European Community (Coking Coal)

– in the House of Commons at 12:00 am on 21st March 1977.

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8.32 p.m.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I beg to move, That this House takes note of Commission Document No. R/2639/76 and of the comments in the Fourth Report of the Select Committee on European Legislation, &c. but is mindful that the proposal is only one of several aimed at providing long term security of Community energy supplies which as a whole are likely to be beneficial. This is a very timely debate, and although it is specifically about the European Coal and Steel Community coking coal scheme, this is very relevant to the steel industry, and therefore it may be helpful if I broaden our discussions to other matters of EEC energy policy. The Scrutiny Committee has expressed an interest in EEC energy policy, coal burn and coal stocking, and also the House is very interested in JET.

Next week, on 29th March, the Energy Council meets in the morning and the Research Council in the evening of the same day. As I shall be in the chair for the Energy Council, this debate provides an opportunity for me to outline the Government's approach.

Of course, JET is not in any case on the agenda, because that subject is for the Research Council to deal with, and the Minister of State, Department of Industry will be chairing that meeting. However I shall take the opportunity to tell the House that the Government are taking very vigorous action to canvass the cause of Culham, because we believe that there is a very strong case for it, and naturally we hope that we can persuade Ministers of the Research Council to share that view.

Before I come to the particular proposals that we are discussing I shall say something about the development of EEC energy policy.

Photo of Mr Tom King Mr Tom King , Bridgwater

The Secretary of State has introduced a subject that is not strictly within the coking coal situation—that of JET and Culham. We do not quarrel with that. What is the time scale, as the Government see it, in relation to contracts of employment already in existence for personnel at Culham? A decision on the time scale is imperative.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I fully understand the hon. Gentleman's intervention. In referring to that matter I was only trying to complete a range of the issues that are of concern and interest to the House. We are anxious to make rapid progress. The Commissioner recently made a statement suggesting that this matter should be settled urgently, and I agree with him. However, I cannot answer the hon. Gentleman's question specifically, except to say that we hope that we shall obtain an early decision.

I hope that it will be convenient now to deal with our approach to energy policy as a whole. There is no doubt that for the whole Community, as for the United Kingdom, a successful approach to energy policy is necessary, given the dependence of the Community as a whole on world fuels. Little progress has been made in the past and part of the explanation may lie in the fact that the approach was centralised, whereas these issues are extremely important for member States and their interests do not always correspond.

Therefore, I have tried a consultative approach in making two tours to capitals—one in the autumn of 1975 and, secondly, as President of the Council of Energy Ministers in January of this year, when I sought an understanding of the position of Ministers on matters that were coming up for decision. I urged that we should try to make progress on the building block principle of finding the points that are agreed, seeking informality in our manner of dealing with these matters, primacy of ministerial control, and a measure of realism in our approach.

We now have an agreed work programme. I suggested to my colleagues, following my recent tour of various capitals, that we should consider a more open policy of discussion within the Community on a matter that concerns everybody—namely, the conservation of energy, on which papers have been submitted by the French and on which there is great interest world wide.

My argument is one with which the House will be familiar in domestic energy terms—namely, that we cannot achieve a successful policy without a full programme of consultation and without public opinion being aware of the choices. Since nobody is arguing for federal control of energy resources belonging to member states, our best chance of harmonising our interests lies in the methods I have described.

The view expressed by all the Ministers whom I have met recently is that we should make an early approach to the Carter Administration in the United States. I hope to see the United States Secretary of State when he comes to London shortly, and in two weeks' time, when I visit Washington, I shall see Mr. Schlesinger, who has been given responsibility for establishing a Department of Energy in the United States.

As for Britain's position on Community energy policy, let me emphasise that we are the largest energy producers in the Community. I have given the figures to the House on other occasions, but I shall now refer to them briefly. A figure of 27 per cent. of all investment in energy in the Community is British, 33 per cent. of all investment in coal is British, 51 per cent. of all investment in oil is British, and we have unrivalled experience in operating nuclear power stations. Any British Minister is bound to be taken seriously at the Energy Council, as indeed British Ministers are.

We have an interest in seeing that our position as the major producer is given due respect and regard. We have an interest in the investment and the protection of that investment. Quite clearly, we have an interest in sharing the cost of research and development, in as much as that can be achieved. JET is one example of that.

The specific interests are well known to those who follow these matters. The first is the minimum support price, and we have urged our case strongly in the Council of Ministers. Although the matter has not yet been agreed, I have pointed out to my colleagues in Brussels that, with our heavy investment in oil and in coal, a support price is a necessary and reasonable objective of Community energy policy.

We also have a great interest in opening up our market for coal in the Community. The Community is a historic market for British coal and we should like to see it reopened and developed. Therefore, we have an interest in the imports of coal that are making it difficult for the Community to develop greater independence in coal production and use. We are interested in stimulation of the coal bum and in the conversion of power stations to coal burning. In the interim we are interested in a proper coal stocking scheme. We are also concerned—and this is of international interest—in the development of a conservation programme, since there is a massive gain to be made here for every country in the Community and elsewhere.

Every member State with which I have had discussions has expressed an interest in the Euratom loan scheme that was proposed a year ago, but not then agreed as part of the package and on which we have a reservation, as on coking coal itself. The formation of a policy has been slow, although we reached agreement in December on emergency sharing provisions in the event of an oil shortage.

We are now looking for proposals to reduce our dependence on imports and to stimulate indigenous fuels. We are awaiting proposals from the Commission on stock provisions, on provisions for stimulating coal burn, and on the protection of investment—and I should include MSP—but none of these is ready for the Council meeting next week.

I now turn to the coking coal proposal that is the reason for tonight's debate, but I hope that the sketch that I have given of the Government's approach will make it easier for the House to understand what I have to say about coking coal.

At present the ECSC provision for coking coal is based on a scheme that allows protection subsidies on coking coal against American and Australian prices and a sales subsidy when there is a transfer of coking coal across the borders. Almost all of this benefits the Germans. It is worth about £20 million a year and is paid for by a production levy and by some contribution from ECSC funds.

