|Previous Section||Home Page|
Column 723British coal will not be able to compete in the short term with coal from abroad. That is why the Select Committee decided that there should be some form of assistance to the coal industry and that the industry should not be left to the marketplace. Vast assistance will be given to the nuclear sector under privatisation, so why throw our industry to the wolves when everyone knows that it cannot compete? That is why some people, including the Government, have pushed hard to extend the ports at Immingham and elsewhere. They know that the negotiations between British Coal and the CEGB will result in contracts for 60 million tonnes of coal--10 million more tonnes of imports, resulting in the loss of miners' jobs.
Do we want to leave this country in a state where it cannot meet the demand of our power stations for coal because the industry has been so run down and we need more imports? Does anyone think that the prices of £20 and £28 a tonne for imported coal will be available then? No. Schoolchildren know that. We saw what happened during the oil crisis. It is crazy to do this. Without using my Yorkshire words, may I say that the Select Committee recognised that. Coal is the natural power we have available. If the Minister is in possession of the facts, will he tell us how many British pits, of those that are left, are really uneconomical? There may be a few, but if "uneconomical" means that they must produce coal at the marketplace figure for imports of £20 to £28 a tonne, every pit in this country must be uneconomical. If that is so, there is no great future for the mining industry, although we shall have serious need of that industry one day.
I have referred to figures in the past, and I will not bother the House with them tonight. It seems that some Conservative Members have no respect for the industry, and the hon. Member for Brigg and Cleethorpes seems to think that this argument is a big laugh. He should come to my constituency to see whether pit closures are a big laugh. He would see miners' estates, which some members of the Select Committee have seen. Half the estates are boarded up and those properties that are occupied house aged miners and the widows of miners. Shops and schools have been knocked down. The hon. Gentleman should look and decide whether the social consequences of the savage running down of the mining industry are a laughing matter. I assure the House that they are not.
The Select Committee expressed its concern that the Department's research and development expenditure is set to fall in real terms in 1989-90. As the hon. Member for Havant (Sir I. Lloyd), the Chairman of the Select Committee said earlier, it is essential that the Grimethorpe plant and others like it should be kept operating and that if there is a lack of private funds, the Government do not allow the Grimethorpe plant to close. We talk now about the greenhouse effect and carbon dioxide. That plant contributes to research into the greenhouse effect, which is one of this country's worst problems.
Last year, the Committee criticised the expenditure incurred by the Department of Energy when it moved to expensive headquarters on a prime London site. The Government have said that some of the major Departments should move out into the regions, so one cannot make a case for spending a colossal amount of money on a new building in London, as my hon. Friend the Member for Hartlepool (Mr. Leadbitter) said. I recall
Column 724that the Committee suggested last year that it might be suitable to erect that building in an area such as Pontefract or Abertillery. I support the proposal for Pontefract or Castleford, but unfortunately that has not happened. A report today on the Property Services Agency main estimates showed the vast increase in costs of this new development and there should be some explanation for that. I noticed that the hon. Member for Brigg and Cleethorpes left the Chamber immediately after his speech. Unlike him, I believe that the Department of Energy has a continuing part to play, especially in view of our energy prospects. There is also a major part for the Select Committee on Energy to play, and I hope that the Government agree. I also hope that the Minister will give great consideration, when wiping out 20,000 mining jobs, to negotiations. Although nobody on the Government Front Bench appears to be listening, I will say to the Minister that his Department should negotiate with others to see what can be done to introduce alternative employment in the communities that will be wiped out, especially when one considers all the young men who will have no weekly income.
Mr. Alexander Eadie (Midlothian) : I have followed the debate closely and I understand the strong plea made for the preservation of the Department of Energy. Many hon. Members may not be aware that the Department of Energy was a creation of the party of the present Government. Although the Department was defended in strong and strident terms, I have my doubts about the outcome. As we have said in previous debates, when the present Secretary of State took office, one of his terms of reference was to abolish the Department of Energy. I hope that the defence put up for the Department is listened to, but I have my doubts.
We have heard today about manpower in the coal industry. The House must be informed about how catastrophic the contraction of manpower in the coal industry has been. I recently had an exchange with the Under-Secretary of State for Energy on the figures and I was able to point out that, in the past seven or eight years, the coal industry has contracted by 151,000 or 152,000 men. It is the greatest contraction suffered by any industry in so short a period. We are not talking about pits being closed because of dud technology, because they are using outdated technology, because there are no coal reserves left or because the manpower is aging. A young age group works in the coal industry at present. The average age is about 34 and the older men have left the industry. We do not close pits that have been exhausted ; we close those that have great reserves of coal. When it was proposed to close Bilston Glen colliery in my constituency, I pointed out that that pit had hundreds of years of coal left. Even in Monktonhall, which has been mothballed, £30 million, £40 million or £50 million was spent in reaching coal reserves which would last for hundreds of years. In the Midlothian constituency, there is coal lasting for hundreds of years, yet it was decided to close those pits.
