Coal Industry

Part of the debate – in the House of Commons at 8:56 pm on 26th June 1989.

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Photo of Andrew Mitchell Andrew Mitchell , Gedling 8:56 pm, 26th June 1989

I am grateful for the chance to speak in the debate. I recognise the sincerity with which Labour Members prosecute any debate on the coal industry. There is a sort of agelessness about the way in which it is conducted. For many Labour Members it is clearly a measure of success if miners are kept in jobs, whereas Conservative Members believe in promoting a successful industry that can produce economically and sell what it produces.

I want to make three general points. The first is about the tremendous progress that has been made in the industry in Nottinghamshire. It is a pity that Labour Members do not look more carefully at that aspect. Secondly, in one or two tangential ways, I have some sympathy with the hon. Member for Sedgefield (Mr. Blair) about the coal industry's difficulties in the negotiation of contracts. Thirdly, I emphasise the critical need for the industry to be returned to the private sector as swiftly as possible.

I read the motion moved by the hon. Member for Sedgefield with some surprise, because it did not acknowledge the tremendous progress that has been made by the mining industry. It does not show the sort of support for the industry—which Conservative Members would have expected following the review of Labour policy—or the new brand of trade unionism represented by the Union of Democratic Mineworkers which so well fights for its members' interests. The hon. Gentleman may have failed to show his motion in advance of the debate to the latterday Machiavelli who plays such an important role in the Labour party—Peter Mandelson.

In a hitherto adverse market, the mining industry has made much progress, and it is important to recognise that. Its operating profit this year at £500 million is twice as much as last year, as my hon. Friend the Member for Sherwood (Mr. Stewart) said in his excellent speech. It is not for nothing that my hon. Friend is known in Nottinghamshire as the miners' friend—a title to which he is justly entitled.

Tremendous price reductions have been made in the industry, saving its customers £500 million in the past year alone. Operating costs have been reduced by over 20 per cent. in real terms. Deep-mine profits of £125 million have been made, whereas the comparable figure for last year was a loss of £112 million. Accidents in the industry have reduced by no less than two thirds since the strike, from 93 per 100,000 man shifts to 29·4. Conservative Members would have liked to hear Labour Members acknowledge how well the industry has done over recent years.

Deep mine operating profits of £73 million were achieved in Nottinghamshire last year. Even after capital charges of £55 million, an overall profit of £34 million was made. Productivity in Nottinghamshire has increased by nearly 12 per cent., which represents 4·35 tonnes per man shift and an increase of nearly 40 per cent. in three years. So far this year, productivity is running ahead of those levels. Those are significant statistics.

Nottinghamshire provides well over half of British Coal's deep-mine profits. I ask my hon. Friend the Minister what possible commercial justification he sees for British Coal having its headquarters in London, miles from the nearest pit. It is an extremely valuable piece of real estate. For those who work there, it is a nice, gentle location overlooking the walls of Buckingham palace, but there can be no possible commercial justification for it. Even if there were some economic justification for it, it is bad for management to be so far removed from its area of commercial activity.

Given that nearly 60 per cent of British Coal's deep-mine profits come from Nottinghamshire, will my hon. Friend the Minister, in the run-up to privatisation, encourage its chairman and board to locate near its most profitable area? I agree to take British Coal's chairman to see the excellent office sites in Nottingham so that he can see how congenial it would be to locate there. Many people believe that such a move would send out highly desirable signals to the industry and the generators who buy from it.

Pressure on the industry remains intense, and nowhere more so than in my constituency. Earlier this year, Gedling colliery underwent massive restructuring. It will never be enormously profitable because its seams are too thin, but it sells almost all the coal that it produces, because its quality is so high. Heavy losses were made last year, and this year, following the costs of major restructuring, it has been set a new target of 12,500 tonnes a week. I am glad to be able to tell the House that last week, for the first time, the much reduced work force managed to reach that target. Excellent progress has been made and we should congratulate its men and management on what has been achieved and express the hope that it continues.