There is no requirement that the British Government should pay anything towards the scheme, but the British Steel Corporation is levied under the scheme. That levy at present goes to the British Government under the arrangements that were made in 1973 and it does not go across the exchanges to Brussels.

Because the scheme was thought likely to be temporary, it was intended that the rate of support would lessen during 1977 and finish by the end of December 1978, but it has now been found necessary to continue the support. The Commission proposal that we are now discussing is that the scheme should be extended to 1985, that the annual tonnage covered should be raised from 15 million to 18 million and—this is of great concern and a matter on which the BSC has made representations—that the United Kingdom contribution at present paid mainly by the BSC, with smaller amounts from Ford and GKN, should be diverted to Brussels. That would mean that £2 million would be transferred across the exchanges through the Treasury to the Commission.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

Since it is suggested that the tonnage should be raised from 15 million to 18 million, will not the £2 million be updated by that amount?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

That is a marginal matter. It is important that while in 1975 it was agreed that the British contribution would be paid to the Government by the BSC, it is now proposed that it should be diverted to the Community.

Photo of Mr Julius Silverman Mr Julius Silverman , Birmingham, Erdington

Will not the Federal Republic be almost the sole recipient and beneficiary of this arrangement?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I said a few moments ago that the Germans were the main beneficiaries under the coking coal scheme. It was agreed that the tapering off, which was to begin in January 1977, would be stopped and that we should have a little more time to consider the proposals.

The attitude of the United Kingdom is that there is no great significance for us in the extension to 1985, although the extension alone would mean that the BSC, Ford, GKN and others would continue to pay money into the Treasury. The BSC has expressed a vigorous view on this and it is contained in an annex to the Scrutiny Committee's report. That is why it has urged us to look critically at any extension of the scheme.

The increase of the annual tonnage with the payment of £2 million to Brussels, to come to the point of my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman), is a serious matter for us. The BSC does not benefit much from the scheme and the proposals would add a burden across the exchanges.

Since our situation is still as it was in 1973, we see no reason to change the existing arrangements. However, there are factors which have to be taken into account, and that is why I went a little broadly in my opening statements.

If we are to consider Community energy policy—and, although I have no experience of other councils, the position may be similar there—there is an element of bargaining or package dealing. We are concerned about certain other matters that would be of specific benefit to us. One is stocking aid for coal, where it is necessary that the coal industry should be able to stock coal pending development of its markets and the recovery of Western economies.

Secondy, and of equal long-term importance, it is necessary to take advantage of any provisions for Community support for conversion to coal-burning capacity. Thirdly, and even more important, at least in the short term, we need some import licensing arrangements to allow us to monitor cheap coal imports into the Community.

We know that these proposals are up for consideration and we hope that the Energy Council will find it possible to reach an agreed line. It will not be possible for progress to be made on all these matters next week, though I hope that we shall make progress at the second Energy Council meeting that I shall be chairing in June.

I invite the House to understand that my attitude towards the coking coal arrangements that will come up for discussion next week is conditioned by general reaction to the possible development of other schemes which would be to the benefit of the United Kingdom. That is the spirit in which I intend to approach the Council meeting on 29th March.

There is bound to be an element of give and take in all these matters and I very much hope that there will be good will in the spirit that I have tried to establish and in the harmonisation of approach between this country and other member States and that there will be a constructive attitude to the needs of the United Kingdom in the development of policies. Subject to anything that is said in the debate, I hope that the House will endorse that general approach.

8.50 p.m.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam

I welcome the fact that the Secretary of State will be presiding over the Energy Ministers' meeting next week and that he has chosen the debate on this motion, particularly Document R/2639/76, to look at this problem in a wider context.

I have been asked to speak for the Opposition as a member of the Energy and Research Committee of the European Parliament. I assure the right hon. Gentleman that he was welcome at that Committee's meeting when he came to Brussels. I hope that his example will be followed by other Ministers. Of course, we have had former Conservative Ministers talking to committees of the European Parliament about the problems that they face. Therefore, I speak not only for the Opposition, but as a member of a Committee that has been dealing with these issues in the European Parliament.

To a certain extent I must and intend to speak from a Community point of view, as the right hon. Gentleman did, and to look at the problem in the wider context. Of course, I might also look at the matter from a steel point of view, as I represent a division of Sheffield. But the Sheffield blast furnaces are rapidly vanishing to coastal regions where most coking coal is used.

There have been debates on energy policy and recently on a minimum price for oil on the Giraud Report in the Assembly of the European Parliament. No doubt the Minister has studied that report.

We have before us a document dated 4th November. I shall concentrate on the narrower side first and then respond on some of the issues that right hon. Gentleman has put to us.

This debate is of value. I praise the work of the Scrutiny Committee. I hold the view that the scrutiny of European legislation is second to none in this House and country though certain Mem- bers from other member States may slightly disagree with me. The work of the Scrutiny Committee has brought home to me the fact that some aspects of this problem were not considered by the Energy Committee of the European Parliament because it did not have the full benefit of the wisdom of the British Steel Corporation last year.

Although the scheme that we have been operating for some time makes sense to the Community, I accept the view expressed by the Minister and the BSC that it is of no advantage to Britain, the time scale is interesting. On 11th November the Commission asked the European Parliament for its views. On 25th November M. Krieg was appointed as rapporteur, or draftsman. On 30th November the Energy and Research Committee, which the Minister visited, gave the proposals a favourable passage. I was present at that meeting

When we looked at the proposal, several points were brought up. We referred to the implementation of energy guidelines drawn up by the European Council in December 1975 and to Community guidelines, which stressed the need for a system of aid for coal and coke. The Parliament had requested the Commission to ensure that the current subsidy schemes, which had proved successful in the Community, should be extended. Therefore, as a Member of that Parliament learning of these doubts now I appreciate the value of the Scrutiny Committee.

In the report a difference was made between two types of aid: production aids at an annual rate per coalfield and aids for the sale of coal. The difference has been stressed subsequently by the British Steel Corporation.

Amendments were made to a number of articles in the report by M. Krieg and the matter was referred to the Council and to the European Parliament forthwith. That open dialogue and consultation with the European Parliament by the Council and Commission is improving and is to be welcomed.

