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Clause 9

Volume 933: debated on Friday 24 June 1977

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Activities Relating To Petroleum

I beg to move Amendment No. 3, in page 7, line 16, leave out 'refining' and insert 'treatment'.

I shall be introducing a later amendment—No. 5—which deals with the revision of the definition of "petroleum" which appears in Clause 9 (5). The definition as it stands includes natural gas and will continue to do so if the amendment to Clause 9 (5) is agreed.

The use of the word "refining" in Clause 9 (1) (a) does not correctly desscribe the processes which apply to natural gas—for example, the separation of different gases which occur together in natural gas. The substitution of "treatment" for "refining" will cover the processes, and "treatment" is also wide enough to cover the refining of oil. I hope that the House will accept this minor but necessary change.

It is encouraging that the Minister and I can see eye to eye in view of the fact that I moved this amendment in Committee. One is entitled to pose a rhetorical question about the drafting procedures throughout the Bill being a little questionable because the earlier Act adequately defines "petroleum" and the Bill does not seem to do it for the first time. However, I do not want to be grudging and churlish to the Minister because at least he has granted us a minor and modest concession.

Amendment agreed to.

I beg to move Amendment No. 4, in page 7, line 25, at end insert—

'and that the revenues of the Board from those activities shall not be less than sufficient for meeting all their outgoings properly chargeable to revenue account in connection with those activities on an average of good and bad years'.

With this we may take Amendment No. 6, in Clause 10, page 8, line 12, at end insert—

'Provided that the revenues of the Board from the activities under paragraphs (a) and (b) of this subsection shall not be less than sufficient for meeting all their outgoings properly chargeable to revenue account in connection with those activities on an average of good and bad years'.

In considering the provisions of the Coal Industry Bill we have taken a realistic view of the probable future of the industry. We accept, for example, that oil and gas are finite resources and must be treated as such. Nuclear energy must be considered carefully before positive decisions are taken, although we have expressed reservations about the delays that appear inevitable in reaching these decisions. Solar, wind and wave energy all require much research and development, and the lead-in time with all these sources is long.

12.30 p.m.

We accept that it is likely that within the next few decades it may be desirable that the United Kingdom should establish a method of processing at least some of its coal into liquid fuels and synthetic gas and will wish to use some of its coal instead of oil as chemical feedstock. It is, therefore, essential to consider more closely the implications of the Bill and, particularly, of this amendment.

It is difficult to forecast exactly when it will be necessary for the United Kingdom to utilise coal in these ways, but there is no dispute that it will be necessary. Oil must be reserved for transportation— petrol, diesel and aviation fuel—and petrochemicals. This will result in the availability of oil for these uses diminishing, but, even then, the economic case for making oil from coal may not arise until the end of the century. If so, it is premature for the NCB to diversify now into such activities as oil refining simply to gain experience.

The prime task for the coal industry in the next decade must be to establish adequate mining capacity and to produce sufficient coal in the 1980s and 1990s. This must be its first priority.

The object of the amendment is to ensure the commercial worthiness of any NCB project If the Board is to enter into something that is outside its normal role, the commercial viability of any project in which it engages should be substantially proved before the venture is undertaken. The amendment does not stop the development of coal outlets but merely asks for strict discipline to be placed upon this public body to proceed on a wholly commercial and non-subsidised basis.

Some of the debates in Committee and some of the Minister's pronouncements at that time lead us to believe that the amendment should be acceptable to the Government. For example, the Minister, referring to the NCB and its operations, said:
"In all these operations the National Coal Board will act, and will be expected by the Government to act, on a commercial basis, as it does in its existing chemical activities".
He also said:
"All these activities would be undertaken jointly by the NCB and BSC partnership, seeking co-operation with established companies". —[Official Report, Standing Committee A, 26th April 1977; c. 253.]
Those are worthy Conservative principles with which we do not disagree. It would be quite wrong for a body such as the NCB to enter into a venture in which it did not have a great deal of experience unless it were part of a consortium including people who were highly experienced and successful in this field.

