Mrs. Margaret Thatcher (Finchley)
Richard MarshThe Minister has certainly given the House an excellent account of the problems as he sees them, of the coal industry and of cheap fuel. I agreed with him particularly when he said that the nation cannot afford a fuel policy which puts us at a disadvantage with our competitors. Naturally, any fuel policy cannot be acceptable unless it takes into account the interests of those who buy [column 262]coal and other fuel, as well as those who produce them.
I took issue with the right hon. Gentleman when he said that his was the first attempt to have a look at the fuel trends, including the coal industry, in the economy. In fact, it seems that from the beginning of the National Coal Board, if not before, there have been attempts to try to determine the trends of coal and fuel consumption.
Mr. Marsh
I was saying that this was the first attempt by the Government to tackle the problem properly. The first attempt ever was really the first White Paper on Fuel Policy, presented to Parliament by my predecessor.
Mrs. Thatcher
Yes, and ever since the Labour Government have been presenting White Papers on fuel we have had trouble. Indeed, the trouble began when they started presenting those documents. Before that, we seemed to have people presenting documents who were in a better position to do so. Once the Government started to co-ordinate all the estimates of all the nationalised fuel industries the Minister found himself in trouble, and he has been in trouble ever since.
The fact of the matter is that the Bill is a means of accomplishing the plan for coal set out in the White Paper and in previous speeches of the Minister. To debate the Bill without referring to the conditions for coal mentioned in the White Paper would be like debating the ghost without Hamlet. As in every previous debate on coal-borrowing powers and finance for coal, we must obviously refer to the conditions laid down in the White Paper.
The problem with most plans has been that they have concentrated on extrapolating existing trends and often they have not spotted changes in trends. It is the change in those trends that always causes economic difficulties. This has been particularly so in the case of the coal industry. The 1950 plan for coal estimated that the total demand for coal in 1961 to 1965 would be 240 million tons a year. In fact, it fluctuated between 190 million and 197 million tons during those years. In 1956 the N.C.B. document “Investing in Coal” announced
“The Board have come to the conclusion that output of … 250 million tons a year cannot be attained before 1970.”
[column 263]Thus, the whole effort during the early years was to get more and more coal because it was about the only source of fuel we had. The whole effort of the N.C.B. and the Government was designed to assist the further and greater production of coal.
This is the context in which the nuclear power programme was first considered. Hon. Members who have studied previous debates on coal and other fuel—and there have been many; hon. Members have obviously been studying them because it is practically impossible to obtain some of the relevant volumes of Hansard from the Library—will have seen that the whole emphasis was on the conservation of coal and on economy in its use. Against that background we had the 1955 and 1957 White Papers on Nuclear Energy. In a debate on nuclear power and oil supplies, when discussing one of those White Papers, the then Mr. Robens said:
“The programme for nuclear energy indicated by the Government is wholly approved by us on this side of the Committee. We would agree with the right hon. Gentleman and the Government that the nuclear energy programme should be the greatest for which resources are available.” —[Official Report, 30th April, 1957; Vol. 569, c. 61.]
Mr. Swain
I trust that the hon. Lady is not forgetting that, at that time, the forecasts made by the then Tory Government and the N.C.B. were based on the fact that it appeared, certainly in the long-term, that it would be impossible to produce enough coal in this country with the pits and men available to satisfy our energy needs. That is why we had to launch out with a nuclear programme.
Mrs. Thatcher
That has been the burden of my speech so far. I am sorry that the hon. Gentleman has been asleep through it.
Mr. Swain
I could never go to sleep in the presence of the hon. Lady.
Mrs. Thatcher
I can only reply, “Touché” .
To return to the debate, following that pleasant interlude, the first drop in sales of coal started in 1957 and went on through 1958 and 1959. However, that was thought to be due to, perhaps, the mild winter of 1957, or the economic situation as it then was. It was not [column 264]spotted as being a basic difference or change in trends until 1959, when we had the revised plan for coal. From that time on we got stuck on a target of about 200 million tons a year.
The 1959 plan was for 200 to 250 million tons of coal in 1965—still too high for what turned out to be the case—but from the period 1961–62 the Coal Board reports, and particularly hon. Gentleman then sitting on this side, pinned their entire faith, and continued to pin their entire faith, to a target of 200 million tons of coal per year. I agree with the right hon. Gentleman that this may have blinded them to the market trends that were taking place, and to the increasing competition from other fuels.
