House of Commons Hansard Debates for 5 Jul 1993

Mr. Ian Taylor (Esher) : My right hon. and learned Friend's contribution to the proper discussion of defence priorities in this document is to be warmly welcomed, certainly on the Conservative Benches, where the only constructive discussion will take place. Will he look closely at the shifting foreign policy objectives ? There are many current concerns about the former Soviet Union, such as the potential destabilisation that may be caused by the movement of Russians outside Russia. There is also the problem of nuclear proliferation, especially in the middle east. We in Britain need to know that we have the resources available to meet those foreign policy commitments as and when they arise.

Mr. Rifkind : I agree with my hon. Friend. The situation in Russia is, at best, uncertain and there could be either beneficial or worrying developments. No one can predict how events may turn out. Russia remains a nuclear super-power and, even after it has fulfilled all its obligations under the START treaty, in 10 years it will still have more than 3,000 strategic nuclear warheads.

For reasons such as those, we have to maintain a strong defence, and NATO must continue to be the fundamental bedrock of our defence policy. That has been the guiding factor that has determined the sort of defence capability that we must continue to have long into the 1990s.

Mrs. Margaret Ewing (Moray) : In the context of the reduction of RAF Tornado squadrons from seven to six, will the Secretary of State confirm that there will be no implications for the development of RAF Lossiemouth as a key base in the deployment of and training in the use of those aircraft ? When will he be able to announce exactly the further plans for the operational capability of the GR1s ?

Mr. Rifkind : The particular squadron that will be disbanded as a result of today's announcement will be the

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No. 23 Squadron at RAF Leeming. Other matters will be reported to the House when we can give specific information.

Sir Nicholas Fairbairn (Perth and Kinross) rose --

Hon. Members : Hear, hear.

Sir Nicholas Fairbairn : I am obliged to hon. Members on both sides of the House.

May I congratulate my right hon. and learned Friend on his terse and trenchant statement, and suggest that, for the country's benefit--as the hon. Member for Upminster (Sir N. Bonsor) said--that is as far as we can go? May I suggest that he abandons the "about" theory next year? We are to have "about" 40 destroyers or frigates, which I am told means between 35 and 45--and presumably means 35. Thereafter, the figure will be 35, which I am told means between 30 and 45. If everything can be numbered correctly, why are destroyers and frigates, which will apparently be repaired and refitted at Rosyth, given such a vague assessment?

Mr. Rifkind : I echo the House's welcome to my hon. and learned Friend on his return to the House after his recent illness. We are delighted to see him in the Chamber.

I appreciate my hon. and learned Friend's concern about the number of frigates and destroyers. He will be pleased to know that, contrary to some press speculation, the 18 major warships which I said recently would be refitted at Rosyth are in no way affected by today's statement. We were, of course, aware of the contents of the White Paper when I reported to the House on the allocated programme that would go to Rosyth. In the consultation document, which we hope to publish later this week, the figure of 18 major warships will be confirmed.

Mr. Andrew F. Bennett (Denton and Reddish) : In view of the commitment of the Secretary of State and of the Government to a new non- proliferation treaty, how can we continue to try to develop a new free-fall nuclear bomb and the tactical air-to-surface missile system? Would it not be logical to abandon that attempt and to save money, which could then be used necessarily to increase our conventional weapons and conventional defence systems?

Mr. Rifkind : The whole question of the future of our sub-strategic nuclear capability is currently under consideration. I hope to be able to report to the House fairly soon on that matter. I do not want to add anything at present.

Mr. Winston Churchill (Davyhulme) : However skilfully my right hon. and learned Friend may have dressed up his announcement today, is he aware that he cannot conceal the fact that it constitutes part of the relentless rundown in the capability of our armed forces from an already tiny base? Is he aware that it is especially a matter for regret that he has not been able to reprieve any more of the overstretched infantry battalions which still face cuts?

