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Walden, George

Walker, Bill (T'side North)

Waller, Gary

Walters, Sir Dennis

Ward, John

Wardle, Charles (Bexhill)

Warren, Kenneth

Watts, John

Wells, Bowen

Wheeler, John

Whitney, Ray

Widdecombe, Ann

Wiggin, Jerry

Wilkinson, John

Wilshire, David

Winterton, Mrs Ann

Winterton, Nicholas

Wolfson, Mark

Wood, Timothy

Yeo, Tim

Young, Sir George (Acton)

Younger, Rt Hon George

Tellers for the Noes :

Mr. John M. Taylor and

Mr. David Maclean.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.

Madam Deputy Speaker-- forthwith declared the Main Question, as amended, to be agreed to.


That this House commends the Government's record on the development and funding of community services for all

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people in need of care ; reaffirms its support for the policy of community care ; believes that it will be complemented and strengthened by the proposals contained in the Government's White Paper, Working for Patients ; and looks forward to an announcement of the Government's conclusions on Sir Roy Griffiths' report, Community Care : Agenda for Action, in the near future.'

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Coal Industry

Madam Deputy Speaker (Miss Betty Boothroyd) : I must tell the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.

7.14 pm

Mr. Tony Blair (Sedgefield) : I beg to move,

That this House believes that the future of a resource as important as coal should not be left to market forces ; opposes reliance on imported coal to meet Britain's energy needs ; and calls upon Her Majesty's Government to intervene in the negotiations between British Coal and the electricity supply industry in order to ensure the long-term contracts for production which are necessary for the coal industry to fulfil its duties to the country, the consumer, the environment and those that work in it.

We have debated the coal industry many times, but rarely in the context of such pressing and urgent developments. We are not talking this time about whether we should close so-called non-economic pits or save them in the interests of mining communities. This is not a debate about whether the coal industry can make itself efficient, because the industry has recorded a 35 per cent. reduction in costs in three and a half years, and such a record would be the envy of any private sector company. It is not a debate about productivity, as it is generally acknowledged that no other group of workers could rival the 75 per cent. increase in productivity that the miners have achieved in recent years. We have peeled away the outer layer of arguments about Britain's coal industry and we are down to the core. The focus of our debate may be the coal industry but the issue concerns the whole future of the nation's energy needs. The question is whether a modern energy policy should be dictated by short-term market forces, as Conservatives believe, or whether--as the Labour party declares--it should be the product of industry and Government acting together to balance the long-term interests of the country against the vested interests of the market.

Whether in meeting the traditional concerns of the consumer or the fresh challenge of the environment, we say, without hesitation, that energy policy is too vital to our future, too critical in its effects on our quality of life and too fundamental in its strategic importance for industry and the consumer to be left to the vagaries of the market. The essential truth, which the Government seem incapable of recognising, is that what the marketplace wants is not necessarily what the country needs.

This is not an abstract argument. It arises today in an acute practical form. We know that British Coal is in the process of negotiating new contracts with National Power and PowerGen--the duopoly created by privatisation of the generation of electricity. At the moment, the two bodies take about 75 per cent. of British Coal's output and are thus pivotal to its survival.

In turn, National Power and PowerGen are negotiating contracts to supply power to area boards or distributors. That is supposed to happen under the new contract system that is central to the privatisation process, whereby each of the area boards negotiates for separate parts of the generating capacity. That was the original plan. With more than 70 different power stations and 12 area boards, the nightmarish complexity of the contractual arrangements--to be superimposed on the merit order system which, by common consent, has worked well for decades--is only

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now becoming apparent. When I visit power stations and ask about the new contract system I find that the response varies between despair and hysteria. So complex is the new computer system that it alone will add £60 million to consumers' bills.

As I said, that was the original plan. Yet the Financial Weekly of 22 June says :

"Government advisers on the privatisation of the electricity industry have proposed scrapping the horrendously complicated intra-industry billing and charging system planned for the sell-off. The advisers are said to have told ministers that the system won't work".

