Coal Industry (State Aids)

Opposition Day – in the House of Commons at 10:14 pm on 5th February 1986.

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Photo of Mr David Hunt Mr David Hunt , Wirral West 10:14 pm, 5th February 1986

I beg to move, That this House takes note of European Community Document No. 9316/85, and supports the Government's intention to ensure that the new rules governing state aids for the coal industry should continue to take full account of the United Kingdom's objective of achieving a smooth transition to a sound and viable industry.

The document before us underlines the important link between the Government's priorities for the United Kingdom's coal industry and the vital part played by coal in the European Community's energy strategy.

Since the European Commission announced its intention to introduce a new regime for state aids, my right hon. Friend the Secretary of State for Energy has taken a firm line. He made it abundantly clear to the Commission last spring that while we had no objection in principle to a well-thought-out regime, it was important that it should be workable within the member states most affected by it —West Germany, France, Belgium, now Spain, and, above all, ourselves. The House may be assured that the Government's early and robust line has borne fruit. The United Kingdom has greatly influenced the contents of the proposal, but there is no room for complacency and, as I shall demonstrate, much work remains to be done in Brussels before the United Kingdom can sign up to a final decision.

The present regime was drawn up to take account of the need to maintain an economic Community coal industry. it was part of a strategy designed to maintain the security of Community energy supplies following the 1973 oil shock. The key objective was to achieve a balance between maintaining Community coal production and the necessary competitive conditions whereby production was rationalised and costs reduced.

The existing decision covers the following main points: financial support towards grants for operating and social costs paid by member states to their coal industries; grants towards liabilities relating to past closures; forecasts of production and sales of coal; proposals for new development over a five-year period; and the build up and holding of coal stocks.

Member states are required to seek authorisation under the existing regime before paying grants. In practice, however, the Commission has adopted a pragmatic approach and taken account of the varying circumstances of the member states involved.

The 10 years which have elapsed since the present decision was introduced have seen major changes in the coal industries of the member states most concerned—France, Belgium, West Germany and the United Kingdom. In recent years, rationalisation has occurred in the industries of all those member states, but with each choosing to approach matters according to their circumstances. Belgium and France have concentrated on the reduction of manpower and capacity. France, for example, is on target to reduce manpower from 70,000 to 30,000 in the years 1983 to 1988 and to reduce production from 17 million tonnes to 10 million tonnes. In the United Kingdom greater emphasis has been placed on improving productivity and operating costs. All four member states Will, of course, continue to have an interest in the new state aids regime. We expect, too, that Spain will share this because it will also face similar problems as it settles into its Community membership.

The draft decision proposes a more limited range of operating aids to member states' coal industries—deficit aid, sales aid for coking coal, investment aids and salary supplements. Of these, only deficit grant is of direct concern to the United Kingdom. In addition, the decision would permit a range of social grants to be made, covering redundancy and pension costs and other historical costs arising from pit closures in the past.

The main changes which the European Commission now proposes are that aids should be allowable only for improving productivity, for providing new economically viable capacity and for solving social and regional problems. It also means that certain types of aid—for recruitment and coal stocks—should be eliminated.

The Commission also wishes to alter the dates by which member states are required to submit information and are proposing dates which have no practical meaning in the context of United Kingdom financial years. What is of greatest importance, however, is that the Commission has made it clear that it intends to implement more rigorously than hitherto the letter of the decision. Therefore, although the Government support the principle behind the decision, which is compatible with our domestic objectives for the coal industry, we also regard it as of paramount importance that the new decision should be workable.

Photo of Michael Fallon Michael Fallon , Darlington

I am a little puzzled by my hon. Friend's remarks now and by his remarks in the explanatory memorandum, in which he said that one of the proposed changes to the existing regime is: Lack of defined criteria by which Commission are to judge acceptability of proposed aids. My hon. Friend then says in the memorandum, as he has just said to the House: If the Commission were to exercise without sensitivity their proposed powers to limit state aids … they would jeopardise the achievement of NCB's primary objective which is to break even by 1987–88. Is it the Government's view that the Commission is being too tough or too soft?

Photo of Mr David Hunt Mr David Hunt , Wirral West

We believe that in setting the objectives the Community has got the overall thrust of its policies correct. The Government are determined to achieve at the March Energy Council — I shall be interested to hear what my hon. Friend has to say if he has an opportunity to develop his points more fully—a system which not only follows through in the direction of the objective which we support but does so in a way which will enable the National Coal Board to achieve the break even point and will enable the regime which is introduced to be workable.

The Commission, in putting forward the proposals, has sought to increase its control over the granting of aids by member states. Its concern, rightly, is that aids should not cut across the precepts of the Common Market. Member states, on the other hand, especially the United Kingdom and the West Germans, are equally concerned to ensure that Brussels should not impose unacceptable constraints upon us in respect of matters which are essentially for us to determine. We have been making our views very clear and shall continue to do so as negotiations continue.

The general objective of the draft decision marks the greatest difference from the existing regime, and I have already referred to that in response to my hon. Friend the Member for Darlington (Mr. Fallon). The existing regime was based largely on the notion that the Community's coal industry still had to face a major reduction in capacity and that Government support would be justified throughout such a period. The new decision sounds a more positive note, which the Government can entirely endorse. It looks forward to a more competitive coal industry able to open up new economically viable reserves. This will provide an appropriate framework for the Government's continued support for the NCB's investment in the industry and with the social costs of restructuring. Much of the NCB's investment goes to improve existing long-life collieries. As hon. Members will be aware, last year the board announced many investment programmes to open new faces, install new machinery and computerise the monitoring of mining operations.

I hope that hon. Members will get the opportunity this evening to pay tribute to the magnificent efforts of men and management alike in achieving, for the first time in the board's history, deep mined output in excess of 3 tonnes per man shift. That is a tremendous achievement, and I hope that much reference will be made to it in the debate tonight.

With restructuring and improved productivity performance, the NCB will be on target for break-even in 1987–88 and thereafter able to progress to the establishment of a secure and self-sustaining industry.