The Committee on Budgets—the noble Lord Bruce of Donington was acting chairman—pointed out that the estimated cost of the proposal before us would be reflected in an increase in the special fund for inter-Community sales aid from 30 mua to 36 mua, which is probably to what the Secretary of State referred. But the Budget Committee of the European Parliament approved this as well. This went through the European Parliament on 17th December. We should all support the idea that we should look at this again and decide on an overall perspective what is the best way of handling it.

I return to the subject of sales aids, which the BSC does not like. As the Secretary of State pointed out, these are the difference between the subsidised costs of Community coal at pits and the cost of imported coal at steel works distant from Community pits, and this mainly involves across-frontier sales. This applies particularly to steel works in Holland, France and Italy. Outside sources of supply include United States and Australian coal.

There is no green pound for these calculations. Payments are made in units of account. As the pound has declined, the BSC has told me that the burden on the BSC has been that much more severe. The Secretary of State has already referred to the agreement made at the time of British entry into the EEC whereby, because the NCB sells and the BSC buys no coking coal on the Continent, it was agreed that on entry the United Kingdom should be part of a scheme for production aid purposes that would effectively exclude sales aid. This was agreed when we entered the Common Market. There is no contribution from the Government to Community sales aid funds, and the BSC levy contribution is paid not to the Community fund but to the Government. It was understood that the BSC levy should be recycled to the BSC. It has now ceased, on the insistence of the Commission, which creates some urgency.

Photo of Mr Julius Silverman Mr Julius Silverman , Birmingham, Erdington

It would be wrong to say that it has now ceased. It will cease if the new legislation comes into operation.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam

No. I understand that it has ceased already. Perhaps the Secretary of State can confirm this. That was the information that I was given. Perhaps he can clarify whether it will cease.

Conditions in this country are almost totally different from those on the Continent. I agree that we should be subsidising the German Government and other Community steelmakers. Therefore, this should be looked at again. With coking coal Britain has an advantage in being almost entirely self-sufficient, although 1·3 million tons was imported last year, of which the major proportion came from the United States and Poland. An examination of the payments indicates that Community countries other than Britain would pay 16½ million units of account and receive 27 million units of account, so the other Community countries do considerably better than we do.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

The hon. Member for Sheffield, Hallam (Mr. Osborn) prefaced his remarks by saying that he would be supporting the case in favour of steel, but everything that he has said has been against the steel point of view. He said that the Opposition would support it.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam

The Opposition are supporting the Secretary of State's line, because he is renegotiating the proposals that have gone through. The Secretary of State knows perfectly well that, once a measure has gone through the European Parliament, it is then looked at by the Council of Ministers.

Had the British Steel Corporation gone to the European Parliament and explained the point of view put to the Secretary of State for Energy when the matter first arose, and had the Corporation given Members of the European Parliament from this country the information that it has given the Select Committee in the last few weeks, this matter would have been looked at more closely then.

The problem is how better to make use of the dual mandate and ensure that European Members from the British Parliament balance national, or even local, interests against Community interests.

The British Steel Corporation and the other industrial groups may realise that they do not necessarily have to go to the Commission only and may think that they can go to our Ministers instead. So they feel that they do not have to go to the Economic and Social Committee with their views, but there are, however, 36 Members of this House and of the other place who are able to represent their views in the European Parliament. Had those groups represented this point more forcefully to us at the time, we would have discussed the matter with the German and French Members.

But, as the Minister pointed out, coal for coking presents problems, and the BSC is very anxious to widen its sources of supply of coking coal from this country so as to ensure adequate supplies. The developments by the British Steel Corporation, such as that at Normandy Park steelworks at Scunthorpe, using Phurnacite-type fuel, should be pursued.

The Minister says that he will look at this matter again in the Council of Ministers. I hope that he will send it back to the Commission and that the Commission will put revised proposals both to the Ministers and to the European Parliament, and that after that debate the members of the Committee will take a fresh look at the situation.

In his wider appreciation the Minister pointed out that we are as dependent on the oil-producing countries as we were three and a half years ago. He referred to the importance of the nuclear programme, a subject which was debated earlier this evening. There have been cut-backs. The aim was to have had a 200 GW programme. It is now possibly 85 GW and this could ultimately be a programme of 130 or 140 GW. That means that we must look to conservation and to geothermal and solar energy. Alternative energy sources must be considered. My colleague Senator No é from the Italian Parliament has carried out a report on solar energy. Conservation has been considered by the Commission.

If the Secretary of State can accelerate harmonisation so that we achieve common standards I should welcome that. Mr. Springorum, the German Chairman of the Energy and Research Committee, produced on 10th June guidelines for a Community coal policy. I presume that the Minister has received this. Mr. Springorum wanted to stabilise the market for hard coal and deplored that hard coal production was falling in the Community. We are faced with that problem in this country. He wanted aid for coal to be made obligatory, not optional. That report and the report by Mr. Burgbacher on stockpiling are most important.

The Minister called for us to make the best use of our energy resources. The Community document has been discussed and will be the subject of a report by Lord Bessborough, who is a member of the Energy Committee, on the funds being made available to provide inducements to the Community's electricity producers to put in operation some 300 GW of coal-fired production by the early 1980s. Lord Bessborough is dealing with the question of 30 per cent. grants spread over a shorter period. These are all part of the measures concerned with the use of coal.

The Secretary of State has been President of the Energy Research Committee of the European Parliament. It is therefore important that hon. Members should have his views. I am grateful that he has put them forward. The right hon. Gentleman referred to JET. That subject hag been before the Committee. The Commission reached a decision a year ago. I welcome that the Minister toured the capitals in the autumn of 1975 and again this January to see what were the requirements of the various members. Perhaps there is other work that we could study, such as the use of tidal energy and the use of hydrogen as an energy carrier. I welcome the Secretary of State's forthcoming talks with Mr. Schlesinger, because, through the International Energy Agency, it is essential that, at a high level as well as elsewhere, we should know what both the Americans and the Canadians are doing and that they should know what we and the Community are doing.