The Government already possess powers through the British National Oil Corporation to get into oil refining and petrochemicals. It is a little strange that, at this stage, they should find it necessary to include such provisions in a coal Bill. It is not our desire to restrict the activities of the NCB. Our purpose is to try to ensure that its future projects will be commercially viable.

I referred in Committee to what the Under-Secretary had said on 19th June 1975. Those remarks were relevant at that time, but the Minister referred during the Standing Committee considering this Bill to assurances that had been given about the BNOC and commerciality. We simply seek to include in the Bill the same sort of restrictions as have been placed upon the BNOC. They are voluntary restrictions. It was spelt out clearly by the Minister what would be expected of the BNOC.

Assurances are no substitute for having words written into legislation. I hope that the Minister will be able to convince us and those outside the House that the NCB will not be allowed to compete in an unfair way, that all its projects will be subject to the strictest commercial scrutiny and that those who are involved in the mineral extraction business in this country need have no fear. Many of these people have been in touch with us. In Committee, my hon. Friend the Member for Exeter (Mr. Hannam) spelt out in detail their fears about the Bill. Since then we have had further representations from British Gypsum which has expressed great fears about the implications of Clause 10. It is because of those fears and the fears of others in the industry, including ARC, which has also been in touch with many of my hon. Friends to express doubts and reservations, that we have tabled our amendments. I know that several of my hon. Friends will wish to speak to them.

The assurances given by the Minister in Committee are not sufficient to remove the fears of people in the mineral extraction industry. Considering the number of people working in the industry and the number of jobs involved, it is little wonder that they have expressed doubts.

We all sympathise with the NCB in wanting to spread into other fields, but we must not allow unfair competition to be created for those who are already working in this highly successful industry which provides many jobs in the private sector throughout the United Kingdom.

I hope that the Minister will give us some assurances and will show some good will by accepting the amendment, which would strengthen the Bill and make the position of the NCB very much better, because it would ensure that, if there were a chairman of the Board who had some ambitious schemes that were perhaps not always as viable as they might be, this legislation could control his ambitious projects and they could not be started—with taxpayers' money—without the strictest scrutiny, as would be the case if a private company started on a new venture. Such a company would have to go to its merchant bank. It would have to arrange finance, and unless the project were commercially sound there would be little chance of the finance being made available. Similar criteria should be applied to the Coal Board. I hope that the Minister will accept the amendment.

It always amazes me that on Report we cover so much of what we have already worked our way through in Committee. In contrast with what was said by the hon. Member for Ross and Cromarty (Mr. Gray), I believe that these amendments are very restrictive. They are contrary to the whole philosophy of the Bill, which is to provide expanded opportunities for development by the National Coal Board.

Many of us are interested to hear about the Coal Board's proposed developments. There is, for example, the Park Colliery project in Cannock. I hope that, perhaps on Third Reading, the Minister will tell us about some of these important developments. The Bill's philosophy is expansionist, but I fear that the amendments could make it very restrictive. It has always been the practice of the Coal Board to extract certain materials in the course of its activities. Basically, there is nothing new in the Bill on that aspect.

I cannot say that Labour Members have the numbers of representations which Opposition Members seem to have had from extractors. I am sure that the dangers that they portray to commercial firms are in reality—

Does the hon. Gentleman agree that it is more natural for those who have reservations to make them to Opposition Members rather than to Government supporters, who would be expected to agree with the legislation in any case?

The hon. Gentleman knows that I do not always agree with Government legislation. I am sure that extractors know that Labour Members would look with an open mind at anything that was put to them. However, it has not been our experience to have the large numbers of representations which apparently Opposition Members have had. I do not believe that there is any real threat to the commercial viability of any private undertakings. We are as interested as the Opposition in maintaining jobs.

As regards diversification, the hon. Member for Ross and Cromarty acknowledged that in possibly 10 or 20 years there may be need for oil refining to be included within the National Coal Board's activities. We cannot at the moment judge the rate of technological change and the need or otherwise for the Board to move into areas such as oil refining. I should have thought that the Opposition, in the same way as the Government, would encourage important diversification of this type by the Coal Board.