I am sure that many hon. Members have important points to raise this evening, and I do not want to take up the time which is available for discussion. However, perhaps I could just remind hon. Members of the key points which arise from the new state aids proposals.

First, there is nothing new or sinister about the state aids regime. This proposal will replace a regime that has been in existence in various forms since 1965. Secondly, the proposal does not involve the payment of Community funds to member states. It allows member states to support their own coal industries without infringing the European Coal and Steel Community treaty. It would, of course, be open to us to refuse to sign the new regime, but that would be to no good purpose as it would mean that our payments of operating aids and social grants would be illegal. Thirdly, it is important that the new regime should be workable within the individual member states most concerned, and for as long as necessary. The United Kingdom's clearly expressed objective is to achieve a flexible and workable regime.

Those objectives are entirely consistent with those of our own coal industry. The regime will enable us to meet our targets.

The objective of my right hon. Friend the Secretary of State for Energy, when this matter goes to the March Energy Council, will be to ensure that the new regime gives maximum flexibility to member states in the challenging task of creating economically viable Community coal industries which can compete successfully in the world market.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian 10:26 pm, 5th February 1986

We are proud of our miners, we are proud of our industry and we are proud of our efforts to raise productivity. We are also jealous of the technological expertise of our mining engineers.

Perhaps I might introduce a controversial note to the debate. There is an absence in it. Previously, we have always had briefs from the National Coal Board setting out its approach, but the silence from Hobart house on this is deafening. Have any of my hon. Friends received a comment from the NCB?

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

The hon. Gentleman is very fortunate. None of my hon. Friends has received any comments. That is sad, because it is our industry. When our industry is affected, the NCB has a duty, as a publicly-owned industry, to make its attitude known.

Photo of Michael Fallon Michael Fallon , Darlington

Will the hon. Gentleman give way?

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

No. I want to be brief. We are fully aware of the background to these proposals. Current Community provision for the industry expired on 31 December 1985. The Minister explained why there had to be a new proposition. The House must be made aware of the fact that this is an attempt by the Commission to get control of member countries' coal industries. Apart from the usual stranglehold of a bureaucratic structure it has not made a very good job of it. I call in aid the Minister who had some reservations about the outline of the document.

The Commission has not made a good job of the draft directive, because its analysis is faulty on so many points. It merits the criticism that has been heaped on it by some member states. My information is that this is the fourth or fifth draft of the proposals. We could not have a better portrayal of uncertainty than that.

A report in the Financial Times on 25 September 1985 stated: The United Kingdom Energy Secretary has made it clear that because there is virtually no intra-Community trade in coal there is no case for Brussels control. To some extent, the Minister expressed that same sentiment in his speech tonight.

It would not be unfair if I expanded what the Secretary of State expressed through the Financial Times. The EEC countries produce coal for their local markets. British coal does not compete for the German market, and vice versa. Therefore, it is hard to understand why Brussels should intervene.

I had a word with the Secretary of State before the debate. He assured me that when the matter comes before the Energy Ministers Council on 3 March, he will stand by what he expressed in the Financial Times and will not accept control by Brussels of the United Kingdom coal industry. On that basis, and because we are considering only a take-note motion, the Opposition will not divide the House. That is reasonable.

The House should be aware of the turmoil caused by an earlier draft of Commissioner Mosers' proposals. It resulted in a political dressing down for him from the Federal Republic of Germany, which threatened to use its veto. The draft report would have resulted in 500,000 Europeans landing on the scrap heap by the 1990s. The argument was that it would have resulted in a saving of £2 billion a year in state subsidies for coal. But that would have to be set against a £2·4 billion a year increase in social costs. That is lunatic economics. The net result would have been a drain of almost £ million on European treasuries each year.

In Germany, the loss of one third of mining jobs would have added 20 per cent. to the Federal Government's borrowing requirement. In Belgium, the closure of the industry would have increased the Government's budget deficit by 30 per cent. It was a false belief that Europeans would be freed from the web of state subsidies.

The Coalfield Communities Campaign sent me a good paper, which shows how low is the United Kingdom subsidy per tonne compared with other countries. The subsidy in Belgium is £15·47 per tonne; in France, £19·19; West Germany, £12·06; while in the United Kingdom it is £8·41 per tonne.

The Coalfield Communities Campaign posed a good question. It asked me whether this money would be saved by devastating coal field communities. The fallacy of the Commission paper was that miners who became unemployed would be absorbed into an expanding EEC economy. That contradicts the Commission's report of 1984–85, which said that a rate of growth above the present short-term trend of 2·5 per cent. would be necessary to improve substantially the unemployment situation in the EEC.

Some hon. Members will be aware of the fact that at the moment the EEC unemployment level is 15 million. Current Commission predictions of Community economic growth to the end of the 1990s of 2·6 per cent. are hardly sufficient to reduce current levels of unemployment never mind absorb another 500,000 if such coal plans are implemented.

So much for the argument that the social costs of unemployment are only short term. It is a patent nonsense. Any number of coalfield local authorities are still suffering from unemployment and the social, environmental and general economic effects of closures —I can name a few, such as Durham county, the south Wales valleys, Scotland, or west Barnsley in Yorkshire. The coal communities have one of the highest unemployment rates in the country. I am advised that the Coalfield Communities Campaign has produced a figure of nearly 2 million unemployed.

I suppose that we shall want to test the framework of the qualified continuation of state aids suggested in the proposals. We must question and challenge whether it could remove some of the genuine concerns expressed throughout the community vis-a-vis the originally proposed regulations. As the Minister hinted, we need to amend the way that we test such proposals.

We should welcome the late conversion of the Commission to the theory that state aid is indispensable, especially for producing the volume of coal required in the Community to maintain the impetus for a reduction of import dependency. However, we must criticise the absence of state aids for the extension of the market for coal, both in industry and in electricity utilities.