I want to give an example of the economic lunacy we practise and of the logic of bedlam. I was at a meeting with British Coal where we were having discussions with Mr. Moses, a director of British Coal. We were talking about
Column 725how a British pit could survive in the present economic and competitive climate. The general secretary of the National Union of Mineworkers said that British Coal was telling us that a pit must produce coal at so much a gigajoule, although British Coal also said that it could not control the cost per gigajoule because factors in the market place determined that. We were told, for example, about the effects of rises in the value of the pound and about competitive bids from other countries. We asked whether Selby's closure would be considered if it did not live up to the gigajoule cost because of the balance of payments crisis and interest rates. Selby is the so-called jewel in the crown of the coal industry, but Mr. Moses' reply was, "Yes, we would have to consider it."
The Chairman of the Select Committee on Energy told us about the subsidy that the mining industry is receiving. I am not saying this in a spirit of cirticism, but if we are dealing with the costs of producing energy we must consider other arguments, such as the cost of nuclear power over the years. We must also consider the security of supply--which could be the subject of a valid debate in the House. I can best illustrate my argument with reference to the ridiculous position of the South of Scotland electricity board. The SSEB has gone back on previous understandings and agreements. It had previously said that we needed an indigenous coal industry. Indeed, the present chairman of the SSEB is on record as saying that it would be unthinkable if we did not have an indigenous coal industry in Scotland. He said that we would always need a coal industry in Scotland. However, he has changed his mind about that and is now putting forward similar arguments to those advanced by Conservative Members and is saying that the competitive argument must be considered. The chairman of the SSEB followed that competitive argument, despite the fact that the Secretaries of State for Scotland and for Energy have been told that something had to be done because otherwise the coal industry in Scotland would contract to nothing. The chairman of the SSEB went ahead with commercial considerations as the Government told him to do and did a deal for the importation of 1 million tonnes of Chinese coal. What about the argument for security of supply? The chairman of the SSEB said that that coal was cheaper. I am certain that it could not have been cheaper. Indeed, all the evidence and analyses are proving that it could not have been cheaper. Surely one cannot defend supplying our power stations with Chinese coal because by no stretch of the imagination could one say that that would give us security of supply. That is why I said that this policy is the height of lunacy.
I do not want to take up much more time because I want to leave the Minister time to respond to the debate. As a result of this debate, all the information that the Select Committee has given us and all the appraisals, I hope that we will agree that factors other than cost are involved. I hope that the Government will do something about the present uncertainty in the coal industry.
If we are to talk about blatant preference in our energy policy, the coal industry and the coal communities also have a right to express their blatant preference about the production of coal. We can still use the same argument on behalf of coal that was used 10, 20, 30 or even 40 years ago. We have coal in abundance. Therefore, we would be foolish as a country to contract our coal industry to such an extent that we would be dependent on imports of coal.
Column 726I hope that we can get that message across in this debate to both the Government and the members of the Select Committee.
Mr. Alex Salmond (Banff and Buchan) : I was glad that the hon. Member for Pontefract and Castleford (Mr. Lofthouse), my colleague on the Select Committee, referred to vote 3 and the administrative costs of the Department of Energy. I am also pleased that almost a full ministerial team is now present because I believe that I speak for all members of the Select Committee in saying that we should like specific answers to the questions about the administrative costs and the location of the Department that we have raised in successive years in estimates debates.
We have questions about the expenditure incurred on the refurbishment of the offices of the Department of Energy. We are seriously concerned by the Department's apparent lack of consideration of the unanimous view of the Select Committee--again, expressed in two successive years--that the Department should seriously consider moving its staff from central London to other locations. Indeed, so irritated was the Select Committee by the unspecific and cursory response to last year's report that we described it in this year's report as "Civil-Service-speak for doing nothing". The Department is hardly paying even lip service to the Government's professed aim of decentralising staff from London. The public will find it remarkable that a Department which is now spending £13 million on refurbishing its offices opposite Buckingham palace--at an actual cost that is about 280 per cent. above the original estimate--is not seriously considering whether it is possible to move most of its staff out of central London. I understand that the report of the Select Committee on the Environment today has expressed parallel concerns about the costs involved in refurbishing the offices of the Department of Energy.
Sir Gordon Menzie, the chief executive of the Property Services Agency, has described the £13 million expenditure--and the 280 per cent. increase over the original estimate--as an extremely good deal. If that cost escalation over a two-year period is an extremely good deal, one is tempted to ask what an extremely bad deal would be. If we take Sir Gordon Menzie at his word--and he is arguing that that expenditure is only half the standard commercial cost of office accommodation in central London-- I expect that we are meant to believe that we are lucky that the expenditure on the refurbishment of the offices of the Department of Energy and its move to its new location opposite Buckingham palace has not amounted to £26 million. When is the Department seriously to consider moving its staff outside central London?