In other words, the negotiation for the carve-up of power station contracts, which was at the heart of the case for privatisation that the Secretary of State advanced, is in a complete mess. At least it is now easier to make sense of each day's press as it speculates on the future of the Cabinet in general and of the Secretary of State in particular. As the right hon. Gentleman's plans for privatisation come step-by-step closer to terminal chaos, so does his anxiety to flee his Department, or even to abolish it, become ever more frenzied.

We are now witnessing a rather undignified race between the reshuffle and the day of reckoning ; between the right hon. Gentleman's future ambitions and his past mistakes. He has at least one unrivalled talent--he is always the first to abandon the sinking ship. Nothing in politics is closer to a gale warning than the sight of the right hon. Gentleman trying to climb on board one new Department after another. The Opposition have a very firm view of his prospects--a view which, I have no doubt, is endorsed by his Cabinet colleagues--that he should stay where he is and stick with what he started. If a critical element of his privatisation process is failing between National Power and PowerGen, the pressure will become all the greater to put the squeeze on short-term fuel costs to provide some fig leaf of justification for continuing with the privatisation proposals.

During the past few years British Coal has reduced the cost of coal supply to the electricity industry by some £650 million. That has not been passed on to the electricity consumer because the Secretary of State has been fattening up the industry's profit sheet to pave the way for privatisation. None the less, it has happened. The contracts between British Coal and the electricity industry amount to 75 million tonnes. We have heard reports that the electricity industry is now thinking of contracting for only 60 million tonnes, which would lose the country 15 million tonnes, 15,000 jobs and 15 pits. When the matter was first raised a few weeks ago, the Under-Secretary gave one of his memorable interviews on the "Today" programme. He was asked seven times whether the reports were correct, and as each answer or non-answer became longer and more incoherent, we were reminded of what Lord Byron said about his mother-in- law : "She has lost the art of communication but not, alas, the gift of speech."

If the Under-Secretary, who is charged with responsibility for the coal industry, does not know the state of the negotiations, we are entitled to ask who does. If it is true that the electricity industry wishes to import more coal or heavy fuel oil, and if that is brought into the southern ports, it will reduce the need for power sent south from the midlands power stations and therefore reduce the need for midlands coal. Conservative Members should reflect on that when they vote tonight, because a 15 million

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tonne reduction in coal is not at the margin of energy policy : it is fundamental. It would mean a significant fundamental shift in energy supply.

Today we have prepared an analysis of what the international coal market might look like over the next few years. If we consider all the main centres used to import coal into Britain, it is difficult to understand how any sensible Energy Secretary could be justified in relying upon imported coal to meet the country's future energy needs. The latest "International Coal Report", published just a week ago said, for example, about Australia :

"Australian exporters are suffering acute shortage."

It said :

"The supply situation is so tight that the world's largest exporter of seaborne coal is about to become an importer."

We know that the new Australian pits to be opened during the next few years are intended to supply Pacific basin countries, and in particular Japan, which is constantly opening up new coal markets. The home market in the United States is growing, and its new acid rain controls are estimated to put $2 to $5 a tonne on the price of its coal, so there is no succour for us there. What about Poland, Colombia or South Africa? Are we to make our energy needs dependent upon supplies from those countries? What about the great hope mentioned a few years ago by many Conservative Members, that to meet future energy needs we should look to coal produced by China? According to our figures, in the first quarter of this year China's coal exports declined by 11 per cent., and according to the most recent reports, China is now importing coal.

Mr. Nicholas Bennett (Pembroke) : I have been listening with fascination to the hon. Gentleman's speech. He mentioned both oil and coal, but not nuclear power, which provides the second largest percentage of generated electricity. What representations did he receive from the National Union of Mineworkers and from sponsored Labour Members when they discovered that the new pro-nuclear policy of the Labour party was pushed through while they were out of the room?

Mr. Blair : In a debate about the price of fuel and how to reduce costs to the consumer, it is rather peculiar for an hon. Member to make a statement in favour of nuclear power. I am grateful that he has raised the matter, because, if the privatisation process has taught us anything, if it has brought us any benefit, it is that it has exploded once and for all the notion that we should go nuclear because it is cheaper.

