Motion made, and Question proposed,
That a supplementary sum, not exceeding £162,277,000 be granted to Her Majesty out of the Consolidated Fund to defray the charges which will come in course of payment during the year ending on 31st March 1988 for expenditure by the Department of Energy on assistance to the coal industry including grants to the British Coal Corporation and payments to redundant workers. — [Mr. Norman Lamont.]
The House has been listening to a most interesting debate, introduced with his characteristic good humour and geniality by my hon. Friend the Parliamentary Under-Secretary, on the hurricane that blew through the fair forests of England. I wish that I had an equally interesting and congenial subject to present to the House, but I fear that I have not. I apologise for the fact that it is unavoidably dry and technical, although I think not unimportant.
The object of my Committee's report is the examination of a particular aspect of expenditure. The Committee's prime responsibility, under Standing Order No. 130, is to examine expenditure generally. This is a responsibility that we discharge with some assiduity and, I hope, accuracy.
Support for the coal industry continues to he a major segment of public expenditure. As the Secretary of State told the House not long ago, the Government are spending about £2 million a day on new investment in the coal industry. The particular subject of our report was a Supplementary Estimate for £162 million, made up broadly as follows: £100 million towards the increased deficit which is anticipated in the current financial year, and £60 million towards what is broadly defined as restructuring, but which is essentially the redundancy lump-sum arrangements which have been made by the industry. That is exactly what it means.
My Committee has been concerned with both these subjects and with three aspects of them. The first is the scale of the provision, and I shall come back to that in a moment. The second is the under-provision in the Main Estimates, despite our warning to the Government last year that we suspected that there would be under-provision. The Government were somewhat contemptuous of our view and said so quite openly. The third aspect with which we are concerned is British Coal's failure to achieve its goals, although we are fully aware of the size of the problem that the board has to face and of its recent achievements.
There is in the public expenditure White Paper a forecast of loss before deficit grant of £195 million. The latest Government memorandum suggested that this would be significantly in excess of £200 million, so Parliament voted £414 million in 1986–87 for deficit grant and a further £114 million in a Supplementary Estimate. The public expenditure White Paper has projected another £195 million loss in 1987–88 and warned that it could be substantially greater than £200 million.
The question is: when is this going to end, if ever? We know that during the first world war the men of the line were known as the Old Contemptibles. There is a group of beneficiaries in the Budget which I think we could call the "old reimbursables". It includes, certainly, British Coal, British Rail, Girobank, the common agricultural policy, the Northern Ireland Housing Executive, British Shipbuilders and a number of others.
So, when we look at the figures for British Coal in particular, we must realise that this is but the tip of a very substantial iceberg indeed. The total Treasury operating subsidy to British Coal from 1982 to 1987–88 was the staggering sum of £6,025 million—roughly £120 per head of the population, or £300 per family. If that target subsidy figure is met, it will cost each family £42, and if the subsidy that is concealed in the CEGB's purchase-of-coal arrangement is added, both those sets of figures are very substantially increased.
The hon. Gentleman refers to these massive subsidies. I think he ought to bear in mind that many things are subsidised in this economy of ours. For instance, would he consider that the £550 per annum that is paid by every family in Britain to assist farmers, not only in this country, but indirectly in West Germany, France and elsewhere, is a massive subsidy? That is far in excess of anything relating to the coal industry.
I quite appreciate the point made by the hon. Member for Bolsover (Mr. Skinner). If we look at these massive documents, the public expenditure White Papers and analyses, we see a wide range of subsidy. I do not wish to comment on the merits of any particular one, but it seems to me that in making judgments, as we are trying to do, about the scale of public expenditure, these figures cannot be neglected. Some are very large indeed, and all of us have views on the merits, or indeed the demerits, of particular subsidies, but I do not think that we can escape the obligation to look at them sanely and sensibly and to recognise and appreciate their scale and significance.
When Sir Robert Haslam was giving evidence to my Committee two or three weeks ago, he made the claim that by 1988–89 British Coal should effectively be operating out of the red and he in profit. He suggested that three fundamental conditions must be fulfilled if British Coal was to achieve that position. First, the dollar should not weaken; secondly, international coal prices should remain firm; and thirdly, there should be harmony in industrial relations.
Within the last few days it has become clear that, far from going in the direction that Sir Robert wishes, the dollar is falling, thus aggravating the problem. There is no sign of international coal prices firming. They, too, are tending to fall. And, sadly, industrial relations harmony is not exactly what everyone would hope. None of Sir Robert's conditions has been fulfilled.
What provision for deficit grant will the Government be likely to have to make in the main March Estimates this year? That question greatly concerns my Committee, and I believe that it should concern the House and the country. We would be grateful if my hon. Friend would give us as precise a figure as he can.
Let me deal next with restructuring. The Summer Supplementary Estimate for the redundant mineworkers payments scheme was £39 million, which covered the closure of 16 pits, with five expected in that year. The payments would be made to some 15,000 miners who left the industry. The Committee understands the reasons for that, but what future provision is now required? In his evidence Sir Robert Haslam predicted a further 20 closures and a further 15,000 redundancies, on the favourable conditions that he postulated. Even if the Government do not share the Committee's gloomy prognosis on the last occasion — which, unfortunately, seems to have been justified — our pessimism may have to be repeated on this occasion, and the Government may take a different view.
The Coal Industry Act 1987 provided about £300 million for restructuring grants, with a total limit of £700 million. The restructuring grants order will increase that sum to £500 million. If the protection of long-term contracts does not continue and dramatic increases in productivity do not occur, the number of closures could clearly increase. The Committee is, I think, entitled to ask what will be the cost to the nation. As the House has already discovered this week, that question has a particular, immediate and much more local application to Scotland.
The Committee reached two key conclusions in paragraph 10 of its report. The first was that, if there were more closures, there would have to be more restructuring support than appears to be anticipated at present. The second was that, if there were no more closures there would have to be more support of the deficit on the operating grant as the coal industry endeavoured to meet what are undoubtedly likely to be severe and challenging market conditions.
I do not wish to lead the hon. Gentleman into the current great Scottish problem, but has he any objective view on the use by an electricity board of short-term marginal costings?
Whether short-term or long-term marginal costing is the appropriate technique for pricing electricity is a complex and difficult subject, and would lead me down many avenues and cul-de-sacs, so I do not think that I wish to pursue it tonight. The Committee will undoubtedly explore the subject with my right hon. Friend the Secretary of State and with other witnesses, and we shall return to it.
Can the Government now define the limits of the claims that they are prepared to allow the coal industry to make on the taxpayer, whatever the circumstances? As we know, those circumstances are widely unpredictable. The financial consequences of meeting the downside risk are prodigious, and it is for that reason especially that my Committee wished to bring the subject to the Floor of the House this evening.
It is always a great pleasure to follow the hon. Member for Havant (Sir I. Lloyd), as I have done on many occasions in these debates, for he always argues his case fairly and objectively.
I am sure that the hon. Gentleman has seen the headline in the Financial Times which, perhaps, described the position more dramatically than he did. It read, "More subsidy or close pits"—or perhaps it was, "Close pits or more subsidy". I may not have got it exactly right, but I have got the sense right.
The hon. Gentleman has told the House that it will be the responsibility of his Committee to examine the matter in greater detail. I wonder whether he has had a chance to glance at Hansard of 23 February, when his hon. Friend the Parliamentary Under-Secretary of State for Energy answered a question put by the hon. Member for Meirionnydd Nant Conwy (Dr. Thomas). I do not intend to give details for every year, but if the hon. Gentleman examines the answer he will find that other nations pay massive coal subsidies in comparison with us.
In 1987, for instance, the subsidy in Belgium—which has a much smaller coal industry—was £57·55 per tonne. France, which has a slightly larger coal industry, paid £22·16 per tonne. The Federal Republic of Germany, whose coal industry is more comparable with ours, paid a subsidy of £29·45 per tonne. The United Kingdom subsidy is £10·12 per tonne. West Germany pays nearly three times as much. If we are to view the matter objectively, we should do so by taking into account what happens to other coal industries.
I remember hearing Sir Robert Haslam tell us that if we were to draw comparisons between our coal industry and others, West Germany was probably the fairest comparison in Europe. He said that our coal industry costs were 35 per cent. better than those in West Germany. He was also able to tell us that West Germany is not allowed to import a single tonne of coking coal.
Other nations take steps to protect their coal industries. For whatever reason, West Germany has decided to do so. A tremendous argument is taking place about this at present. For example, the hon. Member for Clwyd, North-West (Sir A. Meyer) said yesterday that if the policy of electricity privatisation were pursued, it would mean the complete demise of the coal industry. That was not said by one of my hon. Friends.
I should like, however, to deal with other aspects of the fine contribution of the hon. Member for Havant. Many doubts have been expressed in the coal Estimates. One was based on the decline in the value of the dollar, on which the hon. Gentleman commented. In 1987, the gap between the prices of British and foreign coal increased by 25 per cent., or £6 a tonne. As Sir Robert Haslam said in his evidence, it led to the loss of about £500 million-worth of sales. He is on record describing that loss of £500 million as
pro rata to our size equivalent to wiping out the entire profits of ICI: one has only to imagine the effect of that on the United Kingdom's industrial and financial scene to recognise the severe problems we are facing.
