COAL INDUSTRY BILL
Again considered in Committee.
Question again proposed.
Mr. Marsh
I return refreshed, after that short intermission or technical hitch, to the subject of the money with which the Clause is concerned. A number of hon. Members have asked for explanations. Seldom, if ever, has such a degree of detail been given as is presented in the White Paper. In paragraphs 128 to 131 appear a great many explanations, and the hon. Member for Worcestershire, South (Sir G. Nabarro)—I mention him this early in my speech to satisfy him—quoted freely from these paragraphs.
The position is that borrowings under the 1965 Act, excluding temporary borrowings, will be about £700 million by March, 1968. If one therefore allows for temporary borrowings and stocks, borrowings may exceed £800 million by the end of next year. I must come to Parliament long before there is any danger of the statutory limit being exceeded, and this means that under the Bill I would expect to ask Parliament to approve a draft order, probably before the end of 1969.
It is not unreasonable that an industry faced with the difficulties which the coal industry faces should have a clear idea of its future, certainly up to the middle or end of 1969. It is equally right that, when dealing with sums of this size, Ministers should have to return to Parliament. This system means that I or some other Minister of Power—which is an attractive thought from time to time—will return here before the end of 1969 for further discussion on this to get an additional order. Hon. Members on both sides have considered ways of avoiding this procedure. However, the sums involved are so enormous that there must be some method of adequately dealing with the matter. [column 1266]
The hon. Member for Worcestershire, South pointed out strongly that we should sell off coal stocks. This is an attractive proposition which, I assure the hon. Gentleman, had crossed the mind of the N.C.B. from time to time. With 30 million tons of coal on the ground, if the N.C.B. could get someone to buy it, that would be considered a good thing. The problem is that if one were to sell it internally, one would be displacing coal with coal. We are making arrangements to use additional coal in power stations, but we will be coming to that in a subsequent part of the Bill.
Exports have been a difficult problem for a long time. A large element of American coal going to the Continent consists of coking coals—they probably constitute the major proportion—but a large proportion of our stocks consists of bituminous coal, and that does not mean that our stocks are of coal which other people are buying from the United States. I should not have thought that we could break into the American market and, in any case, I am sure that hon. Members on both sides would agree that it would be very marginal in the short term—
Sir Harmar Nicholls (Peterborough)
rose—
Mr. Marsh
No, I really must get on.
Sir Harmar Nicholls
I should just like—
Mr. Marsh
The hon. Gentleman is a brief visitor this evening—but never mind.
Sir Harmar Nicholls
That does not alter the fact that I am listening to the Minister's speech. Is he saying that this £30 million worth of stock is unsaleable, and therefore should not be included as stock or what does he mean?
Mr. Marsh
I did not say that it was £30 million worth of stock, but 30 million tons of stock. I say that it is unsaleable in that the Board has not been able to sell it. Most people would agree that the Board's marketing is extremely efficient—
Sir G. Nabarro
I have put this point to the right hon. Gentleman on many occasions. He has given a variety of [column 1267]good reasons why the Coal Board cannot sell that 30 million tons of coal. I put to him earlier, and on Second Reading, that a large part of this coal has been there for years. Is it not the fact, therefore, that it is unsaleable? If that is the case, will he say so? Alternatively, why not switch over the dual-fired power stations that are consuming millions of tons of imported oil, all of which is capable of being burnt in power stations, instead of imported oil?
Mr. Marsh
We will come later to the question of coal-burning power stations. In terms of the deterioration of stocks, our coal stocks 10 years ago amounted to 8.6 million tons. It, therefore, follows that the vast bulk is less than 10 years old, and its deterioration has not been considerable. If someone would buy it, nobody would be happier than I to see the Coal Board sell it.