Then, in 1965, came the first of the Government White Papers. But just before that, F. Leethe right hon. Gentleman's predecessor said in a Written Answer about the 200-million-ton target:
“… there is no question of the Government … requiring a reduction in this.” —[Official Report, 9th February, 1965; Vol. 706, c. 51.]
So, even as recently as two years ago, the whole industry was still pinning its faith to that basis and, presumably, so were hon. Gentlemen representing mining constituencies.
Came the 1965 White Paper, just a few months after that Written Answer and, suddenly, there is a drop of 20 million or 30 million tons a year in the estimate. Comes the 1967 White Paper and there is another drop, making a total of 45 million tons, to a target of 155 million tons. Of course, there would then be considerable dislocation in the industry, and I agree with the Minister that it might have been better if one had not pinned such tremendous faith to the 200 million tons a year target. But now the tendencies may have gone the other way. Where, before, one was extrapolating an upward trend and getting the wrong answer, one now appears to be extrapolating a downward trend, but possibly going too far down in the future.
It may be that the right hon. Gentleman takes the view that every forward estimate since 1959 has been too large for what actually was produced, and is, therefore, now attempting to get a thoroughly realistic target so that the eventual production and the target will not be very different—
[column 265]Mr. Eric Lubbock (Orpington)
Is the hon. Lady aware that in the United States it is the fashion to develop forecasts for far more years ahead than we do here; and that even though they cannot be expected to be entirely accurate, they are a very useful guide to industry and to all those working in the fuel manufacturing industries?
Mrs. Thatcher
Right now, I have enough problems on my plate here without discussing the United States. I am aware that the United States has cheaper fuel at the moment than we have, but not all its forecasts are correct. When I was in America in March last it was struggling with a change in economic plans. It is always so. It does not matter where the economic forecast occurs, the point at which one gets a change of trend is difficult to spot until after it has occurred, and it is very difficult to formulate a policy to meet that event. The future policy is undoubtedly to plan for a contracting coal industry.
Looking back into the reports, this is not a new feature. It has been obvious during the last two or three years that this has been happening for some time. It has been said that there must be concentration on profitable pits. It is, perhaps, unfortunate that those pits are situated in areas of high employment, and that the more unprofitable pits are to be found in the more difficult areas where unemployment is high—or that is so to a very considerable extent. There are obviously certain pits which are exceptions to the general rule, but the collieries that have produced a profit tend to be in areas where employment is high.
Mr. Edwin Wainwright (Dearne Valley)
I am grateful to the hon. Lady. She is partly correct, but she must take into account the very large pockets throughout the industry where that is not so. In my area, surrounded by seven collieries, is one district with only 1.3 per cent. unemployment.
Mrs. Thatcher
One of the good things about the position is that those pockets alleviate the general problem, because it means that people can go from an unprofitable pit to one that is profitable but, presumably, the more one contracts the industry the less that becomes possible because there are fewer jobs available in those pockets. I am glad to see hon. [column 266]Members opposite nodding their assent, so I would seem to be correct in saying that.
The trend in debates has been that the continuance of the uneconomic pits tends to threaten the future of coal as a fuel, looking at it as a whole. So one is faced with an inherent dilemma. If one cuts out the uneconomic pits, and also increases productivity—which even the right hon. Gentleman admits causes problems of manpower—one reduces the number of men employed in mining. This appears to be necessary in order to make coal a competitive fuel for the future, but it does not decrease the human problems, and it is with those that we now have to try to deal.
It seems to be widely accepted that there must be contraction in order to make coal a really competitive fuel, and we are all anxious—perhaps for selfish as well as for other reasons—that it should be a competitive fuel. I already pay between £14 and £15 a ton for household coal—
Mr. Kelley
Would the hon. Lady agree that there are pits bedevilled by labour problems because they are on the threshold of large industrial areas, where there is a shortage of labour for the lower-paid tasks? People have to be transferred from higher paid jobs to the lower-paid tasks and, as a consequence, the costs of production go up. Labour problems therefore contribute to the other difficulties.