One of the doubts expressed in the Estimates — I think Sir Robert Haslam said this—was based on the hope that the dollar would stabilise at about $1·50. There was a hoo-hah on the radio this morning about what has happened to the pound. It was said that the pound is leaping forward and that there is no restriction on it. For some hon. Members who recall 1981, when we experienced the massive slaughter of a large section of British industry, that statement will be of little comfort. I do not think that there is a hope in hell of the dollar reaching !1·50.
That doubt about the dollar is overshadowed by the doubt about British Coal breaking even, and I do not think that there is a chance of it doing so. The Government have left themselves open to the charge that they are anti-British Coal and, together with the Estimates, that is what we must debate tonight.
To some extent, we are having the same debate as we had last Wednesday. We are talking about finance, restructuring and deficit grant. I confirm what the hon. Member for Havant said. At the end of the miners' strike there were 169 pits. British Coal contemplates that by the end of March 1988 there will be 66 pits, even taking into account the three new pits in the Selby complex. Total manpower has fallen from 220,000 to 127,000 — a reduction of 93,000, of which 78,000 were miners.
Those figures do not tell of the misery and pain that the closures have caused mining communities. Those closures were carried out under the name of restructuring. Those job losses are without parallel in recent times in any industry in the United Kingdom.
The figures that I have given are not entirely accurate because more pits will be closed and more jobs will be lost. When considering the Coal Estimates and the Select Committee's report we must consider the serious position in which the coal industry finds itself. The present average age of miners is 34. The perception of the coal industry among much of the public is that pit closures have involved aged men being offered an opportunity to leave on generous redundancy terms. That ceased to happen some time ago.
Further, much of the public's perception is that all the pits that have been closed were clapped out and were using mining technology of yesteryear. On the contrary, pits have closed that were not old and used modern technology. In general, they were not closed because of exhaustion of coal seams but because of market conditions.
Those closures have been accelerated by the promise of cheap foreign coal, much of which is heavily subsidised and sold at below the cost of production. I dealt with that matter in some detail in my speech last Wednesday.
Parliament must be made aware of the changing pattern that will emerge. British Coal has claimed that during the massive contraction of the industry all the redundancies have been voluntary and have been carried out under the Government's redundant mineworkers payments scheme. However, when the Government abandoned that commitment, redundancies proceeded under British Coal's own scheme, which was not so generous. It made offers to miners to stay in the industry, and some did.
The new dimension that overshadows the debate is that that offer has been withdrawn. For the first time since the 1930s, coalminers will be shuffled on to the dole. Many of those 34-year-old kids are faced with the prospect of their working lives ending because there are no other employment prospects in mining communities, and that is a scandal.
I used the phrase "those kids"; they are 34 years of age. I could say "my kids", because this year I will be 68 years old. Never in my wildest dreams did I dream that I would have to make a speech in this Mother of Parliaments while people are cold and dying of hypothermia. Those kids will end up on the dole and will be unable to find a job for the rest of their natural lives. What a prospect that is. It is a scandal.
All the evidence in the dispute between the South of Scotland electricity board and British Coal points to the fact that there was Government connivance in it. The Secretaries of State for Energy and for Scotland laid themselves open to a charge of conspiracy. The international coal report in the Financial Times said that the Secretary of State for Scotland gave assent not once but twice to Donald Miller to negotiate contracts for foreign coal. The Secretary of State for Energy, who is supposed to be the Minister with responsibility for coal, made it clear this year that he supports the British electricity supply industry being entitled to buy its coal from whatever source it chooses. The proposed slaughter of the deep-mine coal industry in Scotland or the fact that 3,500 jobs would be lost did not bother them one bit.
I have done various calculations about the effects of the slaughter of the British coal-mining industry, and we are talking about a loss of 7,000 to 10,000 jobs. Railway workers' jobs, and the jobs of those engaged in other aspects of the transport industry and in the light engineering industry, are in peril. When we look at the Scottish economy, we see nothing but a desert of hopelessness.
The matter took a further twist when British Coal took the SSEB to court on the basis that it had a valid contract for coal burning at the Cockenzie and Longannet power stations. It obtained an interim judgment from Lord Prosser. His judgment was based on the fact that the effect of that on the Scottish coal industry would be "catastrophic and irreversible." The learned judge showed more concern than the Secretary of State for Energy. Despite that judgment, the SSEB is to import 1 million tonnes of coal from China, Australia and the United States. That is why there was anger in the House last night. The Secretary of State for Scotland did not tell the House what had already happened in relation to that order for 1 million tonnes of coal. Some of us understand what happens in the machinery of government.
The Secretary of State for Scotland issued a press release on Sunday—an unparalleled action—and said that he would be winding up the debate on electricity privatisation on the following day. He gave the impression that when he did so he would give some hope to miners in Scotland. But he made what I have described as a sixth-form debating speech, and he gave no hope to Scotland's miners. All he could say was that he hoped both sides would come together and resolve their differences.
I remember the interjection by my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) who said that we faced a similar situation when we were in government. He described how he brought both sides together. There was some knocking of heads, and agreement was arrived at. He forgot to say that I was present at that meeting as the Minister responsible for coal.
I could go on and quote what The Scotsman said, but I will say instead that what distinguishes the Secretary of State for Energy from the Secretary of State for Scotland is that, by virtue of his office in the Department of Energy, he meets the chairmen of the Central Electricity Generating Board and of British Coal. We understand, however, that the Secretary of State for Scotland will deal only with the chairman of the South of Scotland electricity board. Time and again he comes to the Dispatch Box and mouths its case. He has never seen representatives of British Coal in Scotland. The charge that I am making in relation to the coal industry in Scotland is that he has not been even-handed in his approach. It should be the duty and responsibility of a Minister to be even-handed in dealing with this great crisis.
I have described what happened in the privatisation debate last night. The Minister cheated by putting out that press release on Sunday and then saying that there was very little that he could do. There is little doubt that the future of the coal industry is tied to the future of the electricity industry, as the hon. Member for Havant said. More than 75 per cent. of sales go to the CEGB and SSEB, and since 1982–83, 70 per cent. of its total output has gone there.
It is a matter of public record that the CEGB told the Select Committee on Energy in 1986 that it could import 30 million tonnes of coal within three years. Since then, the Secretary of State for Energy has helped that process by giving permission for an 8 million-tonnes-a-year deep-water port at Fawley, Southampton. We know that there are two Bills before the House now to seek approval for two ports on the Humber, each for importing 5 million tonnes a year. We know that the SSEB claims that it has facilities to import more than 1 million tonnes.
I told Conservative Members on Wednesday that when one examines what it is possible to achieve and the international market, it is very difficult to see how we could indulge in importing coal. But I am not prepared to predict what will happen to coal imports in view of the way in which this Government are carrying on.
I have much respect for the hon. Member for Midlothian (Mr. Eadie) when he is speaking in coal debates. He has been easy and liberal in his criticism of the Government's policy towards the coal industry. Perhaps he would like to put it into perspective and tell us about the time when he was a Minister in the Department of Energy in the previous Labour Government. How many pits did he close, and how much less did he invest in the coal industry than we have invested since we took office?
Mr. Eadie: I shall have pleasure in telling the hon. Gentleman about that. I have already described, for example, what we did in relation to Scotland when there were problems in the coal industry. The hon. Gentleman asks what we did when we were in office. We started research and development into the coal industry. We started projects for making oil and gas from coal. Indeed, when I became Minister for energy—in answer to the hon. Gentleman's question about what the Government did then for the coal industry—the Labour Government introduced "Plan for Coal" to revitalise that industry, which was at the undertakers. We have nothing to be ashamed of in our attitude to the coal industry.
The Government seem to encourage these initiatives but they can see what will happen to British Coal and its long-standing arrangements with the electricity industry, and say that the free market is the optimum mechanism for planning the production of coal and electricity, despite the fact that Sir Robert Haslam among others has warned that the international coal market is not a free market and is unlikely to become one.
If the hon. Gentleman knew anything about the coal industry, he would realise why I am saying this. The seams were too small for the technology used today to operate in them. There was a need to close pits even on safety grounds, and on the basis of reorganisation so that central pits could do the winding. It meant that pits were more efficient.
But at present, efficient pits are being closed. They are productive, raising a profit and operating the most modern technology. The only reason why they are being closed is that there are sudden movements in the market price of coal, as a result of coal being produced in South Africa by slave labour and produced in Colombia by children. If that is what Conservative Members want, they must live with that on their consciences for the rest of their lives.
I must come to what is at the back of what my hon. Friend is saying about the noises we are hearing from Conservative Members. I know that there is a lot of talk on Conservative Benches about 30 million tonnes of coal being imported into this country. I have already told them my analysis of the facts and that such a plan does not make much sense. Tonight, I want to fill in the scenario of what would happen to the British coal industry with that extra 30 million tonnes of coal coming in.
In Scotland, there would be no pits left. In the northeast, where there are six pits, one would be left. In north Yorkshire, eight pits would be threatened and they would have only six left. In south Yorkshire, eight pits would be threatened and there would be 11 pits left out of 19. In Nottinghamshire, nine pits would be threatened out of 19 and there would be 10 left. In the centre, and north of Derbyshire, five out of nine would go, and four would he left. In the western division, five would be threatened and six would be left. In south Wales, nine pits would be threatened out of 14 and there would be five left. Of course, the Kent pits would be wiped out.