My hon. Friend the Member for Midlothian (Mr. Eadie) advanced a proposition which I find attractive though, with regret, I have to say that I do not think that it offers much hope. He said that the compensation paid to the coal owners was too high. That matter, of course, was not one for me—I was not the right hon. Gentleman who fixed the compensation stock for nationalised industries at that time—and it would be profitless for us to discuss whether or not the level of compensation has been sold many times, and those who now own it probably have no relationship to the original coal proposition but it is not one that helps us out of our difficulties.
My hon. Friend also referred to a matter on which he feels very strongly. I respect him for it because has has always pushed the interests of his constituents. He said that there needs to be a plan on a regional basis for dealing with the social consequences whatever may be the scale of the rundown. It was to this point that my right hon. Friend the Member for Easington (Mr. Shinwell) returned when he asked specifically about rundown.
It is quite impossible to project as far ahead exactly which pits will close when, and rather easier to say what the total [column 1268]coal production will be. None the less, two pits are known to be due to be closed during 1968—as a result of exhaustion, for which there could be no argument. One would certainly expect most of the 16 deferred pits to be closed in the course of 1968, and there are known to be some 31 pits in jeopardy, of which a number would clearly go during that period. Of course, in a year, and certainly in the course of more than a year, this pattern changes very much; some pits improve their performance. But we can see pretty clearly what the size will be in the end.
My right hon. Friend made a point about productivity. He was passing on a question which miners asked him and which I am asked at miners' meetings from time to time. The question was: what is the effect of productivity on manpower leaving aside any decision to change the levels of coal production? This is one of the dilemmas we face, and it is important to face it. If productivity rises, it means by definition fewer men. If productivity does not rise, it means higher prices, inability to sell the coal, and fewer men. There is no way out of this impasse. That is a phrase I wanted to get in at some stage this evening, but seriously this is an important point.
If, as is sometimes said—I think it completely impracticable and quite impossible—coal production were frozen at the existing level until 1970–71, we would lose 100,000 coal miners as a result of productivity alone. If we could not get that productivity we would lose even more men and be able to produce less coal.
It is right that hon. Members should say, “Have the Government done enough in alternative employment?” It is right that they should put probing questions to Ministers. What would be disastrous would be to try to convince coal miners that there was any way out of this contraction in mining manpower apart from certain limits. It would be a wicked thing to do because (a) they would be disappointed and, (b), social measures would not be taken.
Mr. Shinwell
I am following with great attention what my right hon. Friend is saying and I recognise that in [column 1269]a sense we are on the horns of a dilemma. Does he not realise that if we say to men in the mining industry, “Your pit is not paying its way, therefore you have to work harder, use the machinery at your disposal with greater effort and greater effectiveness. If you do not do that the pit will close.” so that the men go ahead, put their hearts into the work and produce more coal, greater productivity, only to discover that many of them become redundant—there is the dilemma—obviously, the third question I put to my right hon. Friend applies? Before men become redundant, or are made redundant, the Government in some way must be able to offer them alternative employment.
Mr. Marsh
The Government are, of course, engaged in a series of new measures in relation to alternative employment in these industries. The whole point of the Bill and of the White Paper is based on a belief that increased coalmining productivity is the defence which the miner has against redundancy on an unacceptable scale. Therefore, the purpose of the Bill is to give the industry a breathing space to help it to get the level of productivity to enable it to compete with other industries.
My right hon. Friend made the point that he would not vote—Front Benchers on this side of the House know that this can frequently be no idle threat—unless he was satisfied that the money was being used for social purposes as well as other purposes. But some of this money arises out of the increased coal stocks and there is some criticism about the growth of coal stocks. One of the arguments we would get is that we should curtail production because that would involve coal stocks. But part of the price which the community has to face in giving the breathing space is a recognition that there are large stocks of coal on the ground and the policy which we are pursuing is bound to mean that these coal stocks will continue to increase for a time. The financing of additional coal stocks is part of the social measures.
