Mr. Nicholas Bennett (Pembroke) : On a point of order, Mr. Speaker. Those of us who were here on Friday and listened to an interesting debate on eastern Europe are rather surprised to see that the Official Report has missed out from the report at least three speeches. One was an interesting speech by the hon. Member for Bradford, North (Mr. Wall) in praise of Leon Trotsky. Is there a Stalinist in the Hansard office who has declared the hon. Gentleman a non-person?
Mr. Speaker : I have received an apology from the Editor of Hansard to say that a technical malfunction of Hansard Press resulted in most of the speech of the hon. Member for Gravesham (Mr. Arnold) all the speeches of the hon. Members for Bradford, North (Mr. Wall) and for Ruislip- Northwood (Mr. Wilkinson) and the beginning of the speech of the hon. Member for Meirionnydd Nant Conwy (Dr. Thomas) being omitted. A correction will be made in the text of Hansard today. The Editor expresses his regret.
Mr. Pat Wall (Bradford, North) : Further to that point of order, Mr. Speaker. On Saturday morning, Radio 4 referred to my speech as odd. I thought that I had given an even-handed description of both Stalinism and capitalism. I ask you, Mr. Speaker, whether my speech exists--I understand that all our speeches, interventions and even interjections are reported in Hansard. If my speech does not exist, is there a technical case for saying that Radio 4 is in breach of privilege?
Mr. Jacques Arnold (Gravesham) : Further to that point of order, Mr. Speaker. As a speech was reported in Hansard in my name although it was made by another hon. Member, can you advise me what to do when in the second paragraph I am supposed to have waxed eloquent on Balkanisation? Far worse than that, I am supposed to have said :
"It is wonderful to be able to quote a statement from the present political leader of Bulgaria."--[ Official Report, 1 December 1989 ; Vol. 162, c. 977.]
What can I do to safeguard my reputation, Mr. Speaker?
Mr. Nicholas Soames (Crawley) : On a different point of order, Mr. Speaker. It is not related directly to the hon. Member for Linlithgow (Mr. Dalyell)--it is more general than that--but earlier this afternoon, in a question to my right hon. and learned Friend the
Column 26hon. Gentleman referred to a loyal and devoted civil servant. It was one of the seemingly endless occasions on which he has done so on the Floor of the House on an issue which surely has had its day. Is it correct, and if it is not, what can be done about it, for the names of senior civil servants to be mentioned in this way? Would it be possible for the House to examine whether there is a better way of handling these matters?
Mr. Dennis Skinner (Bolsover) : On a point of order, Mr. Speaker. Surely it would be wrong for anyone to stop my hon. Friend the Member for Linlithgow (Mr. Dalyell), or anyone else, raising important matters in the House merely because a long time has passed since the issue arose. We all remember the case of the Guildford Four and the 15 years which followed, during which hon. Members asked questions about the case. Tory Members could have said that that should stop. It is a good thing that it did not stop. Another example is the Rover sweetner. The questions about that will run on and on and on.
Mr. Tam Dalyell (Linlithgow) : On a point of order, Mr. Speaker. Could not the matter which I raised be brought quickly to an end and cleared up if the deputy Prime Minister were to tell us from the Dispatch Box whether he believes that Sir Leon Brittan, his friend and protege , was right or not right in saying that Mr. Charles Powell and Mr. Ingham quite improperly approved the disclosure
Mr. Speaker : Order. That is a matter for the Government Front Bench and not for me. I say in answer to the hon. Member for Crawley (Mr. Soames) that we must all calculate the use of names of those who are not Members of this place and the impact on them when mentioning them. However, hon. Members have freedom of speech in the Chamber, and that cannot be rationed.
Statutory Instruments, &c.
That the draft Census Order 1989 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Human Organ Transplants (Unrelated Persons) Regulations 1989 be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Patnick.]
That European Community Documents Nos. 8520/89 and 8521/89 on Air Transport be referred to a Standing Committee on European Community Documents.-- [Mr. Patnick.]
Coal Industry Bill
Order for Second Reading read.
Mr. Speaker : Before I call the Secretary of State for Energy to move the Second Reading of the Bill, may I say that once again there is a great demand to take part in the debate, and I therefore propose to place a 10-minute limit on speeches between 7 pm and 9 pm. I hope, however, that hon. Members called before that time will bear the limit in mind in the interests of others.
This Bill is of major importance, not just to the coal industry but to the framework of our energy policy over the next five years. It may be helpful, therefore, if I set it in perspective before going on to introduce its detailed provisions.