The public will be astonished that a Department with running costs that we have detailed in our Select Committee report as being over £30,000 per person this year, compared to the Welsh Office expenditure of just under £20,000 per person per year--just over one third less than the expenditure of the Department of Energy--is not seriously examining relocating its staff outside central London. In view of the fatuous explanations that we received both in oral examinations before the Select Committee and in written answers, the people of Scotland
Column 727will find it disgraceful that the oil division of the Department of Energy is not located where it belongs--north of the border. On 26 June 1989, the Minister of State, Department of Energy referred in a written answer to the reason for the location of the oil division's staff in London, stating :
"Moreover the division is very much involved in providing advice to Ministers and has day-to-day discussions with the headquarters of the companies in the oil and gas industry, most of whom remain located in London."
That view was confirmed in oral evidence to the Select Committee by Sir Peter Gregson and others. It demonstrates a total lack of understanding about the causal relationship between the location of the Department of Energy and the location of the headquarters of the oil companies. The Department of Energy is in London because the oil companies are located in London. The simple fact is that the corporate headquarters of the international oil companies are located in London because the Department of Energy is located in London, with its key divisions of petroleum engineering and offshore licensing. The written answer also states :
"No specific discussions have been held with the companies on this issue."- -[ Official Report, 26 June 1989 ; Vol. 155, c. 359. ] That is an interesting admission because less than two weeks ago I had discussions with a major international oil company which currently has its operational divisions in Aberdeen and its corporate headquarters in London. I asked its representatives directly and specifically what their response would be to the movement of the Department's petroleum engineering division and licensing staff north of the border to Scotland. The answer was quite specific : they would review the location of their corporate headquarters in London and would follow the Department's movement of staff.
The Select Committee would like a direct answer to our direct question : when will the Department give proper and serious examination to the question of relocation generally, and to the specific question of relocating the oil division north of the border?
Since the Select Committee made its recommendation on this point last year, we have gathered some interesting allies to our cause. I am thinking in particular of Professor Ross Harper, the president of the Scottish Conservative and Unionist Association, who has become a recent convert to the idea of moving the whole of the Department of Energy north of the border.
I do not want to be too rough on Professor Harper because in the past few days he has had some hard lessons on the reality of power politics between Edinburgh and London. No doubt some English Members have been following this interesting episode in Scottish politics. Professor Harper was the nominee or choice of the Secretary of State for Scotland for the post of chairman of the Conservative party in Scotland. Unfortunately for Professor Harper's ambitions, he ran into the Prime Minister's favourite son, the Under-Secretary of State for Scotland, who was appointed against the advice of the Secretary of State. Professor Harper has been learning some lessons about where the power lies in the Conservative party and where power lies in relations between Edinburgh and London.
Column 728It would be worthwhile for Professor Harper to examine why for the past 10 years there has been no move by the Department of Energy to locate oil staff north of the border. The only move in that direction was 15 years ago, when the Offshore Supplies Office was established in Glasgow as a direct result of political pressure from the Scottish National party at the time.
It would also do Professor Harper some good to look at the Select Committee's minutes of 25 January this year. On that day, I was engaged in discussion with the Secretary of State for Energy about a related matter-- where it would be proper to locate the office of the Director General of Electricity Supply. I suggested that perhaps that office could be located in Scotland. The Secretary of State replied that that was "an eccentric notion". Perhaps Professor Harper should consider why the Secretary of State for Energy regards it as an eccentric notion to try to supervise the electricity industry of England and Wales from north of the border yet finds it entirely natural and normal that the direction and policy of the oil industry, which is located largely north of the border, should be run from London. That is a clear example of the hypocrisy and the fatuous reasoning that underlies the location decisions of the Department of Energy.
Those in the regions of England and in the nations of Scotland and Wales are of the opinion that it is high time that they ceased to subsidise the south-east of England through the concentration of Civil Service staff in London. That subsidy arises not just from the payment of Civil Service salaries and inner London weighting but from the whirlpool effect on the private sector and on private sector headquarters. This process of subsidy has ceased to be acceptable in the regions of England, and in Scotland and Wales.
The opinion in Scotland is that it is totally unacceptable that the oil divisions of the Department of Energy should continue to be located in London. That is not because we think that it is crucial that the 200 staff of the division should be located north of the border but because we recognise the thousands of jobs that would follow from the major oil companies if the Department made such a decision. It is not acceptable that the oil jobs concentrated in Scotland should be the jobs at the sharp end of the industry--the dirty, dangerous, offshore jobs. We are entitled to the policy jobs and the corporate headquarters employment now located in London which should be in Scotland.