Mr. Swain
My right hon. Friend has referred to coal stocks. Is he aware that part of the money to be found under the Bill will go to finance 15 per cent. or so of the total stocks which are open-cast mined coal at the moment, and that 15 [column 1270]per cent. represents about 3 million tons of the overall stocks? Will he not wisely consider the abandonment of all open-cast working in the future, as nearly its total production today is being put into stock? Will he abandon open-cast working in favour of deep-mined coal?
Mr. Marsh
I hesitate to be led astray by my hon. Friend into the rather complex issue which he has raised. There is this clash, as it were, between open-cast coal and deep-mined coal. Open-cast coal at present is, I think, about 4 per cent. of total production; it is absurdly cheap in comparison with normal coal and is, therefore, beneficial to the industry commercially. On the other hand, there is the question whether it is sensible to go on mining open-cast coal, given the surplus of deep-mined coal. This is a perfectly reasonable question to raise, and it is one I am in process of discussing with the Coal Board at present.
I want to finish dealing with the perfectly fair questions put by my right hon. Friend the Member for Easington. He spoke about investment in the industry. It is essential to get increased productivity, and one of the methods of doing it is investment in the most modern efficient machinery in the world, such as we have in some of our long-life pits. I was very interested recently to meet the Soviet Minister of Mines and, only last week, the Ukrainian Minister of Mines, both of whom were very impressed by the standard of British mining equipment in use in this country. Eighty per cent. of all the investment it is intended to make would be in the long-life pits, and the remaining 20 per cent. is a minimum level of investment, mainly on safety measures, in short-life pits. To that extent again, therefore, one would hope that this level of investment would all go towards ensuring that miners may have the breathing space to which I have referred.
My hon. Friend the Member for Derbyshire, North-East (Mr. Swain) said that he wished the figure in the Bill were even bigger. I have a lot of sympathy with that view. I do not think that the Committee is under any illusion that it has paid the final bill for this exercise by the present Bill. At other stages in the future, other Ministers of Power, as in the past, will return to the House with [column 1271]Coal Industry Borrowing Powers Bills. But, because of the size of these figures, it is important that limits should be set which force Ministers back to the House of Commons in order that not only the finances but the policies upon which those finances are based can be debated.
The White Paper, the Bill and the measures stemming from it will be debated many times in the future. It is proper that they should be. I ask the Committee to resist the Amendment. Perhaps it is too much to hope that the hon. Member for Yeovil (Mr. Peyton) will now feel inclined to ask leave to withdraw it, on the ground that he has been convinced. However, if he is unwilling to do so, I ask my right hon. and hon. Friends to vote against the Amendment, in the belief that the borrowing powers are essential to the health of the industry and the humane treatment of the men engaged in it.
Mrs. Thatcher
Without wishing to restrict anyone who wishes to follow in the debate, I think that it might be convenient at this point if I were to comment on what Richard Marshthe Minister has said. He has, rightly, covered a wide debate and answered many of the points raised, but I shall confine myself to the narrower issues before the Committee. I shall make my comments under five heads: forecasting, the financing of stocks, investment, closures, and financial disciplines.
I agree with the Minister when he says that no one knows what will happen. This, in a way, is the key to the Amendment now before us. If there is one sure thing about forecasting it is not only that it has been wrong but that it has been proved wrong at an unparalleled rate recently. All forecasts have been wrong has been increasing. It is easy to demonstrate that merely by looking at the figures put up to the Prices and Incomes Board in 1965, on the basis of which the National Coal Board asked for a price increase. The figures put forward then were confounded in the Board's Annual Report for 1966–67. The demand forecast was already too high and the productivity forecast was already too low, even in that restricted time. [column 1272]
In the Second Reading debate we went over the past year's forecast, which has been even more wrong. I agree with many hon. Members that we now face problems the dimensions of which could not have been appreciated a number of years ago. In 1959 we had a target of 200 million tons a year and Sir I. Horobinone of my colleagues, then Parliamentary Secretary to the Ministry of Power questioned whether we could sell that quantity of coal in a year if it were produced. The then Mr. Robin said:
“This is the answer to the Parliamentary Secretary, who shrieked the other week, “It is all right talking about 200 million tons, but you have got to sell it when you have got it.” Of course one has, but it can easily be sold. There is no need to get bothered about it. We could export 10 million tons of coal a year, too.” —[Official Report, 23rd July, 1959; Vol. 609, c. 1553.]