12.45 p.m.

The real threat is that these amendments could restrict necessary activity. By laying down hard, economic parameters, they could stop the Board engaging in the much-needed extraction of certain minerals. Perhaps the best example is the extraction of coal from under the North Sea. In the course of that work the Board might come across many other materials which have to be extracted but in which, with the present level of knowledge, it would be uneconomic for any commercial enterprise to become engaged. Indeed, it might be uneconomic for the Coal Board in the short term to extract some of these minerals from under the North Sea.

The amendments would have the effect of stopping the Board extracting these vital minerals during North Sea exploitation over the next few years. This may be important in future. As we have already seen with North Sea oil, what is uneconomic today might become the height of sanity and economy tomorrow.

The argument applies to mineral resources, not only in the North Sea but in other difficult areas in which the Coal Board could be debarred from working by reason of the harsh restrictions sought to be applied by the amendments.

I trust that my hon. Friend the Under-secretary will stubbornly resist accepting these amendments, because they are damning to the whole philosophy of the Bill. I believe that the Opposition are considering merely short-term profit. They are considering merely what is economic today, not what might be economic salvation tomorrow, which is far more important.

The hon. Member for Can-nock (Mr. Roberts) may know a great deal about the coal industry, but he has displayed an abysmal ignorance of the problems involved in the quarrying, road-stone, sand and gravel industries. That may be because there is less of the quarrying and road material extraction industry in Cannock than there is in South-East Derbyshire.

I have certainly had anxious representations by firms which feel that they are in grave danger of being severely undermined, not because they are afraid of competition from the National Coal Board—private industry thrives and has learned to survive on competition— but because they are afraid of unfair competition. The industry is justifiably anxious because no assurances have been received from the Government—naturally, we hope that we shall get those assurances now—that there will be safeguards for fair competition.

All the representations that I have had tell the same sorry tale. The road-building, quarrying, sand and gravel industries in the East Midlands—certainly in Derbyshire—are in a sorry plight already, thanks to the Government's mishandling of the economy and the rundown in the building and construction industry.

There have already been large numbers of redundancies in many of the firms concerned in this vital area. It is not easy to turn these industries on and off like a tap. Once they have been run down, it is difficult to rebuild them when demand revives, as it will do when we get another Conservative Government. Many companies are now down to bedrock, if I may use that expression in this context. There have already been many redundancies. There is a recession in the building and construction industry, as Labour Members have admitted from time to time.

The firms involved in the extraction of sand and gravel and road materials are seriously concerned about their low profitability. While they are struggling for survival, this proposed legislation will allow the Coal Board, on finding these types of building materials, to extract and market them itself.

As I said in my opening remarks, these companies have no objection to com- petition, provided that it is fair. The danger is that it will be unfair, because the Coal Board will have certain advantages enabling it to conceal the true cost of these mining operations. There will be no guarantee that the operations, if there is diversification into these fields, cannot be financed through hidden subsidies, which would further seriously erode the ability of the existing private sector industry to survive.

My hon. Friend the Member for Ross and Cromarty (Mr. Gray) has stated the general arguments. I wish to refer to one large group of companies in particular, the Tarmac Group, which operates extensively in the Deryshire area as well as elsewhere. It says in a desperate plea to me—no doubt the Minister has had similar representations through the trade associations, if not directly from individual companies—that the present recession in the construction and aggregates industry has already resulted in a 30 to 40 per cent. reduction in its output.

There have been considerable redundancies and plant closures in that group, as in others, over the last two or three years. It is now down to little more than its skilled personnel. The essential structure of such companies is in serious danger of being eroded further if the Coal Board is allowed to embark on subsidies or unfair competition. In a letter to me, Tarmac says:
"It is our strong contention that such minerals should be worked and marketed by companies already established in the aggregates business, so that the capital already invested and skilled personnel employed are not wasted."
This is the point to which the Minister has not addressed himself, the problem of an existing industry with the investment already incurred and the personnel and facilities already provided. If on top of that, in a time of recession and serious over-capacity, a nationalised industry is given freedom to diversify in this field, it can do so only at the expense of further over-capacity and further recession among those already operating.

