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Lord Hardy of Wath: McIntosh!

Lord Varley: My Lords, I beg my noble friend's pardon. I shall show the photograph to my noble friend Lord McIntosh of Haringey at the end of the debate.

The local authorities which cover the area are doing what they can to create what they euphemistically call a "growth zone", but they lack the financial incentives and the money to do it at the pace that is required. A few months ago the Deputy Prime Minister launched a task force to implement money through what is called the Coalfield Regeneration Trust. The money allocated to the regeneration trust is a pathetic amount of £10 million. To be charitable, that £10 million regeneration trust could be described as a step in the right direction--a small deposit towards what is really required. But the Markham Valley site alone--the lunar landscape to which I have just referred--will cost £37 million for site reclamation, development, proper roads, a motorway junction for access and servicing, and environmental services. There are dozens of comparable sites throughout Britain.

The coal industry and the industries associated with it have shed something like 250,000 jobs since 1984. I do not believe that any industry, over the same period, has experienced job losses on such a scale in such concentrated areas.

Fortunately, former mineworkers have a pension scheme. In fact, they have two: a mineworkers' pension scheme and a staff scheme. Here I must declare an interest. I am a beneficiary of the pension scheme, for service going back to the early 1960s. I receive 28p a week from the scheme, on which I pay 40 per cent tax. However, I make no complaint about my personal position. Given that the service took place a very long time ago, 28p represents good value. Fortunately, I receive bigger and better rewards from pension schemes linked to later employment.

Mineworkers' pension schemes are very wealthy and successful. That success reflects great credit on the schemes' trustees and the fund managers. The pension schemes have generated huge surpluses. I do not want to go into all the detail, but because the Government became the guarantor of the pension scheme--that is what the men in the pits voted for when the pits were privatised--the Government are legally and properly entitled to a proportion of the pension surplus. To date, that entitlement adds up to £3.4 billion. The Government have not taken that amount so far; I believe they have taken around £250 million a year. The surplus money is still accumulating interest and profit. It is conservatively estimated that it will soon exceed £4 billion.

The Government deserve to be rewarded for the risk that they took in guaranteeing the pension. But as the present day beneficiaries grow older, the numbers will decline and the risk will diminish. It seems to me that

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some of that colossal pension fund surplus could be used to enhance the benefits of pensioners, but also some of the Government's proportion could be channelled into helping to regenerate former coalfield areas.

I want to mention another matter which may be considered relatively minor in terms of this debate. However, it is not minor to the men concerned. All I ask is that my noble friend should refer to it in his reply or promise to write to me. It is the question of miners' concessionary fuel. I have been told that the Department of Trade and Industry, which takes responsibility for the concessionary fuel scheme, has it in mind from April next year to offer to those who benefit from the scheme not only UK-produced fuel but manufactured briquettes made abroad, including Chinese anthracite. All of this may be a great slander on the Department of Trade and Industry and I shall be very pleased to hear my noble friend say that it is not true. Perhaps he will look into the matter and comment on it in due course.

It seems to me that the coal industry is at a critical turning-point. I re-emphasise what I said at the beginning of my remarks. The Government must either take a bold policy decision soon to hold the current level of production and protect the coal industry's market at around £25 million tonnes a year, or they must openly and honestly declare that the industry must face the full force of the market as it pertains in this country, and that it must do so without help.

If the Government choose to support the coal industry, they will have to say that they are doing it on energy policy grounds and strategic grounds. It will mean facing up to the environmental questions referred to by my noble friend Lord Hardy and investing in clean coal technology. It will mean subsidising the private coal producers or the private electricity generating companies which burn coal. I know that it will stick in the gullet of many Members of the House of Commons, but it would be barmy to renationalise the coal industry, as some suggested in another place on 10th November--even though the market capitalisation of RJB is only £45 million. RJB bought the English coalfields from the Government at a cost of £814 million and they are now worth only some 6 per cent of the original price.

If the Government say that it is no part of their business to keep the industry intact, it will wither away quite quickly. We shall have to face up to the need for a massive realistic programme of financial assistance to regenerate the areas concerned. That would need to be done quickly and with great sincerity. I mean a worthwhile programme of financial assistance, not the fiddling, paltry £10 million regeneration scheme that our loveable Deputy Prime Minister was put up to announce some weeks ago. There was a strange juxtaposition in this House earlier when the House debated the pressures on housing in the south-east and what is likely to happen early in the next century. If we

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do nothing about the coal mining areas, miners' children and grandchildren will drift south and exacerbate the problems that exist in those areas.