Mrs. Thatcher
I had gathered that from previous debates on the subject. My point is that I believe that every one accepts that there will be a contraction in the mining industry, and a contraction in the number of people who are employed in it. There are pits that are marginally economic; that is to say, if one of them is closed down it may be necessary to bring coal from a distance from another pit where, although the cost of the coal at the pit head may be less, cost plus transport would not enable it to compete with the coal which could be produced from what I would call the marginally economic pit.
I agreed with the right hon. Gentleman when he said that this is a very dangerous industry, and I ask hon. Members to accept that in what I say I am very sincere, as I know other hon. Members are. [column 267]It has always seemed very fearful to those employed in comparatively safe occupations that mining—even last year, which was a good year—has such a very bad accident record; good for the mining industry compared with some years but one which most of us would consider bad. The average was three men killed and 20 men injured each week. That is quite apart from the tremendous amount of industrial disease coming from mining, of which all of us who have dealt with industrial injury have knowledge. In so far as this is eccentuated in the uneconomic pits, I shall be delighted if that position can be reduced.
It may have been necessary in the past, when coal was our only fuel, to have the maximum number of people down the mines getting the coal. That is not the case now. It seems futile to have more than are necessary going down the pits in conditions in which there will certainly be some deaths, and much danger, to dig up coal that no one wants to buy, and which is put on a stock heap which is already 27 million tons high—quite apart from undistributed stocks—
Mr. J. T. Price
I am interested in this aspect. I understand that the hon. Lady has a very distinguished record as an economist. In deploying this kind of argument, she should draw the distinction that our coal is an indigenous natural resource and an asset of the country—200 years reserves of coal under our feet. The alternative fuels are not under our feet in the same way, but have to be imported, and paid for in foreign exchange. This seems to be a very important economic argument, quite apart from the sentimental or humanistic arguments the hon. Lady is now putting forward so nicely.
Mrs. Thatcher
The hon. Member's argument would have been true many years ago, but natural gas is just off our shores and nuclear power has a very small foreign exchange content. Middle Eastern oil can certainly be paid for out of sterling because we own large reserves and oil industries are considerable earners of foreign exchange. Using expensive fuel in industry raises its fuel costs and that worsens balance of payments because it increases export costs. Further, there are a number of basic industries which are high users of energy. That [column 268]cost enters not only into their products but into more sophisticated ones as well.
I have been very much more generous in giving way—and I have thoroughly enjoyed it—than did the right hon. Gentleman. I thank hon. Members opposite for helping me through a comparatively difficult speech. I turn now to the main provisions of the Bill. There seem to be three main provisions. The first are the social provisions, secondly, there are the protection provisions, and thirdly, there are the provisions for borrowing. The social provisions recognise that contraction will come about and will affect many—let us face it and be realistic—who have no hope of finding alternative employment.
There are certain places to which we shall never get industry to go. If we close our eyes to that fact we shall be completely unrealistic. The only hope there is for some of the younger workers to move away, as I gather some have already done, to more profitable pits. It is very right and proper that the social provisions should be directed to helping those people. We have no quarrel with that; we thoroughly support it.
We should, however, note that there has been already a very considerable contraction of the coal industry, long before the Government produced White Papers about it. Looking through the figures, right back to 1957, which is the earliest year for which figures were compiled on the same basis as this year and is conveniently 10 years ago, we find there were 703,000 employed in the mines. The latest pink paper from the Ministry of Power shows that in the week ending 11th November—nearly 10 years later—387,000 were employed in the mines. That is a contraction of 316,000. Hon. Members will correct me if I am wrong, but apparently that contraction has taken place without a great deal of dislocation, without redundancy and without any considerable problems. There obviously have been problems—
Mr. James Griffiths
The hon. Lady is on a very important point here, but I think that she has missed a point that she should bear in mind. Every time pits are closed the number of jobs available, not only now but for those who are growing up in these communities, declines. One of the social costs is that [column 269]young people are being deprived and these are becoming decaying communities.
Mrs. Thatcher
I am always prepared to learn from the right hon. Gentleman. I have been doing so for many years now, but I think that he will agree with the Minister that if one were given a choice one would not send a son down a pit. I would not do so, and I would be interested to know how many representatives of the National Union of Mineworkers would do so. It comes down to the problem of trying to find alternative employment for the younger generation—if not in the area, at a point fairly near it, which would be a suitable growth point which could absorb young people from that area. That point may not be exactly in that area, but at a distance away. It is far better if it is at a point where it is suitable to get industry permanently established so that it can be an industrial growth point.