I must ask why importing foreign coal is advocated. It is provided, as my hon. Friend the Member for Rhondda (Mr. Rogers) has said, by the sweat of South African labour and the work of eight-year-old children in Colombia. It comes from Poland, who are concerned only about getting currency, or from China or the Soviet Union. How can this Government even contemplate wiping out the coal industry to the extent that I have suggested? Are they advocating that we should import 30 million tonnes of coal? It would be the height of idiocy.
At Question Time yesterday and in the electricity privatisation debate, the Secretary of State for Energy said that we had to have a nuclear power industry because it was in the strategic interests of the country. Yet he does not believe that it is in the strategic interests of the nation to have a coal industry. He concedes that we may require 90 million tonnes or 80 million tonnes of coal and wondered what we were worrying about, but he did not say where that coal would come from. That is why I make the charge that, although the Government may say that they are pro-coal, they give every indication of being anti-British Coal.
The debate gives us the opportunity to talk about the coal industry. The Government seem to be financially conscious. I could give them figures to show what the slaughter of the coal industry would mean in Scotland. We would he talking not about millions but about billions of pounds, and not just that but the human misery that would go with it of 34-year-olds being flung on the scrap heap. I welcome the opportunity of opening the debate for the Opposition.
I feel that I have been here before, year after year after year. Debates about Supplementary Estimates for the coal industry remind me of the debates which we used to have about Supplementary Estimates to prop up British Leyland. I am not making a point about whether it is right that we should approve the Supplementary Estimates. The question that we should ask is whether the endless subsidies of the past have helped to produce a more efficient, competitive coal industry. Have those subsidies helped to produce cheaper coal which could have saved hundreds of thousands of jobs in the rest of British industry which has suffered job losses and uncompetitiveness because our energy prices have been too high?
The answer has to be that huge subsidies have not helped to make the coal industry more efficient, but over more recent years there has been a change of policy, with the subsidies having had a few strings attached. The Government have insisted that the industry also plays its role and gets its house in order. That is the big difference.
When we consider the huge amount of taxpayers' money which has gone into the coal industry, we could say that it was justified if it had achieved a coal industry which could now produce a product which could compete not just in our own market but in Europe, our natural market. Unfortunately that has not happened because too many of the subsidies have been granted too freely by the House, without the proviso that the money went into the development of more efficient new faces, more automation and more restructuring.
Too much money has gone on featherbedding inefficient pits which should have been closed. Restructuring could have resulted in more coal being produced at a lower price, which would have meant more secure jobs in the coal industry. That is the tragedy of the endless, repetitive sessions which we have had year alter year in debating the provision of more money for the coal industry. Thanks to the Government—my hon. Friend the Minister will confirm this shortly—at long last we are ensuring that we are getting value for money from the subsidies. The industry is becoming more competitive and more efficient.
As the hon. Gentleman will know, imports of foreign coal have to comply with fair trading rules. If there is evidence of dumping, as there has been in the past which has led to unfair prices, and if it can be identified, it will be stopped. The coal board is happy to insist on that policy and I am sure that the Government support it. Certainly within the EEC the fair trading rules would ensure that there is a competitive market.
The point I want to emphasise is that British coal could be the cheapest in Europe. We can produce coal at about £20 a tonne in our most efficient mines. All we have to do is concentrate on opening up and developing more of our enormous reserves. We could have lower-cost production with more automated machinery. The work would be less hazardous and less risky, with higher rewards for those who work in the industry. As a result, coal could be produced in excess of our demands. British Coal could compete against all imports and we could re-establish some of the long-lost export markets. That should be the Government's target, and I hope that my hon. Friend will confirm that that is the strategy. If it is not, the House should not approve further subsidies without ensuring that they are being put to good purpose.
I am grateful for that intervention because I was coming to that point. As Opposition Members will no doubt agree, far too many pits which still have good reserves have been closed. Those pits could still be open. They were closed not because the subsidies were not generous enough but because they were too generous. Those subsidies allowed the industry to relax in a featherbedded atmosphere instead of improving its management and its industrial relations, as it has done in the last two years.
British Coal's overheads and wasteful bureaucracy have been got under control, with an improvement in productivity. That has happened only because the Government have insisted that subsidies should have strings attached, that the industry had to make a contribution, that working practices had to improve, that restrictive practices had to end, that there should be flexible working and that the coal industry should operate in the industrial relations climate in which every other industry had to learn to operate to survive. There is nothing special about the coal industry which means that it should be protected from the natural forces of world competition. It would not need such protection if it continued to improve its productivity in the way advocated by management and more enlightened union leaders.
The hon. Gentleman says that there is a natural market for coal, but the energy market is not a natural market in any way. He talks about featherbedding and support for the British coal industry. Does he not accept that it receives the least support of any coal industry in Europe, while its efficiency and production are the best in the world? Does he further accept that there has been considerable dumping? The hon. Gentleman talked about the Government taking action against dumping. That is codswallop. The Government have never taken any action against dumping—even when the European Community asked them to take action against dumped American and Polish coal.
I rather regret having given way to the hon. Gentleman because he appears to have used that opportunity to make his own speech. I think it might be appropriate if I got on and expressed my own thoughts rapidly so that hon. Members can make their own contributions. The hon. Gentleman is wholly wrong. He has completely missed the point. Subsidies are relative. One needs subsidies if one does not have the enormous potential coal reserves that we have in this country. With our opportunities for low-cost coal production, we do not need subsidies.
We have had subsidies only because the industry has not got its act together and because management has not been allowed to manage and trade union leaders have refused to co-operate in achieving higher productivity and threfore lower-cost coal as well as a better living standard for those who work in the industry. That is what has to happen now. I believe that the Government will insist that it does. One way of doing that is to make the industry face reality at long last, as every other industry has had to do. That does not necessarily mean more pit closures or lost jobs. It could mean the opposite.
If the industry seized the enormous opportunities that it now has—not just as a result of the privatisation of the electricity industry but as a result of the enormous future of new coal technologies—instead of trying to resist them, it could make the most stupendous comeback and could be exporting coal and creating more employment and more wealth.
I do not believe that that can happen entirely within the present structure of British Coal. I accept that enormous progress is being made with British Coal, and undoubtedly the industry will become more efficient so that it will be able to compete against imports when the electricity industry is privatised. However, I believe that something more has to happen. I regret that the Government have not responded to the Select Committee's report of last year.
We went into the coal industry in great depth and studied coal industries in the private sector abroad. We examined the potential of improved productivity. Our recommendations were not unanimous, and no doubt Opposition Members will express the opposing view. The majority view of the Committee was that we have suffered a handicap because we have handcuffed ourselves and prevented the private sector from contributing to coal production.
I have always maintained that it is not just ridiculous but an absolute scandal that major companies such as BP, which have worldwide experience in coal production and which produce almost as much coal as British Coal, although they have to produce it abroad, should be prohibited by statute from investing in the British coal industry. Think of the enormous opportunities that could have been opened up if we had allowed British private enterprise, with mining expertise, to go into partnership with the nationalised industry to open up new faces more quickly than British Coal has been able to do, and to help to produce more competitive coal. If we had done that, we would have a flourishing coal industry.
That does not necessarily mean that we have to privatise British Coal. However, by now, we should have allowed competition from the private sector to develop alongside British Coal. We should have allowed new investment from the private sector to come in. As with oil and gas, licensing should be with the Department of Energy and not under the patronage of British Coal.
Already, one or two area boards are interested in operating coal mines. An individual electricity generator may well wish to participate in the investment of British Coal. Opportunities from the private sector should be encouraged and not prohibited under the Coal Industry Nationalisation Act 1946. Licensing of coal reserves should lie with the Department of Energy and should be given to those who wish to have a go on a competitive basis.
When British Coal decides that it wants to close a pit and abandon reserves of coal—it has done that only too often—the private sector should have the opportunity of taking that pit over and making a go of it. We know that private sector consortia — they could be mining co-operatives—would like to have a go at proving that some of the pits that British Coal has said are not economic are, indeed, profitable when run with less bureaucratic management and improved working practices. [Interruption.] The hon. Member for Blyth Valley (Mr. Campbell) is shouting. I hope that he will have an opportunity to shout in a moment, when I finish my speech. Perhaps he has not visited one or two of the private deep-mine pits, as I have. I can give him an example of one such pit in Stoke, which is limited to employing only 30 miners because that is all that the law allows. As a result, that mine can work only one shift. It wants to work two or three and take on another 30 or 60 miners. There are unemployed miners in the area made redundant by British Coal yet the private operator is not allowed to take them on and operate two or three shifts thus creating more coal reserves at a competitive price.
The Government still force the British coal industry to work under such artificial restrictions. The restrictions should be removed and the private sector given the chance. The coal miners made redundant by British Coal should be given a chance of alternative employment opportunities, which many of them want.
Too many pits have been closed that could have been economic. British Coal alone has decided that they are uneconomic. The opportunities for the private sector have been frustrated when they should have been opened up and liberated. The British coal industry has an enormous opportunity to compete. The new technologies such as the fluidised bed, combined heat and power, city district heating and coal gasification are contributing to electricity production and energy supply in other countries, but are not going ahead in this country because we have a monopoly that is not as efficient as it should be and restricted competition from the private sector at the edges. When the electricity industry is privatised, the opportunities will begin to open up—if British Coal takes advantage of them.