The right hon. Gentleman has rightly stressed how much of Britain's energy supplies come from its own resources. He has discussed the importance of the minimum support price for oil. There have been differing views about that. Mine were made clear in the debate in the European Parliament—the rapporteur was a M. Giraud. They are that to a certain extent the minimum price support is irrelevant provided we are in world surplus.

My hon. Friends have differing views on the matter, but in the Energy Committee of the European Parliament we have tended to take the view I have expressed, because whatever investment has gone into Continental Shelf oil must not be undermined by commercial practices, whether from established oil-producing countries or, perhaps, some of the member countries of the EEC which would benefit from the purchase of cheap oil at the expense of our investment. This is a complex issue.

This debate is of value and an experience because it highlights the importance of the Scrutiny Committee and of the importance for industrial groups, whether nationalised industries or in the private sector, to be able to make their views known to the 36 British Members of the European Parliament in good time. I hope that the Secretary of State will now take steps to ensure that that happens.

9.8 p.m.

Photo of Mr Julius Silverman Mr Julius Silverman , Birmingham, Erdington

In the absence of the right hon. Member for Bournemouth, West (Sir J. Eden), who is Chairman of the Scrutiny Committee, I, as acting Vice-Chairman, have been asked to raise this matter and explain the Committee's point of view and why we published the paragraph we did.

The hon. Member for Sheffield, Hallam (Mr. Osborn), whom I thank on behalf of the Scrutiny Committee for his kind words about our work, has tended to broaden this into a general debate on energy, particularly energy conservation. The Committee has submitted to the House, apart from this instrument, four other documents for debate—one instrument and three consultative documents—which will allow the House to debate the issue of energy and energy conservation in the EEC in a much wider context than this debate. The Committee was concerned in its deliberations solely with this instrument, however.

The major evidence that we received, apart from the evidence of the Department, was a communication from the British Steel Corporation, and I think that it is proper that I should read it, because it sets out the Corporation's view perfectly clearly, and if it is true, as the Minister says, that this must be considered as a sort of package with other energy matters and it is necessary for the Government to make concessions on the matter, at any rate the Committee thinks that the Government should realise how serious this point is and what is being given away in exchange for what we are getting for it. The document from the BSC puts the case and the history clearly. It says: The Energy Ministers of the Community are meeting in Brussels on Tuesday 21 December to consider proposals for a number of decisions in the Energy field, including an extension and modification of the current ECSC coking coal subsidy scheme. If any of the various proposals in respect of the scheme now before the Council of Ministers were to be adopted the financial consequences for the British Steel Corporation would be serious.The Corporation has no objection to that part of the scheme which authorises Governments to subsidise production of coking coal. That presumably means that it has no objection to the present situation being extended. Our concern is with the second part of the scheme which provides for a Community fund, financed partly by Governments, but mainly by a levy on steelmakers, from which sales subsidies are paid on coking coal delivered across frontiers to steelworks distant from the pits.The origin of this scheme long pre-dates UK entry into the Community; it was conceived at a time, before the oil and energy crisis, when some system of Community sales aids may have been desirable in order to make Community coking coal competitive with the much cheaper imported coal.In the new circumstances following OPEC and its aftermath, the scheme may still serve a purpose in helping to maintain Community coking coal production at the desired level. But what is absolutely clear is that in no real sense has the system of sales aids any relevance to the conditions which prevail in the UK.The NCB sells no coking coal in the Community; whilst the BSC purchases almost the whole of its requirements from NCB. I interrupt that to say that I think the total amount of our coal imports is just over 2 million tons, of which only a part is coking coal and practically none of this comes from the Community; it comes from third countries. Basically, therefore, conditions in the UK make it unlikely that this country will ever benefit from the Fund; and, as in the past, the principal beneficiary can only be the Ruhr coal industry, and indirectly the German Treasury.The special position of the UK in fact was fully recognised in 1973 when the scheme in its present form was negotiated in the Council of Ministers. Under an arrangement effectively removing the UK from the scheme, the British Government was exempt from making any contribution itself to the common subsidy Fund: BSC was required to pay a levy on coking coal consumption on the same basis as other Community steel producers; but it was agreed that the money should be paid not into the Community Fund, but into a special account in this country, and the proceeds were made over to HMG. The 1973 agreement in the Council of Ministers said nothing about the disposal of the money accruing to the Government, but it was understood by all concerned, including the Community steel producers, that the logic of a special UK arrangements required HMG not to pocket the money but to recycle it back to BSC. HMG acted accordingly and arranged for the money to be returned to the Corporation via the NCB.Unfortunately, however, this recycling arrangement has now come under attack from officials in the Commission who deny that it was ever the intention that the money should be refunded to BSC. They maintain that this puts the Corporation at an unfair cost advantage vis- à-vis its competitors, and that the recycling constitutes therefore a Government subsidy contrary to the Treaty of Paris. They insist that in future the BSC must be treated no differently from other producers in respect of this levy.The various proopsals for extension of the coking coal subsidy scheme now before the Council include one from the Commission which would put an end to the UK special arrangement in its entirety. But the proposal which seems to command most support is that put forward by the German Government. They are naturally keen to renew the scheme, and are prepared to continue to give the British Government a special position; but not however the BSC. Under this proposal the British Government would continue to be exempt from making the contribution to the Fund; BSC would continue to pay the levy into a special account in the UK; HMG would be free to use the money for any purpose except because of the Commission's objections, for recycling to the Corporation.If the Corpoation has to subsidise anyone, clearly it is better that its own Government should be the beneficiary rather than the German coal industry, but any scheme which is set up to subsidise the Community coal industry and whose result in the United Kingdom is to require British Steel Corporation to subsidise its Government must be inherently absurd and requires radical review. The absurdity could perhaps be tolerated if the price of Community solidarity were to be small. But the amount involved is substantial —the levy on coking coal consumption by British Steel Corporation amounting to about £2 million a year, on top of the steel production levy which currently costs the British Steel Corporation £7 million a year. That makes £9 million in all.

