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Smith, Rt Hon John (M'kl'ds E)Smith, Llew (Blaenau Gwent)
Snape, Peter
Soley, Clive
Spearing, Nigel
Spellar, John
Steel, Rt Hon Sir David
Steinberg, Gerry
Stevenson, George
Stott, Roger
Strang, Dr. Gavin
Straw, Jack
Taylor, Mrs Ann (Dewsbury)
Tipping, Paddy
Turner, Dennis
Tyler, Paul
Vaz, Keith
Walker, Rt Hon Sir Harold
Wallace, James
Walley, Joan
Wardell, Gareth (Gower)
Wareing, Robert N
Wicks, Malcolm
Williams, Rt Hon Alan (Sw'n W)
Williams, Alan W (Carmarthen)
Wilson, Brian
Winnick, David
Wise, Audrey
Worthington, Tony
Wray, Jimmy
Young, David (Bolton SE)
Tellers for the Noes :
Mr. Jack Thompson and
Mr. Eric Illsley.
Question accordingly agreed to.
Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.
Resolved,
That this House welcomes the Government's acceptance of the principal recommendations of the Report by the Trade and Industry Committee "British Energy Policy and the Market for Coal" (HC 237), and in particular the offer of a transitional subsidy for additional sales of United Kingdom underground coal for electricity generation, the wide ranging package of measures to assist the regeneration of coal field areas, the commitment by British Coal that they will offer to the private sector pits which they do not themselves wish to keep in production, and the Government's intention to bring forward as rapidly as possible the legislation necessary to privatise British Coal.
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Coal Sales (Financial Assistance)
10.29 pm
The Minister for Energy (Mr. Tim Eggar) : I beg to move, That this House authorises the Secretary of State to pay, or undertake to pay, by way of financial assistance under section 8 of the Industrial Development Act 1982, sums exceeding £10 million in total but not exceeding £120 million in total to support sales of coal produced from underground mines in the United Kingdom.
Mr. Kevin Barron (Rother Valley) : In our earlier debate, I tried to get an answer to a question but no response was forthcoming in the Minister's reply. In a letter to hon. Members dated 28 June, the chairman of the British Coal Corporation said that British Coal had "made a very competitively priced offer to the generators for additional sales",
which had been rejected. The Minister said five days earlier that no one had actually asked for the subsidy to secure additional sales for British Coal. Could he tell us whether, when British Coal asked the generators, it knew how much per gigajoule the subsidy would be, or whether it was trying to negotiate with the generators without knowing how much the subsidy would be?
Mr. Eggar : Nobody knows what the level of subsidy is. I am sure that the hon. Gentleman will have noted from the parliamentary answer that I gave about two weeks ago that we have asked for a response both from British Coal and from private sector coal producers to assist us in setting the level of subsidy. To paraphrase my answer, we have basically asked for information regarding the world price of coal as they perceive it--as the hon. Gentleman will understand, there is a dispute about the level of the world price of coal.
We have asked producers for an indication of what their production costs are and, on that basis, we should like to proceed to set the level of subsidy that is available. I apologise for not being able to address the hon. Gentleman's point in my earlier remarks, but I can assure him that it was not a valid one, because there has as yet been no application for subsidy from British Coal.
Mr. Barron : Is the Minister telling the House that British Coal did not have the subsidy when it tried to negotiate additional sales and made the offer that has fallen through and been rejected by National Power, and probably also by PowerGen?
Mr. Eggar : I can tell the hon. Gentleman that, by definition, British Coal did not know the level of the subsidy when it entered into whatever commercial negotiations it entered into with National Power. He has only to look at the answer that I gave.
The House will be aware that the White Paper outlined the Government's intention to offer financial support both to British Coal and to private sector coal producers who could secure a genuinely additional market for United Kingdom underground coal for electricity generation at world-related prices, where that was consistent with the relevant European Community provision. The Government propose to provide that support under section 8 of the Industrial Development Act 1982. At this stage, I propose to set the limit for expenditure on the subsidy at £120 million.