The coal industry's performance over the past five years has been remarkable by any standards. British Coal has done well to maintain its United Kingdom sales. Between 1983-84 and last year, in spite of the damage done to customer confidence by the strike and in spite of large falls in the price of competing fuels--particularly imported coal and oil--British Coal lost only 4 per cent. of its business. It was able to fend off the competition only because of very large gains in productivity and improvements in cost.
Since before the strike, productivity has risen by over 75 per cent. and operating costs have fallen in real terms by 30 per cent. That is a success story that outstrips even the large gains in productivity seen elsewhere in industry during the past 10 years. In the past four and a half years, more than 90 pits have closed. The number of employees has more than halved, from some 220,000 to a current total of fewer than 90,000. There has been virtually no recruitment from among communities that hitherto, to a greater or lesser extent, depended on mining, and I for one do not wish to play down the human consequences of those changes.
Each pit that has closed, however, has been subject to a detailed review procedure like that of no other industry, and each man who has left has done so voluntarily. British Coal has been able to offer alternative jobs to any men who wanted to remain in the industry ; for those who wished to go, substantial amounts of redundancy pay have been made available, as well as counselling and retraining. To help bring alternative jobs to mining communities, British Coal set up British Coal Enterprise. I know that many hon. Members will have seen the exhibition that BCE set up last month nearby, and I for one have been most impressed by its contribution to the creation of new employment where mines have closed.
Mr. Ted Rowlands (Merthyr Tydfil and Rhymney) : I apologise for interrupting the right hon. Gentleman so early in his speech. He said that miners had been able to exercise their rights under the colliery review procedures. In the summer, men at the Merthyr Vale colliery and pit in Aberfan wanted to exercise those rights, but were told that unless they agreed to the closure by the following Saturday
Column 28they would lose every redundancy payment. They were therefore unable to exercise any rights under those procedures to assess what they considered to be an act of vandalism by British Coal.
Mr. Peter Hardy (Wentworth) rose --
Mr. Ronnie Campbell (Blyth Valley) rose --
Mr. Wakeham : I am trying to answer the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands), but the hon. Members for Wentworth (Mr. Hardy) and for Blyth Valley (Mr. Campbell) have risen to their feet. In a minute I shall have to ask the hon. Member for Merthyr Tydfil and Rhymney to repeat his question, because I will have forgotten what it was.
Our policies--voluntary redundancy, the colliery review procedure and job creation through British Coal Enterprise--amount to a package that is unrivalled in any other industry. By and large, these policies are working extremely well, but I recognise the strength of the point made by the hon. Member for Methyr Tydfil and Rhymney. As circumstances change the policies will have to evolve, but they are widely recognised as being a fair and effective mix. We shall encourage British Coal to continue to pursue them.
Mr. Hardy : Does not the Secretary of State condemn British Coal's attempt to influence events in a dishonourable, outrageous way by casting aspersions on or writing critical letters to the review panel because it had the audacity to appear to criticise British Coal for its rather doubtful approach to redundancies?
Mr. Wakeham : I do not believe that the hon. Gentleman's question meets the circumstances of the case. Some views have been expressed by British Coal and by the chairman who presided over the independent reviews, but it is not for me to comment on them at this stage.
Mr. Wakeham : Implementation of decisions is not a matter for me ; nor was it a matter for my predecessors. I cannot defend every single action by management ; it will have to defend its own actions. However, the Government have played their part by providing additional resources and a system that is generally acceptable and working very well.
Within the 100 million tonnes a year of sales, the bulk goes to power stations. For the past four years, British Coal has had a joint understanding with the Central Electricity Generating Board under which it has supplied around 75 million tonnes a year at a price which fell year by year, in real terms, and which since November 1987 has in fact been frozen in nominal terms. Negotiations have been going on between British Coal and National Power
Column 29and PowerGen on the terms of the contracts that will replace the joint understanding from vesting day at the end of March 1990. As some hon. Members may have heard, British Coal has today announced that it has successfully reached agreement with each generator on the outline terms of interim three-year contracts. For the first two years of the new contracts, British Coal will supply an aggregate of 70 million tonnes a year. In the third year it will supply 65 million tonnes. Prices will continue to fall each year in real terms. There is nothing in the contracts which prevents British Coal from bidding to sell additional spot tonnages where that makes financial sense.
These are, I emphasise, interim settlements. Negotiations will continue with a view to reaching longer-term agreements covering the period beyond the next three years. At the same time, the two sides will be working to flesh out the details of the three-year agreements.