Miss Margaret Herbison (Lanarkshire, North)
I thought that my right hon. Friend the Member for Llanelly (Mr. James Griffiths) would deal with the point made by the hon. Lady. If I understood correctly, she said that until fairly recently there were not redundancies when pits were closed. My area suffered more than any other part of Britain. Year after year when pits closed we had very serious redundancies in an area where there was little or no other employment.
Mrs. Thatcher
Perhaps I should change slightly what I said and say that there have been so serious dislocations to date. Perhaps the right hon. Lady would agree with that. The younger people have been moving away—[Interruption.] I have been very generous in giving way, but, to enable other hon. Members to make their speeches in the debate, I should get on with my speech as quickly as possible.
Protective measures for coal were considerable before the Bill was introduced. There was 2d. a gallon on oil and now it is 2.2d. per gallon. In the Select Committee on Nationalised Industries, I understand that Mr. Stanley Brown, when giving evidence in April this year, said that at the moment the preference which the Central Electricity Generating Board [column 270]is giving to coal is costing the Board of the order of £3 million a year. Unlike the new measures in this Bill, which will not go on to the cost, that went on to the cost of electricity. There was thus already a very extensive protection to coal before the Bill was introduced.
I also understand that, although sometimes power stations are built on comparatively cheap coalfields, they do not necessarily always get the cheapest coal from those coalfields into the power stations. This came out in evidence given to one of the Select Committee sittings when Sir Ronald Edwards was questioned by my hon. and gallant Friend the Member for South Fylde (Colonel Lancaster). Sir Ronald was asked:
“You said that very frequently you had to take more expensive coal and that the cheaper coal, even though it might not be better coal, was going elsewhere. Are you going so far as to say that where you placed a power station in the East Midlands or Yorkshire or West Midlands, nevertheless you were having to take coal from some other region in the country?—There are such case, yes, Sir.”
Even if one sites power stations at a point where there should be the cheapest coal, it is not always forthcoming.
The Bill provides further protection for coal. It is interesting to see how the Minister has arrived at the figure of an extra 6 million tons. He did not tell us exactly how he arrived at that figure of the extra amount to be used for electricity and gas each year. I think that the answer is to be found in the White Paper, in which there is an analysis of the amount of coal expected to be used in power stations in 1970 in the event of specified amounts of protection being given to oil. That is on pages 57 to 59. I refer to cases II and III. In case II the oil tax was assumed to be at 2d. a gallon throughout the period, with no special preference for coal at power stations. In that case, the power stations would take 78 million tons in 1970. In case III the tax was assumed to be 6d. a gallon for power station use, when power stations would take 78 million tons, that is an extra 6 million tons. It seems to me that is where the the 6 million tons comes in. This analysis does not give a figure for gas, but gas would not take very much extra coal. The Minister is providing extra protection amounting in all, with the old protection, to 6d. a gallon on oil to increase the use of coal.
[column 271]Mr. Marsh
That is not quite the way the argument arose. We sought, first, to find out where the trend figures were going. This gave a figure of 149 million tons in 1970. One hundred and forty-nine million tons in 1970 would have meant a manpower rundown of about 45,000 men a year. We then looked to see whether this was possible, both in terms of the social consequences and in terms of the extent to which this would start a run-out of the industry. We tried to work out what was the maximum amount of run-out which was manageable. This is where the figure of 155 million tons came from, more or less.
Mrs. Thatcher
We would agree that, if there is to be a protective subsidy for coal, it should come from the taxpayer and not be borne by the consumer. How far the subsidy is legitimate for these purposes perhaps we can go into further when more of the statistics are available.
Hitherto, the competition has not come from nuclear power or from North Sea gas, although the debate which has taken place outside the House has been about that. The competition has, in fact, come from oil. The White Paper points out at page 78 that the new Pembroke station could products, if oil-fired without tax, energy at 0.42d. per kWh and, with tax, energy at 0.53d., whereas the cost at Drax, which is coal-fired, is 0.56d. So we are putting a charge on oil to bring its cost up to the present cost of coal. We are a little concerned that we might be adding to the burden already borne by industry at a time when it is having great difficulties in getting its prices down for the export market and will continue to have those difficulties, because export business has never been very profitable, as the Minister knows.
