House of Commons Hansard Debates for 29 Mar 1993

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in that year, the total volume of imports expected is only 10 million tonnes. How will a subsidy help British Coal to find the other 13 million tonnes? If it does not find them, how will the 12 pits stay open beyond next April? I will give way to the President of the Board of Trade if he will answer that question.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney) : As well as asking that vital question, will my hon. Friend ask another? What credence can we give to the process of consultation about the 10 pits that are not even included in any of the figures? If my hon. Friend's figures are right, what hope or belief can there be in the integrity of the whole inquiry and consultation process, which could save Taff Merthyr and other collieries among the 10?

Mr. Cook : There has been no offer to privatise them ; it has been a clear-out sale.

The President of the Board of Trade has had time to think of his answer, so I shall give way to him. Now that we have demonstrated that the output of those 12 pits exceeds imports, can the right hon. Gentleman explain to us where the market is for their output? Who is going to buy the 13 million tonnes?

Mr. Heseltine : It is apparent that the hon. Gentleman has not read the Select Committee's report. Its whole essence pointed to a range of ways in which there would be a larger market. I have followed the Select Committee's principal recommendations, to enable British Coal to meet that marketplace.

Mr. Cook : The principal recommendation was recommendation 17. The President of the Board of Trade is right, but recommendation 17 did not simply say, bring in a subsidy. Recommendation 17 said, bring in a subsidy and make it conditional on the electricity companies purchasing the additional tonnage. The right hon. Gentleman, in a negotiation process that would stun any union leader, has given the subsidy to the electricity companies, which they have taken, but in return they have made no commitment to buy one bag of coal.

Mr. Julian Brazier (Canterbury) : Does the hon. Gentleman have in mind a figure for the compensation that would have to be paid to British Gas if it was made to tear up its contracts with the generators?

Mr. Cook : I should have more respect for the hon. Gentleman's question if British Gas could guarantee a supply of gas to domestic gas consumers. British Gas has entered into interruptible contracts with the power stations, which means that they can interrupt the contract for gas for 55 days a year. Those 55 days will be during the winter, when British Gas needs gas for domestic consumers. I do not see why we should allow British Gas and independent producers to back us into a national energy strategy which would mean that for 55 days in the winter we were vulnerable to disruption of supplies. Arithmetic is plainly not the right hon. Gentleman's strong point. We have still had no answer from him. Where will the extra tonnes go? For that matter, where did the figure of 12 pits come from? If the President of the Board of Trade has not identified the market for those 13 million tonnes, how did he arrive at the figure of 12 pits saved? I think I have a clue which provides the explanation. The clue was provided by the Under-Secretary of State for Corporate Affairs, the hon. Member

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for Hatton-- [Interruption.] I apologise. The hon. Member for Tatton (Mr. Hamilton). Tatton, I am bound to say, sounds much more appropriate to the hon. Gentleman.

Last Tuesday, the Minister for Energy was due to address the World Coal Institute. Last Tuesday, the Minister had other things on his mind, so he sent his hon. Friend the Member for Tatton, who was introduced as having a background in coal and opencast mining, which interested the rest of us. As he left, the hon. Member for Tatton was doorstepped. He was asked about the prospects of success for the White Paper. His reply was, "We are mining a rich seam of support on the Back Benches."

I suspect that in that reply there was more truth than we heard in an hour today from the President of the Board of Trade. The figure of 12 pits has nothing to do with the consequences of the subsidy, or with any calculation of what the market is for extra output. The calculation behind the figure of 12 pits is, simply, what is necessary to get Tory Back Benchers into the same Lobby as the Minister. It is a figure that owes nothing to Boyds, or Caminus, or to the other consultants. That figure was chosen by the Patronage Secretary and expresses his total knowledge of the mining industry. It is the figure that he needs to turn rebels into loyalists. I urge those loyalists not to be taken in by that. The Government are not mining a seam of support on their Back Benches ; they are digging a pit for their Back Benchers to fall into, because one year from now none of those 12 pits will be open.