My right hon. and learned Friend has announced today that there will be further reductions in the front-line strength of the Royal Air Force. As my hon. and learned Friend the Member for Perth and Kinross (Sir N. Fairbairn) has just mentioned, the reduction from 50 destroyers and frigates a decade ago to about 35 is a matter for deep concern. Looking to the overall capability of our armed forces, is my right hon. and learned Friend aware

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that we shall no longer be able to fulfil our capabilities, as we have in the past, if we ever have to fight a significant conventional war?

Mr. Rifkind : I cannot agree with my hon. Friend's conclusion. We believe that we would be able to defend these shores against the threat to which my hon. Friend refers. He must reflect on what changes he believes are justified in the light of the end of the cold war, the collapse of the Soviet Union, the removal of the Soviet naval threat from the Atlantic and the removal of any likelihood in the foreseeable future of a direct attack on the United Kingdom. One cannot, of course, exclude the possibility that those threats, which have largely disappeared, might re-emerge at some date. However, they could not re-emerge overnight, but only over a considerable period. If there was any evidence that such a new threat was beginning to re-emerge, there would be a bounden duty on this Government, as there would be on all NATO Governments, to revise our defence capabilities.

In all honesty, we cannot argue that it necessary to maintain in the vastly different circumstances of the 1990s a balance of capabilities that was designed for the cold war. There is a need for greater flexibility and mobility, and that is why part of our planned enhancements which have been envisaged in recent years are to continue and are to be made available to our armed forces in the way that I have described.

Mr. Greville Janner (Leicester, West) : How many people will be made redundant by the armed forces as a result of the previous announcements by the Secretary of State and of his announcement today? As the figure will run into thousands, and as those people will be made redundant when millions of people are already looking for jobs, will the Secretary of State confirm that he has consulted the Secretary of State for Employment about the results of such redundancies? Have his officials talked and listened to Department of Employment officials about the employment results of his policy?

Mr. Rifkind : Redundancies in the Navy and the Air Force were announced in recent months. Today's statement has done nothing to change the figures as, obviously, we took those matters into account. I announced a proposed size for the Army of 119,000 some months ago and a large part of the draw-down has been completed. There will be a need for a third phase of redundancies on the basis of the orginal proposals that were announced some time ago, but that will not be changed by the White Paper.

Mr. Michael Colvin (Romsey and Waterside) : No one could accuse my right hon. and learned Friend of lacking presentational skills. He made--as any good lawyer would--the best of a brief which, at first sight, seems to be inadequate and driven more by the Treasury than by defence considerations.

Will he address the question of the mobility of our armed forces which has been raised by some hon.

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Members? He has not answered the question about support helicopters, or those about heavy lift air transport of a tactical and strategic nature. Does he agree that it is important that, if we are to fulfil our obligations to the United Nations peacekeeping and peacemaking efforts, we must be able to get men and equipment to the places where they are needed as quickly as possible?

Mr. Rifkind : I agree unreservedly with my hon. Friend. We have carried out a new assessment in recent months as to the likely need for support helicopters. That assessment has suggested that enhanced financial provision--greater than had been anticipated previously--is needed to ensure that support helicopter facilities will be available. That provision is built into our assumptions.

We are working on the precise identification of the type of helicopter that would be required, and we hope to come to an early conclusion. My hon. Friend knows that various options have been discussed recently. The need for a proper enhancement of support helicopters is accepted unreservedly.

Mr. David Young (Bolton, South-East) : The Secretary of State has poured scorn on the suggestion of a defence review. May I ask him for a commitment that he will not allow British forces to go into any future situation where those troops would be overstretched, under-resourced and underfunded until there has been a defence review?

In view of the redundancies that are implicit in the statement, what discussions are the Secretary of State and his Department having with the DTI and the Department of Employment to ensure that areas that are dependent on defence contracts have other industries brought in, and ensure that the skill of men and women in the defence industries is not lost when they are thrown on the scrap heap?

Mr. Rifkind : The signs are rather encouraging. Over 70 per cent. of those who were made redundant from the Army during the past year have now found employment. The fact that that has been possible during a severe economic recession is a useful indicator of how valuable their experience has been. The hon. Gentleman should welcome that.