The letter continues: In our present financial difficulties we cannot support an additional cost of this magnitude. We are strongly of the view that any extension of the scheme should be on the basis of: —

  1. (a) full United Kingdom exemption from the sales aid aspect of the scheme, the Minister exercising his right of veto under Article 95 of the Paris Treaty if necessary;
  2. (b) failing this, a clear understanding by all concerned, including the Commission, that in one way or another Her Majesty's Government must be allowed to channel money back to the Corporation",
which, of course, is the present situation.

That forthright and clear letter, which sets out the position both historically and economically, is based on three points: first, that the proposed scheme is unfair for the British Steel Corporation; secondly, that the United Kingdom is in an entirely different position from the rest of the Community and the position there is irrelevant to the situation in the United Kingdom; thirdly, that it would seriously erode the competitive position of the British steel industry in an extremely difficult situation. Those are the views of the Corporation, and those were the views that the Scrutiny Committee had on board in making its presentation to this House, in recommending this matter for debate, and in publishing the paragraph that it did.

We as a Committee appreciate that here and there the Minister may have to negotiate, that there may have to be give and take, and that, in substance, a large part of Community legislation is legislation by negotiation. Nevertheless, it seems to me that, whatever advantages the Minister may get from other fields of energy association, this matter should be dealt with separately.

Incidentally, I say in passing that I wonder whether this is a matter of energy. In substance, coking coal is not used as a source of energy in the steel industry, but is an essential raw material in the manufacture of steel, and possibly it comes outside the question of the energy arrangements. It is something different, which is probably why the Committee dealt with it separately.

I have no doubt that during the 12 months that are available for reflection and before further negotiations the Minister will pay due attention to the serious views put forth by the British Steel Corporation and by the Scrutiny Committee.

9.19 p.m.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

I welcome the debate and, indeed, the suggestion by the Secretary of State and my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) that this subject needs to be considered in a wider context. I pay tribute to the Scrutiny Committee for its work, and, like the hon. Member for Birmingham, Erdington (Mr. Silverman), I wonder why this matter should be looked at in an energy context as opposed to an industry one. That is a matter that I should like to consider in some detail. I think that this wider view is important.

I realise why the British Steel Corporation should seek to get the best possible deal that it can for itself. It would be failing in its duty if it did not do so, but the Secretary of State, as he goes into a period of negotiation, will, I hope, take a wider view of this subject. As one who, as a member of the Select Committee on Nationalised Industries, has just returned from talks with the Commission and with the Belgian and German steel industries, I felt it right to give some views which from my standpoint seem clear both as to the Commission's attitude and as to that of other European steelmakers in looking at the future of coking coal both for the British Steel Corporation and for the European steel industry as a whole.

The Secretary of State struck the right note when talking about the factors which have to be taken into account. Paragraph 3(1) of the document contains the words: As regards coking coal, this involves firm, long-term commitments on the part of the iron and steel industry. This is the context in which we should look at this subject and it was the theme of the hon. Member for Erdington. This is the point at which we should try to look for a moment in a wider context. I hope that in replying the Secretary of State will pay some attention to my questions.

In passing, I declare an interest as one who started his life working in the coke ovens. This is a privilege which, I believe, is shared only by the hon. Member for Redcar (Mr. Tinn), who is a Government Whip. The whole future of the coking coal industry depends on the way in which the British Steel Corporation operates its coke ovens and the way in which it will operate those ovens in future in relation to other European developments. The first new feature we face is what I detect to be the increasing rationalisation of production facilities within Europe.

It is noticeable, as one travels around, that there are out-of-date coke ovens in operation in various European plants. By the same token, and this is the way to look at these matters in context, whatever the immediate short-term argument may be about the British Steel Corporation and the levy, we must not forget that in the past three years the BSC has been able to draw £246 million in loans from the Commission on favourable terms with guarantees as to the foreign exchange situation through the Treasury. That sum of money has provided a substantial underpinning for construction of new coke ovens, which we welcome. These are part and parcel of the balance which we must strike.

If we look at the way in which the Community is moving towards product specialisation, it is important to decide where Britain will stand as a coking coal producer over the coming years. There are various other factors which will bear upon this. First, if we look at the situation as it stands, it is true that we depend almost entirely on imports of coking coal. We must do so until we get round the problem of the high ash content of our own domestic supplies. That situation is also true for other European steel manufacturers who produce coking coal. It is my contention that there will be opportunities in the future, certainly within the period envisaged in the agreement, for this country to be an exporter of coking coal. If we ignore the fact that we are an island with coastal works, we are ignoring one of the major advantages open to us within the Community.

I would have liked to hear more of some of these broader issues. I accept that the Secretary of State has departmental responsibilities. I am rather concerned about what the input of the Department of Industry is. On the technological level—having touched on finance and marketing—this country now has a direct stake in the direct reduction process. At Hunterston we are going ahead with ideas which will substantially reduce our offtake of the normally produced pig-iron and eliminate the use of coking coal. To that extent there is a definite interest in this country in the opportunities to sell and export coking coal, which is possible. On the other hand, technically we must also be aware that we may find, over the years, that our views on these matters change, depending on the Hunterston experience.

I have put three problems which seem to be particularly relevant to the British Steel Corporation and to the country in terms of finance, marketing and technology. I have two specific questions. First, what is the input of the Department of Industry in the three areas I have mentioned?

It is right to return to a theme which some of us have developed on a number of occasions concerning our worries about the way in which, in matters affecting the BSC, the Department does not take a positive rôle but seems to follow on the coat tails of the Corporation. I understand fully why the Corporation should wish to fight for its corner, but I look for a clear, far-sighted and, above all, overall view from the Department on where Britain's best interests may lie. Therefore, I should be interested to know what the Department is putting forward in these matters and to what extent its views will be reflected in the Secretary of State's conversations.

Secondly, I should like to hear what the BSC thinks, because if it is to be part of a greater rationalisation of production facilities, if it is to be part of a product specialisation, I wish to know in what areas it expects to thrive and whether it supports my contention that there are opportunities for it to be an exporter of coke.

What worries us above all is the feeling that we deal with these matters in a rather sterile fashion. We consider the documents and proposals which come before us in the sense that they exist and, therefore, we have to do something about them. I ask the House to think about them in a fundamental way, because unless we consider them on a longer-term basis we shall miss opportunities to take a broader view, which is what this matter is all about.