Earlier in his speech he had said that contraction was the answer for the coal industry, and that if it contracted and had time to do so coal could be competitive with oil anywhere in the country.
We have followed up the remedies of contraction. The industry has had time to contract, but it has not become competitive with oil anywhere in the country, and we still have tremendous problems. It is not only the forecasting of demand that has been wrong. There has been forecasting of the rate at which the remedies would work and how, and this also has been wrong. For this reason, we think that if the Coal Board wants large, increasing sums of money it should come to the House more and more frequently. We should keep a much closer watch on the changing forecasts about coal, because they change far faster than was ever envisaged when we first had these Acts.
I want to add something about financing stocks. During the Second Reading debate I asked the right hon. Gentleman a number of questions about stocks—about their quality and age. He has not answered them, but we still have to face some rather confusing figures about stocks. The hon. Member for Dearne Valley (Mr. Edwin Wainwright) has said that under a Tory Government we had stocks of 50 million tons. I quickly looked back at the figures, which were for undistributed stocks held by the Board. The highest figure was in 1959, when stocks were 35.7 million tons. That does not take into account distributed [column 1273]stocks. Had the then Minister pursued the current policy of adding to the stocks regardless, the problem with which the right hon. Gentleman is faced today would be far greater than it is. We should have a larger and larger stockpile and larger and larger amounts of working capital tied up in stocks which were never likely to be sold.
What the Coal Board did then was to say, “We shall reduce the stocks by reducing production below the level of demand” , and the stockpile naturally fell. But at the end of last year we had stocks of 20 million tons, valued in the Coal Board accounts at £80 million on the basis of their current value. That was writing them down from a higher value, because I understand that when they are put on the stockpile they are valued at market price and not cost price. Their market price has been higher but their written-down value was £80 million. That applied to 20 million tons.
We now have an extra 8 million tons. Assuming this to be put on the stockpile at £5 a ton, we have in stock tied up an extra £40 million, which means at the moment that we have tied up in stocks £120 million. Already the right hon. Gentleman is proposing to go on increasing stockpiling, although he knows that probably a number of these stocks will never be sold. An article in The Economist of 21st October said:
“So on the Coal Board's own unpublished reckoning, up to 50 million tons will be piled up into huge coal tips by the early 1970s. A ton of coal costs as much to store over ten years as it does to dig—which is close on £5 a ton. So £500 million could eventually be locked up in vast deteriorating heaps, for which the Minister of Power has undertaken in theory to compensate the Coal Board.”
If this is so, it is economic madness in any terms, bad for any business enterprise and bad for the morale of those in the coal industry. Morale will never be raised in the industry while the men know that the coal they mine is going to increasing stocks in increasing piles. As far as I can see, morale will be raised and the right people recruited at managerial levels only when the industry has finished its contraction and is once again competitive on its own unsubsidised merits. At that point it can expand.
Mr. Marsh
The logic of what the hon. Lady is saying would be to return to a policy now of reducing production [column 1274]below the level of demand so that the demand could be switched into stocks. If that is what she is saying, the figure in 1970 would not be 155 million tons but something like 120 million tons. Does she think the industry could face that?
Mrs. Thatcher
The logic of what the right hon. Gentleman is saying is that he will go on increasing stockpiles regardless of demand. Is he seriously saying that? I would prefer to have production reduced below demand and spend the money on what we will have to spend it on eventually—not on increasing stock piles, which is putting money to a dead purpose, but on helping people to go to other industries and helping other industries to go there if need be. That is a more constructive use. If the right hon. Gentleman's predecessors had followed his policy, we should have a problem of unmanageable proportions now.