Hon. Members have referred to the question of the continuation of the Department of Energy itself. The oil industry provides a neat illustration to show why it is by no means rational to say that because segments of the energy industry have been privatised we do not need a Department of Energy to overlay a policy. At present, no less than one third of the Department's total staff is employed on oil-related matters. For a number of years the oil industry has been largely in the private sector and it is now almost completely in that sector, yet the Government concede that there is still a need for a large proportion of the Department's staff to be devoted to that vital industry. Whether industry is in the public or the private sector, there remains a public policy requirement and a requirement for an energy strategy--something, of course, which this Government have manifestly failed to provide.
Column 7296.44 pm
Mr. Rhodri Morgan (Cardiff, West) : It is a great pleasure to be able to participate in this slightly unusual debate. By dint of these rather special circumstances Front Benchers have become Back Benchers and vice versa. You, Madam Deputy Speaker, are the fairy godmother. Your powers end at 7.26 pm, and we shall all revert to our normal status. Opposition and Government Front Bench spokesmen will not wind up the debate ; that will be for the hon. Member for Havant (Sir I. Lloyd) to do. It is a particular pleasure for me as a former member of the Select Committee to note that one glass slipper belongs to the hon. Member for Havant and the other to my hon. Friend the Member for Hartlepool (Mr. Leadbitter). The Minister and I, on the other hand, are discussing this very important set of subjects as ordinary persons and with no kind of superior status.
I suppose that the most important question of all--it is the subject on which I propose to concentrate--is whether we need a Department of Energy and a Secretary of State for Energy. The former Member for Scunthorpe reinforced that point. The hon. Gentleman now represents the next-door constituency, whose name I temporarily forget--
The key question is whether we need a Department of Energy, and that is dealt with under vote 3 in the Select Committee's report. It is uppermost in the minds of the Secretary of State and of civil servants in the Department as they contemplate their future, following what I understand is known in Harvard business school jargon as the endgame strategy that the Secretary of State is pursuing. Having privatised the pylons and other appurtenances of the electricity industry, the right hon. Gentleman can dispense with the Department and tell the Tory party conference about it, to rapturous applause. At that point, the right hon. Gentleman will presumably have had some form of promotion or will receive it shortly thereafter. That is known as following the principle, "privatise or perish". I do not think that I am attributing anything to the Secretary of State that he would not be happy to have attributed to him when I say that he must already have written his Tory party conference speech a thousand times in his head. He must have contemplated how wonderful it will be to refer to the notch on his belt once he has got rid of a large electricity supply industry and put it into the private sector. Having got rid of a large nationalised industry--perhaps the biggest--to the private sector, he can then justify the abolition of a Department of State.
This is a matter of interest to me not only as an ex-member of the Select Committee but as an ex-civil servant at the Department of Trade and Industry at a time when that Department still had responsibility for energy. I witnessed from inside the split up of the Department following OPEC's massive oil price rises in July 1973--from $2.50 a barrel to $10 a barrel--when energy was the word on everyone's lips. Superficially at any rate, there is a justification for saying that energy is no longer in crisis.
Column 730On a superficial level we may be justified in saying that we do not face that great financial cataclysm of the Financial Times index being as low as 146. It is about 2,000 now and that must warm the cockles of the hearts of some Conservative Members who have a direct interest in that sort of thing.
The western world has survived 13 years of high oil prices, and so there is a belief that we can, to use an apposite phrase, put the energy issue on the back burner. It is fair to say that the Secretary of State for Energy takes that view. For him the important thing is promotion and his next Tory party conference speech. However, the rest of the country is concerned about energy. After the legislation privatising the electricity supply industry is enacted, will there still be energy questions which require a separate Department of Energy? We may have said after the great oil price rises in 1973, "Nice one Faisal", but after the abolition of the Department of Energy, will we be happy to say, "Nice one Cecil"? Some of us believe that energy questions remain the same no matter how many nationalised industries fall within the purview of the Department and the Secretary of State for Energy.
It is fair to warn the Secretary of State for Energy that if he is pursuing an endgame strategy and wants to race to his promotion and get rid of the Department of Energy as a notch in his belt, he cannot blame other Secretaries of State such as the Secretary of State for the Environment for muscling into the energy question. He cannot even blame his right hon. Friend the Prime Minister--another fairy godmother--if she and her colleagues refer to proposals for coal and carbon taxes at international conferences or in Tory party think-tank papers.