I come to the reprieve measures, which will keep the pits open for a further six months, the measures decided just before the Labour Party conference, and as to which, according to The Times—
“Even Mr. Will Paynter, the President of the National Union of Mineworkers—who have most to gain by a change in fuel policy—suspected ‘a certain amount of gimmickry’.”
Mr. Paynter did not say that he was surprised at the gimmickry but that he suspected it. The cost of keeping these pits open for a further six months is between £5 million and £8 million. I want to tackle this question by reference to the [column 272]stock position, of which the right hon. Gentleman gave some details taken from the annual Report of the Coal Board. In fact, the Minister said that the value of stocks at the end of last year was £110 million. The value must have risen a good deal since then, because that related to a stock position of 20 million tons. It is now nearly 28 million tons. Moreover, that was the sale price of the stocks. Already, the coal put to stock has deteriorated very considerably. From the value of £110.5 million was to be taken £28.5 million, which figure represented specific provisions for loss of weight, degradation of quality, the cost of lifting, marketing, etc.
Sir G. Nabarro
May I bring my hon. Friend right up to date from the Ministry's own statistics? On 12th November, undistributed stocks were 19.663 million tons; distributed stocks were 18.983 millions tons; total of undistributed and distributed stocks, a mammoth figure of 38.64 million tons on 12th November.
Mrs. Thatcher
I agree with the figure, but the figure my hon. Friend gives of 19.663 million tons undistributed stocks refers to 12th November of last year. The figure for this year is 27 million tons. My hon. Friend is out in the wrong direction. The figure is worse than even he thought.
Sir G. Nabarro
Well done! I apologise; 27.825 million tons is the undistributed and 19.086 is the distributed. The two together total 46.911 million tons.
Mrs. Thatcher
I shall treasure that apology: They are rare.
The stock position is already extremely high and the doubt is whether much of the coal will ever be sold. We know nothing about the type or quality of the coals in stock. I hope that before the Committee stage of the Bill the Government will tell us what are the types of coal in stock and how long they have been there, because I suspect that some of them have been there for 10 years or more.
The cost of stocking coal for 10 years is as much as the cost of digging it. This is where we have very serious doubts about the wisdom of certain Clauses. What is the point in reprieving pits to increase the stocks of coal when it would [column 273]seem that we are short of buyers and many of those stocks will never be sold?
The Minister was interrupted—it was either an interruption or one of those remarks which are made from a seated position—by someone saying, “Throwing men on the scrap heap” , or “on the taxpayers” or “on National Insurance” . Coal is produced at a cost of about £5 a ton. If it is not sold, the loss is £5 a ton. If it is not sold, the loss is £5 a ton. It then goes on the stockpile. Over 10 years it will cost another £5 to stock it. As I understand the latest productivity figures published in The Times this morning, the output per man shift is now just over 2 tons of coal. Taking absenteeism at 20 per cent., it means that a man will produce about 8 tons of coal a week at a loss—assuming that it is not sold—of £40 a week.
Would it have been better not to have reprieved some of the pits but to have spent the same amount of money on helping in another way? The fact is that much of this coal will never be sold. I hope that before the Committee stage we shall have much more detail given in the Coal Board's annual Report is pitifully small and we want to know much more about them.
I assume that the protection measures—we shall require an assurance on this—are transitional measures only. There will probably still be a problem at the end of them, but they are presented to the House in the faith that they are transitional measures. The longer they continue, the longer it will take for coal to become competitive.
I turn to the borrowing powers. I am sorry that I have taken a long time, but I have not occupied anything like all of it myself. There is another £200 million by 1971, although the amount already provided should have lasted until then. It is yet another miscalculation, presumably because sales are down and stocks are up. Stocks will continue to be up and it looks as if a large amount of the extra money has to go into ordinary stockpiling.