Tonight, the House will want to express further concern that the document and arrangements for state aid relate to two basic assumptions that are challengeable. First, when it refers to competitively produced coal and pricing levels, there is an assumption that the accountancy methods of each of the coal industries are comparable and that the final selling price of coal is based on the same component parts of the accounts. Normal depreciation and normal rates of interest may vary considerably between industries, as does accountancy for tax, subsidence costs and so on. It is illogical that a major part of the EC budget, where there is comparative cost accountancy, is devoted to the common agricultural policy. But that principle does not seem to be relevant to our industries.

The Commission, in a reference to state aids and other proposals on energy requirements, assumes that all coal imports in the Community are fairly priced for production and transportation costs, although it has agreed to examine import prices. Tonight it must be reinforced that more than 50 per cent. of coal imports to the Community are categorically unfairly priced. According to the Commission's statistics, during the first six months of 1985, 31 per cent. of imported coal came from South Africa and 14 per cent. from Poland. Polish coal is subsidised so that Poland earns foreign currency. The apartheid system in South Africa ensures low wage costs, which, together with coal for oil swaps, means that South African coal is unfairly priced.

The present deliveries of Colombian coal do not provide the Colombian Government with royalties. Because of a generous system of tax concessions Exxon can sell Colombian coal as a loss leader to secure a future market. Foreign coal is being dumped on European markets. The European Commission usually takes strong retaliatory anti-dumping measures when other products are being dumped, for example Japanese typewriters or Brazilian shovels. This dumped artificially cheap foreign coal is being used to denigrate the European coal industry. When foreign coal is dumped below cost, it is being subsidised.

We often hear the phrase "security of supplies". The Commission knows that it strikes a chord of anxiety after the events of the 1970s when the oil price quadrupled. For coal it originally meant marginal coal imports to supplement domestic production. The Commission embellished that, and redefined it to mean the availability of cheap coal from external sources. While domestic producers and trade unions argued for the necessary support measures, the Commission, in a piece of skulduggery, was involved in negotiations about contractual supplies with Colombia, Australia, the United States of America and Canada.

I said that I intended to speak briefly, and I shall fulfil that promise. The House could give a guarded welcome to the continuation of state aids, and the Minister's assurance that Brussels will not dictate to our indigenous coal industry. But we must express anxiety about the lack of detail regarding application.

Photo of Mr Spencer Batiste Mr Spencer Batiste , Elmet 10:44 pm, 5th February 1986

I should like to endorse the sense of pride expressed by hon. Members at the remarkable efforts of the coal industry in the past few months in achieving a considerable expansion in productivity. This shows the prizes that are available for the industry if we follow sensible policies that secure the industry's future on a sound and profitable basis. It is especially important that we have the power to decide the shape of that future in Britain.

Photo of Kevin Barron Kevin Barron , Rother Valley

Will the hon. Gentleman explain that point a little further? Might it not also be the case that the reason for the major increase in output per man is the massive job losses in the past two years?

Photo of Mr Spencer Batiste Mr Spencer Batiste , Elmet

The hon. Gentleman will have an opportunity to develop that point. I do not believe that that is true. There is a new sense of realism in the coal industry. Those who work in the industry know that their future depends on the industry being profitable. They are cooperating and working towards that end.

It is important that we maintain the progress that has been made and that the fundamental decisions about the industry's shape are made in Britain. In so far as the European regime enables us to continue along the lines that we wish to follow, so be it—I see no objection to endorsing a European regime. My hon. Friend the Under-Secretary of State and my right hon. Friend the Secretary of State have been very robust in fighting for British interests. I would happily accept their assurances.

There is, however, one matter on which I seek special assurance. Under the proposed changes, in category (a) aids will be allowable for solving social and regional problems but in category (b) aids will be eliminated in relation to recruitment. Only a few weeks ago, in the Upper Waiting Hall, NCB (Enterprise) Ltd. put on a remarkable display showing the success it has had in creating jobs in mining areas. The company's job creation record is one of the most successful I can recall. About 500 new jobs a month have been created at a lower cost than initially any other scheme.

Photo of Mr Spencer Batiste Mr Spencer Batiste , Elmet

If the hon. Gentlman had attended the exhibition and looked at the records, he would have seen a full list showing where jobs have been created. I am sure that the House would like to know that there were scarcely any Labour Members present at that exhibition while virtually all Conservative Members with mining constituencies were present. Perhaps the affairs of the mining industry would improve a great deal if the Opposition talked a little less about unemployment and more about job creation and took practical measures that are needed to help their regional problems.

A number of my colleagues and I are taking active steps in our constituencies to ensure that local industry and commerce are made fully aware of what NCB (Enterprise) Ltd. can offer. This weekend, I shall hold a seminar in my constituency on that subject. I seek the clearest of assurances from my hon. Friend the Under-Secretary of State that the new regime in Europe will in no way interfere with the undertaking he gave last year in Committee on the Coal Industry Bill. I asked him whether NCB (Enterprise) Ltd. would have all the money that it could usefully use to create jobs in mining areas. My hon. Friend readily gave that assurance. I hope that, before we vote, he will repeat it and assure us that the proposed regime will in no way change that.

Photo of Kevin Barron Kevin Barron , Rother Valley 10:49 pm, 5th February 1986

The Minister has spoken of the overall aim of the British coal industry and of the industries throughout the EEC. I hope that he will be more specific and tell us of the likely effect on our coal industry of the minor changes that have been made to the cyclical and strategic stocks of coal and to recruitment. What effect are these changes likely to have on the industry over the next few years?

I assume that the Minister is in contact with the Secretary of State for Energy by some means, and, although the Minister responded to the written question by my right hon. Friend the Member for Barnsley, Central (Mr. Mason), I should like to know exactly what was meant by the following: The proposed new Community energy objectives have been discussed twice by the Council of Energy Ministers. My right hon. Friend the Secretary of State has argued that the new objectives should be seen as markers, not as prescriptive targets." — [Official Report, 3 February 1986; Vol. 91, c. 11.] If there were any major problems in the British industry, would the industry ignore what the Council of Energy Ministers has been saying in Brussels?