Mr. Dennis Skinner (Bolsover) : If the agreement is allowed to continue on that depreciating scale, does the Minister not realise that Britain will have to import more coal? It may cost less now, but who knows what its future price will be? With a £20 billion balance of payments deficit, does the Minister not understand that it is economic lunacy to import more coal and thereby to add to the balance of payments deficit? The answer is to keep pits open and to use British coal. The Government ought to pay attention to our long-term energy needs.
Mr. Wakeham : The contracts which are freely entered into by British Coal and the generating companies are very good for both. The hon. Gentleman may cast doubts on this, but, according to Sir Robert Haslam's statement today,
"The new contracts are a firm rebuff for the Jeremiahs and their gloomy forecasts for the future of coal. It is evident that the scare stories' of further massive contraction of the industry have been seriously overstated."
It is good news for the coal industry, and the hon. Member for Bolsover (Mr. Skinner), who seeks to represent it in the House, should take credit for his industry when the opportunity presents itself.
Mr. Tony Benn (Chesterfield) : Is it right for the Secretary of State to shield himself behind British Coal? Nuclear power is up to three times as expensive as coal, and the Government have supported it. Opencast mining is desperately damaging to the environment, and the Government have supported it. The importation of coal, to which my hon. Friend the Member for Bolsover (Mr. Skinner) referred, deepens the balance of payments deficit. Those are Government decisions. They are not matters on which the Minister can shield himself behind the chairman of British Coal.
Mr. Wakeham : The Government have provided very large resources for British Coal and, by and large, in recent years British Coal has taken great advantage from that and has substantially improved its position. I paid proper credit to that at the beginning of my speech. The right hon. Gentleman is deluding himself and the House if he believes that the coal industry can be protected by Government intervention to stop, for example, coal imports. The competition that British Coal must face--it will face it successfully--is from competing fuels--for example,
Column 30natural gas and oil, both of which are available in this country. Unless British Coal can compete against those fuels--I believe that it can--the future will be bleak. I do not believe that the right hon. Gentleman's analysis or his remedy are right.
Mr. Chris Mullin (Sunderland, South) rose --
Mr. Wakeham : I must not stand here and answer questions. My task is to make my speech in support of the Second Reading of the Bill. I have given way many times, and I may well give way to the hon. Gentleman when I have made progress.
Those agreements are important steps forward for both industries. They will allow the contracts between generators and distributors to be put in place according to the planned timetable. The prospect of further reductions in real terms in the cost of coal in each of the next three years is good news for the electricity consumer. The contracts are also good news for the coal industry. They remove much of the uncertainty that has overhung the industry in recent months. They give British Coal a large tonnage to go for and time in which to adjust its capacity and costs. But British Coal's ability to retain this business in the longer term will depend upon its own efforts to get its costs down even further over the intervening period. The remarkable productivity trend over the past few years must continue, and I believe that there exists within the industry the will and the technical skill to achieve it.
Mr. Mullin : I represent part of Sunderland, where 1,700 people are employed in the Wearmouth pit. One of the most disastrous things to happen is that, through our port and others along the coast, large quantities of coal are imported from cheap labour economies, including South Africa, Colombia and places with which no level of productivity can ever permit our miners to compete. Does the right hon. Gentleman understand that that is disastrous for the 1,700 men at Wearmouth pit and that, if it continues, it will lead to the closure of that industry, which is one of the largest remaining industries in Sunderland?
Mr. Wakeham : As the hon. Gentleman knows, it has not been the policy of this Government or of the Government whom he would support to restrict the import of coal into this country. Levels of coal imports have not substantially altered in recent years. British Coal is capable of meeting a substantial portion of the needs of the British generating industry for a long time to come.
Mr. Alexander Eadie (Midlothian) : I thank the Secretary of State, who has been generous in giving way. He has informed the House about increased productivity and the agreement that has been reached today. He has confessed that he will not be opposed to the import of coal and he has announced that gas will be a great competitor. Is he aware that an energy group of hon. Members had a lecture by the chief executive of British Gas and that he told his assembled audience that British Gas expects to have between 2 GW and 7 GW of gas-fired power stations in 10 years' time? Will the Secretary of State concede that he is misleading the House to some extent about the long-term prospects for coal if the policy of the importation of coal goes ahead and if gas-fired power stations become the order of the day?