I hope that my hon. Friend the Minister will tell us that at long last the matter is being reviewed and that the British coal industry will now be given an opportunity to participate in a future as exciting as anything that it has experienced since the industrial revolution.
I promise to be brief, Madam Deputy Speaker, because I know that many of my hon. Friends who have constituency interests in the debate wish to speak. One item, which is of concern to me, has cost the coal industry much more than the grant is worth. Although I welcome the assistance to the coal industry, I have grave concerns about the Government's attitude to that industry.
Although the miners have been working very hard and producing record tonnages, their morale is very low. Why? Basically it is because of the Government's lack of a clearly stated energy policy that defines their prospects. In many cases it seems that the only reward for hard work is closures. I ask the House to remember that there has been a 60 per cent. increase in productivity. Why has there not been an increase of 60 per cent. in wages?
I am concerned that the money being contributed to the industry will be wasted by the chairman of British Coal, who seems more interested in manoeuvring trade unions into taking industrial action and using his public relations department to make the people of this country think that the unions are evil and irresponsible. In recent weeks he has successfully created unrest in a union renowned for its moderation. Like the Secretary of State, he harps on about the leader of the National Union of Mineworkers, accusing him of scaremongering about the present situation in the industry and flexi-hours.
Similar charges were made by a previous chairman and by a previous Secretary of State for Energy before the 1984 strike, when Mr. Scargill referred to 70 pit closures if the strike was lost. History has proved Mr. Scargill absolutely right: there was a pit closure programme. It was a strike that Sir Ian MacGregor himself has since admitted was manipulated, just as the problems in the industry are being manipulated today.
My concern is that a great deal of money is being lost by the arrogant bloody-mindedness of the chairman of British Coal, acting on behalf of the Government, to propagate anti-trade union political dogma. He appears to be desperately trying to attain the Prime Minister's beloved Victorian values, making himself the master whom the miners may serve subject to his will and without themselves having any say.
The proof of that lies in the chairman's heartless attitude to sacked miners and his insistence on a new code of conduct in place of a well-tried and fair one, which makes the board alone the sole arbitrator.
The chairman of British Coal has sought also, without consultation, to inflict weekend rosters on the deputies' union to replace another workable procedure. He dictated a small pay rise, again without any consultation, which illustrates his masterly arrogance. He is also refusing to backdate it to November, as has always been the procedure.
How can anyone on the Government Benches fail to see that deliberate manipulation on the part of British Coal, which has a public relations department of which Goebbels would have been proud? I include in that the Secretary of State for Energy, who I assume condones the chairman's behaviour. I condemn his attitude and that of the Government in their running of an industry as vital to the nation as the coal industry. I hope that British Coal and the Department of Energy will see sense and will ensure that this financial contribution to the industry is not wasted by their attitude towards the trade unions and the nationalised industries.
I welcome the opportunity to speak in this debate and should like to place clearly on record my views concerning coal. I see coal as an important, essential and strategic national asset. I believe that we in this House, and as a Parliament and Government, have a duty to ensure that the nation maximises this great national asset.
There is no doubt that there will be differences of view and opinion as to how that should be achieved. I do not doubt the integrity of Opposition Members and of the views that they hold. I hope they will be generous enough to accept, and will not doubt, my integrity. I have a high regard for the hon. Member for Midlothian (Mr. Eadie). He brings enormous experience to the House. He will not be surprised if I say that one of the lessons I have learnt is to look at the mistakes made by others and try not to repeat them.
Some of the mistakes which were made were, sadly, made under the Government in which the hon. Gentleman was a Minister. He must face that. Of the 295 pits that were closed during the stewardship of the Labour Government, not all were worn out and required closing. I accept that many of them were worn out—let me make that clear.
What I cannot understand is how Labour Members can argue that closing pits on that scale is somehow acceptable if done by a Labour Government, but that any closures under a Conservative Government are made because we have a vendetta against the coal industry. It would be an odd sort of vendetta that required the British taxpayer to pay, because it is the taxpayer who pays, not the Government. The Government use taxpayers' money, or they borrow it, as did the last Labour Government. Fortunately, the present Government have not been borrowing, but have been spending £2 million a day to modernise our pits.
If I have any comment to make in that regard, it is that our massive reserves of coal should be exploited to the maximum. If any aspect requires to be looked at in greater detail with the hope of obtaining greater rewards, it is that of opening up areas of greatest potential.
Does the hon. Gentleman not understand that, when he talks about the Labour Government closing the pits in the 1960s, what actually happened was that the small pits were closed so that there were then super-pits in the same areas, mining the same coal? The miners from the small pits went to the super-pits, but under this Government the super-pits are closing, leaving reserves in them.
Sadly, unlike the hon. Gentleman, I am not an expert in the detail of these matters, but I assure him that I can understand the mathematics of investment, return on investment, productivity, and soon. Sadly, "super-pits- is a description given to something that happens to be bigger. Unfortunately, as anyone with any business experience knows, bigger does not always mean more efficient. That is one of the great tragedies.
The hon. Member for Barnsley, East (Mr. Patchett) spoke about a substantial increase in productivity—I acknowledge that that has happened—and asked why there had not been a similar percentage increase in wages. That is the economics of the madhouse. Nobody expects to increase productivity by a given percentage and for wages to increase by a similar percentage, because it all depends on the gearing ratios. Anyone who wants to work out the mathematics in that way ought not to be promoting any industry.
As I said earlier, I see coal as an essential, strategic national asset. There are massive oportunities to produce low-cost coal. Here I have to declare an interest, because in my constituency there are companies which use electricity on a substantial scale. Because of that, they want electricity prices to be held at the most competitive level so that they can compete in world markets.
Included among those companies—although it is not the largest user, it is a big user—is the whisky industry, which employs many more people in Scotland than the coal industry. In terms of the return to the taxpayer, that of the whisky industry is massive, because the taxpayer makes no direct investment in it, unlike in the coal industry. The taxpayer enjoys a return of £1,000 million per year from the whisky industry, which is obtained through revenue and taxes.
Labour Members know that we have recently taken an extensive look at the whisky industry, because Labour Members and I have combined to bring a Bill on that subject before the House. It is an all-party Bill and we have the same interests in common. We are concerned that our whisky industry should continue to prosper and survive. When I visited the whisky research laboratories, the cost of energy was discussed on two occasions. Until then I had not realised just how important energy costs were.
Perhaps the most emotive subject with regard to employment in Scotland is the steel industry. I think that all in Scotland are united in the belief that it is essential that we continue to ensure the well-being of Ravenscraig and all its associated suppliers. It is imperative that Ravenscraig continues to receive energy at competitive prices. Indeed, that is probably the most important single area affecting coal and electricity.
I shall answer the hon. Gentleman's question, if he will only listen. One great problem, which was noticeable last night, is that Opposition Members do not want to listen. They think that they are the only ones who care. We care. We care very much about the whole of Scotland, not just about one narrow sector of it. We recognise that Ravenscraig, by its increased productivity and the way in which its work force has responded to the challenge that it has faced and to the miners' strike—we must remember that—has shown clearly that the men deserve to retain their jobs. We have a duty to ensure that the way in which coal is produced in Britain is not an impediment to the retention of their jobs.
That can be achieved through new work practices. I welcome the fact that miners at Longannet are prepared to consider the introduction of flexible working. The miners there, contrary to the advice that they are getting from some sources, recognise that their jobs can best be retained if they change to meet the changing times. The Government are prepared and willing to continue to invest taxpayers' funds on a substantial scale. No one can say that there has not been substantial investment. I am not opposed to helping any industry at any time. I am not opposed to what, in the House, are roughly called subsidies. I am opposed to a continuation of subsidies where there is no change and no willingness or preparedness for change, but where workpeople are used as an instrument to achieve political ends, whatever they may be and whoever is practising them.
No one should play God with other people's jobs and futures. No one should play God with other people's families. Anyone who imagines that the Government can somehow create and continue to keep jobs in being on the false basis of continuous subsidies is not living in the real world. It is necessary to ensure that there is change in return for the massive investment of taxpayers' funds.
There have been substantial changes within the coal industry, on which it should be complimented. Productivity in some sectors of the industry now compares favourably with many other sectors overseas. Such returns are the only real yardstick.
The difference between the United Kingdom's coal industry and many others is that, sadly, our coal industry has been used for political ends at the sharp end of political activity. That is sad because miners, like many other tightly knit groups of people in Britain, are loyal to their mines and country, as they demonstrated effectively in two world wars. There is no question but that the mining communities have contributed handsomely to Britain's well-being. I believe that that loyalty has often been abused — [Interruption.] The problem of the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) is that he does not believe in anything. I speak from conviction. The hon. Gentleman does not know what he believes in and has no conviction. He persuades no one and convinces no one.
In any consideration of Scotland's coal industry, one must first acknowledge that at least half, if not more, is now opencast. The public are not concerned with how coal is obtained, but the industry is interested in the technicalities, and the experts can explain just why there is that great interest. I have a tremendous admiration for individuals who are prepared to go down the mines. It is not something that I would wish to do. I have been down a mine only once—
Mr. George Foulkes (Carrick, Cumnock and Doon Valley): On a point of order, Madam Deputy Speaker. As you are aware, many Labour Members with vital constituency interests want to speak before 10 o'clock. Is there any way in which you can ask the hon. Member for Tayside, North (Mr. Walker), garrulous as he is, to draw his remarks to a conclusion, perhaps on the basis of tedious repetition?