Competition, provided that it is fair, is not objected to. But, as I have said, the only way in which the Coal Board could enter this industry profitably at a time when the industry is not profitable is through entering it in a subsidised form. Otherwise, how can it possibly be profitable for the Board when it is barely profitable for the existing companies with capital and resources already underemployed?

The Minister should address himself to that argument before he rejects out of hand our amendments, which provide certain safeguards to see that the competition for diversification in this field should be fair and to provide protection for existing interests.

I am not sure that, even if one assumes that what the hon. Member for Derbyshire, South-East (Mr. Rost) has just said is correct, the amendment would give all that much safeguard. As I read it, it puts a minor restriction on the activities of the Coal Board.

If the Coal Board is allowed, as it would be under the Bill, to exploit minerals which it finds in the course of its general exploratory activities, it would require a special investment decision by the Board to permit it to go into non-coal mining activities. If the aggregates industry is in difficulty, if it is in recession, I would not think that the Board would wish to go into quarrying and mining at a time when there is virtually no way for a profit to be obtained.

I was rather impressed by the accounts of the Coal Board, when I saw from the returns of the subsidiary companies just how many of them seemed to make profits. Far from criticising the Coal Board for loss-making or subsidising activities, I think that it appears to prefer to exploit the market and to make profits out of ancillary activities.

If the Conservative Party is complaining that there is a danger of subsidised competition by the Board, it would seem that that unfair competition would come, if it is to come, when the Coal Board was itself exploiting coal, because then, having got the coal from its opencast or deep-mining activities, it would be free to dispose of the other materials at a rundown price. Therefore, there is a greater danger of the Board's hitting at the aggregates industry in the private sector through coal mining activities than by going into the aggregates industry as a separate and commercial venture.

If there is a danger of unfair competition, this is perhaps not the best way in which the amendment might have been worded. It might have been a bit more inhibitory on the Board's going in for activities outside its natural realm of operation and indulging in unfair competition. I am not criticising the Opposition too much, because I realise that sometimes it is extremely difficult to pin down the activities of large corporations by means of amendments to Bills. We have all tried it at different times, and we do not always succeed.

I do not think that there is much danger to the aggregates industry from the Bill. Even so, I do not think that the Opposition's amendment would do much to remedy the situation that they envisage.

The Opposition said in Committee that they would return to some of these subjects, and they are keeping their promise. I believe that I understand their motives in putting down their amendments, particularly this one. They stressed in Committee their reluctance to see the National Coal Board have access to public funds for commercial purposes under the clause and said that all the operations should be commercially viable. I admit that the hon. Member for Ross and Cro-marty (Mr. Gray) had no complaints today about the general philosophy.

We fully discussed these matters in Committee, where we had long debates. The Board considers, and the Government agree, that it is necessary for the good of the coal industry and the economy for it to engage in the oil and petrochemical activities for which Clause 9 gives powers. I repeat what I said in Committee, that
"This is not to say that the Board will squander money and resources on anything that seems to offer a possibility of securing outlets for coal and its products".—[Official Report, Standing Committee A, 28th April 1977; c. 304–5.]
It must have sufficient freedom to exercise its own judgment, and it would be wrong specifically to fetter future ventures in the petrochemical industry which may be of value. It would be wrong to single out this particular set of activities for a special set of conditions as proposed in the amendment. I remind the House that under the Coal Industry Nationalisation Act 1946 the Board has a general duty to break even.

1.0 p.m.

Like many of the amendments put down by the Opposition, Amendment No. 6 is neither particularly good nor particularly bad. I do not want to spend a lot of time on it and we will discuss some aspects of it later. We discussed this clause fully in Committee, and I have answered the points of concern expressed by certain industrial interests.