9.26 p.m.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

Kind words, which I echo, have been said about the Scrutiny Committee, but there is one point which I should like to bring to its attention.

Scunthorpe is a steel producer. Being interested in this subject I went to the Vote Office, where I was able to obtain certain documents. The key to the matter was the letter to which my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman) referred, but it was not available in the Vote Office. I had to go to great trouble to discover that the letter from the British Steel Corporation, which is salient to this subject, was available and, in fact, had been deposited in the Library. I ask my hon. Friend the Member for Erdington to ensure that the Select Committee takes note of that point so that it may ensure that hon. Members may more easily find useful documents which are referred to in its reports.

Complimentary remarks have been made about the Select Committee, and it is right that we should say something complimentary about the British Steel Corporation. Its letter is a key to the subject that we are discussing. The fact that it wrote to the Select Committee is perhaps primarily why the letter came to the notice of the House. It was not the private sector—although it will be equally affected—but the Corporation which wrote the letter.

The inadequacies of the Common Market have once again been demonstrated. Those in the Steel Community in Europe were faced with the problem that, because some countries do not have coal or a coke-producing potential, or because in the case of other countries the commodity had to be transported long distances, in order to deal with the question of imports from outside the Common Market a fund had to be devised to provide a subsidy. When we joined the Common Market we were approached to take part in the scheme. We said that it would be of no benefit to us because we did not obtain coke or coking coal from long distances.

A compromise was therefore arrived at, with Government support, and an account was opened with the Treasury. I understand that our levy was about £2 million a year. Every year, religiously, the British Steel Corporation and the private sector paid this £2 million levy and deposited it in the account with the Treasury, and every year the Treasury said "We will give it back to you." That is a ludicrous situation. The whole matter arose as was said in the letter from British Steel: Unfortunately, however, this recycling arrangement"— that is the polite way of putting it— has now come under attack from the officials in the Commission who deny that it was ever the intention that the money should be refunded to BSC. What is proposed now is that a scheme which envisaged 15 million tons of coking coal should be updated to 18 million tons, so that our contribution shall be made larger and we shall now pay into the fund on a scheme in which we have no interest and from which we have no benefit. But, for the time being, we shall keep the account going and deposit with the Government this £2 million. The only restriction is that we do not give it back to the BSC. The Government get some advantage from it, and that is better than having it go elsewhere into foreign countries.

During his speech, the hon. Member for Sheffield, Hallam (Mr. Osborn) said that he represented a steel constituency and was looking at this matter from the point of view of steel. I, too, look at this from the point of view of steel, because that is my job in this House. I understand my right hon. Friend's position. He has to negotiate and to make the best he can of the situation. If there are advantages in stocking coal or making subsidies available to coal-fired power stations, he must do the best he can. However, the hon. Member for Hallam criticised this arrangement in detail and then revealed that he would support it. From my point of view, this is not acceptable. I feel that it should be opposed.

One of the arguments that we can use in the Common Market, because this is a matter which arises in Europe itself, is that there should be fair competition and that the most efficient should do better. It may suit Europe as a whole to say "We have this problem with our steel industry where we are dragging in coking coal from a long way off." This is the natural advantage that we have. This whole idea goes against the principles of the Common Market itself. It is arranging a subsidy for coking coal which is to the benefit of certain sections in Europe, namely, the European producers, rather than to the benefit of ourselves. I think, therefore, that we ought to fight this proposition on that ground as well.

It seems to be crazy to set up a fund, to levy the BSC £2 million, to place it in an account in the Treasury, and then give it back again to the BSC. That is ludicrous and stupid. But, on the whole, the BSC is still getting the benefit of it. However, I shall object strongly if we are to lose this amount of money for steel. It is my job in this House to be concerned for the good of the nation as a whole, but it is also my job to look after my own corner. If we are getting advantages for the nation in certain other areas and in certain other industries, the Minister should take note of them. When he conducts his renegotiations, however, I hope he will make it clear that when this matter was debated in the House certain of us vouchsafed our objections in principle and in detail.

Having looked at the BSC's position in detail and in principle, I feel that it is right for my right hon. Friend to say to Europe "We are a special category. In the interests of the Common Market, you are distorting free trade. What is in it for British Steel?" It is right that we should get an amelioration, equal to the amount we are putting in, to the benefit of British Steel in particular.

If this kind of money were available, I would certainly think that it could be used in the interests of my constituency in particular, and of the nation in general, by investing in a new blast capacity for more iron at Scunthorpe, which we need to go with the excellent steel-making facilities that we already have.

9.36 p.m.

Photo of Mr Frank Hooley Mr Frank Hooley , Sheffield, Heeley

I do not know whether it is a coincidence, but there was a report in The Times the other day about coking coal finds in Australia. It reads: British and European steelmakers are to benefit from a new source of high-quality coking coal in Australia which is to be developed by a consortium which includes the national Coal Board.Queensland has awarded an exploration licence to a subsidiary of Overseas Coal Development which could lead to about 200 million tons of high quality coking coal being made available to Europe's steelmakers. In these discussions we have been concentrating our minds on various financial fiddles so beloved of the Common Market—we pay this and someone gets it back, or someone pays that and it goes into this fund, and eventually it cycles all the way round. I understand that coking coal is a scarce and extremely valuable resource in Europe. It is not infinite and there is not as much of it as we should like. I am therefore wondering whether we ought to look at the problem of adequate supplies in a rather wider context than Europe. It would certainly appear that the National Coal Board is doing that and, I am glad to say, it is taking a very active interest in the large deposits that have apparently been discovered in Australia.

In this matter, as in so many others, it is quite foolish to talk as though Europe existed as an energy island. It does not. No discussion of energy problems can be confined to the context of Western Europe. Even a country as powerful and rich as the United States is not an energy island to itself. Western Europe certainly does not enjoy the various energy resources that the United States enjoys.