My hon. Friend the Member for Midlothian (Mr. Eadie) referred to the meetings that have taken place in Europe in connection with the document that is before us. What was discussed in April 1985 which resulted in leaks to the effect that our industry was to lose about 50 per cent. of state aid along with other mining industries in the EEC? What was on the table and how did we arrive at the present position?

If we are to discuss the coal mining industry logically, we must understand how our European colleagues were sizing it up and how they regarded its future. It is clear that it will be dominated by the British coalfield for many years to come.

Under the heading "General Objectives", article 2 states: Aids granted to the coal industry may be considered compatible with the Common market provided that they contribute to— improving the competitivity of the coal industry by optimising the productive capacity in order to adapt production to the conditions prevailing on the energy market; opening new economically viable capacities". The opening of a coalfield takes place within a massive time scale that extends into five, 10 or even 15 years, depending on where the field is situated. How can world markets be assessed to determine whether we should opt for new capacity? There is a surplus of world energy because of a lengthy recession. Against that background, I should like to know how we can assess what will be economically viable five years hence, or even further into the future.

My hon. Friend the Member for Midlothian talked about the dumping of coal and directed his remarks to Colombia and America, which are dumping coal into the European market. That is being encouraged, in a way, by the reduction in shipping costs. The cost of shipping fuel to Britain from America is one third of what it was in 1980. We know what is happening in South Africa and we are aware of the political turbulence in that country. The United Nations and the Commonwealth — we are members of both organisations—have condemned the vicious way in which coal is extracted from the South African mines. The mine operators use contract labour from neighbouring countries and those who mine the coal are kept in compounds during their 12 or 18-month contracts before they return to their homelands and families.

When discussing economic viability, we must recognise that the European coalfields generally do not always reflect the standards and living conditions of those in other countries whose industries are sending their coal to Europe. It is nonsense to talk about planning economic viability for the European coal industry in the present circumstances.

Article 4, under the heading "Sales side", states: Aids for supplying coal to specific markets may be considered compatible with the Common market, provided that they do not exceed, for each individual coal region or undertaking, the difference between forseeable average costs per tonne of coal produced and the comparable price of coal from non-member countries. That is directed to supplying specific markets with British coal. For years, all the British coal industry unions have been arguing for the expansion of production of anthracite coal in south Wales. The present chairman of the NCB has said that in his opinion the Margam project, if it were seen through, would lead to the production of anthracite and would, to use his description, be a gold mine. We are still waiting to see whether Margam and south Wales anthracite will be produced in the quantities needed. Instead, we are sneaking anthracite into this country through the iron curtain from Poland. I invite the Minister to tell us by how much anthracite coal is being subsidised in Poland before it is brought on to the European market, especially as south Wales miners have been wanting the Margam project to go ahead for so long.

Photo of Mr Allan Rogers Mr Allan Rogers , Rhondda

Is my hon. Friend aware that the then director of the south Wales coalfield, Mr. Philip Weekes, and Mr. Ian MacGregor met a group of Welsh Members during the coal strike and gave a complete commitment to the development of the Margam new mine and then used it as a form of publicity to weaken the morale of south Wales miners during the coal strike? They were and are still lies. The director and Ian MacGregor have reneged on their statements since the end of the strike.

Photo of Kevin Barron Kevin Barron , Rother Valley

It can certainly be said that the morale of the south Wales miners is low at present because of broken promises in relation to Margam. I hope that in his brief winding-up the Minister will say exactly when the Margam project will begin and when anthracite will come out of south Wales on to the market. I have used anthracite for many years, but I have heard that people who buy coal-fired boilers for domestic use are now being dissuaded from using anthracite. We want to know why we are not using anthracite when it can be mined in European coalfields.

In article 8 of the document we have the question of inhibited liabilities. The Minister will know that, sadly, last week the Horden colliery appeal was turned down under the terms of the new machinery which has been set up since the end of the coal strike. That is a great pity. I do not know all the details of the Horden colliery appeal, but I know that it suffers greatly, as does any colliery close to it, because it is on the north-east coast. It suffers from the cost of keeping it pumped free of water when it is closed. I wonder whether the National Coal Board looked at that question during the appeal. I wonder whether the NCB recognised those liabilities and the fact that, even when producing, it could be given permission to give aid to coalfields that needed it.

I would particularly like the Minister to spend some time on article 9, which states: All Member States which intend to grant aid to coal undertakings in 1986 shall, by September 1986, provide the Commission with:

  1. (i) a statement of intentions and objectives for the industry for the period 1987–1990".
In his opening speech the Minister said that he would like us to congratulate British miners on the record levels of output in recent months. I shall certainly do that. I was lucky to work in a good coal mine. There was a good investment in the mine, which has been a major precursor to profitable pits. As a consequence, it was always in a position to achieve targets of over 3 tonnes per man shift. I, and I am sure all hon. Members, thank the British coal miners for their achievements, although that is not unusual. Given the right conditions and investment, they have done that for many generations—certainly while my family has been involved.

Does the Minister intend to tell the trade unions about the Government's objectives for the coal industry between 1987 and 1990? They will be bleak years. The redundancy payments scheme has been extended, but it will end in 1986–87. Nobody who works in the coal industry knows what the future holds for the collieries. They can make guesses, but they will not know, even next year, what is to happen to their collieries because there has been so much confusion in the industry since the ending of the strike. This information will be sent to Europe, so we ought to be debating it and those who work in the industry ought to know about it as well.