Thank you, Madam Deputy Speaker. I have attempted not to repeat myself. I have attempted to cover widely the areas of genuine concern in Scotland. There is no doubt about the genuine feelings of concern that were demonstrated by hon. Members last night. I can understand the deep feelings of the hon. Member for Midlothian. If I had his long experience of and attachment to the coal industry, I would feel as deeply about it as he does, and I respect that genuine concern and feeling. However, I have little respect for what I call the engineered feeling that one sometimes gets. I make it clear that I exclude the hon. Gentleman from that.
There is no question but that the Government have backed British coal massively since 1979, and any attempt to claim otherwise is to ignore the fact that over £8,000 million of taxpayers' funds have found their way into the coal industry in different forms. Consequently, I have no hesitation in saying that the taxpayers have every right to expect the United Kingdom's coal industry to respond to requests for changes in work practices and for a continued increase in productivity.
Other United Kingdom industries have responded to such requests. I have mentioned the steel industry, which has shown that it can compete effectively with its overseas competitors. We can prevent steel from coming into the United Kingdom by showing that other people cannot produce steel of the quality, and at the rate and the price, that we do. I am confident that the United Kingdom's huge reserves of coal can, must and should be exploited to the benefit of the industry and the people who work in it, but, more important, to the benefit of the nation.
Miners in the high-productivity areas who are now working flexible hours and a six-day working week are enjoying substantial pay returns. The hon. Member for Carrick, Cumnock and Doon Valley shakes his head. I have relatives in the Nottingham area who are miners. That gives me no knowledge of the mining industry, but they tell me what they are earning and how they have paid for nice new cars, houses and so on. They have explained to me that that has happened because they have been able to increase their earnings substantially since the introduction of the new scheme. I can say only that I have seen with my own eyes how their standard of living has improved and how they want it to continue to improve. [Interruption.] I wonder whether Opposition Members ever go anywhere. I wonder whether they have been to the mining community in the Nottingham area.
I am trying to explain as well as I can that in some parts of the United Kingdom there are high-productivity pits and the individuals who work there are reaping the benefits and the rewards. I should like other parts of the United Kingdom to enjoy the same benefits and rewards, because eventually the taxpayers, the users of energy and electricity, will benefit. It is essential that our electricity industry continues to improve and to provide manufacturing industry with electricity at competitive prices.
I welcome the opportunity to speak in this debate. I conclude by saying that I found yesterday's activities quite distasteful. Opposition Members were not prepared to listen to the speech of my right hon. and learned Friend the Secretary of State for Scotland, who was continually interrupted when he replied to the debate. As you, Madam Deputy Speaker, pointed out this evening, that has an effect on the debate. I also feel that it was in bad taste to suggest that somehow my right hon. and learned Friend does not care. He does care. I know that he cares.
Order. The hon. Gentleman is straying quite a way from the debate. Last night's debate is over. I ask him to confine his comments to this debate.
I was responding to the opening comments made by the hon. Member for Midlothian. When you, Madam Deputy Speaker, look at Hansard, you will see that the hon. Gentleman began his speech with comments about my right hon. and learned Friend the Secretary of State for Scotland, and you will also see what occurred during the debate. I thought that I should place it on record that I believe that that was in bad taste. My right hon. and learned Friend does care. Like me, he believes that the long-term future for coal and for the energy and electricity industries lies in the two sides getting together and making sure that they can produce a viable answer. In that way, we can see a future and a way ahead.
I shall do my best to make a short speech in the limited time that is available, as a number of hon. Members wish to speak.
In my constituency, some working miners have been made redundant as a result of colliery closures. The Supplementary Estimate of £162 million for the industry includes a deficit grant of £100 million and a restructuring grant of £62 million. It is fair to ask why this money is needed.
The British Coal memorandum says that the money is needed because of additional colliery closures and industrial action by the NUM. I believe that it may also be needed because of the overtime ban, but I do not intend to dwell on that except to say that I think that the NUM was ill advised to take such a step. British Coal says that colliery closures are due to poor performance and prospects, to financial pressures—which I believe are as a result of phoney costings—and to deteriorating market conditions.
The hon. Member for Midlothian (Mr. Eadie), for whom I have the highest regard, has said enough about subsidised imports. Suffice it to say that those imports are coming from Australia, China and Colombia. The hon. Member for Rhondda (Mr. Rogers) indicated that to some extent that is the result of slave-type labour. In other times, when we in Britain took a better moral stance, that would have been totally unacceptable.
Will the hon. Member give way?
Mr. Livsey: No. I shall not give way as there is little time available and many hon. Members wish to speak.
The question that remains is what effect that will have on the coalfield communities. In my area in Wales, two pits are to close — Abernant and the Lady Windsor colliery at Abercynon — and 1,600 jobs will be lost. Some miners from Abernant live in my constituency.
Abernant mine has some of the best anthracite in the world, and the pit is only 30 years old. It would be a travesty to close the pit because it has enormous reserves. Millions of tonnes of first-class anthracite are still in the ground at Abernant. It will not be mined because of a lack of investment and 650 men with an average age of 36 who are all family men will lose their jobs. A Welsh-speaking community which is very precious to Wales will disappear overnight.
There is also the threat of the site being used for opencast mining. That will occur because of a combination of suspicious accounting and inducements through redundancy payments to weaken the resolve of the men working in that pit. British Coal should invest in the Margam pit and give opportunities for the 900 jobs that could be created there. The attitude of the south Wales NUM has been constructive in that regard and it should be given the opportunity to open that pit and create more jobs in the south Wales coalfield. What is happening is the destruction of communities and the butchery of the south Wales coalfield by British Coal.
Do the Government have an energy strategy which includes coal? The Minister should listen to my remarks. Is there a policy which is a balanced mix between deep-mined coal, opencast coal, oil, nuclear power and alternative sources of energy? I do not believe that the Government have properly thought through their policy at this time. The truth is that there is a reliance on imported coal. The electricity privatisation has driven a coach and horses through an energy strategy.
It is not as if the Government have merely moved the goalposts. They are beginning to saw them down as well. A short-term temporary gain in free-market coal will destroy our coalfield communities. Have the Government a conscience about the people in their prime who are being put on the scrapheap? From some of their remarks tonight, I do not think so.
Deep-mined coal should have a future lasting at least 200 years and I sincerely hope that the Minister will give us assurances about that when he replies. What about the position in Scotland with coal imports and the South of Scotland electricity board and privatisation? Four thousand Scottish mining jobs are on the line and there is electricity over-capacity in Scotland. Indeed, as the Torness nuclear power station comes on stream, it will add to the problems. The nuclear industry is subsidised and more pressurised water reactors are in the pipeline. Yet coal remains less well subsidised in comparison with the nuclear industry. The loss of indigenous energy resources in the coalfields will be great as many pits are being closed.
Electricity privatisation will also put the south Wales coalfield on the line. At least 12,000 direct jobs in the industry could be affected by subsidised coal imports. We believe that opencast is a blight and destroys the environment. It also destroys communities. In our part of the world it destroys villages and even chapels.
Referring to what might be regarded as the Government's hidden agenda, as elaborated by the hon. Member for Erewash (Mr. Rost) how could the Ryan company in south Wales have holdings invested in it by Consolidated Goldfields, which operates in South Africa, where it has an extremely dicey reputation in employment? It could be one of the companies involved in the privatisation of British Coal once it has removed some of the uneconomic mines.
Opencast mining produces a £500 million profit. We must settle the balance between opencast and deep mining. Deep mining is labour-intensive and that remains extremely important.
The effect on communities of the loss of jobs and closures will be immense in future. Reference was made earlier to the fact that 96 pits are left. Page 21 of the Select Committee on Energy report states that the standards that British Coal employs have an
increasing emphasis on the £1·50/GJ parameter … we therefore regard British Coal's rules as robust.
There are 96 pits at present and when we consider the figures in the Select Committee report it is obvious that 36 per cent. of the coal produced in Britain costs more than £1·50 per gigajoule. That means that at least another 30 pits will close if the rules are to be applied strictly.
Underground coal reserves in Britain are immense and we believe that they should be worked. The coalfield communities believe that morale should be higher in the industry. They ask that the communities should not be destroyed and that sensible accounting methods should be used to judge the profitability of mines. Let those communities survive with collieries that pay. They should survive with support commensurate with the level of support given to subsidised coal that is now being imported into this country.
The Order Paper tells us that the Select Committee on Energy report is relevant to the debate. Apart from the speech made by the hon. Member for Havant (Sir I. Lloyd), the Chairman of the Select Committee, that report has hardly been mentioned. I will attempt to bring it to the attention of the House.
The Select Committee on Energy produced a unanimous report and there were a majority of Conservative Members on the Committee. It is constructive and I am grateful to the Select Committee Chairman for the way in which he led the debate and for his constructive speech. He told us that the Estimates were equivalent to £162,277,000. I will not go into the figures in too much detail.