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Mr. Mark Fisher (Stoke-on-Trent, Central) : Will the Minister make sure that he explains to the House how the subsidy works, in terms both of timing and of prior knowledge? He appeared to be saying to my hon. Friend the Member for Rother Valley (Mr. Barron) that, at the time of negotiation with the generators, the scale of the subsidy is not known. That being so, how can anyone wishing to take advantage of the subsidy know what its value is?
Mr. Eggar : I understand the point that the hon. Gentleman is making. Further exploration is needed. As I am sure the hon. Gentleman understands, there is a genuine difference of view about the world price of coal.
Mr. Barron indicated dissent.
Mr. Eggar : It is no good the hon. Gentleman shaking his head. We have received representations from a number of different parties arguing about the world price. There are genuinely conflicting views, and much depends on what one factors in for transport costs and so on. In order to assist us with setting the level of subsidy, we have asked for information not only on what people perceive the world price to be--the House will understand the difference between spot and contact prices and so on--but also on production costs, because, as the Government and the Select Committee have repeatedly said, the subsidy is the difference between the world price and the production cost. At this stage we are waiting for additional information.
Mr. Dennis Skinner (Bolsover) : We know that at least two of the 12 market-tested pits have been closed as a result of all the shenanigans that have gone on. What will happen to the other 10? We cannot afford to wait a long time. There was speculation that, without this debate, British Coal would close one of those pits on each day of the miners' conference. This debate probably helped to prevent that for a while.
Here we have 10 pits that are still in the market-tested regime--we think. Let us assume that they want to take advantage of what is now a fairly favourable world market for British coal. We can argue about the price per gigajoule and all the rest, but we are close to it and better in many cases. The game will be finished before the end of the year for those 10 pits, so what is the procedure to ensure that miners and management can keep them open? The Minister must tell us exactly what the procedure is for ensuring that subsidy is paid so that they can get some of the extra market.
Mr. Eggar : The hon. Gentleman's assertion that there is little difference between the production cost of some pits and the world price is probably not correct.
Mr. Skinner : Some of the pits are excellent.
Mr. Eggar : I quote from memory, because I do not have the figures exactly to hand, but I think that it is fair to say that the lowest cost deep-mined pit in the United Kingdom is the Selby complex, which is producing coal at slightly above £1 a gigajoule. Depending on the adjustment that one makes for the calorific value of our coal compared with world coal, and for such matters as chlorine and sulphur content, it is generally felt that the world price landed at ports is quite considerably less than
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£1 a gigajoule, although there is an argument about whether that is spot or contract prices. Transport costs must be considered as well. A difficult and complicated assessment must be made to arrive at the world price. [Interruption.] This is a very difficult and important area. The hon. Member for Bolsover (Mr. Skinner) asked a perfectly reasonable question, and I am trying to answer it. When private sector producers or British Coal have secured additional contracts or are advanced in their negotiations, they will provide the Government with the information for which we have asked--there is nothing to stop them providing it in advance--and we will consider each case on its merits. We shall bear in mind what the Select Committee said about the appropriate level of subsidy and make a decision in the light of that. We shall want to listen carefully to what British Coal and the private sector producers have to say. Mr. Fisher rose --Mr. Eggar : I do not know whether the hon. Gentleman wants to make a speech, but it may help if I deal with questions in replying to the debate.
Mr. Fisher rose--
Mr. Eggar : If the hon. Gentleman still wants to intervene, I shall, of course, give way.
Mr. Fisher : The Minister has given us some idea of how the procedure works. Is he telling the House that it is the procedure that operated on the occasion referred to by Mr. Neil Clarke in his letter to hon. Members? He wrote :
"We made a very competitively priced offer to the generators for additioanl sales".
That offer was rejected by National Power.
Is the Minister saying that the generators came to him in the way that he has just described to the House? Has the procedure that he has described every been put into effect, and was it put into effect on that occasion?