Mr. Rod Richards (Clwyd, North-West) : On the subject of rebels, the hon. Gentleman calls in his amendment for existing volumes of coal production to be maintained. That implies that the Connah's Quay power station will not get the go-ahead and that the several thousand jobs tied up with that power station will not be realised. Is the hon. Gentleman telling his hon. Friend the Member Alyn and Deeside (Mr. Jones), whose constituents stand to benefit from some 2,000 to 3,000 jobs, that he should vote against the creation of those jobs and should support his party?

Mr. Cook : I have already had correspondence with the management in charge of the Connah's Quay project. I have said to them that I see no reason to disagree with the proposal to use sour gas, which cannot be used for domestic heating.

Mr. Richards : The hon. Gentleman is splitting hairs.

Mr. Cook : No, I am not splitting hairs. Our concern is that gas, which is perfectly capable of domestic use, could more efficienty be used for domestic purposes than turned into electricity.

If any of the rebels are in doubt, I urge them to look at the White Paper. It does not talk about saving 12 pits. The White Paper, crafted by civil servants, is more honest than the President of the Board of Trade has been with the House. Paragraph 13.8 says : "The Government has therefore concluded that there is a case for enabling British Coal to phase the inevitable closures needed More pits will be kept open for longer in the interim."

There is not talk there of a permanent solution--only of phasing and only of the interim. If the President of the

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Board of Trade and the House really want to provide a long-term future for those pits, what they have to do is what the right hon. Gentleman has failed to do : tackle the rigged market, which is squeezing coal out of the chance to compete.

The President of the Board of Trade was good enough to quote from British Coal's press release when he made his announcement last Thursday. It is a pity that he did not quote from the following paragraph, which said :

"In its evidence to the Department of Trade and Industry inquiry"-- that is, to the right hon. Gentleman--

"British Coal made clear its view that only a radical transformation of the market would affect the prospects for collieries threatened with closure."

That was British Coal's view : that only a radical transformation of the market would do that.

It is no good the right hon. Gentleman saying to us that it would be wrong to intervene in the market. This Government intervened only four years ago to create the rigged market. What is wrong now with intervening, when we see how it is working? [ Hon. Members-- : "It is not working."] The President of the Board of Trade could have done a number of things, had he wanted to correct the market.

Dr. Keith Hampson (Leeds, North-West) : Will the hon. Gentleman give way?

Mr. Cook : No, I am not going to give way to the hon. Gentleman. I gave way to him last week, and it turned out that he did not even know the unemployment figures for his own constituency. My advice to the hon. Gentleman is that he should return to his constituency, spend some time there and, when he is knowledgeable enough, come back here and then intervene in debates.

The biggest failure in the White Paper is that the President of the Board of Trade has not accepted any of the recommendations of the Select Committee about how to change the rigged market. That, I presume, is why the Government have not tabled a procedural motion that would have enabled us to vote on the amendment in the name of the Chairman of the Select Committee. In that way, the House would have had the opportunity to endorse those recommendations which the right hon. Gentleman has ignored.

Mr. Malcolm Bruce (Gordon) : Does the hon. Gentleman agree that the President of the Board of Trade's attempt to suggest that the White Paper effectively follows the Select Committee's recommendations is a misrepresentation and a fundamental divergence from the Select Committee's recommendations? The hon. Gentleman has already said that the White Paper does not allude to the rigged market. In addition, the Select Committee's recommendation that there should be a subsidy for coal is conditional upon securing extra contracts. The President of the Board of Trade's White Paper has not made one iota of difference. He has done nothing to secure those contracts.

Mr. Cook : The hon. Gentleman has made his own point and I hope that he will speak later in the debate. I agree very much with him. As for the Select Committee's recommendations which the President of the Board of Trade has ignored, he could have accepted the recommendation that the nuclear levy be paid to an independent trust. Then we would know that

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it had been set aside for decommissioning costs and that it was not being used to cover Nuclear Electric's current costs. If Nuclear Electric can compete, fine ; good luck to it. But it is not entitled to a subsidy five times larger than the right hon. Gentleman's subsidy to the coal industry. Nuclear Electric's subsidy is so large that if it were given to British Coal, it could deliver almost half its coal to the power stations free of charge. The most extraordinary feature of this subsidy is that we pay it to the French as well. That is why we are now importing so much electricity from France, more expensive electricity from France than from British Coal or British Gas. The electricity companies buy it only because they can claim the subsidy that goes to nuclear power on French imports.