Therefore, we ought to hear something from the Secretary of State about the best balance—in physical and not in monetary terms—between the use of our coking coal resources by Europe and ourselves and the resources of this important raw material to which we may reasonably have access in Australia and possibly other countries. It may well be that the best interest of Western Europe is not to subsidise the production of this raw material and use it up in a decade, or a decade and a half. It may well be more sensible to obtain some of it much more cheaply from a friendly country, such as Australia, and to balance the use of indigenous resources against the importation of this raw material from elsewhere.

I am not sufficiently expert on coking coal or steel-making as to give a personal judgment on this matter, but I think that when we discuss energy we should discuss it in a world and not in a purely West European context.

The other interesting point was made by the hon. Member for Arundel (Mr. Marshall), who pointed out that there are experiments going on for direct reduction steel-making which do not involve the use of coke at all. I do not know how far these experiments have gone, or whether they point to a totally new way of producing pig iron.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

Would the hon. Member care to accept that those of us who visited the Korf works found that the Russians have ordered 16 plants with 400,000 tonnes capacity to work on one site with a total output of more than 5 million tonnes? This will equal the large integrated steelworks and traditional blast furnaces. We are going into an area in which large plants are being used in a practical sense and this may alter our thinking in the time scale of this agreement.

Photo of Mr Frank Hooley Mr Frank Hooley , Sheffield, Heeley

That is a very fair point. This clearly has a bearing on policy in relation to the exploitation of European sources and the possible future import of coking coal. We should examine this problem not just from the point of view of fiddling about with million-pound subsidies here and there, but consider instead how important it is to use up or not use up the physical resources of this important raw material.

The Secretary of State said in his brief opening remarks that he wanted to use this opportunity to broaden the debate into the general discussion of energy problems, and since that is apparently in order I wonder whether he would tell us his views on the development of the nuclear argument in terms of Western European energy supplies in the light of the quite serious social disruptions that occurred recently in West Germany. There have been violent protests against the siting of nuclear power stations. These have occurred wherever the federal authorities have wanted to put nuclear power stations. Some Lander Governments have passed legislation or regulations actually forbidding the utilities from going ahead with the siting or location of nuclear power stations at particular points.

Photo of Dr Maurice Miller Dr Maurice Miller , East Kilbride

Is my hon. Friend aware that there were similar demonstrations in France a couple of years ago?

Photo of Mr Frank Hooley Mr Frank Hooley , Sheffield, Heeley

Yes, I am aware of that, but they were not quite of the scale or ferocity of those in West Germany in recent months.

I do not know whether there is evidence that public opinion and feeling on the siting of nuclear power stations is leading to a general reappraisal of energy questions in Western Europe. But certainly it would be very odd if the meeting that my right hon. Friend is chairing next week did not include some comments by the Federal Republic about the growing social strains that a big programme of nuclear power stations would undoubtedly put on the societies of Western Europe. I am not saying that we are reaching crisis point—far from it. However, there are straws in the wind.

Then there are the related international problems. There have been diplomatic tensions between the United States and Germany about the contract with Brazil and between the United States and France about the contract with Pakistan. Clearly, this development will play a part in the international discussions on energy policy.

At the beginning of the debate the Secretary of State did not say much about non-conventional sources of power in the European context. France is the only West European country actively to experiment with tidal power, yet this country has almost unique potential in that field in the Severn Estuary, and possibly elsewhere. Also, the American Administration is becoming more and more interested in solar power and wind power and I wonder whether this interest is reflected in any way in the evaluation of power sources by the EEC. Is it thinking in these terms? If so, perhaps it could do so with a little more vigour, drive and imagination and retreat a bit from the state of passionate attachment for nuclear power which followed the oil crisis.

My right hon. Friend referred to the JET programme. I must confess that as a layman I am a little cynical whether that will ever eventuate. Equally, as a layman, I regard it as an important scientific and engineering undertaking. It will be disastrous if we continue to dither over this matter in Western Europe because of a silly quarrel over whether the project should go to Northern Italy or Culham. All my reading on the subject leads me to believe that the expertise concentrated at Culham gives that area a far greater claim on the project. I hope that my right hon. Friend will press the claim.

This is not a general debate on energy matters in the conventional sense, and I shall not explore other aspects of the problem. I was glad that my right hon. Friend the Secretary of State for Energy extended the debate from the technical consideration of coking coal. I hope that at the end of this debate he will find it possible to say a little more about some of the other matters that have been mentioned.

9.47 p.m.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

I shall not follow the remarks made by my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) too closely, although he struck a chord in my mind when he mentioned coal discoveries in Australia. No doubt those discoveries received a great deal of attention in the British Press. Too often substantial and valuable discoveries of coal in and around Britain have been dealt with in a muted fashion. We have been modest about the tremendous discoveries of coal obtained in Britain in recent years. My hon. Friend was right to say that we should look upon ourselves not as an energy island but as part of the wider world. Therefore, we should not take too modest a view of our potential.

The hon. Member for Arundel (Mr. Marshall) tried to take the wider view and, interestingly, began his remarks by suggesting that he had begun his life in a coke oven. The odd whiff of sulphur can still be discerned since the hon. Gentleman now occupies a place on the Conservative Benches. He is certainly one hon. Gentleman on that side of the House who knows something about steel and coal, since he had an association with South Yorkshire before he decided to seek the more salubrious pastures of Arundel. I am glad that he has not forgotten us. I welcome his views and his thoughtful questions to the Minister.

It is interesting to note that the hon. Member for Sheffield, Hallam (Mr. Osborn) is not now with us, but I heard his speech with interest. I only wish that when I opposed him in an election in 1966 I had striven a little harder, so that I could have joined my hon. Friend the Member for Heeley rather earlier on the Labour Benches. However, I wish to congratulate the hon. Gentleman since it is the first time I have seen him at the Dispatch Box.

I am in the fortunate position of having in my constituency both steel and coal interests. I was interested to hear the remarks of my hon. Friend the Member for Brigg and Scunthorpe (Mr. Ellis), who has worked very hard to master the needs and problems of his area. I hope that he will see the extension of iron-making which his constituency needs. Some of the pits in my constituency produce coking coal. Therefore, I welcome the European commitment to provide long-term support for coking coal.