The Secretary of State appears to be asking whether we need a Department of Energy. Is it enough for the Secretary of State to say, as he appears to be saying now, "I will shovel all the shares in the electricity supply industry off the back of the lorry and then I will sell the lorry"? There is something extremely irresponsible about that view unless the Secretary of State can show that energy questions have become much less important than they were. We are concerned about this because the Secretary of State is in a paradoxical position. He is trying to be the commandant of Colditz and the secretary of the escape committee at the same time. He cannot slide out of his responsibilities at the Department of Energy. Important questions are covered by other votes that we have discussed tonight. Colossal questions remain in relation to the remainder of the coal industry, although that is a much shrunken industry at the moment. How do we handle the question of the future of the British coal industry? What about the formulation of a policy for the industry? How can we make reasonable estimates for the coal industry? The Chairman of the Select Committee on Energy, the hon. Member for Havant, raised this matter earlier. Why do we go through this whole annual rigmarole of having two sets of estimates for the coal industry? The Department of Energy always underesti-mates the size of the restructuring grant and the time within which the industry will break even point. Perhaps the Department of Energy believes that that is the right way to provide incentives for the management and the men in the industry.
Mr. Allen McKay : Does my hon. Friend agree that the figure of £311 million represents about 15,000 redundancies? If there are 15, 000 redundancies and the restructuring money has gone, will there be a new restructuring grant or will we depend on normal redundancies? The hon. Member for Brigg and Cleethorpes (Mr. Brown) seemed to say that he did not care what other countries do to subsidise the products of this country provided that his constituents do not pay a subsidy. That appears to be a return to the old days of the empire when the country depended on the empire for subsidies.
Mr. Morgan : My hon. Friend has raised a very important point. Reading between the lines in the estimates it seems that we can calculate the number of impending redundancies, but the Minister refuses to confirm those figures in parliamentary questions. If the full story about the real number of possible redundancies for the following year was included in the estimates, that would frighten the life out of us. That is why the Minister does not do that. We need a Department of Energy to deal with such questions.
In addition to the coal industry, the Department of Energy must also consider energy conservation. We do not know the Department's policy on energy conservation. It has reduced expenditure on energy conservation, but it has not said that energy conservation is a less important issue. If we consider the Government's policy according to what is said rather than deeds, it would appear that energy conservation is, in the view of the Prime Minister and her Cabinet, the most important issue facing the planet. However, we are proposing to abolish the Department which should have the clear remit to formulate energy conservation policies.
We do not know the Department's policies on energy conservation. What are they? How much expenditure is involved? Where would the Department of Energy fit in with the other Departments and make a contribution, for example, with the Department of Education and Science, the Departments of Health and for Social
Security--particularly if we are thinking about the implications of hypothermia? We must bear in mind that we have the worst record with regard to hypothermia in western Europe despite having one of the mildest climates. Those are huge issues which make a case for a separate Department to deal with energy matters.
Another important energy-related matter is the greenhouse effect. That is a top priority issue if we consider the Government's words and not their deeds. The hon. Member for Erewash (Mr. Rost) referred to the need for better technology with regard to energy conservation and efficiency, for example, in connection with combined heat and power and the insulation industries.
What about the relationship between privatisation and the nuclear industry rump which would remain in the private sector? We understand that even if the bulk of the electricity supply industry is privatised, some vehicle will have to be found to keep the risk part of the nuclear industry in the public sector by loading it into British Nuclear Fuels plc, which would remain under the wing of the Department of Energy instead of being privatised alongside the power stations. The dodgy part of the industry, the equivalent of the sewerage problem in water privatisation, will be kept in the public sector. The private sector will take the assets and profits and poor old Muggins--the British taxpayer--will continue to bear all
Column 732the risks of unexpected rises, which we all know are expected rises, in the costs of nuclear waste disposal, reprocessing and power station decommissioning. The issues related to fairness, handling, monitoring and the estimating of BNFL's costs--as it will have to carry the risks on behalf of the taxpayer--require a separate fully-fledged Department of Energy.
In the end, we are not primarily concerned with how many nationalised industries come under the wing of the Department of Energy. Rather, we are concerned with the size of the energy questions that it must handle. We know that the price of energy has, in general, been falling since February 1986 in real terms. We have had three mild winters in succession and we do not hear weekly stories about pensioners freezing to death in their council flats as we heard during the harder winters of 1985 and 1986. That has tended to make Ministers believe that those issues are less important now. If the Government try to proceed with the idea that they can get rid of the Department of Energy because they have disposed of its major, remaining nationalised industry, they would be very irresponsible, particularly when they are apparently now still thinking of trying to find a way of unloading the industry on to the private sector by guaranteeing or writing off the risks, debts and difficult parts of the electricity supply industry and keeping them with the taxpayer. That is the application of an old principle of Roman law called "nil prospectus desperandum"--in other words, "Do not do anything that frightens off the shareholders," or, "Let us leave something in it for the stags, otherwise it will not seem a popular privatisation."
If the taxpayer is to continue to carry the can for all the risks involved in the electricity supply industry after privatisation, he must have a proper, fully-fledged Department that can examine the big issues in the industry. Opposition Members do not want the Department to go out in a huge fireworks display involving the employment of expensive advisers and advertisers, and finally see the Secretary of State move on somewhere else, leaving all the problems to his successors.