Article 9 contains many details. I should like the Minister to comment on (2)(f). That refers to the available information on proposed closures of pits and to the reemployment of redundant mine workers on regional development programmes. The hon. Member for Elmet (Mr. Batiste) referred to National Coal Board (Enterprise) Ltd. and said that it is creating 500 jobs a month. If so, it is remarkable. National Coal Board (Enterprise) Ltd. was formed a few months after the strike in 1984. It can be described only as a knee-jerk reaction by this Government. They were embarrassed by the economic arguments that lay behind that strike. They had been told for a very long time that even without the closure of more pits, there was already a very high level of unemployment. That resulted in this knee-jerk reaction. Nobody can say that NCB (Enterprise) Ltd. has been providing 500 jobs a month since July or August 1984. It may have been doing so during the last few months; I do not have the figures. I do not decry NCB (Enterprise) Ltd. I hope that it will go from strength to strength and that the money that it needs will be provided, but it is coming nowhere near to getting rid of the problems that have been created by the loss of jobs in British coalfields in the last two years.

Article 10 states: In assessing the measures and programmes submitted to it in connection with the closure of particularly loss-making pits the Commission shall take account of the special situation of individual coalfields or Member States. What criteria are used in Europe when these assessments are made?

Hon. Members who represent coal mining constituencies where there is terrible unemployment want to know whether the decisions are taken in this country or in Europe and what criteria are used. The Minister referred to job losses in France and the lack of investment there, but he forgot to mention the massive job losses in British coalfields during the past two years. Over 50,000 miners have left the British coal mining industry in the past two years. It has created massive unemployment in mining constituencies. Job opportunities for young people are lacking. If the Minister is to refer to what is happening in the British coal mining industry, he ought to be prepared to be as open about it as he was about France.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedfordshire North 11:04 pm, 5th February 1986

This is to be only a short debate. Therefore, I shall confine my remarks to only a few matters. The hon. Member for Midlothian (Mr. Eadie) referred to the European subsidies and mentioned that the Belgian subsidy is the highest. He also mentioned the figures for France, West Germany and the United Kingdom. We should get the figures in proportion. Belgium, which has the highest subsidy, has the lowest production, 6·3 million tonnes. In France, where the subsidy is £19·19 per tonne, production in 1985 was 15 million tonnes. The Minister has rightly indicated that it will fall to 10 million tonnes. In Western Germany, where the subsidy is £12·06 per tonne, production last year was 88·4 million tonnes; that is still falling with the closure of uneconomic pits. In the United Kingdom the subsidy is £8·41 per tonne, but production is likely to be 91 million tonnes in 1985. When one is dealing with subsidies, it is important to get the whole thing in the right proportion.

I accept that subsidies have to be reduced, but now is not the time to do it because the coal industry could not stand it. When we were discussing the Coal Industry Bill in 1981–82, the Government said that viability would be achieved in the coal industry in 1983–84. In 1983–84 we were told that viability would be achieved later now it is in 1987–88. I should like to believe that but I do not accept that it will happen.

Nobody has yet mentioned one of the greatest factors which may destroy the glorious opportunities for the coal industry—the fact that the price of oil is falling fast. Oil went up from $2 per barrel to $42 per barrel in Libya; then it started falling fast. Many of us indicated only a year ago that the price was on the way down. I have always forecast that it would be well below $20 per barrel. If it falls to $15 per barrel, not only will oil interests be concerned—

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

Order. I am following the hon. Gentleman. He is stretching the limits of the debate a little far and is turning it more into a debate on oil. I hope he will get back to the subject of coal.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedfordshire North

I shall come back to the subject. When fuel oil becomes competitive with coal there will be difficulties.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedfordshire North

I want to finish quickly because other hon. Members want to speak.

When the price of oil comes down to $18 per barrel it will be competitive with coal. Some of the coal-fired power stations will be in difficulty because the oil-fired power stations will be viable and will be in operation once again. The coal industry has been unsuccessful only because it has been unlucky over the years.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedfordshire North

I prefer not to give way. This is a short debate and some of my hon. Friends want the opportunity to speak.

We shall have to watch the oil price carefully to ensure that the coal industry is safe. On that point alone I recommend that the subsidy system in the United Kingdom must be maintained to ensure that we have a viable industry.

May I compliment the Government on having been successful in bringing to an end the miners' strike? The strike lasted far too long and cost the country over £5 billion which could have been spent on the diversification of industry and other things. On 20 December the Parliamentary Under-Secretary of State indicated in a written answer that 23 collieries had closed since the end of the strike. Have any more closed since that date? That was the right course to take to improve the prospects for coal. Coal production costs are now going down and at the same time the output per man shift is going up. Congratulations to all the miners involved. Surely the Government's policy must be right. Develop the Vales of Belvoir, the Selbys and the long-life pits; have more of those and we will gradually become competitive internationally.

It is extraordinary how the jackals all come in for the kill. I would like to debate the issue at some length, but there is no time. We must have a realistic attitude towards imports. Most European countries inside the Community import coal. Germany has a subsidy system which will be maintained. We have not been importing coal from abroad, even though we have the right to do so. But it is wrong to say that it is subsidised in all countries. There are different forms of mining. It is open-cast in the United States; open-cast in South Africa; open-cast and deep-mined in Australia. They can push it on to the international market, as has been said. The low freight rates can cause difficulties competing.

I have maintained the utmost brevity, but I say in conclusion that it is for those reasons that we would put in jeopardy the progress made by the United Kingdom if we did not maintain a subsidy system in Western Europe to maintain not merely their coal industry but also ours in Britain.

Photo of Mr Alec Woodall Mr Alec Woodall , Hemsworth 11:11 pm, 5th February 1986

I apologise for missing the Minister's opening remarks because I want to put a question to him which he may already have answered. Why is it that the consultative document from the EC was signed on 2 October last year and his explanatory memorandum on that document was signed and issued by him on 24 October last year but it has taken us until 5 February 1986 before we start to discuss the documents and their implications? I ask that question rather pointedly because last December I received a letter of one paragraph from the area director of North Yorkshire informing me that he saw no justification whatever for keeping open Kinsley Drift mine.