Several hon. Members rose--

Madam Speaker : Order. We must now move on.

STATUTORY INSTRUMENTS, &c

Motion made, and Question put forthwith pursuant to Standing Order No. 101(3) (Standing Committees on Statutory Instruments, &c.).

Merchant Shipping

That the Merchant Shipping (Local Passenger Vessels) (Masters' Licences and Hours, Manning and Training) Regulations 1993 (S.I., 1993, No. 1213) be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Michael Brown.]

Question agreed to.

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Orders of the Day

OPPOSITION DAY

[16 th Allotted Day

]

Pit Closures

[Relevant document : The First Report of the Trade and Industry Committee of Session 1992-93 on British Energy Policy and the Market for Coal (HC 237), together with Memoranda of Evidence (HC 703).]

Madam Speaker : I have selected the amendment in the name of the Prime Minister. I shall limit speeches to 10 minutes between the hours of 7 pm and 9 pm.

Mr. Harry Barnes (Derbyshire, North-East) : On a point of order, Madam Speaker. The motion that we are to debate ends with a reference to measures that would ensure

"a fair opportunity for coal to compete for a wider market." No. 36 in the Remaining Orders of the Day and Notices of Motions--last, but not least--is the Energy (Fair Competition) Bill, which would introduce measures such as those referred to in the motion. In those circumstances, is it not right that we should be given an opportunity to consider that measure following today's debate? The Bill could do what the Secretary of State has not done to save the coal industry in this country.

Madam Speaker : The hon. Gentleman will be aware that that is not a point of order for me. He is a good publicist, though : I note that it was his own Private Member's Bill to which he referred. 4.29 pm

Mr. Robin Cook (Livingston) : I beg to move,

That this House recalls that Her Majesty's Government encouraged the belief that the proposals in the White Paper, The Prospects for Coal' would reprieve 12 pits and widen the market for their coal by providing a subsidy for their output ; notes that within three months of its publication two of those pits have already closed and no extra contracts have been secured for the coal of the other ten pits, which therefore remain at risk ; records its concern at the damage from the continuing closure of Britain's coal mines to the coalfield communities, the mining equipment industry, and the long-term security of energy reserves ; and demands that Her Majesty's Government now acts to secure the future of the remaining pits and adopts the recommendations of the Trade and Industry Select Committee in its Report, British Energy Policy', which would ensure a fair opportunity for coal to compete for a wider market.

Three months ago, the House debated the White Paper on coal. The press reports on that White Paper were all quite clear about its bottom line-- that 12 pits had been saved. Most of them put that bottom line in their headlines. The Daily Telegraph announced : "12 pits reprieved by Heseltine".

The Financial Times carried the headline :

"Government to save 12 pits".

The Independent --marginally more optimistic than the rest--said : "13 pits have hope of survival".

In Today, we read :

"£500 million bill for taxpayers to reprieve a dozen pits". The Daily Express --the official organ of the state, which saves us from speculating what Conservative central office is saying by faithfully reprinting every word--announced :

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"12 pits and 7,000 jobs are saved".

Those half-dozen newspapers did not all reach the same conclusion by accident. They were all heavily briefed, lobbied and guided to the same conclusion--that 12 pits would be saved. But the educational effort that was mounted to get the message across to the press was as nothing compared with the one-to-one tutorials set up to convince Conservative Back Benchers --and many of them believed what they were told.

I see that the hon. Member for Davyhulme (Mr. Churchill) has temporarily absented himself from the Chamber. He was quoted by the Press Association a fortnight ago as saying that

"Had he known then what he knew now he would have voted against the White Paper rather than merely abstaining."

I hope that the Patronage Secretary's representative will convey to the missing Member our hope that we are tonight giving him a second chance to redeem himself. We can assure the hon. Gentleman that there will be more rejoicing tonight in our Division Lobby over the one prodigal who returns to it than over the 295 who got it right last March.