We are also being asked within that amount for more sums for capital investment. Certain strictures on the investment policies of the Coal Board were made in the Report of the National Board for Prices and Incomes on Coal Prices. [column 274]We shall want to know about this, too, in Committee. Three particular criticisms were made of the Coal Board. Paragraph 62 of the N.B.P.I.'s Report says:
“We have learned that in recent years the net return on new investment in collieries has often fallen short of the rate of return … applied by the Board as an appropriate criterion to new colliery projects” .
I assume that the majority of this extra capital investment is going to new colliery projects and not to ancillary activities. If it is going to ancillary activities. If it is going to ancillary activities, there are other criticisms to meet.
Paragraph 63 says:
“We consider that this more critical examination of the assumptions on which investment calculations are made should also apply to the National Coal Boards ancillary activities, particularly the diversification projects on which the Board is now embarking.”
It is a matter for consideration, if the finances of the Board are so shaky that it needs to come to us for another £200 million, whether it should be taking part in the exploration for North Sea gas.
The third criticism concerned the benefits of modernisation. The Report said, at paragraph 62:
“… the benefits of modernisation have not been fully reaped because of the inability to secure the estimated numbers of man-shifts worked.”
Those are three criticisms of the investment policy of the Coal Board. The right hon. Gentleman knows that I do not have much faith in the Board. Before we give powers for the extra borrowing we shall want assurances that some of those criticisms have been listened to, and that action has been taken to see that the grounds for them do not occur again.
It was on Clause 7— “Parkinston's Clause” —that we got one of the first smiles from the right hon. Gentleman during his speech. While the numbers of miners in the industry are being run down, the number of people on the Board is being put up. If a private enterprise did that, all hon. Members opposite would have a fine old time debating against me.
Mr. J. T. Price
The hon. Lady is drawing a very interesting comparison between the practice of private enterprise and the boards of the nationalised industries. That is a good ideological point. But when Mr. Weinstock took over the [column 275]controlling directorship of G.E.C. he “shot down in flames” over 90 per cent. of the administrative staff. He closed the head office, with 2,500 administrators, and stuck the office on the outskirts of London with 250 staff who, he says, are doing the job as well as the others were. That is private enterprise, so there is not much in the hon. Lady's point.
Mrs. Thatcher
The hon. Gentleman is helping me. My complaint is that the Coal Board is doing just the reverse and is increasing the number on the Board, and probably the number of salaried people at headquarters, as compared with the number of miners.
The reason the right hon. Gentleman gave was that it was to take certain people from the regions on to the Board. I understand the duties of members of any board; they have a duty towards the industry, and that is their only duty. As Minister, the right hon. Gentleman is responsible to the coal industry. Why is the right hon. Gentleman putting on the Board regional members who, according to his own description, are not responsible to the industry but will be responsible for taking up some of the slack produced by the closures? Unless he is taking on people who are connected with the coal industry and responsible to it, the only point in taking on regional people is to make provision for those who become redundant.
They might have to argue to the Board that, if it pursued an expensive coal policy, it might prevent a cheap fuel policy in the area concerned. If a pit is producing expensive coal and the area cannot get oil without the tax, it can get neither cheap coal nor cheap fuel. There might well be a regional member of the Board arguing for cheap fuel—for more oil or other fuel—within an area, and he would not then be discharging his duties to the Coal Board.
Mr. Marsh
The hon. Lady is rather off the point here. I do not want to get into a managerial science argument, but I accept that every member of the Board is directly, completely and solely responsible to it for the industry as a whole. The intention is to have a functional Board with people undertaking specific functions and because very [column 276]different problems arise, for example, in the central coalfields as compared with the Welsh coalfields, to have people—as in the steel industry—devoting themselves to those problems in the industry. That is not unusual in any large industry.
Mrs. Thatcher
Perhaps we can go into more detail in Committee. It is a more suitable point for Committee, but as the right hon. Gentleman mentioned it, I also did so.
I agree with the Minister's fuel policy objectives. I agree that they should primarily be cheap energy, subject to adequacy and security of supply. His intentions in this direction are absolutely right. I hope that the optimism which has often been shown in the Coal Board's annual Reports will soon be put into practice. The last Report said that coal can be made fully competitive with any other fuel. It said:
“… the Board have stressed that coal can continue to be made available in quantity at a price which is fully competitive with other fuels, and without the need for heavy capital expenditure.”
We on this side of the House look forward to the time when that objective is achieved.