The Government must face up to the crisis. It is no good Ministers looking to officials in their departments to bring forward schemes to soften the impact and put off the evil day. Officials will always do a good job. They will always find some short-term palliative to get over the immediately difficulty, as I have seen happen on dozens of occasions. Ministers will say that that is wonderful. They will be Micawberish, hoping that something will turn up. It is "make up your mind time" for Ministers. It is time for them to be brave and bold. I hope that they will be.

6.16 p.m.

Lord Lucas: My Lords, I am grateful to the noble Lord, Lord Hardy of Wath, for introducing the debate and am honoured to take part in it. I suspect that I am the least well-informed speaker on this subject. I did go down a deep coal mine in my youth, when the National Coal Board seemed to take the view that there were not enough Etonians under ground. I suspect that that view is shared by other people for other reasons! I greatly enjoyed the experience, but cannot say that I have had any great involvement with the coal industry since then.

There are a number of very good reasons why the Government should continue to support the coal industry. It is something that only the Government can do, because it requires a long-term strategic view on what is right for this country. Looking ahead, we are clearly in for some rough times in the energy market as fossil fuels run out. As has been said by other speakers, many of the reserves of those fuels lie in parts of the world that are not naturally stable or particularly friendly towards this country. We are therefore likely to see some sharp fluctuations in prices and availability.

There is a great deal to be said for making sure that in this country we continue, for the sake of the stability and long-term health of our economy, to have a diverse set of available energy sources; and that, where possible, those sources are indigenous. I welcome the Government's efforts in relation to alternative sources of energy, and hope that they will continue to build over the years, but they would come nowhere near to replacing the coal industry, or indeed the nuclear industry. We are faced in the short term with price pressures from dumping and subsidies overseas, and from short-term economies in relation to gas-fired power stations--short-term in relation to our life-span, if not those of our children.

Industry, given the chance, may take a five-year view on what is the best fuel to use and the best strategy for generating power. Being speculative, it might even stretch it to 10. The Government must think in terms of 50 years. They must think in terms of contingencies about which the ordinary industrialist may not have to think. The Government must see it as their responsibility to reduce the risk of catastrophe that the country is running in the long term--at the

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acknowledged cost of some greater price, an insurance premium, as it were, that we all must pay on electricity in the mean time.

We cannot expect the Government to do anything about the subsidies that Germany gives its coal industry. There is remarkably little evidence that this Government will be effective, even in dealing with monstrous illegalities like the French beef ban. The German subsidy on coal has been running for a long time. We managed to do nothing about it; this Government have made no dent in it. It will continue. There is therefore a cost to the Government in supporting the coal industry which comes from the failure to deal with subsidies elsewhere. The Government must bear that cost. It is a consequence of failures and of the decisions that they have taken and it is not right that they should impose the costs of those decisions on the coal mining industry.

When it comes to coal, particularly deep coal where the main reserves lie, the Government need to consider the desirability of keeping the industry going in a manner that will enable it to respond, when the time comes that coal is needed again in large quantities.

It is clear that a large proportion of the world's fossil fuel reserves is in the form of coal. It is also clear to us all that when push comes to shove and there is a lack of fossil fuel and alternative energies remain, as they will, substantially more expensive than fossil fuel--Kyoto or no Kyoto; global warming or no global warming--we will use those fossil fuels.

The coal industry has a good, long future world-wide. We should not, for reasons of short-term economic circumstances, put our participation in that industry--a substantial and successful industry--at risk, particularly when so many of the factors disturbing the industry are essentially down to the Government, one way or another, in terms of the decisions they take about the structure of the energy industry in this country and the extent to which they allow subsidised coal imports to displace our domestic production.

I do not suppose that I have made myself popular with my Front Bench in saying that. I do not believe that either Front Bench will be pleased with any of the speeches today, but I hope that we shall hear something of comfort from the noble Lord, Lord McIntosh. At least his party has an historic association with the coal industry. I hope it still means something to them.

6.21 p.m.

Lord Dormand of Easington: My Lords, it is inevitable that, as the fifth speaker in the debate, I shall repeat some of the points made by previous speakers. I make no apology for it. In any case, repetition will serve to emphasise what I, like others, believe are important points. I was delighted to hear that the noble Lord, Lord Lucas, enjoyed his visit down the pit on one occasion. I am sure that his enjoyment depended largely on the fact that he knew that he did not have to spend the rest of his life down there.