We are facing the probable demise of the coal industry. I do not want to appear to be going over the top or to be over-egging the pudding, but I believe that that threat exists. Hon. Members who are familiar wih the energy debates will be aware that the White Paper on public expenditure estimated that British Coal's loss before deficit grant would he £195 million in 1987–88. The Government's latest figures have increased that significantly to more than £200 million, which is different from the £414 million to be voted by Parliament in 1987–88 for deficit grant. That difference arises from the Treasury's practice of paying money to support British Coal in both cash and accruals. The Select Committee recognised that in paragraph 3 of the report.
The Committee went on to express some concern, and concluded paragraph 4 by saying:
However, we would welcome a further indication in the debate on the Estimate from the Government of their current thinking as to whether any new legislative provision for deficit grants will be necessary before the end of the next financial year.
Surely the industry requires such information. It needs to prepare. It has not been able to do that while the mining industry has been run down in the past four years. The Select Committee has never been as confident as the chairman of British Coal that British Coal would break even by 1988–89. It says as much in the report.
As recently as 3 February, Sir Robert Haslam continued to he optimistic that British Coal would achieve that target. As the chairman of the Select Committee pointed out, Sir Robert said that three things would be necessary for British Coal to achieve it: first, the dollar should not weaken further against the pound; secondly, international coal prices should be firm; and thirdly, there should be industrial relations harmony in industry.
The House will recognise, as did the Committee, that the first two factors are outside the control of the industry. On the third one, the Committee took the view that it was not its job to become involved in the details of industrial relations, but it did not detect much flexibility or evidence of the two sides working well together. It stressed its worry about that in paragraph 5.
The problems of industrial relations are always two-sided. I speak as one with 39 years of experience of the mining industry before being privileged to come to the House. For 10 of those years I was an NUM official, and for another 10 an industrial relations officer. So I think I can claim with due modesty to have a little experience of mining and its industrial relations.
Especially since the strike, there has been little harmony between management and men. If I had the time, I could highlight many incidents of deliberate provocation. A recent example of that caused me concern. It happened at the country's major pit, Kellingley colliery. After the pit deputies' union had been to the national reference tribunal, the judge had requested both sides to go back and work normally until further investigations took place.
The manager of the pit instructed the deputies to carry out duties that increased the area of the mine for which they were responsible from 3,000 to 6,000 m. The deputies took the view, shared by their union, that such an extension of their responsibilities was an unsafe practice and could possibly put men's lives at risk. Given my experience in the industry, I agree with them. Record after record of production achievements have been gained at that pit. In the previous five weeks before the dispute it was producing 55,000 tonnes of coal per week. If the manager's instructions are not provocative and an example of bad industrial relations, I do not know what is.
Sir Robert Haslam told the Select Committee that, without good industrial relations and without the prevention of disputes, there would be further pit closures next year. He said that up to 20 pits could close. If that is the case, surely Sir Robert Haslam should first put his house in order.
The Select Committee mentioned the restructuring grants. We are all aware that colliery closures result in a need for such grants. The increased provision for those grants has been necessary because of the increased number of colliery closures. Hon. Members will be aware that that increased provision is the second increase this financial year. In 1987–88, 16 pits were closed or merged, compared with an anticipated total of five. The manpower employed has fallen by 15,000. Paragraph 6 of the report acknowledges those figures.
Sir Robert Haslam told the Committee that it was possible that there could be 20 pit closures and 15,000 jobs lost. He said that at least a handful of pits—five—would certainly be closed. As Sir Robert Haslam has said that it is possible that another 20 pits will be closed, what sort of money will be needed in grant if the pace of pit closures continues? Indeed, the Committee was mindful of other factors that could create a mass pit closure programme.
The Committee was aware of the proposed privatisation of the electricity industry and expressed certain views about it. It is well aware that the privatisation could—I am not saying that it will—be the death gong of the mining industry. Whatever fancy clothes or fancy names are given to such things it is a fact of life that, unless there is a statutory agreement between the two major industries—coal and electricity—the result could be further colliery closures.
I am not suggesting that the supply of 80 million tonnes of coal to the electricity industry will be wiped out overnight—of course not. Nevertheless, some of the demand for coal from British mines will be withdrawn and there will be imports. Unless the Government are prepared to place a statutory obligation upon both industries regarding the supply of coal there will be further pit closures. There is no need to take it from me; read what Sir Robert Haslam had to say as recently as Monday this week.
Although Sir Robert Haslam braces himself and makes noises about his optimism for the industry, which is welcome, he goes on to warn that, without such an obligation, further job losses and pit closures will follow. We all know that, without such an obligation, the privatisation of the electricity industry will wipe out the major part of the coal industry.
Indeed, when the Select Committee was taking evidence for the previous report, Professor McClusky gave evidence to us that he forecast that mining production would be down to 60 million tonnes by 1992. It looks to me as if Professor McClusky will be right.
I shall wind up my comments as other hon. Members wish to speak. I hoped to have the opportunity of saying much more tonight, but, unfortunately, that has not been possible. I should like the Minister to say whether he will take into consideration the views and fears of the Select Committee regarding the protection of the supply of British coal to British power stations and whether he will take the advice of Sir Robert Haslam on the matter. Both the Select Committee and Sir Robert Haslam have listened to expert advice and gone into the matter in depth. Sir Robert, with his great knowledge of the industry, warns that, if there is no statutory obligation on the coal industry to supply the electricity industry in this country after privatisation, there will be no protection or future for the coal industry.
It is a pleasure to follow the hon. Member for Pontefract and Castleford (Mr. Lofthouse) because, like me, he is a member of the Select Committee on Energy, although I do not agree with his final words, and because the debate refers in part to the report.
Let us consider the motion upon which the debate is based. Tonight, in a quiet, civilised manner, we are having a sensible debate in which Opposition Members can put forward their fears and concerns, but it is not a major parliamentary occasion. Many hon. Members are elsewhere and yet, by the end of tonight, we shall have voted through quietly the sum of almost £136 million-worth of additional resources to British Coal. That is not an insubstantial figure and it shows the Government's commitment to the coal industry. A Government who were not committed to the coal industry would not come along here on a fairly quiet parliamentary day and ask for approval to spend £136 million just at the drop of a hat. The Government's commitment to the British coal industry is beyond dispute.
It is up to each member of the Select Committee to work out his interpretation of the Committee's conclusions. One can be in favour of a Select Committee report whether one is a Labour Member or a Conservative Member. We can all quote various parts of the report and pray those parts in aid of our own arguments. However, the report is quite clear in its conclusions and states, in paragraph 10:
The presentation of this Supplementary Estimate is an opportunity once again for the House to receive an account from Ministers of policy towards the coal industry.
We shall all look forward to my hon. Friend the Minister's response to the debate.
The report continues by saying that British Coal
has made welcome improvements in productivity,"—
hon. Members on both sides of the House have noted that—
and the Committee hopes that these will continue.
However, here is the important point. The report states:
the industry's deficit and the number of closures necessary have both been considerably higher than was anticipated at the beginning of the financial year.
The Supplementary Estimate is in itself evidence of that.
We do not believe that the coal industry should be sustained whatever the cost to public funds".
That is a major conclusion of an all-party group of Members of Parliament who have deliberated on the matter. Some have brought to bear their personal experience and knowledge of the coal industry, but we have all put our signatures to that important conclusion. The report makes certain qualifications which, obviously, represent the broad consensus among Members. In it we reiterated the conclusions of our previous report that the industry's future cannot be left wholly in the invisible hands of market forces. The Government are not doing that. The fact that the Government are putting £163 million of valuable public expenditure into the industry is a clear indication that this Conservative Government recognise the difficulties facing British Coal.
However, we have to put British Coal on notice. When I first came into the House nine years ago, I represented a steel constituency and from my experience of that I know that however much a Government—whether Labour or Conservative — are willing to support an industry through difficult times, the long-term future of that industry cannot for ever be secured by or be dependent on the begging bowl approach to its problems. As we vote through this considerable sum of public expenditure, we must be sure that there is a clear prospect of British Coal being able to succeed in the future.
Nobody, least of all me, who represented the steel industry for four years in circumstances that are not dissimilar to those facing British Coal in what was the Brigg and Scunthorpe constituency, which included the steel works town, can derive any pleasure from either Labour or Conservative Governments constantly coming to the House for large sums of public expenditure, because that is not good for the long-term future of the work force in that industry.
I fully accept that Opposition Members, with their long tradition of direct involvement in the coal industry, are genuinely concerned with the future welfare of the miners working in the industry. However, from my experience during my first four or five years in this House, I advise them that eventually their mining communities will thank them, as the steel workers of south Humberside thank the Conservative Government, for ensuring that the long run for the steel industry—and for the coal industry—is not based on the ability of the industry to persuade the House of Commons to pick up the tab when there are substantial losses. The long run for those industries, and for the secure future of the miners, is dependent on their being able to participate in selling their product at a price which the customer is prepared to pay and which competes in world markets.
With the efficiency and the high quality of management in British Coal, and with the high quality of mining expertise among the miners, there is no reason why Opposition Members should fear competition. There is no reason why it should be impossible for British Coal to compete on international terms.
I remember being told eight or nine years ago, by Opposition Members who took an interest in the problems of the steel industry, "British Steel will never be capable of facing the world environment. We will always have to protect it." That has been proved not to be the case. For the first time, I sat this morning in a Standing Committee which is bringing that industry to the full benefits of a secure future.