The President has once again today tried to explain that this is all the fault of my right hon. Friend the Member for Chesterfield (Mr. Benn). The President is only here at the Dispatch Box to carry out the policies left in place by my right hon. Friend the Member for Chesterfield--a commitment to continuity in energy policy which I had not hitherto suspected of the Government. I will therefore give the House a brief history of the interconnector.

As the right hon. Member for Honiton (Sir P. Emery) was good enough to tell the House last week, the interconnector began life in negotiations under a Conservative Government. What happened in 1978 was that my right hon. Friend gave capital borrowing consent for the interconnector. The President's charge is that my right hon. Friend had not wrapped up the details of the contract. Hardly surprising, because there was no contract. The President has deposited in the Library a summary of the legal advice that he has received on the interconnector. Its opening paragraph explains when the contract came into being. It says :

"The framework for the operation [of the interconnector] is governed by a Protocol entered into on 16th June 1981."

My right hon. Friend the Member for Chesterfield has an alibi for his whereabouts in June 1981. It was impossible to go to any meeting of 10 people in the Labour movement in 1981 without finding my right hon. Friend addressing it--he was not negotiating with the French over a protocol for the interconnector.

Nor, may I say, is that the real problem with the interconnector. The turning point of its history does not come until 1989, the year when the Government gave Electricite de France the right to qualify for the nuclear subsidy. The Government, having given that subsidy, could have accepted the recommendation of the Select Committee to remove it. To be fair to the President, he sent the Minister of State across to Paris to talk to the French and explore the problem. I have here the press release which he issued that day and I shall share with the House the very first sentence, the thing that the Minister of State felt was most important and should go at the beginning of his press release :

"I made it clear that the Government recognised that it was not legally possible to prevent the importation of French-generated electricity via the link."

Picture the scene, Madam Speaker. We have a Minister who is sent to France to negotiate for British interests. What is the first thing that he does? It is cheerfully to tell the French that he has not got a legal leg to stand on. I have tried hard to picture the same scene in reverse. I have tried to picture a French Minister landing at Heathrow

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and, as he lands, saying that he recognises that it is not legally possible to get what he is asking for. I have failed to capture this picture in my mind's eye.

The President told me last week that I was blaming the French. I do not blame the French Government. The French have a Government who stick up for France and good luck to them. I just wish that we had a Government who stuck up for Britain.

e biggest reason why coal is being squeezed out of the market is not nuclear, it is not the French ; it is because, since privatisation, these Ministers have licensed a whole new generation of gas-fired power stations in the full knowledge that every time they signed a licence they were shutting three coal pits. On their plans, five years from now Britain will generate more electricity from gas than from coal. That is why the Select Committee floated threcommendation that the outputs from those gas power stations shouldbe changed to mid-merit and to peak rather than following baseload. Mr. Churchill : Yes

Mr. Cook : I am glad that I have the support of the hon. Member for Davyhulme (Mr. Churchill) on this point.

On energy grounds, that is very attractive. When it comes to energy strategy, it is daft to put gas through power stations to turn it into electricity for baseload. The most sensible thing is to pump it directly to heat homes and factories. The most wasteful thing to do with it is to put it through a power station first, because that way one loses half the heat, not heating factories or homes but heating cooling towers. It would make sense when it comes to our national resources as well.

To achieve this massive switch from coal to gas, we shall divert one third of the output of North sea gas into electricity generation. There is one clear consequence of that : North sea gas reserves will run out one third faster. When they do, we will be dependent on imported gas to keep the light bulbs burning. Gas on the international market comes from countries which are by-words for political instability, such as Algeria and Russia. A key event occurred in the course of the energy review which should oblige the President to rethink this strategy. Two months ago Russia increased the price of the gas that it exports to Germany by one third. There is a danger that we are repeating the errors of the 1960s and early 1970s when we relied on imported oil because it was cheap ; when we became reliant, it was no longer cheap. When we find that we are reliant on imported gas, we will find that it is no longer cheap. But we need not become reliant on imports of gas if we conserve our own fuel assets and that should be the concern of a Secretary of State for Energy. The cost of his White Paper will be the loss of half our present coal reserves. That is what is at stake. The most revealing figures in the Boyds report are that half the coal reserves to which we have access are in the 31 pits at risk. There is a cost to the nation that should concern the Secretary of State with responsibility for energy.