Is the Secretary of State aware of, and has he studied, recent history which, for example, shows that in 1981 imported coal was 20 per cent. more expensive than indigenous coal because of industrial unrest in Poland? Does he know that every 20 cents change in the sterling-dollar exchange rate makes a £6 per tonne difference one way or the other? Does he know that the world market for steam coal is so small that, if an extra buyer goes into the market for as much as 15 million tonnes, that will, of necessity, drive up the price of imported coal?

If the Secretary of State thinks that that is all the imagination of the Labour party, he should study the recent report by James Capel's international mining department--hardly a body sympathetic to the Labour party--which said about the electricity supply industry in its analysis of the coal industry :

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"A privatised ESI will aim to minimise fuel costs : imports, in the short term, will be the answer In the long term, international prices will go up. The British coal industry could be competitive with world markets by 1990 and could be restricting imports to peripheral power stations by 1995. A free-for-all policy on imports would close many mines which could be competitive."

That is the risk that we take.

If National Power and PowerGen decide, for their own strategic reasons--to second-source coal, as has been reported ; if they want imports as a matter of principle irrespective of price

competitiveness ; if they believe that to be in their commercial interests, surely it is the job of the Secretary of State to ask whether it is not in the interests of the public to secure supply and whether it is not in the interests of the balance of payments that we do not suffer losses as a result of imported coal. Should not those interests be weighed in the balance against those of the private sector?

We have sought in vain to discover the Government's exact energy policy on coal imports. The junior Minister said in another place a short time ago-- and perhaps it is the belief of the Secretary of State :

"We believe that the purchase of coal, whether imported or indigenous, is a matter for the commercial judgment of individual customers."--[ Official Report, House of Lords, 4 April 1989 ; Vol. 505, c. 1006.]

We are entitled to know the state of the negotiations between the industries, for both of which the Secretary of State is still absolutely responsible under his statutory duties. When we weigh the sacrifices of miners and mining communities, with almost one third fewer employed today than 10 years ago--many of my hon. Friends can bear testimony to the appalling levels of unemployment that still exist in the mining communities --we are at least entitled to know the Government's energy policy on coal imports. It is said that the strategic interests of this privatised duopoly may differ from those of the country, but why should we put those interests above the country's interests? Why should this be treated as if it were some private concern between the Coal Board and the privatised electricity industry, without involving the Government acting on behalf of the public interest?

It is not as if the Government are unable or unprepared to recognise strategic considerations when it suits them to do so. The Secretary of State has talked about coal meeting what he calls, fair competition. How do the proposals on nuclear power square with that proposition? Nuclear power will be ring-fenced from the market with 20 per cent. of all fuel being bought from what are primarily nuclear sources. It was said in the other place that the industry will be given a guarantee against future costs on decommissioning, reprocessing and disposing of nuclear waste if they arise from factors outside the industry's control.

If coal has greater duties imposed upon it in relation to the environment, they will not be subsidised by the taxpayer. The Government may say that the reason they are prepared to offer this unique public guarantee to a private sector company, which is what it will be, is because of the importance of nuclear power. But is coal any less important than nuclear energy? If the Government recognise the market's limitations and the wisdom of taking a long-term view of nuclear power, why do they insist that these matters are of no account with regard to

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coal? If the test to be applied were whether this would provide fair competition, I can tell the Government that fair competition with the nuclear industry is all that the coal industry demands. In order to understand why these policies have come about, we must ask : what is the Government's overriding priority? It is simply privatisation and nothing else. The Secretary of State has been told that nuclear power cannot be sold without these unprecedented public guarantees against commercial risk. We are to have private profit and public liability, and in this grotesque contradiction of everything which the Conservatives avowedly stand for, we can clearly see the simple fact that they have no principle of policy, no motive and no objective in view, save to sell the nation's assets as quickly as legislation will allow and as cheaply as they dare. The message is privatisation first, public interest last.

The long-term future of the coal industry, the pressing demands of environmental protection, which require not the maximising of profit, but its control in the public interest, are to be sacrificed to the idol, the mixture of ideology and vested interest. It is the Secretary of State's peculiar misfortune to be in charge of the largest privatisation in history, just when privatisation has gone out of fashion.