The Parliamentary Under-Secretary of State for Energy (Mr. Michael Spicer) : I am not sure about the implication of the remarks of the hon. Member for Cardiff, West (Mr. Morgan) about hon. Members speaking as private individuals. For my part, I will work on the assumption that, if I get it wrong, I will still be held to ransom by a wide audience and not only by the wonderful constituents of Worcestershire, South, whom I have the honour to represent. I congratulate the Select Committee on Energy on yet another thorough report and on the way in which my hon. Friend the Member for Havant (Sir I. Lloyd) introduced it. With good reason, much of the debate has been about the coal industry. The first sentence of paragraph 4 of the report states :
"The Vote for assistance to the coal industry takes up over three-quarters of the money which Parliament is asked to vote in support of the Department of Energy."
It has been quite apparent from debates in the House and in Committee that a variety of advice is coming forward to the Government. My hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) is right to say that the hon. Member for Hartlepool (Mr. Leadbitter) made an
Column 733impassioned and fluent speech. We seem to be throwing bouquets across the Chamber, but I must tell my hon. Friend that I disagreed with most of what the hon. Gentleman said. The hon. Gentleman characterised the position of British Coal as one of profitability, were it not for the fact that debt servicing, redundancy costs and one or two other things mean that so-called operating profits are turned into losses. He would not get away with that kind of statement in the private sector.
The fact is that, over the years, British Coal has accumulated losses of £2.5 billion, and the Government are coming before Parliament for supplementary estimates. I heard the criticisms that were made by my hon. Friend the Member for Havant. Next year we may have to ask for further grants to the industry. The hon. Member for Barnsley, West and Penistone (Mr. McKay) asked about that point in the context of restructuring grant. British Coal's costs are still above those of international competitors. It is not sensible to ask whether British Coal is currently profitable and whether, with all these flush funds, it will now be able to do all sorts of exotic things that it would not be able to do without them.
The vital question that is being asked by many hon. Members is whether British Coal will be able to compete in the future. My hon. Friend the Member for Brigg and Cleethorpes made an interesting intervention. The implication behind his views about the future pricing structure of British Coal is that British Coal can compete in the future. That lies at the root of what he said.
Mr. Leadbitter : The Minister was kind enough to refer to my interpretation of the operation and profitability of British Coal, bearing in mind inflation, high interest rates, changes in the market, oil prices, competition, and so on. He did not really accept my view. I took my information from a letter dated 6 February 1988 from the Secretary of State, which was sent to the Select Committee on Energy on that day for our consideration.
Mr. Spicer : Some people define profitability to encompass the idea of massive money still being spent on the industry. I have gone through the facts. The industry is costing the taxpayer a lot of money. I know that British Coal defines its present performance in terms of making operating profits. Strangely, as a Minister in the Department of Energy responsible for coal, among other things, I continue to find myself, in the context of this profitable industry, returning to the House and, in effect, begging the House for more money for that industry. Therefore, it is legitimate to ask whether the industry can compete in the future.
My hon. Friend the Member for Havant said that there is no way that coal can be mined at world prices. To some extent, that brings him into conflict with my hon. Friend the Member for Brigg and Cleethorpes. It is certainly not my view. As many hon. Members have stressed, there has been a massive improvement in the efficiency and productivity of the industry. There has been almost a 100 per cent. improvement in productivity in the past four or five years. There is no dispute about that.
The hon. Member for Hartlepool answered his own question about redundancies when he rightly said that there has been almost stable production over that period, with half as many men producing the same amount. That growth in productivity is not only something on which British Coal and those who work for it should be
Column 734congratulated but is evidence that, if the process is continued, the industry will stand on its own feet, particularly when we bear in mind two additional factors. The first was mentioned by the hon. Member for Sedgefield (Mr. Blair) in a recent debate--the present difficulties in the world market. The Government accept that difficulties in the world market, perhaps leading to hardening prices, may exist if the electricity industry goes overboard with imports. There is a small world steam coal market because there are difficulties in the international trading of steam coal. That points to yet another intrinsic advantage--the infrastructure of a home-based coal industry. The Government take the view that, if we can continue the admirable process of improving the efficiency of the British coal industry, it can stand on its own feet and compete against foreigners.
I do not mean to quarrel with my hon. Friend the Member for Havant, as I agree with a lot of what he said. I agree that privatisation of the coal industry cannot guarantee its future, but a policy to privatise the industry is certainly a statement of the Government's faith in the future of the industry. Were the Government not to believe in the future of this industry, they could not properly embark on a policy of trying to sell it to the private sector. Coal is a perfect example of a Government who are backing an industry with massive amounts of money. Hon. Members will have heard Ministers say many times that we are spending £6.5 billion, £2 million every working day, of taxpayers' money on the industry. These are enormous sums of money, but the Government have also shown their faith in the future of the industry and in its ability to stand on its own two feet.