At least the hon. Member for Davyhulme abstained. The hon. Member for Rochford (Dr. Clark), who I am pleased to see is with us, voted with the Government. During the March debate, the hon. Gentleman said :

"While we hoped that we might have been able to save more pits than the 12 which we will save, at least we have 12".--[ Official Report, 29 March 1993 ; Vol. 222, c. 58.]

I am sorry to say to the hon. Gentleman that we are now 10. Only three months later, we have lost two of those pits. At Rufford, the decision has been taken to close the pit, which will cease production when the current face is exhausted--probably in a couple of months' time.

The hon. Member for Wells (Mr. Heathcoat-Amory), the Minister of State, Foreign and Commonwealth Office, who was then Minister responsible for coal, visited Rufford in February last year. This is what he said to the local paper :

"Rufford is a fine example of how a loss-making pit can turn round to become a remarkable success."

Barely a month before a general election, in a marginal Tory constituency, Rufford was a remarkable success. Now, barely a year into this discredited Tory Government's term of office, Rufford is an expendable failure.

At Markham, production has already ceased. As it happens, I have been down to Markham. Only six months ago, when I visited Markham, there was machinery still in service. It was new machinery--machinery that they were still stripping down to install underground. It was modern machinery-- machinery that had helped to make that pit highly efficient and to double its productivity in eight years. It was expensive machinery--machinery that is now among the millions of pounds' worth of machinery that is being left underground in Britain to buckle under pressure and be buried under roof faults. I hope that, in his reply, the Minister will spare the miners at that pit and at Rufford the humbug that it is they who choose to close the pit by accepting redundancy. In those cases, they had no choice. Those at both pits were told that they could stay open until next year, when the coal contract drops by 10 million tonnes, or they could vote to close this year. The difference was that, if they voted to close this year, they would each get an extra £10,000 on top of their redundancy. We have all contested

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elections ; that is how we got here. I doubt whether any of us would care to contest an election in which the voters for our opponent qualified for a £10,000 bonus.

I fully understand why those miners voted for extra redundancy money. The only thing about which they were being consulted was whether their pit would close this year or next. It is a grotesque travesty of the language to say that any of them have taken voluntary redundancy. Let us at least give them the dignity of recognising what the Government forced on them-- compulsory redundancy in all but name.

Mr. Peter Thurnham (Bolton, North-East) : Will the hon. Gentleman make it clear how he intends to pay to keep pits open? Does he intend to keep all 31 pits open? Does he recollect that previous Labour Governments closed 277 pits without any of the generous redundancy payments that this Government have offered?

Mr. Cook : That Labour Government did not make one miner compulsorily redundant. That Labour Government saw an increase in the amount of coal going reduction in the amount of coal for electricity generation. That is why we have a crisis in our coal industry. The hon. Gentleman helpfully brings me on to the reason for the closure of those pits, and the reason why the other 10 are still at risk. It has nothing to do with miners wanting to go.

Neither the White Paper nor the three months since it was published have produced a contract for one extra bag of coal from those pits. That is why they are closing. It will not do for Ministers to say that it is nothing to do with them, that it is not their fault, it is the fault of British Coal for not selling the coal, or the fault of the generators for not buying the coal, or, as the Minister appeared to suggest this morning, the fault of Michael Fish because it has been too warm for the past three months to sell the coal. It will not do, because it was their idea. It was they who came up with the lifeline of a subsidy to find a bigger market. It was they who let the press believe that that would save 12 pits. Now that it is not working, it is they who, for just once in their ministerial careers, must accept responsibility for it not working. We warned them that it would not work. It would not work because the problem for coal is not its price. One cannot sell coal at any price in a market that has been specially rigged to keep it out.

The Minister for Energy (Mr. Tim Eggar) indicated dissent.

Mr. Cook : The Minister may shake his head, but I address my point to him. If there is one thing for which I am grateful to him and his colleagues in the Cabinet, it is that in the past three months they have proved our case about the rigged market. They set out to test the market. The result of that test is already in : two pits have failed it. The result of that test confirms that we are dealing with a rigged market. Let us review the evidence.