Now I turn to the financing of investment. I asked about this on Second Reading and it is germane to the Amendment. I asked what the increased amount for investment would be used for. In the White Paper, the right hon. Gentleman says that part of these extra borrowing powers would be used for increased investment. Increased investment was to have been generated from internal sources but now it cannot be since sales are down on the expected amounts. The White Paper says that increasing investment is required to the tune of £60 million for net capital investment in collieries and ancillary activities.
We are very anxious that any increased investment should go into productive pits, to help produce coal more and more competitively. The Minister, in his Second Reading speech, said that the money will be required.
“… to supplement internal resources, mainly depreciation, available for capital investment of all kinds.” —[Official Report, 28th November, 1967; Vol. 755, c. 260.]
Presumably that would include ancillary activities. R. FreesonThe Parliamentary Secretary, in response to my question at the end of the debate, said:
“A point raised by the hon. Member for Finchley was whether capital expenditure as intended under the Bill will be confined to colliery modernisation or will go to diversifying the activities of the N.C.B. The assurance I give is that this capital expenditure will be extended to the programme of modernisation [column 1275]in the pits, which is of course the policy of the N.C.B.” —[Official Report, 28th November, 1967; Vol. 755, c. 390.]
Who is right? The White Paper and the Parliamentary Secretary or the Minister? They cannot both be right. If they are to have increased borrowing powers, and the Minister and the Parliamentary Secretary do not agree, that is another good reason for reducing the borrowing powers, and to get them to come back to Parliament when they have agreed.
One point on pit closures. I criticise the Government with regard to the instructions which appear to have been given to the Coal Board on pit closures. I noticed that in the debate on the Coal Industry Bill in November, 1965, F. Leethe then Minister said that
“the Board intends, with the Government's full support, to speed up the process by effecting more than half these closures within about two years from now.” —[Official Report, 25th November, 1965; Vol. 721, c. 784.]
So he said the Board intended to speed up the closures. The Report of the National Coal Board for the year 1965–66 said on page 6:
“The Board had originally planned to phase the colliery closures fairly evenly over the years 1966–70 but at the Government's suggestion the major part of the closure programme will be completed in the two years 1966 and 1967.”
No enterprise, whether public enterprise or private enterprise, can operate on contradictory instructions, and it looks at the moment as if the Government asked the Board to speed up these closures, and are now telling the Board to slow down the closures. My sympathies go to the Board on this, because contradictory instructions appear to have been given to it. That is not the Board's fault, but the fault of the Minister and Fred Leehis predecessor, who is now running economic affairs in the North-East.
What we are anxious to do is what was recommended by the National Board [column 1276]for Prices and Incomes when it considered the prospect of raising prices of coal which that Board agreed to. That Board said that what the industry needed was “tightening financial discipline” . On page 15 of its Report No. 12 it said:
“Costs and prices can be held for the future only if this is changed.”
The change required was concentrating on the profitable pits, but not to get the profitable pits to carry the unprofitable pits. It went on to say:
“The Government can help to induce this change by tightening financial discipline.”
This is what we on this side are seeking.
I feel fairly certain that my hon. Friends will not have been convinced by the right hon. Gentleman's reply. I am not convinced myself. I hope, therefore, that my hon. Friend will think it right to press his Amendment to a Division.
Mr. Brian O'Malley (Lord Commissioner of the Treasury)
rose in his place, and claimed to move, That the Question be now put.
Question put, That the Question be now put:—
The Committee proceeded to a Division—
Mr. Webster (seated and covered)
On a point of order. I understand that you have put the Closure, Sir Eric. Although I have been in the Chamber for the last hour and a half, as I was here for the whole of Second Reading, and although I saw a Whip stand up and open and shut his mouth, I heard nothing. What happened was completely inaudible to me. Did you, in fact, put the Closure?
The Chairman
I do not understand what the hon. Gentleman's point of order is. I have accepted the Motion for the Closure.
The Committee divided: Ayes 177 Noes 114.