The second theme of this interesting and wide-ranging debate has been energy efficiency, to which my hon. Friend the Member for Erewash (Mr. Rost) referred in particular. The Government agree with him about building regulations, and amending building regulations will shortly be laid. As he said, this is an important part of any energy efficiency programme. I do not have time to go back over many of the detailed points that were made, but I shall make this point. Energy efficiency has been properly debated and no doubt will be debated again when the Electricity Bill returns to the House. The hon. Member for Cardiff, West nods his head, and I am not surprised that he will be raising this matter.
The Electricity Bill can be characterised in terms of an energy efficiency Bill. It is about efficiency in the production of energy. The whole purpose of the radical reform of the generating side of the electricity industry is to produce energy more efficiently. One of the results of that policy, which is a problem for the coal industry, is that in the production of more efficient energy gas-fired systems are coming forward. In their concentration on coal, the Opposition have to contend with the fact that, while Grimethorpe may produce some wonderful answers, the maximum saving of CO suggested for the topping cycle at Grimethorpe is between 15 and 20 per cent. In terms of gas over coal-fired stations, the figure would be nearer 40 per cent. We cannot just discard these points when discussing energy efficiency. Nor can we discard the fact that, under a privatised and much freer system, which will exist after the Electricity Bill becomes law, energy efficient production systems will be forthcoming. That needs to be stated, because it seems to have been forgotten that it is critical to our policy.
Column 735If that were not accepted by the Opposition- -and they have an interest in not accepting that our Bill will produce greater efficiencies in the production of energy--they have only to look at the wording of the Bill. If, for instance, they wish to concentrate on whether energy will be used more efficiently, which is the other side of the coin from the production side, then they will be pleased to see that, for the first time, the regulator will have a statutory duty to promote the more efficient use of energy.
Mr. Spicer : I shall give way in a moment, when I have finished this point. It may be on this that the hon. Gentleman wishes to intervene. I have heard arguments that that duty of the regulator under the Electricity Bill should be further strengthened. We are listening to those arguments. However, I want to make it clear that, for the first time, if Parliament accepts the Electricity Bill, there will be a statutory requirement on a public body to insist on the promotion of the better use of energy.
Mr. Morgan : I am sorry to disappoint the Minister, but that was not the point I was going to make as it will come up next week. The point I shall make has come up before, and we have not yet had a satisfactory answer. The Minister has the simple-minded, free-market belief that all the provisions to free the electricity supply industry are bound to mean more efficient manufacture of electricity, or there will be no new entrants. Therefore, can he tell us whether there will be any new entrants into electricity generation who will not be doing it simply on take-or-pay contracts, negotiated beforehand so that nobody will know at the point of starting construction whether they will be more efficient?
Mr. Spicer : Although perhaps, unlike the hon. Member, I do not have a crystal ball, I can say that the circumstances will be such that new entrants can come in. A particular point is the removal of the control of the wires, or the distribution system, from the generators. At the moment, that is not the situation. The major generator, or monopoly generator, controls the wires. The playing field will be set on an even basis for new entrants. We have been given signs that there will be many new entrants into the system.
A running theme in the debate is the location and cost of offices. The lease of the offices of the Department of Energy at Millbank ran out in 1982, so that this problem has been with us for some time. Decisions were made in the early 1980s not to move policy-making parts of the Department out of London. To quote the Energy Committee back to itself, it said in another context :
"This is not the right time to move energy policy away from centre stage."
The hon. Member for Cardiff, West spoke at length about whether the Department of Energy should be amalgamated with another Department, but that is not a matter for the Department to determine, as my hon. Friend the Member for Brigg and Cleethorpes said. Whether or not it
Column 736is, a certain number of policy advisers will need to be based in the capital. For instance, some must be ready to assist in the process of reporting to Parliament--which, as far as I understand it, plans to stay in the capital.
Mr. Spicer : I thought I might prompt the hon. Gentleman to rise to his feet. I have only three or four minutes and the hon. Gentleman has made his point. The House has heard him, and I must carry on. For many years, some of the key operational personnel in the Department of Energy have worked outside London. For example, the Offshore Supplies Office works out of Glasgow and Aberdeen, the energy efficiency regional offices are spread throughout the country, as are the electricity meter examining service personnel. We were the first Department to set up a typing pool outside London, in Lytham St. Anne's, and it still exists. However, it has been clear for some time that the major policy-making functions of the Department would need to continue to exist in London.
It is worth stressing that the Department of Energy is a small Department, with only about 1,000 employees. Therefore, the real question is more about how the functions should be located in London. Some 13 options were considered. The major criterion was that the offices needed to be reasonably close to Parliament so that Ministers and officials could get backwards and forwards to Parliament with relative ease. I do not know whether my hon. Friend the Minister of State agrees with me, but I think that negotiating Parliament square from the top of Victoria street, when on a three-line Whip, will not be as easy as coming down the Embankment from Millbank, but one cannot have everything.