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The coal industry is once again facing problems. In the many years of my connection with it, there have always been problems. However, today I believe that some of the problems are rather different. With sympathy and determination from the present Labour Government, they can be solved or considerably alleviated--I say "immediately". The Government have shown sympathy with the difficulties now being experienced.

It would be helpful if the Minister would make the Government's attitude towards the coal industry clear and unequivocal. The Government could and, in my view, should say that for the foreseeable future this country needs a coal industry. The direct employment in the industry of about 15,000 people--reduced though it has become in recent years--is still of great importance. Indirect employment in the coalfield areas and the jobs in the mining equipment companies are equally important. There are other considerations, some of which have already been mentioned, such as the saving on imports.

Some of us have heard from the British mining companies group that if the UK mining industry ceases to be an equal fuel supplier, there will be a loss of up to 8,000 of their companies' engineering jobs and over 50 companies will follow. I fear that those figures are reasonably accurate. We may hear more about them later.

I interpose one little point here. The Minister may be able to say something about the position of Ellington colliery in Northumberland. We are all aware of it, some of the Ellington miners were in the House of Commons yesterday and I had the opportunity to talk to them. I need hardly say how deeply concerned they are.

Much of my speech will be taken up by asking direct questions to which, frankly, we seem to receive either no answers or indirect responses which evade the questions. My first query concerns state aid to the German, French and Spanish coal industries. That has already been mentioned, but it has to be repeated. There is no doubt that those countries receive about £3 billion in assistance. Are the payments contrary to EU law? One answer given is "yes". Another answer is "no"; that the British Government can choose not to provide such help. In the event, we know that the British Government have done that. I want to know what the position is because we need clarification on it. Polish coal is entering this country at prices which do not reflect the true costs of its production and transportation. In other words, according to the usual definition, the coal is being "dumped" in this country. Is that, too, contrary to EU law? Is it likely to be stopped? I should like that question answered.

In the case of Spain, there is the discriminating application of limits on the sulphur content of coal from different ECSC sources. My right honourable friend Helen Liddell, the Minister in another place, has said that the UK has received assurances that UK coal will be treated on the same basis as Spanish coal. Again, my question is: When will we know when that becomes effective?

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In Germany, state aid has led to a distortion in the anthracite market (not mentioned so far) in the ECSC and particularly in the UK. Again, has any practical action been taken on that? I believe that the British Government have raised some or all of those matters with the European Union. However, my main concern now is--and I underline this--to ask: When will something be done about them? To some extent that reflects the concern which my noble friend Lord Varley emphasised in his contribution.

Before too long, the Government will have completed three years in power. We seem to be achieving little, or not that much. On the same principle, it is tempting to refer to the beef crisis, but let us stick to the coal industry for the moment.

The Government responded to representations made by a number of us about distortions in the electricity generating market which favoured the contribution of new gas-fired power stations. I asked the energy Minister how many consents had been given to such power stations since the present Government came to power on 1st May 1997. The answer is that 23 approvals have been made, 14 have been turned down. Those 14 would have generated four gigawatts of electricity, equivalent to 10 million tonnes of coal. I am not convinced that the Government have got the balance quite right, at least for the present. However, we should be clear that the policy of stricter consents is short term and temporary. Those are the Government's words. In the interests of security and diversity of supply, it is of the utmost importance that the Government do not terminate the arrangement prematurely. The 1998 Digest of UK Energy Statistics shows that on current use, proven probable gas reserves will only last only 14 more years.

On a separate but important point, will my noble friend say whether the Government still retain an interest in coal liquefaction? For many years some of us in another place and here raised the question of oil from coal. I am aware that, quite apart from the technical side, one of the many problems is its expense. However, I believe that some research into it by the Government is well worth the money. Perhaps my noble friend is able to comment on it. Some countries, particularly in Africa, have had liquefaction for many years and perhaps we can learn something from them. It is a sad thought that, if the difficulties of coal liquefaction can be surmounted, we in these islands are sitting on millions of tonnes of unmined coal that can be exploited for this very purpose.

The background to everything that has been said in this debate is the efficiency of the UK coal industry. There is little doubt that in recent years the industry has reduced its costs. However, I have found difficulty in obtaining figures that can be compared with those of our competitors. I keep returning to this point. One source shows that the UK industry has reduced its costs to £1.15 per gigajoule but that import prices have now been reduced to 75p per gigajoule. Another source reveals that average UK coal prices are still one-third higher than those for imported coal not supported by state aid.

