Coal Industry

Part of the debate – in the House of Commons at 12:00 am on 24th October 1961.

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Photo of Mr William Blyton Mr William Blyton , Houghton-le-Spring 12:00 am, 24th October 1961

We have had a very interesting debate and I congratulate the hon. Member for Willesden, East (Mr. Skeet) on his defence of the oil interests, which was as good as any I have heard. He was actuated not by the overall national interest, but by the oil interests, which are well represented on the Government benches.

We have heard informative and interesting speeches from my hon. Friend the Member for Neath (Mr. D. J. Williams), my hon. Friend the Member for Rhondda, East (Mr. G. Elfed Davies), and my hon. Friend the Member for Lanarkshire, North (Miss Herbison). I agree with my hon. Friend the Member for Lanarkshire, North that the Minister's reference to Scotland and the pending legislation about the finances of the Coal Board mean that the Scottish industry can look forward to a very bleak time. If we are wrong, I hope that the Parliamentary Secretary will dispel our fears.

The hon. Member for Kidderminster (Mr. Nabarro) is not here. We wholeheartedly agree with the Minister's decision about the import of coal on the application of the Steel Company of Wales and a cement company. Here are two industries which are protected by tariffs and which wanted to import coal to the detriment of the British industry. If we had attempted to remove their protection, they would certainly have fought tenaciously. It must not be forgotten that neither the steel nor the cement industry cried loudly at the fuel policy when we were importing coal at a loss of £3 10s. a ton and selling it to them at the inland price. I regard their action as unpatriotic.

Many years ago I was told by a businessman that there was no patriotism or sentiment in business, and I remember that at the Bank Rate leak inquiry one man said, "It may be unpatriotic to do this, but it makes sense to me." I do not want to spend too much time on this, but I regard the applications by the steel and cement industries as rank impudence in the light of the history which I have outlined.

The difficulty I always find when we debate the National Coal Board's Report and Accounts is that the debate is held nine months after the end of the financial year, and during that time many changes can take place for better or for worse. As a result, these debates cannot be related solely to a Report which is at least nine months old.

When we look at the Report for 1960, we must look at it in the light of events over the last few years. This period has been one of severe depression in the demand for coal, and as a result the industry has been faced with serious problems. The consumption of coal has fallen by over £33 million. I remind the hon. Member for Willesden, East that there was a comparable fall in demand between 1929 and 1932 when this was a private industry, and that then 300,000 miners were put on the dole and the rest of our people were on short time, doing three or four days a week in the pits.

It is to the eternal credit of the Coal Board and those associated with it, and to the Ministry, that a tragedy like that was avoided in similar circumstances in the last few years. We have also had to face a policy of gradual reduction of deep-mined coal and of opencast production, and to refrain from large-scale closures which would have caused valuable reserves of coal to be lost forever.

It is generally accepted that oil has emerged as the greatest competitor to coal, but there are other factors apart from oil. There has been an increase in coal efficiency; a fall in the demand for gas and coke compared with the national output; and a change in the basic pattern of industrial output. It is clear to anyone who looks at them without bias that almost all these factors were outside the control of the Coal Board.

It is, therefore, wrong to hold the Board responsible for the decline in its fortunes. In fact, to me it is remarkable that the Board, without any financial help from the Government, has succeeded in minimising the bad social and economic effects which such a fall in demand would normally have caused in this industry.

Instead of sacking miners and closing pits, the Board chose to stock coal. By the end of 1959 it had stocked 36 million tons, and cut down its opencast production. This was a costly business. In 1959, the stocking of coal cost £27 million, and in 1960 it cost £12.·5 million. No Government help was given to maintain these stocks. The cost was borne by the Coal Board to prevent mass unemployment and to safeguard the future capacity of the industry.

During this period, by a planned policy of reducing the number of men coming into the industry, rather than one of wholesale dismissals, we were able to offset the social effects of a cut in the labour force.

The Board refused to be stampeded into sharp cuts in production, and, nevertheless, succeeded in bringing the stocks down by 6½ million tons last year, and will bring them down by another 7 million tons this year, thereby being assured of an improvement in its finances.

During the last few years some people have raised a considerable cry for the closing down of all the uneconomic pits and the working of only the profitable ones, thereby bringing down our capacity to between 150 million and 170 million tons. These people never concern themselves with the social consequences, or consider how this country will find the foreign currency to replace the coal by imports of fuel. We all know that since the war our greatest problem has been the recurrent balance of payment crisis. Those critics who advocate the closure of the collieries have always put forward the industry's financial position in support of their argument.