Mr. Wakeham : I cannot be certain about the future pattern of fuels for generating, but I know that a substantial number of power stations will be gas fired, as is right and proper. That will add to the diversity of fuel and we know that gas is an environmentally satisfactory fuel. I must add that I was not one of those who were most anxious that the flotation of the nuclear industry should not proceed, but I made a statement to the House when I felt that it was the right course of action. Ten GW of electrical generation capacity were going to be filled by nuclear power, about which there is now considerable doubt, so there will be plenty of markets for which British Coal can aim, if it is competitive and able to seize those markets. I am doing all that I can to enable it to achieve that. The Government's view is that there should be a diversity of sources of fuel. We should like to maintain our level of nuclear power, but nothing that I have done in my time as Secretary of State has damaged the prospects of British Coal--rather the opposite. Mr. Allen McKay (Barnsley, West and Penistone) rose
Mr. Wakeham : No, as I have given way considerably. If I make progress, the hon. Gentleman is next in line and I shall keep him in a corner of my mind. If he sits nicely and quietly, I may be able to give way to him a little later. I have much more to say, so if I give way again hon. Members will complain that I have gone on for too long.
Clause 1 provides for a new deficiency grant which will enable me to reduce or extinguish British Coal's accumulated losses as at the end of this financial year. It differs from the deficit grant, which was available to British Coal until 1987, in two respects. Whereas deficit grant was paid out in respect of each year's losses, the new deficiency grant relates to the accumulated losses in the corporation's balance sheet, rather than to the results of any one year. The second difference is that deficit grant was an ongoing grant and a continuing subsidy. The new grant deals with the overhang of the past, but it is not available to cover any losses that British Coal may incur beyond March 1990.
Apart from restructuring grant, to which I shall return in a moment, we do not envisage offering any grant subsidy to British Coal for the period beyond March 1990, for the simple reason that, taking the next three years as a whole, we expect British Coal to make a profit. As Sir Robert Haslam told the Select Committee on Energy last month, British Coal does not want a subsidy and it does not need a subsidy. However, it is essential and urgent that we address the massive distortions that are now appearing in British Coal's balance sheet. That is because, on the basis of the balance sheet that we expect to see by March, there would be no prospect of British Coal being able to service and repay its debt. In those circumstances, it would be neither proper nor legal for me to continue to lend money to the corporation and the corporation would no longer be in a position to discharge its statutory functions. Let me spell out what those distortions are.
First, until this year, British Coal's borrowings, at around £4 billion, were broadly in line with the value of the
Column 32fixed assets shown in the balance sheet. But the growth in borrowings this year will lift the corporation's debt to nearly £5 billion. Meanwhile, it is becoming clear that pressure on British Coal's margins has left its fixed assets substantially overvalued in terms of their true earning potential. I cannot at this stage tell the House the extent of the write-down that may be necessary. That will depend upon a detailed review of the industry's prospects, and I shall naturally wish to satisfy myself that they are based on demanding output and productivity targets.
Secondly, under a new accounting standard applicable this year, British Coal is expected to provide in its accounts for its concessionary coal liabilities--primarily to ex-employees--instead of charging them on a pay- as-you-go basis. The corporation also has potential liabilities in respect of ex-employees' industrial deafness claims. Over the past four months I have learnt just how painful such long-term provisions in the energy sector can be, and I am afraid that these are no exceptions. The concessionary coal provisions are likely to amount to nearly £2 billion at today's prices and the industrial deafness provision is around £0.5 billion.
Finally, there are the bottom line losses that British Coal has recorded over the past three years, including £200 million last year and perhaps double that sum this year. British Coal's balance sheet has no reserves against which those losses can be offset. Altogether, the losses over the past three years, the provisions in respect of concessionary coal and industrial deafness, and the write-down of colliery assets could amount go more than £5 billion ; they represent the accumulated deficiency with which I propose to seek powers to deal by means of deficiency grant. I foresee a substantial part of such grant being paid immediately on Royal Assent, provided that the Bill receives Royal Assent before the end of the financial year. That will allow British Coal to repay an equivalent amount of its borrowings so that its debt can be brought into closer alignment with the true value of its colliery assets. The remainder of the deficiency grant will be paid over time as British Coal's longer-term liabilities fall due.
Clause 2 raises the ceiling on restructuring grant from £750 million to £1,250 million, increasable by order to £1,500 million, and extends its availability by one year to March 1993.
The increase in the ceiling is urgently required because the existing £750 million has been fully committed. Indeed, there are unreimbursed costs outstanding at present as a result of this year's redundancies. I appreciate the concern felt on both sides of the House about what is implied in terms of further manpower rundown. The proposed increase in the ceiling is a broad-brush figure and is not based on a specific view of what the manpower rundown will be. I think that it is generally recognised that the number of jobs will continue to fall as collieries exhaust their economic reserves and as manpower-saving investment comes to fruition, but I shall certainly not predict the outcome of individual colliery reviews or whether individual mineworkers will wish to remain in the industry or take voluntary redundancy. Similarly, I am not in a position to judge whether British Coal will find it profitable to sell more than the minimum contract tonnages to the power stations or to develop alternative profitable markets for its coal.