Mr. Eggar : I thought that I had made the position clear ; I apologise if I did not. British Coal has not come to us, and I think, although I am not certain-- [Interruption.] I am trying to be helpful. I am sure that the hon. Member for Rother Valley (Mr. Barron) will make his own speech if he wishes ; I shall try to pick up his points after that.
British Coal did not come to us. This is a commercial matter between British Coal and the power generators, and I understand that British Coal made an approach to the generators before the Government made clear what system they would adopt--in an answer to a parliamentary question from, I believe, my hon. Friend the Member for Norwich, North (Mr. Thompson).
Before I was interrupted, I was saying that we proposed to set the limit for expenditure on the subsidy at £120 million. Let me add, for the avoidance of doubt, that I intend to return to the House for further authorisation for funding if and when additional finance is required, because of the size of the subsidy.
As I have said, I shall seek leave of the House to answer any further points. I commend the motion to the House.
10.41 pm
Mr. Derek Enright (Hemsworth) : The constituency that I have the honour to represent is synonymous with the history of coal. Every village in that constituency started, in mediaeval times, as a small farming community,
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developed a coal industry in the same period but was thoroughly exploited in the last century. Houses, roads and railways were built deliberately to provide for their lordships' coal, as it then was. Now there is only one pit left in an area that used to have more pitheads than any other English constituency, and that pit is under threat.I do not want to repeat arguments that have already been adduced, but I feel that neither the Secretary of State nor the Minister has answered some of our questions. We have been talking specifically about the market. The Secretary of State spoke of what had happened under Labour and Conservative Governments, which was not helpful to the future of coal ; if we are looking at history, we should try to draw some lessons from it. The lesson that we have drawn from the throwing away of coal is that the market does work ; the Arabs cornered oil and made the price shoot up, because they controlled it. That was a world market--a market that we must guard against ; but we will guard against it only through the diversity of the supplies that we produce.
As was said by the right hon. Member for Selby (Mr. Alison)--who is not known for his left-wing views--every reliable international study shows that, at the turn of the current century, the main energy source throughout the world will indeed be coal, and perish those who have not sufficient coal to deal with the markets then. It does not matter whether it has a particular subsidy ; the point is, into what sort of market are we selling?
We are in danger of selling into a market that we cannot control. That is one of the problems with British Coal. We have said often enough, and, to be fair, some Conservative Members have repeated it, that the quality of British Coal's top management is not what it should be, certainly not when it comes to finding the markets they could for exports. The markets are there, but British Coal is not attempting to do anything about them, with or without a subsidy. Neil Clarke's expertise lies in spot selling worldwide. He is used to selling uranium and massive amounts of various ores. That is where his mining interest is to be found, and it is a dangerous example for the market with which we are concerned.
The motion implies that the provison of a subsidy to coal is a charity handout, but there have already been handouts. People no longer recall the dash for gas. Let us not forget that British Gas was willing to sell to the electricity supply industry at its price, what it called an economic price that was in British Gas's commercial interests. Against its judgment of the marketplace and despite what the market would take, British Gas was compelled to sell gas more cheaply, although it had a perfectly good reason for not doing so. Incidentally, there are many good reasons why it should maintain a monopoly, but that is a subject for a different debate. The argument is that, as the chairman of British Gas clearly said, one should not be compelled to sell at a price that is uncommercial.
Let us consider the strange way in which the pits were deemed to be economic and how it was decided whether they needed a subsidy. The Minister will no doubt say that Houghton Main has to be taken with Grimethorpe, but let me deal in more detail with the two pits with which I have been closely associated. John T. Boyd, a company not known for its affiliations to left- wing causes, produced a report for the Government. I could read out all the references to Grimethorpe, as they make excellent reading, but I shall mention only the salient points.
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The first is that Grimethorpe already had"a positive cash flow of £1.668 million",
which is a lot of money. The report also states :
"On an economic basis Grimethorpe has the potential to operate as a stand- alone colliery".