The one anxiety about the document that is before us relates to the situation in West Germany. West Germany exports a great deal of coal to other member States. I am not sure whether all the coal that it exports—whether it is regarded as coking coal or semi-coking coal—is used for purposes for which coking or semi-coking coal ought to be used, but West Germany certainly exports a great deal and makes a lot out of it. West Germany is able to export that fuel because it imports large quantities of coal for steam-raising purposes from Poland, a little from South Africa and perhaps some from America and elsewhere.

West Germany produces a lot less than we do but exports and imports more. To some extent it is in the same position as we may be in with offshore oil by the 1980s. Our oil is valuable and ought not to be used for more base purposes. We should make a profit by exporting some of our good oil and importing, in its place, some oil at a much lower price. We could therefore make a profit, and I see no objection to that.

The Germans have been applying that policy to coal for a considerable time. I hope that as the National Coal Board gains in confidence as a result of the Government's policies—and the Government have certainly contributed to growing confidence in the industry—it will be able to enter into commitments and to seek markets to an extent to which it has not been able to do so before.

In so far as the Community's arrangements make that possible and encourage it, that policy should be pursued. If the European arrangements do not encourage it, I suggest that they should, since we have hundreds of years of reserves of coal, far more than anyone else in the Community. I know that the Minister is seeking to ensure that Europeans are aware of British potential.

I congratulate the Secretary of State on his approach tonight in seeking to widen the debate. I know that some Opposition Members took a cynical view of the Minister's attempt to broaden the energy debate when the National Energy Conference was held near the House a few months ago. It is right that the open debate that the Minister is seeking should be open not only in Great Britain but within Europe and in the wider context that the hon. Member for Arundel and my hon. Friend the Member for Heeley advocated.

I hope that we can raise our sights a little beyond the subject of coking coal to 1985. If we can do so, Europe and Britain will be widely and well served. We have the potential and the capacity to promote the interests of Britain and the coal industry by seeking to embellish and embroider the narrow point discussed in the document.

I congratulate the Secretary of State on his approach. The opportunities that are open to Britain are quite considerable, and benefits are available not only for Britain, but on a much wider basis. As a result of "Plan for Coal", during the last three years we have had a capacity and an embryonic confidence that can serve Britain and Europe well.

9.54 p.m.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

With the leave of the House and yourself, Mr. Speaker, I shall briefly speak again. This has been a useful debate. One thing that has emerged is that one can start on what may appear to be a narrow matter, but immediately a whole range of interests can be brought in—I refer to industrial interests, not to a large number of hon. Members.

I congratulate the Scrutiny Committee on having done better than the European Assembly in identifying what is really involved in the matter. It certainly confirms my policy, to which my hon. Friend the Member for Bother Valley (Mr. Hardy) referred, of opening everything up so that nothing goes through on the nod without the subject and its implications being discussed.

The hon. Member for Sheffield, Hallam (Mr. Osborn) asked what had happened to the money. The recycling of the money from the Treasury to the BSC has stopped because of objections from the Commission. The contributions paid to the Treasury would go across the exchanges to the Commission only in the event of the new scheme, which has not been fully worked out, coming into existence.

My hon. Friend the Member for Birmingham, Erdington (Mr. Silverman) spoke on behalf of the Scrutiny Committee and rightly read the BSC letter in full. Without his Committee, the BSC case would not have come before the House. The criticism of the BSC that my hon. Friend reflected when he read the letter is important.

The hon. Member for Arundel (Mr. Marshall) asked some questions with which I can deal quite quickly. There is full consultation with the Department of Industry on wider problems of co-ordination. It is no secret that there is a Cabinet committee on energy. This must have been widely assumed by the House. All relevant Ministers are on the committee and its work covers a wide range of ministerial interests. As a former Secretary of State for Industry, I have seen the committee's work from both sides and I can assure the hon. Member for Arundel that the interests of the BSC are fully reflected there.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

Some of us are looking to the right hon. Gentleman with his experience to do a useful job in the short time that remains before the end of this Government's term of office. Is the idea of product specialisation—the method by which one European steel manufacturer makes one product and another a different product—considered in the committee, and does it also look at the possibility of exporting coking coal?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I agree that the two and a half years that remain to the Government is a short time for consideration of the matters to which the hon. Gentleman refers. In saying that there is consultation and co-ordination in Whitehall I must not purport to speak for my right hon. Friend the Secretary of State for Industry on steel policy within the Community, although I was involved in that at one time.

I am sorry that my hon. Friend the Member for Brigg and Scunthorpe (Mr. Ellis) did not find it easy to get hold of the BSC letter. It was made available to me as a Minister and was put in the Library. In the last Bill considered by the House this evening I noticed the provision for Ministers to make available to hon. Members copies of certain briefs. I cannot promise to do that on every occasion, but I see no reason why Back Bench Members should have difficulty in getting access to documents. I shall look at this point to see whether the House can be better informed.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

It would have been helpful if the BSC letter had been appended to the report and put in the Vote Office. The Committee does not always send its documents to the Library.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

This is a matter for the Scrutiny Committee. I find it difficult to keep abreast of all documents without the assistance of my Department, and I see no reason why a Minister should have at his disposal information that ought to be at the disposal of all hon. Members. If I can help in this matter, I shall.

My hon. Friend the Member for Brigg and Scunthorpe also asked me to see that his views and criticisms, which were very much the criticisms of the BSC, were expressed in the Community. I shall do better than that for him. I shall see that copies of the Hansard report of this debate are made available to other Ministers in the Community so that they can be aware of the interest shown in the debate.

My hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) raised wide-ranging issues about the best balance of advantage. It is difficult to answer him because in the Community legislation has been worked out by bargaining and this form of legislation is not familiar to the House—at least, not until recent events. I shall not go into these matters, because tact all round may be advisable.

It is very unusual for hon. Members, brought up in the tradition of examining every case on its merits, to find that the Community operates in quite a different way. It is not for me to range as broadly as my hon. Friend, but he raised the problem of nuclear energy in the Community. There is no doubt that when I went on my tour of capitals other Ministers expressed considerable anxiety about—

It being Ten o'clock, the debate stood adjourned.