The need to achieve viability is generally recognised, but not by all Labour Members. However, there is a glimmer of hope that recognition is coming. The Secretary of State spoke about British Coal being a supplier of choice and said that it is important that there is a free market in coal. I was extremely surprised, therefore, to hear that generators have said, and I think that I have heard right, that they do not intend to buy exclusively from British Coal, regardless of economics. Surely what is sauce for the goose is sauce for the gander. If they intend to achieve the best value for money, they must allow British Coal that same opportunity. This correct approach for British Coal has been endorsed by the electricity supply industry. I am sure that that approach will be supported by the chairman of the East Midlands electricity board.

A policy of the carrot and the stick is required. Turning round an unprofitable, unproductive and demoralised industry takes much time, but as long as that turnround is being achieved, the industry deserves to be given the time for which it has asked. It must know roughly how much coal will be needed by generators over the next five years. After that, the UDM calculates that the industry will be sufficiently reformed, productive and successful to take on all comers and have no fear of foreign competition.

In supporting my right hon. Friend's excellent amendment to the neanderthal Opposition motion, I do not ask him to intervene in commercial negotiations, but I hope that he will point out that, just as we expect British Coal to compete on its merits, so we expect it to be allowed to compete for all generators' coal requirements and not be frozen out of a part of their market. That is required in order to ensure the future stability of the distributors, the generators, the coal industry and the public.

In addition, the desirability of any form of dependence on foreign coal is now looking particularly shaky, for the reasons expressed on both sides of the House. There is no such thing as an organised market in foreign coal. The Amsterdam-Rotterdam-Antwerp market is not a true spot market. Coal is traded in dollars and at the moment the dollar is, to say the least, a fluctuating currency.

China has been mentioned. It has taken on some long-term contracts, but it has failed to deliver. That country has major infrastructure problems and there are also tremendous problems with its port handling. Later this year it may even have to import coal.

Currently the United States industry is suffering major industrial disruption and it may be hard pressed to meet its internal demands.

British Coal was riddled with political involvement, strikes, appalling industrial relations and a complete lack of commercialism. Since the strike it has produced the same tonnage with roughly half the manpower. The cost per gigajoule in Nottinghamshire is £1·42; it has come down from nearly £2. Those arguments, quite apart from a debt of loyalty that the country owes to the UDM, underline the desirability of a soft landing for the industry and a defined period of time for continuing reconstruction and adjustment.

Recently, the Secretary of State addressed the UDM annual conference. He cannot have failed to notice that the UDM fights just as hard for its members as any other union, but it looks forward to the future and not back to the past. I regret that the union is opposed to privatisation, as nationalisation has been the curse of the industry. I hope that miners will talk to their colleagues in the steel industry before making up their minds about the merits of privatisation. The leadership of the UDM is, nevertheless, determined to ensure that its members get an outstanding deal if privatisation goes ahead.

I wonder whether my hon. Friend noticed the agenda at that conference, which dealt with matters such as the importance of free shares for miners if privatisation takes place; pensions payable with a lump sum at 50 years old; creative schemes such as that at Bilsthorpe; and plans to develop a mothballed pit with the creation of nearly 1,000 new jobs.

Did my right hon. Friend hear the words of the president of the UDM following its deal with British Coal last autumn concerning six-day working? His words are most important. He said: This agreement is necessary and in my opinion will protect the jobs of many miners and the future of the mining industry. The agreement will allow us to compete with any foreign competition and is yet another demonstration that the UDM are working for, the future while other unions are living in the past". But the NUM remains immune to common sense and refuses to accept six-day working.

British Coal and the UDM face great challenges and great difficulties. They need to achieve economic viability, to adapt to electricity privatisation and to face up to the environmental problems about which we have heard. They must also face up to the privatisation of the industry. The men whom I met on my recent visit to the Gedling pit are not interested in the politics of coal mining or in the past. They want a healthy industry where their hard work and skill wins them a secure future and a decent wage.

I hope that we shall soon see a fair deal between British Coal and the generators based on some of the realities that I have raised tonight.