I want to put the matter in perspective. In the fourteen years of nationalised mining the Board has made profits, before taxation and interest charges, of £245 million at the collieries and £75 million on ancillaries and opencast work. During that period imports of coal have cost the Board £74 million, and the stocking of coal has cost nearly £40 million. This has been done to prevent widespread unemployment, as I have said. The profits have, therefore, been reduced, by this alone, to £206 million over the period. Tax liability and interest charges on capital have amounted to £300 million, which has been paid to the Minister, and a deficiency of £78 million has now accumulated—about the same figure as that which we lost on imported coal.

Last year the profit was £20 million, and after paying the Minister £41 million by way of interest on capital there was a deficiency of £21 million. Last year, too, there was an operating profit of 1s. 8d. per ton, but interest charges turned that into a loss of 2s. 4d. per ton. The Board has said that it hopes to reach an all-clear position by 1962. I think that it will take longer than that to wipe out the accumulated deficiency. I hope that the Board succeeds, and I wish it well, but I do not share its optimism about being all-clear on this year's balance sheet. Taking everything into consideration, and I put this very forcibly to the Minister, the Board has done exceptionally well in the circumstances that I have illustrated, in connection with its accounts.

I sat for twelve months as a member of the Select Committee in investigating the gas industry. We spent many hours under the capable chairmanship of the right hon. Member for Blackpool, North (Sir T. Low). It would not be right, nor would it be possible, for me to deal today with the Select Committee's Report on that industry. Therefore, I shall deal with it only in relation to the important methane problem and the Lurgi plant, to the extent that coal is involved. The future of the gas industry rests on lowering its costs and producing a cheaper therm to complete with other fuel.

My grievance with the Gas Council is that for years it has been spending more money on research on the gasification of oil than an the development of the Lurgi process. I wish to tell the House how this came about. In the difference of opinion on coal prices in 1955 was started the breakaway from the use of coal. After all, prices are fixed under a gentleman's agreement and they must have the blessing of the Minister. We recommended some years ago a form of prices for the Coal Board subject to an Order in Council upsetting that decision in the national interest. It must be remembered that the Board, by statute, is prevented from discriminating among its customers, unlike oil companies who can give rebates to their customers.

I have always taken the view that nationalised industries should have the same freedom as have commercial undertakings to fix their prices, subject to the overriding question of the national interest. We must remember that in many of the nationalised industries, because the Minister has refused to sanction the prices at the time when they were applied for, or refused to give tariffs, the boards have lost money. This has happened when political expediency rather than commercialism has determined the Minister's actions.

There is no doubt that the relations between the Gas Council and the Coal Board have not been at all happy over the last few years. There was a long disagreement on coal prices and there was disagreement about the building of coke ovens. Now there is disagreement over the importing of the methane product. In the free-for-all competition which exists, I do not expect the Council and the Board to be genial towards each other while they are competing against each other. But I think that it is very important that they do not act in a manner which is detrimental to each other. It seems to me that what happens in this industry is what set the march away from coal to the gasification of oil.

In 1959, the plant for the gasification of oil produced 130 million cu. ft. By 1965, the figure will be 340 million cu. ft., an increase of 250 per cent. Compare these figures with the Lurgi process. One plant with a capacity of 30 million cu. ft. and another with a capacity of 40 million cu. ft., both uneconomic in size. That is the total available in 1965–66. The coal-based gas will fall from 87 per cent. in 1960 to 71 per cent. in 1966. Gas made direct from coal will fall from 61 per cent. to 49 per cent. in 1966, and if the methane proposal is sanctioned, the total quantity of coal-based gas will drop from 71 per cent. to 69 per cent. by 1966. So the outlook in this connection is anything but bright for coal.

If we join the European Coal and Steel Community we might be sacrificed to the discrimination which would result in favour of Saharan oil products and our coal and steel industries would be directly controlled in matters such as planning investments, labour mobility and most certainly in exports. I say to the Minister that if we have to put British coal on the Continent at 32s. a ton less than our inland price the Coal Board will start carrying another loss. No doubt there will be opportunities in future to discuss the economics of this matter, so I shall leave it there at the moment.

What I want to impress on the Minister is this. We know that the Coal Board is engaged in a joint study of Lurgi plants and that tenders have been got out now in relation to that. I believe that if Lurgi plants can replace present methods of making gas by carbonisation, about 20 million tons of coal per annum would be required to produce the present annual output of gas. If we can be successful in this venture it is likely that that 20 million tons will be increased by increased gas consumption. We have never opposed the increase of refinery tail gases, but until investigation has proved in firm figures that Lurgi cannot produce gas as cheaply as methane the Minister ought not to allow this importation to take place.