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Against that, the Confederation of UK Coal Producers calls attention to what it calls "a whole raft of on-costs" that must be absorbed in this country in reaching the final selling price, which is the lowest pithead cost in the European Community. The on-costs, some of which will be familiar to noble Lords, include: royalties paid per tonne produced; licence fees for consents to mine coal; licence or planning permission fees to local government; mineral planning regimes; and full restoration costs for open cast operations. There are other on-costs. Can my noble friend say whether or not this is a justifiable complaint? I believe that that is a crucial ingredient of the debate. If so, how can we begin to make comparisons in considering the fundamental issue of the price of coal? It will also be of assistance if my noble friend can say whether these facts and figures are reasonably accurate. I find it difficult to believe that the countries that I have named can be so much more efficient in producing coal regardless of the differing circumstances of the nature of their coal deposits.

I hope that I am correct in assuming that the Government, at least for the present, do not place emphasis on nuclear power. I believe that in this country there are two factors of which most people are aware and about which they express fear. Nuclear power carries risks, and waste storage problems are frequently brought to the attention of the public. Accidents in other parts of the world, not least the recent one in Japan, receive massive publicity. Whatever the safeguards, I am sure that people would not welcome an increase in the use of nuclear power, at least at the present time. Most nuclear stations have passed their design lives, and we can assume that some, or perhaps all, of the older stations will have to be decommissioned. We cannot depend on gas for much longer. Therefore, that is yet another reason for ensuring the continuation of our coal industry.

I turn briefly to the question of clean coal technology. I am glad that other noble Lords have referred to this matter. The value of this technology is proven and enjoys the support of most people in the coal industry. Why is progress being delayed? There is a greater need for it now than at any other time. If there is a lack of investment, is there not a case for tax or other incentives? This is a matter which I believe the Government should seriously consider. In a recent debate on the coal industry in another place, my right honourable friend the Minister responsible for energy did not mention clean coal technology, although time may have prevented her from doing so. But it would be helpful if today my noble friend could say something about it, particularly as other noble Lords have touched on it. This is one area in which substantial progress is urgently needed.

In conclusion, I can tell my noble friend that nothing I have said is a criticism, even an implied one, of the Government's policies on the coal industry. However, there is still much to be done. Those of us who come from mining families and have represented mining constituencies recall all too well the attitude and policies of the party opposite. The Government have to deal with some of those legacies. The action taken

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since 1st May 1997 is a demonstration of the appreciation of the work and sacrifices of generations of miners in the most difficult and dangerous occupations. All who are concerned about the future of the industry know that in spite of the real difficulties that it faces, it will receive sympathy and fairness from the present Government, and I hope that we shall hear something about that in my noble friend's reply today.

6.36 p.m.

Lord Ezra: My Lords, in listening to the speeches of the noble Lord, Lord Hardy of Wath, who so effectively introduced the debate this afternoon, and the noble Lords, Lord Haslam and Lord Varley, I thought of the number of times in the past that we had together dealt with coal affairs. I was also very impressed by the contributions of the noble Lord, Lord Lucas, and his strong support of the industry, and the noble Lord, Lord Dormand. For the record, I should declare that I have been in the energy sector for many years. I am still actively involved in it, regrettably at an age when most sensible people would long since have retired, but I cannot resist the lure of trying to promote the efficient use of energy.

I should like to think back for a moment and then move forward. We should recall that in the post-war period the coal industry has suffered the most dramatic turn-round of any industry, perhaps in our whole industrial history. After all, this was the industry which powered the Industrial Revolution and contributed a major part to the country's wealth over several centuries. Regrettably, it is now a shadow of its former self.

When I joined the newly-formed National Coal Board in 1947 there were 700,000 mineworkers on the colliery books and over 900 collieries, no doubt many of them quite small. However, they were all deep mines. That was the number with which we started. Today, there are fewer than 10,000 mineworkers on colliery books and 18 collieries. What has happened is that productivity has increased enormously, but the size of the industry has declined massively.

That is about the past, and we cannot undo it, but, as other noble Lords have said, we must now be concerned about the future. I agree with the consensus view which has emerged that at the very least we need to keep the industry at its present size; and there is a strong case for saying that it should grow further. The reason is that we shall begin to run out of indigenous gas before very long and will depend more and more on supplies from uncertain sources. Furthermore, the decommissioning of nuclear plants is beginning. That process will accelerate, and something will have to take the place of those plants.