I am not sure whether my hon. Friend the Under-Secretary of State will be able to say anything about this — possibly not — but if I were a miner I would look forward to the day when I, my future and that of my family, would not be dependent on the will of the House but on the abilities of the company in which I should like to have a say and be a direct owner—a shareholder. The prospects of the British coal industry are best secured in the long run in the private sector.
One day, Opposition Members who represent mining communities will come to realise, as have their colleagues who represent steel working constituencies — although they may not be able to say so—that their constituents' long-term security is best determined by a private company, answering to shareholders and customers. In that way the attitude and atmosphere will change.
British Coal does not need to fear privatisation, as sufficient coal resources are available to furnish the country's needs. The potential for opencast mining has not been fully developed. Resources are available, and it is important to recognise that we have the potential to reduce British Coal's costs by exploiting to the full the opencast resources so that we can meet the international threat. There is no use insulating ourselves from the international threat. We are a trading nation and we have proved that industries that we did not think would be profitable can be made to stand on their own, make a profit and face the international threat.
It is folly for us to say that the only role for British Coal is in the public sector, dependent upon the good will of Ministers and upon supplies of deep-mined coal. [Interruption.] I have said this many times, but unfortunately it must be emphasised time and again. I have said this about the steel industry in my constituency. It was difficult for my constituents to appreciate what I was saying, until they realised that their long-term job security was being affected.
The statistics show what has been achieved by British Coal. Since 1979 the Government have supported capital investment in the coal industry, with over £5·5 billion of public funds, and £2 billion of further support is planned for the next three years, so the Government are not turning off the tap. The industry must face up to the challenge of international competition and to the fact that its security and that of its workers ultimately will be best secured in the private sector.
I hope that the nuclear industry can face the challenge that the hon. Member for Brigg and Cleethorpes (Mr. Brown) said the mining industry must face with the subsidies that it gets from the Government. Until two years ago I was a miner at the coal face. It is a great privilege to be elected and to come to the House with a knowledge of the mining industry, which Conservative Members do not have. The hon. Member for Brigg and Cleethorpes talked as though the mining industry were a car factory, with a production line that runs all the time. Miners in the coal industry work in the bowels of the earth, where anything can happen. Geological conditions cause constant changes, and it is not an easy industry in which to work.
About 70,000 miners have lost their jobs in the past four or five years under the Government, and 71 pits have closed. I begin to wonder why Arthur Scargill was criticised, because the man was darned well right.
He was right in what he said before the strike, and he is saying it again. Sir Robert Haslam, who appeared before the Select Committee, in answer to a question about privatisation and foreign coal, said, "Well, life is uncertain." The Secretary of State for Energy said that British Coal would have to compete in the market place; in other words, on the foreign market. Foreign coal is coming in and competing with British coal, so the figures quoted by the hon. Member for Brigg and Cleethorpes will go out of the window.
We do not know what our competitors' figures are. The other week 1 asked the Secretary of State for Energy what direct subsidies or direct help foreign coal gets in South Africa, Australia, Colombia, America and Poland, and I was given a completely negative reply. When I collared him afterwards he asked me, if I got to know, to tell him. So we do not know what we are competing against.
What we do know is that deep-sea ports in this country are being changed into coal-importing ports. That is a fact. There is Fawley in Southampton, one in Bristol, one on the Mersey and two on the Humber. That sounds the death knell of the Nottingham coalfield. Once foreign coal gets a hold, once we become blind to foreign subsidies, we must be prepared to see the demise of our coal industry, because once the electricity industry is privatised it will go for the cheapest coal.
If South Africa can offer one of the electricity companies a price for the next five years that is better than British Coal can match, that will be the demise of nine to 10 pits in Nottingham and Yorkshire, making 20 in all. It will be the demise of all industry in the north-east and in Scotland as well. That is the danger facing the coal industry.
Another danger is that which is faced when a country destroys its own industry and is left in the hands of its foreign competitors, just as we were left in the hands of the Arabs during the oil crisis. We relied on oil, and Joe Gormley said that the Arabs would not always live in tents. We ignored him, to our cost, because up went the price.
The same will happen with the coal industry, because men cannot go back to a pit once it has been closed. Our foreign competitors will put up the price, and then we shall see what the cost of electricity will be to the consumer in this country.
I know that a number of hon. Members, particularly Opposition Members, want to speak and I am rising at this point because last week I was left by the hon. Member for Bolsover (Mr. Skinner) with three minutes in which to answer a three-hour debate. If I am not provoked, I shall attempt to sit down before 10 o'clock to give some other hon. Members a chance to join in the debate.
The Government welcome the attention given by my hon. Friend the Member for Havant (Sir I. Lloyd) and the members of the Select Committee on Energy, and indeed by hon. Members generally, to the finances of the coal industry. The finances are characterised, as the Select Committee has commented, both by their weakness and by the unsatisfactory nature of past forecasts of outturn. For reasons that I shall give in a moment, I cannot guarantee the validity of present forecasts. I can, however, give a firm statement of intent. I can also illustrate the consequences of failure to meet the targets that we have set.
There is no doubt that, as has been said, a great deal of taxpayers' money has been spent during the lifetime of this Government on the British coal industry. Expenditure of £9 billion in nine years is a rate of spend far higher than that of any other Administration.
The hon. Gentleman rightly said that the figures are not available for subsidies outside the Common Market. However, as the hon. Member for Midlothian (Mr. Eadie) pointed out, other Common Market countries such as West Germany give higher subsidies to their coal industries.
We do not model ourselves on the West Germans. The West German industry is increasingly looking to this country as a way of getting its coal industry out of the mess that it is in. There is no question of comparing ourselves with the countries mentioned by the hon. Member for Midlothian in determining our future policy on this great industry.
My hon. Friend the Member for Havant asked where it would all end. That is a pertinent question, which, I believe, was also asked by my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown). There is no doubt that this cannot continue indefinitely, especially if those employed in the industry, and those who lead them—through misplaced ideology or a mistaken appreciation of the strength of their position—repay the taxpayer with go-slows, overtime bans, marches to commemorate past strikes, as at Kellingley colliery yesterday, and a refusal to work properly the new equipment with which they have been provided. All that has this year cost British Coal £100 million in lost operating profit—enough to develop the new pit at Margam.
Yes, we will allow a privatised electricity supply industry to buy coal in the best markets, for two reasons: first, because we will not come between the electricity supply industry and its customers who want cheap electricity; and, secondly, because, having put vast sums into the coal industry and knowing that the industry is investing £650 million a year, we are confident that, if its employees so will, it can stand on its own feet against all comers.
We do not share the pessimism of Opposition Members. Hon. Members should contrast the speeches of my hon. Friends the Members for Erewash (Mr. Rost), for Tayside, North (Mr. Walker) and for Brigg and Cleethorpes with any speech from the Opposition. My hon. Friends the Members for Erewash and for Brigg and Cleethorpes, for instance, talked of the prospects for British Coal to improve its costs so as to be able to compete in the world market. By contrast, the hon. Member for Midlothian, with his deep and highly respected knowledge of the industry, seemed to be saying that it was all hopeless, and the hon. Member for Pontefract and Castleford (Mr. Lofthouse) — whose knowledge is massive—talked of the industry's probable demise.
The Minister says, and I agree with him, that British Coal can compete against all comers, provided that the all corners are competing on the same basis. The Minister has already admitted that he is completely unaware of the subsidies given to the coal industry in all the countries outwith the Community. Some of my hon. Friends have said that in South Africa it is slave labour, and in Colombia it is child labour. That is not fair competition, but it is the kind of competition that the Minister is forcing British Coal to fight with its hands tied behind its back. Will the Minister not concede that?
This country imports a minuscule amount of coal from the countries to which the hon. Gentleman referred. From South Africa, for instance, we are talking about 200,000 tonnes of coal, against a total rising to hundreds of millions of tonnes.
This country substantially supports and subsidises its coal industry and imports a minuscule amount of coal from other countries. Therefore, it is capable of competing fairly against those countries. If it proves to be the case that there is unfair competition, the Government will take that matter seriously and will deal with it. At present, the industry is faced with little import competition.
I should like to get on with my speech; otherwise other hon. Members will not have a chance to speak.
British Coal—this is the reason for our optimism—has vast commercially mineable coal reserves and all the advantages—perhaps this is the answer to the question asked by the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes)—of proximity to power stations that are enjoyed by other indigenous coal industries in the world. It is also serviced by the finest mining engineering in the world.
Coal, so far as it is possible to foresee, will continue well into the next century to fuel most of the electricity generated in this country. The cards are stacked in favour of British Coal, if only its workers will play them.
The Government demand that the industry should begin to pay its own way without a continuation of the present massive support of the taxpayer, about which the Energy Select Committee is understandably showing increasing concern.
We expect British Coal to break even in 1988–89 after payment of interest, and after that to generate increasing profits and cash flow to fund a greater proportion of its capital investment programme.
Having said that, we recognise that there are factors affecting the industry that are hard to predict. For instance, the need to meet competition from imported coal and other forms of energy will no doubt involve price concessions on a scale that cannot be forecast with certainty. Since April 1986, British Coal has had to reduce its prices by more than £500 million. Contrary to a belief of the Select Committee, that reflects the fact that British Coal is free to reduce prices to maintain market share.