That is important, because the Minister has regularly talked about putting it together with Houghton. There are certainly shared facilities, but it is possible for the two collieries to operate without them with some technical alterations.
I shall wait until the Minister is ready before saying that, in agreeing to knocking out Grimethorpe straight away, the Government and British Coal showed bad faith to British Coal's customers. When one is trying to sell coal, it is bad to say that one does not care about those whom one is supplying. The first that the industrial customers--the majority of Grimethorpe's customers were industrial customers--knew about their coal supply being stopped was on the news. Only if they happened to listen to the news did they hear about it. What sort of commercial sense is that? What sort of management is that? What is more, firms previously supplied by Grimethorpe are now paying more for their fuel. That is a funny sort of marketplace and a funny sort of subsidy.
Frickley is the last remaining pit in my constituency. The Government brought in Rothschild--eminent bankers, indeed. Rothschild said that Frickley was among the most profitable pits. It recommended, "Sell it off and whizz it out for privatisation." It recommended that Frickley should be on the front shelf for everyone to shop for. However, Frickley mysteriously appears on the Government's list of 21 pits. The only reason for Frickley's inclusion is that Frickley pit was very loyal to the National Union of Mineworkers.
I have not traditionally been a believer in conspiracy theories. However, my right hon. Friend the Member for Chesterfield (Mr. Benn) has referred to the political dimension. That point is made in The Times so it must be correct. The Times stated :
"Clarke to undermine the miners."
Brian Crozier describes what happened. What is particularly sinister is the private army he formed prior to the 1979 election when he met the then shadow Cabinet. That was when the plotting started against the miners. That is indeed sinister. There is no justification in economic or energy terms for getting rid of Frickley.
I regret to say that, in the earlier debate, no mention was made of the package--as the Government call it--to help areas like mine. I would be only too happy if that help were given. Let us consider the RECHAR money. Contrary to what the Government say, a lot of the money being spent on the coal industry and the regeneration of coal industry areas does not come from the Government ; it comes from the European Community.
Between July 1990 and December 1993, almost £12 million-worth of schemes in the Wakefield metropolitan district area were approved. They are licensed and approved and there is no nonesense about that. However, as a result of the Government's shilly-shallying, so close to December 1993, Wakefield has received only £862,043. That is a disgrace. If the Government intend to bring in emergency action, what kind of resolution does that show and what kind of signal does it send? In addition, we do not have assisted area status, when we have one of the largest concentrations of unemployment in Yorkshire.
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One hundred years ago, on 7 September, the Featherstone massacre occurred. James Gibbs and James Duggan were shot by an army sent in by a Tory Government. The Tory Government are not going to send in an army now ; they are killing us bit by bit, slice by slice. It is the massacre of the innocents.Column 129
10.53 pmMr. A. J. Beith (Berwick-upon-Tweed) : In the previous debate, my hon. Friend the Member for Gordon (Mr. Bruce) set out his conviction and mine that the Government lack any coherent policy for the coal industry and have failed to set coal in the framework of a sensible energy policy.
I want to consider the matter from the slightly narrower perspective of my constituency where we have the only remaining pit in the Northumberland coalfield. I have seen three pit closures there in my time as a Member of Parliament and several more before that. So far as I can establish, my constituency produces more opencast coal than any other constituency in the United Kingdom and there are many more opencast coal applications hanging over my constituency. The subsidy that we are discussing must be one of the most ingenious ever devised. I am convinced that someone in the Department of Trade and Industry must have sold it to the Treasury on the basis that the Treasury would not have to pay out very much of it and that it could be accepted on the basis that the prospect of having to pay it was pretty limited. It was a device to get the Government off a political hook, and it was based on the fiction that, somehow, the market conditions had been substantially changed by the creation of the subsidy.