Of course, the Board did not wish to have the powers in Clause 10 so that it could make a loss when it used them. Of course it will act on the basis of revenues from any activities under the clause being more than sufficient to meet the outgoings. To this extent, therefore, the amendment is superfluous.

Another point was raised by my hon. Friend the Member for Cannock (Mr. Roberts). When he talked about other activities in relation to Clause 6, he referred to the Park Colliery. He has been a persistent advocate for this colliery. We expect that there will be meetings next month to discuss this matter. My hon. Friend will be delighted to hear this and he will probably wish to discuss it with people in the locality. It is a good project, although it has some difficulties. The matter is being discussed.

In the case of the similar amendment to Clause 9, it is anomalous to single out any particular activities on which qualifications for breaking even should be imposed. Having given this very quick summary in reply, I hope that the Opposition will seek leave to withdraw the amendment.

I am surprised at that reply. I refer back to the Committee stage proceedings on 26th April, when the Minister said, in reference to the Board:

"In all these operations (under Clause 9) the National Coal Board will act, and will be expected by the Government to act on a commercial basis, as it does in its existing chemical activities."—[Official Report, Standing Committee A; 26th April 1977; c. 253.]
I mentioned this earlier and I refer to it again. In these circumstances I would have thought that the Minister, far from rejecting the amendment, would welcome it. It is exactly in line with the thoughts that he has expressed himself. I cannot think why he has suddenly become so much against including these words in the legislation.

The hon. Member for Dundee, East (Mr. Wilson) made a perfectly fair point and from it I almost gathered that he thought our amendment was not strong enough. If we put an amendment down, he appears to think that it should be in much stronger terms. I hope that the fact that it does not go as far as he would have wished will not deter him from supporting us in this less than satisfactory way of dealing with the situation.

In the points that I tried to make I highlighted our great fear that there would be unfair competition for the private sector, particularly in the mineral extraction industry. The industry is not worried about fair competition at all; it has had to live with competition and has flourished on it, and as a result has produced thousands of jobs throughout the United Kingdom. However, it fears unfair competition from a body in which it sees a potential for undercutting its prices, knowing that the subsidy is there as a support.

If one gets competition of this sort from the nationalised industries, it can create havoc. It does not happen at present, but if we do not write this into the legislation there is no reason why it cannot happen in future.

Division No. 183]


[1.06 p.m.

Atkins, Rt Hon H. (Spelthorne)Finsberg, GeoffreyPeyton, Rt Hon John
Bell, RonaldFisher, Sir NigelPink, R. Bonner
Berry, Hon AnthonyGardiner, George (Relgate)Rossi, Hugh (Hornsey)
Biffen, JohnGow, Ian (Eastbourne)Rost, Peter (SE Derbyshire)
Boscawen, Hon RobertGray, HamishShaw, Michael (Scarborough)
Bottomley, PeterHannam, JohnSims, Roger
Boyson, Dr Rhodes (Brent)Hayhoe, BarneySmith, Timothy John (Ashfield)
Braine, Sir BernardHordern, PeterSpicer, Michael (S Worcester)
Brooke, PeterHowell, Ralph (North Norfolk)Tebbit, Norman
Buck, AntonyLe Marchant, SpencerTownsend, Cyril D.
Clark, Alan (Plymouth, Sutton)Macfarlane, NeilWeatherill Bernard
Clark, William (Croydon S)MacGregor, John
Cope, JohnMcNair-Wilson, P. (New Forest)


Dykes, HughMaxwell-Hyslop, RobinMr. Jim Lester and
Emery, PeterMoate, RogerSir George Young.
Fell, AnthonyMorrison, Hon Peter (Chester)