Dr. Hampson rose --

Mr. Cook : No. I have explained my position already : when the hon. Gentleman has done his homework and comes back to the House, we will let him in.

The right hon. Gentleman is also Secretary of State for Industry. There is another cost here that should concern

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him. His White Paper has just put under the hammer another slice of manufacturing industry. Because Britain has the largest coal industry in Europe, it has the best mining engineering industry, too. It is a big export earner for Britain--£400 million in contracts won by the mining engineering industry last year. It, too, is at risk now. The Association of Mining Equipment Companies warned on Friday that "a sizeable and stable home market is essential for continuing international success."

The industry will no longer have it and the association expects that jobs in the mining equipment industry will shrink from 22,000 to 13,000. Factories in places far away from coalfields, in places that will not see any of the measures which the right hon. Gentleman announced today to help the coalfields, will be affected. There is a final cost that should concern the right hon. Gentleman as President of the Board of Trade. Next time he sits as President of the Board of Trade--possibly in lonely splendour because, as far as we can work out, there has never been a meeting at which anyone else has turned up--he should reflect on the cost to the balance of payments of the White Paper. Five years ago this country was self- sufficient in carbon fuels. The damning indictment of the Government's lack of an energy strategy is that by the first quarter of next century we will be importing three quarters of our primary fuels--this is an island built on coal which could still be surrounded by gas if hon. Members on the Government Benches were not so anxious to hurry up the burning.

The rest of Europe must think that we are mad. If any of them had the coal reserves that we have, none of them would be shutting down those reserves. They would be regarded as a national asset. [ Hon. Members :-- "They are."] Conservative Members say that they are. On the figures in the White Paper, in the next four years Germany, which has smaller coal reserves, will have a bigger mining industry than Britain.

Mr. Oppenheim rose--

Mr. Cook : No, I will not give way. And it costs the Germans three times as much to mine that coal.

Here I come to the point which I find it most difficult to forgive.

Mr. Oppenheim rose--

Mr. Cook : No, I want to finish.

Here I come to the point for which I find it most difficult to forgive the right hon. Gentleman. He is closing not just some of the largest coal reserves in Europe, but some of the most efficient pits in Europe. I have seen them. They are pits which have had millions of pounds invested in them, investment that will now be left to buckle under pressure and be buried under roof fall. They are pits where miners have doubled productivity in the past eight years. They are pits where we have reduced the price of coal by one sixth in the past five years and could reduce it by one sixth in the next five years. How many other industries have doubled productivity and cut prices in the past five years?

The right hon. Gentleman is fond of accusing us of running Britain down, yet here is one of the best success stories of British industry, and he is running it down. He is running down not only the pits but the communities around them, communities which were built there only

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because the coal was found there, communities whose only economic purpose is to provide coal for the nation, communities which will be shattered if that purpose is taken from them.

It is not only members of the Opposition who know that--some Conservative Members know it. Many of them gave promises to those communities last October. Today is the day they have to deliver on those promises, not at the end of the year when the first of the 12 pits closes and not next year when the last of the 12 pits closes. It will be too late to save those communities then. The time to save them is tonight.

The right hon. Gentleman has taken five months to find a solution to give real hope to those pits and he has failed. The House now has five hours in which to record its verdict on the White Paper. I beg hon. Members of all parties not to fail those communities, as the right hon. Gentleman has done, and, when the vote is called, to reject a White Paper that betrays those communities and betrays Britain's coal industry.

5.10 pm

Sir Cranley Onslow (Woking) : I intend to be brief, so I hope that colleagues will forgive me if I do not give way very often, if at all.

As the first member of the Select Committee on Trade and Industry to be called in the debate, I must make it my first duty to convey our thanks to all the staff who worked so very hard to produce the report which is before the House and whose conclusions have been taken so seriously by the Government in the White Paper.