A fair criticism has been made by the Committee that some estimates of British Coal's sales revenue have erred on the side of optimism. The Department of Energy frequently discusses that matter with British Coal. It is a fact of life that the coal market is volatile and uncertain, as is the market for bulk sea freight.
There is also uncertainty about costs. In recent years, British Coal has consistently increased productivity to record levels, reaching over 4 tonnes per man shift in December, and it has redoubled its efforts to reduce costs. Among other things, that has required the acceleration of the closure of high-cost capacity. It is expected that by the end of March there will be 96 pits in production, compared with 110 at the start of the year.
The hon. Member for Rhondda (Mr. Rogers) made a brave fist of distinguishing between pit closures under a Labour Government and those under a Conservative Government. The main difference between the two is that there were 285 closures under the Labour party and 127 under the Conservative party. I have a list that begins with "A" Winning and ends with Ynyscedwyn. I would not be able to complete my speech if I were to read out the long list of names. In the interests of clarity, I shall place in the Library the list of pits closed under Labour. It will clarify the matter once and for all.
I apologise to you, Mr. Speaker. The hon. Member is getting me confused.
My pit, Bates's colliery, was classed as a super-pit and around it were three small pits or little holes in the ground, as we called them. They were closed under the Labour Government, and all the men were transferred to the big super-pit, where we worked the seams that they were working. The idea was to cut the costs, as Conservative Members have been saying all night. We were closing the small pits to make super-pits. Now this Government are closing the super-pits.
The hon. Member has had a good try and a good run, but the fact is that his reasoning behind the closure of pits is really the same as ours, or British Coal's reasoning. It has to do with the increased efficiency and productivity of the industry.
The idea that there is some kind of immorality about the Conservatives closing 30 per cent. of the pits and some kind of morality about Labour closing 70 per cent. of pits eventually gets down our throats.
This accelerated restructuring has led to an additional depreciation charge of £150 million during the year, of which over £50 million has arisen in the past two months.
We have discussed on three recent occasions in Adjournment debates Seafield, Wooley/Redbrook and Abernant. In each case the main factors were a combination of unexpected geological factors—and this is an answer to the hon. Gentleman — and difficult industrial relations, which is a euphemism. The write-off of Woolley/Redbrook alone accounts for some £70 million, which is nearly half of the extra charge this year.
Associated with these closures has been a policy of voluntary redundancy, which has contributed to an expected fall in manpower of over 20,000 between March 1987 and March 1988. As the Select Committee said, the cost of these redundancies has required the use of a significant proportion of the existing £750 million of restructuring grant facilities.
However, some of the redundancies this year arose out of an acceleration of events that would have come about anyway — for example, through the exhaustion of reserves. I see no need for further legislative provision for restructuring grants, although the position will be kept under review.
Returning to the deficit for the current year, the other major factor that has affected it has been industrial action by the NUM and, latterly, by NACODS. That has caused a loss of production of over 3·5 million tonnes and lost operating profits of more than £100 million. These losses were certainly not predictable when the Estimates for 1987–88 were prepared. In partial answer to the Select Committee on the matter of inaccurate estimates, it is not right to seek the approval of the House for expenditure on Votes for anything other than reasonably certain expenditure.
Unpredictable expenditure is an important matter. If the Secretary of State for Scotland does not intervene in the dispute between SSEB and British Coal and that results, as has been widely predicted by British Coal, in the closure of at least three deep mines, would not all the redundancy payments and extra cost involved be a catastrophe for Scotland and for British Coal and its finances? Therefore, does the Minister and the Secretary of State for Energy, who is sitting beside him, believe that it is the view of the Department of Energy, as the coal ministry—my hon. Friend the Member for Midlothian (Mr. Eadie) has said this before—that the Secretary of State for Scotland has a duty to intervene to get the dispute resolved so that the SSEB can use British coal rather than coal from overseas?
The hon. Gentleman makes a point on behalf of one of the sides which are discussing the issue. Each has its own interests which it feels are in the public interest.
That point was made last night. The atmosphere was inflamed—synthetically, I expect. When the question of a trade-off between the interests of the coal industry and the interests of the electricity consumer, particularly Ravenscraig which is a major employer, was discussed, there was uproar on the Opposition side. I still cannot understand what motivated it because there is a balance of interests.
Of course, it is understandable that the respective organisations and institutions representing the differing interests should be in discussion and should debate with each other. The point was made yesterday by a number of Ministers, including myself, that we would prefer the two interests to be sitting at a table discussing the matter rather than fighting each other in the courts and in the press. Surely that is common between us. To say that there is only one interest involved cannot be true.
I accept that. Of course there are interests on both sides, but because it has been fought in the courts and in the press it is difficult to get people round the table. Things have been said which perhaps would have been better not said. Surely in the national interest the Minister responsible has not just a right but a duty to try to get the parties together, even if it means appointing a conciliator or using the Government's good offices, to try to get an agreement in the interests of Scottish industry and Scottish miners. Does the Minister agree?
I agree entirely that things have been said which people will regret and, I suspect, very much so on the Opposition side. I am sure that chickens will come home to roost for Opposition Members who are intent on inflaming the issue; that is what they are doing, a little synthetically in view of the conflicting interests which undoubtedly exist. When will Members from Scotland or elsewhere defend the consumer of electricity and saying that his interest should be paramount? How can Opposition Members say that on one occasion and on another occasion jump up with almost orchestrated violence, as was the case last night—[Interruption.] What will we do about it? We will encourage the two sides to discuss the matter and to come to a reasonable agreement which is in the interests of both. To that extent, I agree with the hon. Gentleman.
No, I was not saying that precisely, because that would be an unbalanced view. What I am saying is that there are interests on both sides. Certainly it is in the interests of British Coal to sell its coal to a customer. It is in the interests of the electricity supplier to make sure that he buys the coal at a rate which gives the best possible price for his electricity to the consumer. Those are two conflicting views. I am saying nothing peculiar or exceptional when I say that we would like the two sides to be talking to each other and trying to find a common position.
Will my hon. Friend bear in mind the point made by my right hon. and learned Friend the Secretary of State last night—that the crucial point is the steel industry in Scotland and the future of Ravenscraig? It is vital that we are not taken in by the synthetic interest of the Opposition, who will scream if anything happens to Ravenscraig.
My hon. Friend makes his point extremely well, and I agree with him. He has reminded me of a point that he made in his excellent speech—in which he spoke as the authentic voice of Scotland. At one point he said that parts of the coal industry were now engaged in flexible working and that if more of the industry was engaged in flexible working it would find it easier to become competitive, north or south of the border.
In that context, I have to say that unfortunately we do not know of anyone currently working flexible hours, although there has been some talk of flexible working north of the border. That is a problem; there is no question about it. The fact that the industry and those who work in it are apparently unwilling fully to utilise the equipment provided for them at the taxpayers' expense is a matter of great seriousness to anyone who wishes the industry well for the future.
Supplementary Estimates are the vehicle provided by Parliament for obtaining funds for expenditure that could not reasonably be foreseen when the Main Estimates were submitted. The financial effects of possible industrial action cannot be included in the Main Estimates. They are rightly a matter for a Supplementary Estimate.
The Select Committee raised a number of other points about future Estimate provisions and the financing of British Coal. As the House knows, the full amount of deficit grant available under the Coal Industry Act 1987 will be paid out this year, subject to approval of the relevant Supplementary Estimate. There is therefore no statutory authority for further provision of deficit grant.
Looking ahead, it seems to us that as long as the industry avoids gratuitous and damaging industrial action, British Coal has a realistic prospect of breaking even in 1988–89. Of course there are risks that it will not do so—for instance, as the hon. Member for Midlothian said, if international coal prices or the value of the dollar fall further. On the other hand, the restructuring and cost reductions undertaken in this financial year will enhance the prospects of break-even in 1988–89.
In answer to my hon. Friend the Member for Havant I would point out that if the corporation breaks even, the question of fresh legislative provision for deficit grant in next year's Main Estimates does not arise. Nevertheless, the Government very much take the point made by the Select Committee in this context and will continue to keep the financing of British Coal under careful review.
I must emphasise that the Government will not continue to provide funds indefinitely, irrespective of circumstances. The current rate of capital expenditure in the industry cannot continue unless fuller use is made of the existing equipment. The refusal of certain trade union leaders to consider modern methods of flexible working and their senseless industrial actions are jeopardising the industry's prospects and their members' jobs. [Interruption.] Opposition Members need to be reminded of that time and time again. [Interruption.] I have told Opposition Members time and again that this Government have put more money into the industry than any other. To say that we do not care is a distortion of the facts, which the Government cannot accept. Having put that money behind the industry, we believe that it is about time that the industry and those who work in it accepted that backing for what it is and started to make full use of it.
I have been through the figures last week and this week. Of course, of the restructuring grant element, which is only one element, a large amount has gone on redundancies. But £650 million has been put into investment this year alone.
A sound thriving future faces British Coal. Apparently, the Opposition do not believe that. I agree entirely that our reserves of coal constitute a great national asset. That is why we have put so much of the taxpayer's money on the table. It is now up to those who work in the industry to allow the machinery which has been bought for them to be fully worked to the benefit of the industry, the country and themselves.