Today, there is a new political agenda which is not about selling off the nation's public services, but about improving them. It is not about the old game of extracting profit from captive consumers, but about new ways of ensuring that consumers, and the society in which they live, can control the profit makers in the interests of the people. It is because the Government are out of date and out of touch that we believe with increasing confidence that, at the next election, they will be out of office as well.

7.35 pm

The Secretary of State for Energy (Mr. Cecil Parkinson) : I beg to move, to leave out from "House" to the end of the Question and add instead thereof :

congratulates the management and workforce of British Coal on their achievements in increasing productivity and reducing costs ; welcomes the Government's continuing financial support for the industry which is enabling it to move towards profitability and a viable future ; recognises that the only secure long term future for the industry lies in becoming an efficient and competitive supplier of coal ; rejects the proposition that British Coal can only sell if its customers are forced to buy, and, has confidence that British Coal, on the basis of its own performance and not of Government dictat, will become the supplier of choice to the privatised electricity industry.'

I very much welcome the opportunity to debate the coal industry, but I must say straight away that I am disappointed by the shallow terms of the Opposition's motion. I wish to start by breaking some bad news to the hon. Member for Sedgefield (Mr. Blair) : the contracts negotiations are going extremely well. In spite of snippets which he may read in the Financial Weekly, I assure him that the new system will be in place and working by 1 October, and all the signs are that we are ahead in our arrangements, rather than behind. Mr. Blair rose --

Mr. Parkinson : No, I shall not give way at the moment. The industry is going through a period of enormous change. Twenty-five years ago, coal had many customers. Most people heated their homes with coal, our trains and ships were largely fuelled by coal, which provided our gas

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and virtually all our electricity. Today the industry has only one major customer : the electricity supply industry, which is being privatised.

Mr. John Cummings (Easington) rose--

Mr. Parkinson : I shall give way in a moment, if the hon. Gentleman will allow me to make a start.

We have made it very clear that the privatised electricity industry, like any other business, will be free to choose its suppliers, and that includes its coal suppliers, but we have also made it clear that we want British Coal to win the bulk of the business and we believe that, on the basis of its own performance, it can. These are not just empty words. It is a sign of our confidence in coal's future that we have committed ourselves to the privatisation of the coal industry after the next election. That is not a commitment which we would make unless we believed that we were going to have something large, successful and worthwhile to sell. We will have a large, successful and worthwhile coal industry after the privatisation of the electricity industry, and after the next election.

Our confidence is firmly based on the industry's performance since the strike. In the year before the strike British Coal produced 105 million tonnes of coal at a productivity of 2.43 tonnes per man shift. Last year, 1988-89, British Coal produced 103 million tonnes at a productivity of 4.14 tonnes. Therefore, output fell by less than 2 per cent. over this five-year period, while productivity rose by over 70 per cent., and productivity is continuing to rise. So far this year it has been running at levels over 9 per cent., above the same period last year. At the end of last month British Coal achieved a new productivity record of 4.63 tonnes--that is nearly 12 per cent., up on the average for last year.

Mr. Dennis Skinner (Bolsover) rose--

Mr. Parkinson : I shall give way in a moment.

I pay full tribute to Sir Robert Haslam and his team for what has, by any standards, been a superb performance over the last few years. Mr. Blair rose--

Mr. Parkinson : I shall give way in a moment.

I believe that it also reflects the Government's record of unwavering support for the industry, not just since the strike but before as well. Over the 10 years since 1979, we have put over £6.5 billion of capital investment into the industry. The investment in low-cost capacity and in modern mining equipment has been a crucial factor in what the industry has achieved. This Conservative Government have provided the taxpayers' money to fund that huge investment.

Mr. Blair : Perhaps I could ask the Secretary of State a specific question. Are these contracts which are presently being negotiated, and which he says are going so well, for the full 75 million tonnes at present taken at British Coal?

Mr. Parkinson : The contract arrangements of which I spoke involved the contracts between the generators and the distributors which, as the hon. Gentleman said, lead on to the coal contracts-- [Interruption.] The centre of my speech deals with why I believe the hon. Gentleman has a wrong-minded approach.