Since March, British Coal has relied on the subsidy to offer extra coal for sale to generators at a sharply reduced price. The price is supposed to be a commercial secret, but since no one is buying it, let us give it some more advertising space. The price at which it is offering coal is

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93p per gigajoule. That is 40 per cent. below the base price in the contract. At that price, generators could produce electricity at a penny-ha'penny per kilowatt hour. That is cheaper than they can produce electricity from the new gas-fired stations, at tuppence per kilowatt hour.

It is cheaper than they can buy electricity from France at threepence ha'penny per kilowatt hour. It is cheaper than they can buy electricity from nuclear power stations, at almost 4p per kWh hour. If ever more proof were needed that we are dealing with a market rigged against coal, what better proof could there be than that the generators will not buy it even when it would give them cheaper electricity?

The largest consumer of electricity in Britain is ICI. It is not a dangerous, leftist front, even if it makes donations to the Tory party. Its power services manager has prepared a comparison which shows how ICI has been disadvantaged by the generators' refusal to buy that cheap, subsidised coal. I shall read it in full, as it is worth sharing with the House :

"Utilising internationally priced coal Fiddler's Ferry power-station, 5 miles from ICI in Runcorn,"

is capable of generating electricity

"in the range of £10-15/vcMWh.

For a high proportion of the time, this power station"-- a coal-fired power station--

"and others like it are underloaded, yet new gas-fired power-stations which require an income of £25-30/MWh are being built and prosper within the market. Generation costs are therefore higher than necessary."

He ends by saying :

"We invite a rationalisation of this economic behaviour." The question that the Secretary of State must answer is this : how can he rationalise that perverse outcome? While he is at it, can he explain why the Government are still approving more gas power stations? Last month, his colleagues at the Department of Trade and Industry approved a new gas power station at King's Lynn. It is an interesting case, because the King's Lynn power station will be wholly owned by the local electricity company. All profits from its sales will go to Eastern Electricity.

I invite the House to speculate on what will happen once that power station, approved by this Government, is up and running. Will Eastern Electricity play the market? Will it whoop with delight when it discovers that a coal-fired power station could give its consumers cheaper electricity than the one that it has just built? If Ministers are so wet behind the ears as to believe that that will happen, they should have taken not the money from Octav Botnar but lessons in how markets work in the real world.

Eastern Electricity will fix its purchasing so that it will take all the output that can be produced by that station, and to ensure that that is what will happen it will do what every other electricity company has done : it will give the new power station a 15-year contract, which guarantees that it will take all the electricity that the power station can produce.

Mr. George Stevenson (Stoke-on-Trent, South) : It is called competition.

Mr. Cook : My hon. Friend takes my punchline. I have marked him down and will bear it in mind against him.

The Government tell us that this is widening competition. It is not widening competition but closing down competition. Nobody else can compete, whatever their price, for the share of the market that those contracts

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guarantee the new gas-powered stations. In the next three years, one third of the entire electricity market will be sewn up in these sweetheart deals.

Mr. Rod Richards (Clwyd, North-West) : In view of what the hon. Gentleman said about Fiddler's Ferry power station, will he tell the House whether he and his party are for or against the construction of the Connah's Quay power station?

Mr. Cook : I remind the hon. Gentleman--it is fresh in my mind because I re-read my speech last night--that he made the same request in my last speech. I have to give him the same answer, and it is straightforward : Labour sees no objection whatsoever to the Connah's Quay project, because it is proposed to use sour gas, which cannot be used to heat homes direct and cannot be used in ovens. Our objection is to sweet gas--a premium fuel- -being turned into baseload electricity with the loss of half its calorific value. That is not only bad for coal mines but is a daft energy strategy. I hope that the hon. Member for Clwyd North, West (Mr. Richards) is capable of remembering that for the time when we debate coal again in the autumn.