The subsidy alone does not change those market conditions. Indeed, it has about it an air of impermanence which is greater than that which surrounds the other features of the market, even though there might also be some uncertainty about them. Among the other features of the market, I include the substantial investment by the regional electricity companies in gas generation and the peculiar position of the nuclear industry.
There is a stronger sense of permanence about the consequences of the investment in gas generation. Clearly, a generator which sees a profit stream coming from the generation is much less concerned about the price that it will have to pay for electricity. That situation already exists, and it will continue throughout the working life of the generating unit in which the regional electricity companies have invested. We have something which, from their point of view, looks a rather better long-term bet than the possibility that they might buy some coal at a price which was brought to the world price by a Government subsidy. Indeed, all the incentives are for them to use the generating capacity in which they have inonopoly power of the regional electricity companies as distributors of electricity to the households of their region. That power has been unabated by the regulator, who, in a very cavalier way, has accepted that the decisions made by the regional electricity companies to invest in that gas capacity were reasonable at the time that they were made. I do not think that that was a proper use of his powers. However, whether I like it or not, it is now a fact that the regional electricity companies' ability to use their monopoly to protect that use of gas has been effectively confirmed by the regulator. Just how far he will allow them to push up the price in response remains to be seen, but so far he has given all the indications of a toothless watchdog. That crucial part of the market is rigged against coal, even when the subsidy is applied to it.
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The nuclear section of the market is protected by the non-fossil fuel obligation and by the substantial subsidy of the nuclear levy. The nuclear levy has taken a very interesting but extremely worrying turn. It was made clear in discussions in the Select Committee that that subsidy is being used to finance the expansion of nuclear generation at Sizewell.The Secretary of State, who, unfortunately, is out of action because of his heart attack, made it clear to the House that he thought that that subsidy was entirely for the benefit of the environment, to be applied to decommissioning for purely environmental reasons. It is not. It has been seized by Nuclear Electric in order to fund its current expansion. It is being misapplied by Nuclear Electric. The argument that it used to defend that action is that it is better off doing that than putting the money into a building society. That is an extremely doubtful proposition in the case of building a nuclear power station at Sizewell. The building society, in any normal market, would have been a better bet.
Today, of course, we were reminded that there is an even more absurd element, which is that French-generated nuclear electricity, purchased and brought through the interconnector, benefits from the levy. What inquiries have the Government made into whether French electricity generators intend to use the benefit that they gain from the nuclear levy for decommissioning purposes when they commission their power stations? I do not think that there is any likelihood at all that that will be done.
The argument is blown into smithereens. It is obviously not effectively a ring-fenced sum to be used for decommissioning purposes, which in itself, incidentally, is still a very powerful subsidy to the nuclear industry. It is being used as an operating subsidy for the nuclear industry on a considerable scale. But that subsidy exists alongside a piece of market protection in the non-fossil fuel obligation. The subsidy will not change the fundamental market position.
Ellington colliery is not one of the dozen pits on the original list--it is one of the so-called core pits and is left to maintain its own market. Its market depends crucially on two things. First, it depends on electricity generation at the Blyth power station. Blyth is an old power station, but it is still working effectively. However, a threat hangs permanently over it. Secondly, the market depends on the electricity that is generated for the Alcan smelter. The coal for that smelter is supplied directly by conveyor from the Ellington colliery to the plant.
If either of those markets were to go, the future of Ellington would wholly depend on British Coal finding a further market for coal, jostling alongside all the other claims on that further market from whatever is left of the original 12 pits. Earlier, we discussed the fate of those 12 pits.
As my hon. Friend the Member for Gordon pointed out earlier, there is not much evidence that British Coal is doing well at seeking out that market. It seems to be dominated by a mentality of retrenchment and shrinkage, not one of going out aggressively to seek the market. I make that criticism against the background that, in domestic terms, the market is rigged against the pits.
I wondered whether we would get any announcement today about the future of British Coal, but the debate was marked by the total absence of announcements from the Government about anything at all. Indeed, it was not until we started to debate this subsidy that the Minister showed
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