It is not just the capital investment itself, but the financing of the industry to which I should like to draw

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hon. Members' attention. We hear a great deal from the Opposition about the industry's financial burdens, but if they took the trouble to look at the figures for themselves they would see that British Coal's debt has actually fallen over the last five years from £4.2 billion to under £4 billion. As the House knows, I shall be coming forward in due course with proposals for restructuring the industry's capital, but I must point out that the massive investments we have made have been financed very largely at no cost to the industry, by grant which carries no interest.

Altogether, since 1979 we have injected nearly £10 billion of grant finance. Going back even further and taking into account previous grants and debt write-offs, our coal industry has received almost £20 billion at current prices since nationalisation, all of which has been written off and none of which bears a penny of interest.

Mr. Skinner : If, since nationalisation, the industry had received as much pro rata as the farmers have received we would be selling coal all around the world.

The Secretary of State referred to the massive productivity increases that the miners have achieved during the past few years. If that is correct--and it is--will he lend his weight to the NUM resolution that will be passed next week, which will state that NUM members want to recoup some of that massive productivity increase in the form of a substantial increase in wages of at least double digits--I hope as much as the 26 per cent. that the top directors got last year?

Mr. Parkinson : The hon. Gentleman consistently speaks up for and cares about the industry, but one of the problems is that he advocates the very policies that would destroy it.

I should like to repeat the last figures that I gave. The taxpayer has provided this industry with more than £20 billion of grant and loans, every penny of which has been written off as loss and not a penny of which bears interest.

Apart from deficit grant we have also provided restructuring grant support. Since the strike the number of men on colliery books has fallen from 170,000 to about 75,000 today. The House will note with satisfaction British Coal's achievement of being able to offer alternative jobs to all who wish to remain in the industry, even in coalfields such as those of Scotland, in which I recognise that the contraction has been especially severe.

No other industry has received such support, but for those who want to leave the industry the grants that we have provided have allowed British Coal to offer redundancy terms that are second to none. We have also made available £60 million of funding for British Coal Enterprise, thereby enabling the creation of more than 40,000 new job opportunities in Britain's coalfields. This is an impressive record by any standards. Our support for the industry has been consistent, generous and effective, and I bitterly resent snide remarks from the Opposition to the effect that the Government are somehow hostile to the coal industry. The facts give the lie to that assertion.

Sir Trevor Skeet (Bedfordshire, North) : My right hon. Friend's figures are impressive--he mentioned a £20 billion write-off since nationalisation. How much additional assistance has been granted to the industry in the form of social credits?

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Mr. Parkinson : As I have said, the £20 billion includes all grants under all headings, plus the capital injected into the industry by the taxpayer and subsequently written off as lost. I turn now to British Coal's relationship with the privatised generators. As I said earlier, there is no tripartite agreement between the Government, the generators and British Coal to reduce coal purchases by 15 million tonnes or by any other figure. The generators and British Coal are about to embark on the final stage of their negotiations, and those negotiations will settle the level of future purchases. I must make it clear that the Government will not force customers into long-term contracts for British coal in order to provide artificial support for the industry. I am confident that if British Coal continues to restructure its operations, to cut costs and to introduce new and more flexible working practices, the generators will choose to retain British Coal as their major supplier. They are hard-headed business men and they know the dangers to their business of being over-reliant on foreign suppliers, just as they have learnt from hard experience, four times in the past 20 years, the dangers of total dependence on a single United Kingdom supplier.

I listened to the sudden discovery by the hon. Member for Sedgefield that coal prices in world markets could go up, that Australia is quite a long way from the United Kingdom and that China is not planning to be a major supplier. I am glad the hon. Gentleman is finally catching on ; these things have been known to me and to other members of the industry for years and they will form part of the considerations which will affect the attitudes of the generators as they come to place their business. The idea that the hon. Gentleman and his juvenile team of researchers have just stumbled on an amazing truth shows how naive and ill-informed he has been to date--

Mr. Blair : I find it difficult to see whether that amounts to a confession or a denial of our principal charge. I shall put the question to the right hon. Gentleman again. I do not doubt that the electricity suppliers are looking at this matter from their commercial viewpoint. I have asked the right hon. Gentleman a specific factual question. He is the Secretary of State in charge of both industries. Have they or have they not been talking about a contract for the entire 75 million tonnes or for a lesser amount of 60 million tonnes?

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