Column 33However, I am not disguising the hard truth that the industry will have to reduce its manpower costs further over the next three years, and the grant is vital if British Coal is to be able to afford appropriate redundancy terms.
Clause 3 makes a technical amendment dealing with loans to British Coal. Its purpose is to enable me to take temporary deposits from British Coal so that I can offer revolving credit facilities as well as term loans.
Because of the weakness of its balance sheet, British Coal has had access over the past two years only to short-term loans, and this has meant a great deal of volatility in the interest rate it faces. Once its balance sheet has been strengthened, I intend to consider how the maturity of its borrowings could be adjusted to a more conventional medium-term structure. There will, however, still be a need for temporary loan facilities, and clause 3 will allow a more straightforward way of providing those.
Finally, the Bill provides for an increase in the limits on licensed mining and other consequential changes.
Mr. Wakeham : I must outline what the Bill contains, but I shall give way to the hon. Gentleman if I have time after I have given way to his hon. Friend the Member for Barnsley, West and Penistone (Mr. McKay).
Private sector coal mining under licence from British Coal, which owns all coal reserves in Britain, produces between 2 and 3 per cent. of our total output. Those mines are limited in size, under legislation from the 1940s and 1950s which has never been revised, to 30 underground employees in the case of underground mines and 25,000 tonnes in the case of surface--that is, opencast--mines.
Mr. Rost : I am sure that many of my hon. Friends will welcome the relaxation of the artificial and outdated restrictions on private mining. Will my right hon. Friend accept, however, that there will not be fair competition unless he alters the licensing system? It should be taken from the patronage of British Coal and transferred to the Department of Energy so that, in common with oil and gas licensing, it is open to tender. In that way, genuine private enterprise competition would be achieved.
Mr. Wakeham : I note what my hon. Friend says. I suspect that improvements could be made to the licensing system, but they must wait, I fear, until a major Bill to privatise British Coal is introduced. That will not happen until the next Parliament. In the meantime, I thought it right to introduce the modest proposals I have outlined to assist, but they are not a substitute for the more fundamental review that my hon. Friend would like.
Mr. Allen Mckay : The Secretary of State has said that manpower in the small mines will increase from 30 to 150. I hope that he will consider carefully the question of health and safety, especially when the rules and regulations are altered. There is a difference between a private mine that employs 30 men and one that employs 150, as such a work force means that the mine is fairly large.
Mr. Wakeham : One of the purposes of the changes is to improve safety in private mines. With the present number of 30 employees, it is difficult to use modern technology and equipment, but the safe operation of mines largely depends on using modern equipment. The hon. Gentleman is absolutely right that safety is an important consideration.
It is important to put our proposals for increasing the size of opencast mines into perspective. The smallest British Coal mine has about 250 underground employees ; and while there are a few British Coal opencast mines with tonnages of less than 250,000 tonnes, they account for a tiny fraction only of the corporation's output. We have made it clear that we would seek a mandate in the next general election to hive off British Coal's operations from its licensing functions and to privatise them once they have become fully competitive. The decision when and in what form the coal industry will be privatised is one for the next Parliament, and we do not want to pre-empt this decision by major changes now in the statutory framework.
Mr. Ashby : When we have such extended opencast mine facilities, will my right hon. Friend please ensure that they are not concentrated in one area as they are in my constituency? We have to suffer opencast mining on top of opencast mining. Will consider the local people so that only one opencast mine at a time is operated and no more?
Dr. Mike Woodcock (Ellesmere Port and Neston) : If my right hon. Friend is saying that at this stage it is not reasonable to transfer licensing arrangements from British Coal to the Department of Energy, will he at least give the House an assurance that he will look carefully at the royalty paid by private mining operators to British Coal? It seems to many Conservative Members that an £11 per tonne advantage in what is supposed to be a free and fair competitive market is not reasonable in the private sector.
Mr. Wakeham : I have no plans for doing that, but my hon. Friend has asked a question and I shall certainly look at the matter. However, I do not give an undertaking that he will necessarily have a favourable reply.
Several Hon. Members rose--
Several Hon. Members rose-- Mr. Speaker : Order. A number of the hon. Members now seeking to intervene have also stated that they wish to participate in the debate and their interventions take up time.