We had a daunting task to perform, under considerable pressure of time. It is a great tribute to the experts helping us and to the staff of the Committee who made our work possible that we produced a report in such a coherent form in such a remarkably short time. At the same time, I must say that there are passages in the report--other members of the Select Committee will possibly agree--where our conclusions did not carry the stamp of detailed and lengthy consideration. Parts of the report are, by nature, in the form of a communique rather than of a report. There are forms of words evolved late at night, on the last night available to consider them, because we had to formulate an agreement to disagree.

Mr. Richard Caborn (Sheffield, Central) : Very well put.

Sir Cranley Onslow : I am glad to have the agreement of the Chairman of the Select Committee. It is important that the House knows where the agreements to disagree are and should not put excessive faith in some of the forms of words in the report. I am in no way dissenting from the main drift of the report, any more than the Government have dissented from it. We formulated the proposition that there should be a subsidy. [Interruption.] I am sorry that the hon. Member for Durham, North- West (Ms Armstrong) disagrees with that idea, but the most important point is that the industry should have time--if necessary, time should be bought farefully knit, coherent set of 39 separate recommendations, every one of which had to be accepted or the whole would fail. I deal briefly with one or two of the report's recomendations.

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The Select Committee recommended that

"the Government consider financial assistance to contracts undertaken in the non-ESI market up to a maximum level of 3 million tonnes per annum for five years."

In response to that recommendation, in paragraph 16.15 of the White Paper, the Government rightly state :

"British Coal made it clear in its evidence to the Review that it is likely to continue to be constrained by insufficient supplies of the grades and quality of coal required by the non-power sector. It does not expect price to be an obstacle to selling the relevant types of coal."

On that basis, and understandably, the White Paper states : "The Government has, therefore, concluded that a subsidy would be unlikely to increase British Coal sales to the non-electricity generation market."

It is important that that fact is recognised, and it was recognised in the Select Committee's report. The reason the recommendation appears in the final version is that some members of the Select Committee perceived a need for the extra market to be presented as being as much as 19 million tonnes.

Mr. Caborn : May I refresh the right hon. Gentleman's memory about that debate in the Select Committee? I think that the 3 million tonnes came out of the original debate on 21 October during an intervention by the hon. Member for Leeds, North-West (Dr. Hampson) on the President of the Board of Trade. Great play was made of the fact that Leeds city council, a Labour authority, was buying Colombian coal. If the right hon. Gentleman remembers, we scratched below the surface in the Select Committee and said how ridiculous it was that local authorities, and indeed health authorities, were having to buy imported coal because, if they did not buy the cheapest coal, the district auditor would be on their backs, telling them that they were acting illegally. We took an objective view of that and said that, even though the Government had placed those constraints on the authorities, we could assist them and assist the mining industry to find the larger market for coal. That was the logic behind the 3 million tonnes.

Sir Cranley Onslow : It may have been the argument, but it was not necessarily logical. It may have escaped the hon. Gentleman's memory that we did not test the proposition by calling evidence on it. British Coal's statement that it did not regard price as a constraint on the selling of non-electricity supply industry coal is contained in the review and must be accepted. It is necessary for some of the exaggerated expectations--

Mr. Adam Ingram (East Kilbride) : The right hon. Gentleman is saying that the argument was not logical, but it was the argument that was used. Will he confirm that he accepted it when he signed the report?

Sir Cranley Onslow : I accepted the report which said that the Government should "consider" the recommendation. I deliberately prefaced my remarks with the comment that it was a form of words, evolved under pressure at the last minute in an effort to pretend that there was agreement. I do not wish the House to be misled about the strength of the structure of those words. Labour Members put more strength on the structure than it will bear.

In an article in The House Magazine, the Chairman of the Select Committee uses the extra 19 million tonnes as the minimum expectation in relation to the additional market that is to be secured. We were talking about what additional market there might be ; we were not making

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promises. We had not tested the projections by asking the generators whether they would buy, or by asking British Coal if it thought that it could sell--

Mr. Michael Clapham (Barnsley, West and Penistone) : Will the right hon. Gentleman give way?

Sir Cranley Onslow : No, there is a limit to the extent to which the debate can become an argument among members of the Select Committee. I have a strong suspicion that other hon. Members also want to participate, which is why I want to be brief.

The article to which the Chairman of the Select Committee put his name is misleading, because it suggests that British Coal's market could be expanded

"beyond the additional 19 million tonnes."