The hon. Member for Bedfordshire, North (Sir T. Skeet) has just mentioned Selby, the Vale of Belvoir and all the new capacity. Is he aware that Kinsley Drift mine was commissioned only on 19 August 1979? It is one of the newest pits in Yorkshire and cost £26 million. The area director said only last December that he could see no justification for keeping it open and was therefore recommending its closure. That pit has 12½ million tonnes of reserves of good quality coal, yet it has got to go, along with 350 jobs.

I want to draw attention to the first two main proposed changes in the explanatory memorandum. They are: (a) Aids to be allowable only for improving productivity, providing new economically viable capacity and for solving social and regional policies.(b) Elimination of certain existing types of aid, for recruitment and coal stocks. What recruitment? As my hon. Friend the Member for Rother Valley (Mr. Barron) has just said, we represent the areas with the highest unemployment in Yorkshire and Humberside. Since the strike ended, there has been no recruitment in the coal industry. Pits have been closed right, left and centre. All the young miners with little service who could not benefit from the redundancy payments schemes have been transferred to other mines which are supposed to be more profitable and to have better capacity. There has been no recruitment, so to talk about phasing out the aid for recruitment is nonsense.

Will the Minister comment on the aid for coal stocks? If all the aid that will be available after 1 July is devoted to improving productivity and providing new, economically viable capacity, productivity will be improved. The hon. Gentleman has paid tribute to the improved output per man shift since the end of the strike. More coal will be produced more quickly and more cheaply. If it cannot be sold, there will be no more aid to help to stock it. In the end, that will mean the closure of more pits, such as Kinsley Drift. That is almost a brand new pit, only six and a half years old, which has to go. The whole thing is nonsense.

I apologise for using rough language, but if Lord Hailsham, who presides in the other place, were listening to the debate, he would be saying under his breath "Bollocks", because that is what it amounts to.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

Order. I believe that on reflection the hon. Member would prefer to withdraw that word. He may choose to substitute another word.

Photo of Mr Alec Woodall Mr Alec Woodall , Hemsworth

I offer to withdraw the remark out of deference to you, Mr. Deputy Speaker, but I was repeating only what the noble Lord said. It was in the press. He was replying under his breath to the bishops who sit on his right.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

The hon. Member must not comment on what goes on in the other place. In this House we are responsible for our own conduct. The hon. Member has shown his willingness to withdraw. I hope that he will make that clear and will proceed with the rest of his speech.

Photo of Mr Alec Woodall Mr Alec Woodall , Hemsworth

I apologised before I referred to what the noble Lord said in the other place. I unreservedly withdraw the remark.

The comparison between what is stated in the document and what the coal industry needs shows that the industry can have aid to produce coal more cheaply, but the more that is produced, the quicker the pits next door will be closed.

Photo of Mr David Hunt Mr David Hunt , Wirral West

It may assist hon. Members, especially the hon. Gentleman, if I remind them that I made clear in my opening remarks that the proposed changes to cyclical stocks and recruitment will have no bearing on practices in the United Kingdom, because we have not previously granted aid in those areas.

Photo of Mr Alec Woodall Mr Alec Woodall , Hemsworth

The hon. Gentleman has signed the explanatory memorandum to the consultative document. In relation to ministerial responsibility and policy implications, that shows that he has no other observations and that he accepts the consultative document. As I have explained by referring to paragraphs (a) and (b), aid can be given to improve productivity and capacity, but the more coal that is produced and the more stocks that are built up, the quicker other pits which are viable at present will be closed.

In reply to the hon. Member for Elmet (Mr. Batiste), I should say that no aid has come to my area from NCB (Enterprise) Ltd—not one job has been created by it. The enterprise scheme will help only those who are prepared to invest their own capital. It is not forthcoming in our area. Representatives of the scheme have visited local councillors in my area to explain what they will do for the area, but until now no jobs have been created.

Photo of Mr Spencer Batiste Mr Spencer Batiste , Elmet

If the hon. Gentleman tried a little harder to bring projects to the attention of NCB (Enterprise) Ltd., he might have better luck in creating jobs in his constituency.

Photo of Mr Alec Woodall Mr Alec Woodall , Hemsworth

How many jobs has the hon. Gentleman created, through NCB (Enterprise) Ltd., in his area? How many have you created? Not one, and you cannot deny it—

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

Order. The hon. Gentleman knows full well that he must address other hon. Members in the third person. References to "you" are, of course, references to me; and I am not involved in this.

Photo of Mr Alec Woodall Mr Alec Woodall , Hemsworth

I beg your pardon again, Mr. Deputy Speaker. You and I have known each other for a long time, and remembering your track record of naming Members, I have no wish to arouse your anger in any way.

I put these points seriously to the Minister. It is nonsense to say that this document will help the coal industry. Aid will be provided after 1 July only to improve productivity and capacity, which will mean that much older pits in my area will get the chop. If the board can close six-and-a-half-year-old pits, God help the pits that are more than 100 years old.

Photo of Michael Fallon Michael Fallon , Darlington 11:21 pm, 5th February 1986

This debate is not wholly about the state of the United Kingdom coal industry. If it was, no one could have put the case for the industry with greater accuracy or eloquence than my hon. Friends the Members for Elmet (Mr. Batiste) and Mid-Bedfordshire (Sir T. Skeet). The debate is also about the Community draft rules.

The hon. Member for Midlothian (Mr. Eadie) said that he was surprised not to receive a brief from the National Coal Board. Conservative Members would have been more surprised if he had received the brief and paid any attention to it, because he has not done so during the past year or so. He also said that the document recognised that state aids across the Community are indispensable, I have read the document a couple of times, and I do not see that anywhere. Paragraph 4 of the Community's explanatory memorandum to the document says not that state aids are indispensable, but that rules to enable their continuation and to police them are indispensable. That is an important distinction.

The hon. Member for Midlothian said that, in view of the contents of the draft rules, the Opposition would not oppose them. I should tell my hon. Friends that, if the Opposition do not oppose the rules, we should at the least be slightly suspicious, because every time that the Opposition have not opposed an instrument or an act of Government policy on the coal industry in recent months it has proved to be very expensive for the taxpayer and for my constituents, not to say his.