Many suggestions have been made about what to do about it. I should like to make two practical proposals. To reassure the noble Lord, Lord McIntosh, in advance, I believe that these are very modest proposals, to which the Government could accede without much difficulty, but they would make a major difference to the future of the industry as it is now.

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The first suggestion is this. The coal industry is having to face up to substantial imports of coal, some of which may be subsidised and some not. What has exacerbated the situation is the strength of sterling. I remember being bedevilled with that problem when I was directly involved in the coal industry. In some periods imports would be very cheap because sterling was high and transatlantic rates were low; at other times the reverse was the case. The problem was to ride the storm. I believe that we have to do that now.

Twelve million tonnes of steam coal are being introduced into this country for power station use. My inquiries have shown that out of current production and existing capacity, and drawing on stocks, it would be possible to replace 5 million of those 12 million tonnes. If that were done over a couple of years, the position of sterling and many other factors might well change and the industry could experience a major respite.

The cost would be minimal. About £5 per tonne, £25 million per annum, would secure an additional 5 million tonnes for the power station market. If they wished to pursue the idea, it would be for the Government to consider how it could be achieved. As the noble Lord, Lord Varley, pointed out, it could be done by the difference being given to the power stations, to the pits directly or in some combined way. To provide that extra tonnage, which would tide the industry over a difficult period, it seems a minimal charge compared with the massive subsidies given elsewhere.

My second proposal looks to the future. Clean coal technology has already been mentioned by a number of noble Lords. If coal is to be maintained as a long-term source of energy in this country, the environmental considerations become uppermost. Unless we can devise technologies which can reliably make coal more attractive from the environmental point of view, it will be difficult to secure its long-term future. That can be done on the basis of processes collectively known as clean coal technology. We do not need more laboratory work. That has all been completed; the processes are known. What is required is a major demonstration plant. Unless we can have such a plant in this country--there are some elsewhere--it would not be regarded as a valid way of going forward. On the basis of that demonstration plant, I believe that we could begin to build up power station capacity using that technology. Within the next 10 or 20 years when many of the nuclear stations could be decommissioned, it is not inconceivable that clean coal plants could aggregate to something like 5,000 megawatts. But in order to achieve that, we must have a demonstration plant.

What demonstration plant do we need? We are talking about a capacity of 400 megawatts. That would cost a substantial sum. But it would not be for the Government to put in that money. We would need to create the conditions under which the private sector could invest in that technology. Two years ago, I introduced a Bill to extend the non-fossil fuel arrangements--they give assistance for non-fossil fuels to be developed--to fossil fuels where there was

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a strong case. I instanced clean coal technology. I remind your Lordships that the principle of the non-fossil fuel arrangements is that no capital is put in to stimulate those developments but that a rather higher price of electricity is guaranteed over a period. For example, if the price of electricity, as at present, is about 2.5p per kilowatt hour on the pool, some higher price would be guaranteed over a period. And on the basis of that benefit the investment, which could be substantial--we may be talking about £300 million pounds going into the plant--could be forthcoming. I am told that in this case little extra is required--something like a ½p per kilowatt hour. On that limited basis--from the Government's point of view the small amount would be spread over 15 years--there could be much interest from the private sector in investing in the demonstration plant, in the expectation that after a few years' experience of that plant no further assistance would be required and that it could well be worth while investing in ordinary-sized commercial plant.

I believe that those two proposals are modest and may represent the view emerging from our debate. I think that we should put forward practical proposals where possible. I hope that they will be considered seriously. As noble Lords have said, in particular the noble Lord, Lord Varley, it is a time for major decision. If measures similar to these modest proposals are not taken now, the mining industry will continue to decline. Of the 18 collieries I mentioned, three are up for closure. So the number is diminishing rapidly. If we are not careful, more will be up for closure simply because the markets will not be there.

Something has to be done. In the long history of the coal industry, from time to time governments have intervened because they have felt it necessary to do so. For example, the government intervened in the market schemes of the pre-war period to cut out the internecine competition between the various colliery companies; otherwise the industry would have been destroyed. From time to time governments have intervened. And this is such a time. Such intervention need not be substantial. It does not need to be anything like the level of subsidies paid in other countries. I believe that these modest proposals could spell the difference between continued decline and maintaining the industry, perhaps with possible expansion to meet the needs of the future.

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