It is especially unwise to have used as an argument to support that the proposition that using combined cycle gas turbines

"as mid-merit or peak capacity"

was something on which the Committee had agreed and which would achieve that purpose. I shall deal with that point next.

At paragraph 23, the Government respond to the Select Committee's recommendation that

"The Government should explore the possibility of some of the CCGTs being used as mid-merit or peak instead of baseload capacity." The important words are "should explore". No member of the Select Committee objected to the Government exploring the possibility. However, no member of the Committee had sufficient evidence on which to base an expectation of what the result of that exploration would be.

At paragraph 250(iii), we cite as an option

"Restricting the operation of CCGTs, so that they are not permanently on baseload."

We then make the important point that

"There is a cost involved, which we have not been able to assess." On the basis of pressure of time, we recommended that

"The Government should explore the possibility of some of the CCGTs being used as mid-merit or peak instead of baseload".

We had had no evidence on that subject, and we had no costs to put before anybody. It is important that the House should have some opportunity to know what costs may be involved. I asked Enron, one of the companies that gave evidence to the Select Committee, as the Chairman will recall, whether it could help on the matter. Enron's reply says :

"The costs of not running CCGT plant in the most efficient way would fall in some combination upon four groups."

The groups are listed as the consumer, who would be forced to buy higher- priced electricity from less efficient coal-fired stations, the generator, the gas supplier and the gas processor. All four would have in some degree to bear a cost. Enron quantifies its view by saying :

"If 10,000 MW of CCGT were affected the annual cost of a reduction in load factor to 75 per cent. could exceed £250 million." I doubt whether, if the Committee had had that evidence before it, it would have framed its recommendation in precisely the way that it did.

Mr. Heseltine : I am grateful to my right hon. Friend for his careful and revealing explanation of where one of the recommendations came from. Did the Select Committee take into account the loss of confidence that might apply

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to companies investing in the North sea if it was felt that contracts that had been freely entered into were to be overturned as a result of the recommendation?

Sir Cranley Onslow : I cannot speak for every member of the Select Committee. However, I can assure my right hon. Friend that that consideration was very much in my mind and in the minds of a number of my colleagues. None of us--

Mr. Caborn : Will the right hon. Gentleman give way?

Sir Cranley Onslow : I am sorry to say that I will not. I am reasonably confident that the hon. Gentleman will be called, so I shall take a chance on that. I ask him to be patient.

I am fairly sure that we should not have accepted the recommendation if we had known that the costs involved, in financial and in psychological or economic terms, were likely to be what they can now be seen to be. I should be surprised if even Opposition Members would have been prepared to sign up to such a recommendation.

I hope that we have been of help to the House in our report, but I point out that there are areas that should still be approached with caution. There was a need to have more work done than was possible because of time pressure. In that respect, I commend the Government's response in the White Paper because it deals with matters in a careful and reasoned way.

Some of the accusations of indecision and delay which have been levelled against my right hon. Friend the President of the Board of Trade are thoroughly unjustified. The Select Committee had no chance to call the coal generators before it and to ask what they would do if they had the opportunity to buy subsidised coal, how much of it they would buy and how long they would negotiate about it. No one, least of all the hon. Member for Livingston (Mr. Cook) who has so much experience of negotiation, should be surprised that the process should have been protracted, and that an answer should not have been arrived at until the very last minute. For the hon. Member for Livingstone to accuse my right hon. Friend of wasting time entirely reveals his ignorance of what is involved. It was critical that there should be signatures on contracts, and it was necessary and inevitable that it should take that length of time to secure those signatures.

The other very important recommendation made by the Select Committee is the emphasis on improved productivity and working practices. I regret that we had to place so much emphasis on those matters, because they should have been dealt with years ago. There can be no possible excuse for the antiquated and antediluvian working practices that restrain productivity in so much of mining, except where safety is involved.

If safety is not involved--we received clear assurances on this from British Coal and others--the improved working practices should have been secured years ago. If they had been, I have little doubt that the strength of the industry and the markets it could command would be infinitely greater than they are today. It is the attitude of the reactionary and politically motivated unions as much as anything else which has prevented the industry from realising its true potential.

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