friend Lord Varley. We are reaching the point at which action must be taken; otherwise there will be no deep mine industry in these islands. If that is the case, no matter how many initiatives the Government take to assist our superb mining engineering industry, that will go down the drain too. That is not a conclusion which anyone with any sense would wish to occur.
My Lords, I beg leave to withdraw the Motion for Papers.
§ Motion for Papers, by leave, withdrawn.