I had not intended to speak on this draft Community instrument. It is complex enough for hon. Members on both sides of the House to examine. As I implied in my question to my hon. Friend the Minister, the Government may be trying to have things both ways. There is an element of schizophrenia here. If productivity in the United Kingdom is improving, as he and my hon. Friend the Member for Elmet have seen and which I saw at Wistow colliery before Christmas, and if the NCB is on target for break-even in 1987–88 — in which my hon. Friend the Member for Bedfordshire, North cast such doubt—why are we threatened by the new proposals? Why did my hon. Friend the Minister say that the proposals are not new or sinister? Why does he say in his explanatory memorandum: If the Commission were to exercise without sensitivity their proposed powers to limit state aids which includes social measures, they would jeopardise the achievement of the NCB's primary objective which is to break even by 1987–88.

I hesitate to press my hon. Friend on that point. He is greatly experienced in European Community matters and has great knowledge of the industry. Only an Under-Secretary of State with his expertise and understanding could respond to that point. He is the best person to answer my question. We and the Opposition are joining to welcome the rules which he says worry him because there is a lack of defined criteria on which to police the state aids. However, why do the rules at the same time possibly jeopardise the board's objective of achieving break-even in 1987–88?

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Energy and Climate Change) 11:26 pm, 5th February 1986

The Minister drew attention to the objective set out in the document which was to aim for a viable coal industry in Europe able to produce coal at world market prices. The hon. Member for Midlothian (Mr. Eadie) mentioned his anxiety about taking an oversimplistic view of the market. It is important that within the EEC regulations and in this country we take account of the fact that when considering the world coal market we are not comparing like with like.

Despite some of the comments by Conservative Members, the EEC coal industry is subject to competition from coal imported from South Africa, South America and Poland which is produced by methods and at rates of pay that would not be considered acceptable within the EEC.

We are taking a rather foolish and short-sighted view of the market if we impose regulations on reasonable working conditions within the EEC while being prepared to open our doors to coal which is produced under conditions which we regard as unacceptable, and undermines our market. That is a point that the EEC and the United Kingdom should be in mind.

The Minister also said that he looked forward to the coal industry breaking even in 1987–88. There are hon. Members on both sides of the House who would like to see the coal industry break even in the right circumstances. It depends on how that is achieved. It depends on whether it is achieved by increased output, increased marketing and selling more coal and, as a result, one hopes, creating more employment and investment, or whether it is achieved by cutting the industry to the bone, eliminating everything on the margins and ignoring all the social consequences and costs. That is the kind of exercise that we are witnessing in the steel industry, which threatens to have devastating consequences for the economy of Scotland and the fortunes of the Conservative party in Scotland.

The coal strike has been referred to. I would like to think that the House could look forward rather than back. We have got over the strike and must now find a way in which to advance the industry. The decision whether to keep mines open must be based on slightly wider criteria than have been accepted by the Government. I speak as an economist. To say, within the narrow accounting confines of the NCB, that a pit is uneconomic and should be closed is foolish if two consideration are not borne in mind. The first is whether there is alternative employment which gives people a viable living and takes them off the public purse. The second is whether the uneconomic nature of the pit is due to long or short-term factors.

The hon. Member for Bedfordshire, North (Sir T. Skeet) touched on the question of the oil price. If, as some people fear, the oil price collapses in the next few months, it would present considerable difficulties for the coal industry. We would be faced with a difficult problem—whether that was a short or long-term development. It is conceivable that the price of oil could fall by $3, $4 or $10, a barrel. It is also conceivable that it might recover, depending on whether OPEC disintegrates or regroups. All of these things are uncertain.

It would be foolhardy to say that we have an uneconomic coal industry because the price of oil, which is sustained by a cartel, has fallen and that we shall close pits wholesale without taking account of the long-term implications. That is why we need a coherent and flexible energy policy. The absence of such a policy has been my consistent and major criticism of the Government. We must determine the parameters within which we want to operate, for coal, oil, gas and electricity. It is not good enough for the Government to sit back and say that they will allow the market to determine price, that they accept no resposibility for the market, irrespective of whether it is manipulated by cartels, multinationals or what I would call slave labour in Third world countries. We have a right and a duty to take account of such factors.

The document does not preclude our taking note of such factors. It says that solving social and regional problems will remain matters in which Government intervention is allowed. I have identified the areas in which there should be intervention. The Government should do more in that respect. I hope that our taking note of the document will not be used as an excuse to reduce such activity.

The hon. Member for Midlothian said that he had not had a brief from the National Coal Board. I agree that none of us has had a brief, but I tried to get some information today and, at the end of the afternoon, got a telephone call to the effect that there is nothing significant in the document, so the NCB does not have a view. It was not terribly anxious to elaborate. That is not very helpful. I should have thought that a Member of Parliament seeking information might have been given a rather more full explanation. I was genuinely grateful for the Minister's opening speech, as I needed some guidance about the background. I realise that we are taking note of a developing policy, within which we can sensibly operate. I strongly believe that the House should start to look forward. We should try to find common ground and recognise some of the wider issues. This sterile confrontation cannot continue. The Minister is committed to that objective, I know. To the extent that he acts accordingly, I shall support him. I reserve the right, however, to take issue with him when I think that he falls short of that objective.

Photo of Mr David Ashby Mr David Ashby , North West Leicestershire 11:35 pm, 5th February 1986

I regret that I have only a minute or two to say what I want to say.

I take the point made by the hon. Member for Rother Valley (Mr. Barron). I come from an area where there has been a considerable rundown of mining capacity. Miners in my area remember that most of the mines were closed when the Labour party was in power. Those miners received neither redundancy money nor, in many cases, concessionary coal.

The current rundown of mines has led to problems in my area. However, at least there are now substantial redundancy payments. We also have NCB (Enterprise) Limited. People in my area, with the help of NCB (Enterprise) Limited, have gone out and sold the area. We have achieved a number of additional jobs for those miners who had lost their jobs.