The costs of rent and refurbishment have risen. The latter, as the Committee noted, is mainly a matter for the Property Services Agency, which is part of the Department of the Environment. In the context of what has been said about energy efficiency, I should put it on record that we shall be moving from what must be one of the least energy efficient buildings in London to one that will incorporate state-of-the-art technology for maximising the efficient use of energy, and will be something of a show case.
Mr. Salmond rose --
Mr. Spicer : No, I will not give way as I do not have time. The notional rent paid by the Department to the PSA, another branch of Government, will be high because it will reflect market rents, which are high in that part of London. The actual rent paid by the PSA, which negotiated favourable terms with the developers, is about half the current market costs in that part of London. That means that the offices will be an extremely good deal for the taxpayer, although the policy of charging opportunity costs to Departments will mean that the Department of Energy's vote incorporates the full market rent.
Mr. Salmond rose --
I have been asked what our energy policy is, and I shall give the House the benefit of it. Before I do so, however, I believe that we are entitled to ask the Opposition what
Column 737are their energy policies. A policy that relies on conservation, the abolition of nuclear power and a cut in CO from coal all in one breath is likely to lead, at the very best, to the statutory wearing of thermal underwear. It certainly would not produce sufficient energy to satisfy our nation's needs.
Our energy strategy is extremely clear and it comprises several simple principles. First, customers should be free to choose the energy they want and should do so from a multiplicity of energy sources--coal, nuclear, renewables, oil and gas. Secondly, energy must be supplied as cheaply and efficiently as possible. Thirdly, to that end, we should ensure that those who work in the industry are well motivated and, as far as possible, shareholders in the privatised companies. Fourthly, we want to make an important distinction between the regulatory bodies and the operators. The regulators of safety, the environment and competition should remain in the public sector. Decisions about investment, capital allocation and management should be put in private hands.
I should have liked to consider the many other interesting and important questions that have been raised, but at this point I will give my hon. Friend the Member for Havant the opportunity to reply. 7.22 pm
I appreciate the wide-ranging reassurances that my hon. Friend the Minister has given. He has opened up a number of areas for debate and it is a great pity that we do not have a couple of extra hours in which to explore those important questions.
The hon. Member for Hartlepool (Mr. Leadbitter) has been one of the most assiduous and persistant gladiators in our Committee for a considerable time. He said that a miner was a very special kind of man. I am sure that the whole House believes that to be true. My hope, as I expressed it once to Joe Gormley, is that the day will dawn, perhaps after Fleischmann and Pons have got it right, when human beings do not have to spend their working lives several thousand feet underground. Until then, however--that goal may be half a century away--the balance between miners' skills and the rewards that society offers must be reasonable, defensible and sustainable. Those words cannot have either a constant meaning or quantum.
My hon. Friend the Member for Erewash (Mr. Rost)
Column 738concentrated with great skill, as he usually does, on energy efficiency. He referred in an anticipatory sense to global warming. We are faced with the problem of global warming and the immense problems that that creates versus global stupidity, global self-interest and global nationalism. My hon. Friend also referred to green politics and said that they were here to stay. I believe that the major parties are more likely to accommodate the green criteria than the Greens are likely to develop coherent economic, defence, social, energy and health policies.
The hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) concentrated on support for the Department of Energy and I am glad to have his support on that point.
My hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) disagreed in his usual courteous way with the Committee's view on the future of the Department of Energy. He said that only one person will decide that particular question and I entirely agree with him. We all know who that one person is. The decision is of such immense importance, however, that the nation is entitled to debate the merits of the issue whatever my right hon. Friend's final judgment may be. I have the greatest confidence in that judgment and I believe that it will be used at the right time in the right way.
The hon. Member for Pontefract and Castleford (Mr. Lofthouse) made a most interesting speech in which he said that the future size of the coal industry must be determined by demand. I believe that there is a great distinction between whether demand is the determinant of the future size of the coal industry or a determinant. Never have greater issues turned on the fundamental difference between those two little words, "the" and "a".
The hon. Member for Midlothian (Mr. Eadie) also concentrated on the contraction of the coal industry. He rightly referred to the young industry, but he also talked about collieries with hundreds of years of reserves being closed. I have no doubt that that is so, but it always raises questions as to how deep one should mine and at what cost. What are the geological problems? Are the seams faulted? I do not believe that one can dismiss such questions simply because it is desirable for social and many other reasons to maintain particular collieries in particular places.
It being three hours after the commencement of proceedings on the motion, Mr. Deputy Speaker-- interrupted the proceedings. The Question necessary to dispose of the proceedings was deferred, pursuant to paragraph (4) of Standing Order No. 52 (Consideration of estimates).