That is why the Select Committee recommended that we should stop handing out licences to every new gas station and that we look at downrating electricity stations to meet peak demand, not running them flat out to meet baseload. The Government totally ignored those recommendations.

There is one other aspect of the rigged market on which I want to bring the House up to date--the interconnector with France. In the White Paper, Ministers welcome changes in the contract with France, which from April

"will ensure that exports will occur"--

that is to say, exports of electricity from Britain to France. It is paragraph 7.106 if the Minister wants to look it up.

I checked last week with the National Grid Company on what exports have occurred since that statement that the changes will ensure that exports will occur. In April, Britain exported to France zero electricity. In May, Britain exported to France zero electricity. In June, Britain exported to France zero electricity. There was a change--I would not wish to deny to the House that since the White Paper there has been some change in our relationship with the French interconnector. The change was that, in each of those months, imports of French electricity were up on the same month one year ago. I remind the House that we are paying more for the electricity from the French interconnector than we would for electricity from coal--from the pits that we are shutting down. I will happily give way to any Conservative Member who is capable of believing for one minute that France would dream of importing electricity from a foreign source at a higher price and at a cost of shutting 31 French pits. I am not surprised that there are no takers, because we all know that there is not the remotest prospect of the French paying over the odds for an import that will damage their domestic industry, which is precisely what we are doing.

Dr. Keith Hampson (Leeds, North-West) : As in so many areas, the hon. Gentleman does not seem to have understood the Select Committee report, if he has read it. The report clearly states that most of our electricity

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companies purchase French electricity because it is cheaper for the company. Although the distortions of the nuclear levy might ultimately make it more expensive, for the companies it is cheaper. Is he saying that companies should deliberately buy more expensive electricity rather than take what is cheap and on offer? Does he accept that some electricity companies, such as Yorkshire, are buying less energy from the interconnected? Indeed, Yorkshire is not buying any French electricity this year, compared with last.

Mr. Cook : The net effect is an increase. In one sense, I welcome the hon. Gentleman's intervention, because it takes me on to my next point. He is absolutely right. The reason why the electricity companies find it profitable to pay more to import French electricity is because--

Dr. Hampson : They pay less but the nonsense of the levy makes it ultimately more costly.

Mr. Cook : They claim it back. We are daft enough to pay them the nuclear subsidy on all electricity from France. Since March, the Government have not paid a penny in the subsidy that they promised to British coal mines, but they have paid millions of pounds to subsidise electricity imports from France. I remind the hon. Gentleman, who seems to have forgotten it, that recommendation (7) of his own Select Committee was :

"Electricity supplied from France should cease to be non-leviable. EdF's ability to negotiate contracts to supply-baseload should be made conditional on UK generators having non-discriminatory access" through the French network. Again, those recommendations were ignored by Ministers.

Dr. Hampson indicated dissent.

Mr. Cook : That is what the hon. Member recommended to his Government.

There is a contradiction here. Ministers have consistently rejected all the recommendations of the Select Committee to challenge the rigged market. Ministers tell us that they accepted the recommendation of the Select Committee. What they mean--I have listened carefully to what they say--is that they accepted the recommendation of a subsidy. But I again have to say that that was not what the Select Committee recommended.

Before the Secretary of State tries to pull that one on the House, let us be quite clear what the Select Committee recommended. Yes, it recommended a subsidy of 16 million tonnes for electricity generation, but it did so with the parallel recommendation that there should be a requirement on the generators in return to contract for 21 million tonnes of additional coal. What the Government did was to offer generators the subsidy without making them give a commitment to buy any extra coal.

Instead of buying that extra coal, the generators are running down coal stocks at power stations. I have two observations to make about those coal stocks. First, I would have more sympathy with the generators' claim that they have more coal in stock than they need if they had not been so busy importing coal for the past five years. According to their own calculations and their own logic, those imports must now be a mistake. If they do not need all those coal stocks at the power stations, they did not need all the imports that have added to our balance of trade deficit, thus increasing pressure on manufacturing industry to achieve more exports to pay for the coal that they did not need.

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