I exhort each hon. Member to go out and sell his area and to get hold of NCB (Enterprise) Limited. They should try to organise a seminar and explain to those in need of jobs when mines close that there are great opportunities for them. I have said time and time again that the important thing is to think positively, not negatively.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth 11:36 pm, 5th February 1986

The Secretary of State said this week that he had been staggered by the success of the industry. We have not been staggered—we have been telling him for months that the consequence of the closure of high-cost capacity would be a substantial economic improvement—but achieved at very high cost both to the community and in loss of reserves. The Government must respond to that success by insisting upon substantial progress with the expansion of coal into the industrial market. However, it is to the European market that I wish to address my remarks.

The NCB has almost a 50 per cent. stake in the shareholding of the British Fuel Company. I hope that the Minister is listening. That company has a 46 per cent. holding in Inter Continental Fuels. In turn, that has a 15 per cent. shareholding in the Coal Trading Corporation Group. That group is actually controlled by two French public companies — Charbonnages de France and Association Technique de l'Importation Charbonniere—[Interruption.] The point is serious, although the title may be amusing.

The point to which the Minister must address himself is that those two companies are part of the French public sector, now increasingly engaged in the importation of South African coal and trading it in France and the Mediterranean. I accept that President Mitterrand is of the same political persuasion as me. He maintains that he is leading the fight against apartheid. The Minister must go to Europe and insist that our successful coal industry obtains the share to which it is entitled inside the Common Market. If that means an assault on President Mitterrand to ensure that he fulfills his promise to lead the fight against apartheid, so be it. The Minister knows that the Government, with a firm attitude, can secure a larger share of the European market. The success of the industry during the past six months demonstrates the case.

It is about time that the NCB once again returned to a rather higher priority for training and recruitment, which have not received the attention that they deserve. Perhaps the Minister will think on that.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian 11:38 pm, 5th February 1986

With the leave of the House, Mr. Deputy Speaker. I shall be brief. The contribution of the hon. Member for Darlington (Mr. Fallon) was a good example of why the Government are in trouble. He either cannot hear or he cannot read. How could he suggest that there is something clandestine about an Opposition spokesman saying that he had spoken to the Secretary of State for Energy who had confirmed that he would uphold the United Kingdom's position at the Energy Ministers' Council and that a British Parliament would be able to decide on the future of the coal industry? If there is anything clandestine or suspicious about that, there is little hope for us. We shall have Yahoo politics.

The hon. Member for Bedfordshire, North (Sir T. Skeet) said that he was in favour of maintaining coal subsidies. I hope that we shall not be frightened off by the changing oil situation. It could be said that the coal industry is lucky and that the oil prices are coming down, but that will have consequences not for the coal industry but for the oil industry. It means that the marginal oil fields will no longer be developed, and that the off-shore oil industry will be devastated.

The House has given the Minister a fair wind and told him what he should do at Brussels. We welcome what he said earlier. He has an easy job in responding to the debate. We want to make sure that the United Kingdom decisions are taken in the British Parliament and not decided by Brussels bureaucrats.

Photo of Mr David Hunt Mr David Hunt , Wirral West 11:42 pm, 5th February 1986

With the leave of the House, Mr. Deputy Speaker. The debate has been comprehensive and has covered a range of issues. Hon. Members' points have been of great value in preparing for the detailed negotiations that stretch ahead of us in Brussels before we can sign the final decision. I hope that the hon. Members for Rother Valley (Mr. Barron), for Hemsworth (Mr. Woodall), for Gordon (Mr. Bruce) and for Wentworth (Mr. Hardy) and my hon. Friends the Members for Elmet (Mr. Batiste), for Bedfordshire, North (Sir T. Skeet), for Darlington (Mr. Fallon) and for Leicestershire, North-West (Mr. Ashby) will excuse me if I do not reply to all of the questions that have been posed, in view of the time restraint. I want to get in as many contributions as possible, so I shall write to all concerned if I am not able to cover their points.

I am grateful to the hon. Member for Midlothian (Mr. Eadie) for dealing with these issues in his characteristically committed way, as he so ably stewarded much of the operation of the existing state aids regime in its early days. No one knows better than he the way with which these matters have to be dealt. My hon. Friend the Member for Darlington must take account of the fact that the direction about which we are talking covers not only deficit but social grants. He will find the answer to his question among the social costs.

The hon. Member for Midlothian, and others, said how proud they were of the achievements of those who work in the coal industry, and there are many reasons why the future of our coal industry has every prospect of being the brightest in Europe. We have the greatest coal reserves in Europe, the best and finest mining engineers, the benefit of world-class British mining equipment and manufacturers, and, with new productivity records being set from Scotland to Kent and from south Wales to the midlands, British miners are demonstrating beyond all reasonable doubt that they are the best in the world. What a transformation we have seen. Output per man shift under the Labour Government, sadly, moved down from 2·29 tonnes in 1974–75 to 2·24 tonnes in 1978–79. The latest available figure is 3·02 tonnes. That means that all the improvement in productivity over the past 12 years has taken place since this Government came to power, and the figure is still rising.

Hon. Members should be in no doubt that at the Energy Council on 20 March, the United Kingdom will continue to resist any inappropriate intervention by Brussels in our coal industry, because the objective for the NCB is to develop an outstanding and economically viable industry that can compete in the world energy market. My hon. Friend the Member for Bedfordshire, North was right to point to the uncertainties that lie ahead, but the board is on target to reach its objective by 1987–88. To achieve that, aids will continue to be necessary. Therefore, it is essential that a realistic and sympathetic system of support should emerge from our negotiation in Brussels to allow progress to continue without any fear of violation of our treaty commitments. We shall continue to press for this. I commend the motion to the House.

Question put and agreed to.

Resolved,That this House takes note of European Community Document No. 9316/85, and supports the Government's intention to ensure that the new rules governing state aids for the coal industry should continue to take full account of the United Kingdom's objective of achieving a smooth transition to a sound and viable industry.