Archer, Rt Hon PeterEvans, Gwynfor (Carmarthen)McDonald, Dr Oonagh
Armstrong, ErnestFitch, Alan (Wigan)MacFarquhar, Roderick
Atkinson, NormanGilbert, Dr JohnMaclennan, Robert
Barnett, Guy (Greenwich)Grant, John (Islington C)Marks, Kenneth
Bates, AlfHamilton, James (Bothwell)Meacher, Michael
Bishop, Rt Hon EdwardHarper, JosephMellish, Rt Hon Robert
Boothroyd, Miss BettyHarrison, Rt Hon WalterMendelson, John
Brown, Robert C. (Newcastle W)Horam, JohnMolloy, William
Canavan, DennisHughes, Mark (Durham)Morris, Charles R. (Openshaw)
Cartwright, JohnHunter, AdamMoyle, Roland
Clemitson, IvorJackson, Miss Margaret (Lincoln)Newens, Stanley
Cocks, Rt Hon MichaelJeger, Mrs LenaOgden, Eric
Cox, Thomas (Tooting)Jenkins, Hugh (Putney)O'Halloran, Michael
Davidson, ArthurJudd, FrankOvenden, John
Davis, Clinton (Hackney C)Kelley, RichardPadley, Walter
Dell, Rt Hon EdmundLamond, JamesPark, George
Dormand, J. D.Latham, Arthur (Paddington)Price, C. (Lewisham W)
Duffy, A. E. P.Lestor, Miss Joan (Eton & Slough)Richardson, Miss Jo
Dunwoody, Mrs GwynethLipton, MarcusRoberts, Gwilym (Cannock)
Eadie, AlexLyon, Alexander (York)Robinson, Geoffrey
English, MichaelMabon, Rt Hon Dr J. DicksonRodgers, George (Chorley)

The fact that the Minister says that these things have not happened and that the National Coal Board is operating in a satisfactory manner in many areas, is all very well, but all it requires is for someone in in a position of responsibility not to have the keen business sense necessary, for some of these projects to develop in a way which might create unfair competition for the private sector.

We are not trying to sabotage the Bill. Throughout Committee we had extremely harmonious and constructive debates from both sides, and there is no question of our putting down wrecking amendments. We want to strengthen the Bill and improve the position, not only in relation to the private sector and the safeguards for it but also in relation to the National Coal Board.

I am sorry that the Minister cannot accept our arguments and I am afraid that I must press the amendment.

Question put, That the amendment be made:—

The House divided: Ayes 43, Noes 90.

Rooker, J. W.Snape, PeterWard, Michael
Rose, Paul B.Spearing, NigelWilliams, Rt Hon Shirley (Hertford)
Sandelson, NevilleStallard, A. W.Wilson, Alexander (Hamilton)
Shaw, Arnold (llford South)Stoddart, DavidWilson, Gordon (Dundee E)
Shore, Rt Hon PeterStrang, GavinWise, Mrs Audrey
Silkin, Rt Hon John (Deptford)Summerskill, Hon Dr ShirleyWoodall Alec
Silkin, Rt Hon S. C. (Dulwich)Taylor, Mrs Ann (Bolton W)
Sillars, JamesTinn, James


Silverman, JuliusTomlinson, JohnMr. Ted Graham and
Skinner, DennisVarley, Rt Hon Eric G.Mr. Joseph Ashton.
Smith, John (N Lanarkshire)

Question accordingly negatived.

I beg to move Amendment No. 5, in page 7, line 40, leave out from '"petroleum "' to end of line 44 and insert—

'means any of the following (other than coal) namely—
  • (a) mineral oil, natural gas and bituminous shales;
  • (b)deposits not mentioned in the preceding paragraph from which oil can be extracted by destructive distillation; and
  • (c)hydrocarbons which are related to mineral oil and are not mentioned in the pre ceding paragraphs.'.
  • I assured the Standing Committee that I would reconsider the definition of "petroleum" following the contributions of Tory Members in that Committee. My conclusion is that the adoption of the definition of "petroleum" used in the Petroleum and Submarine Pipe-Lines Act 1975 would indeed be preferable to that originally incorporated in the Bill. Accordingly, the amendment is put forward for the approval of the House. I am advised that there is no need for the Bill to define petroleum products or natural gas. The meaning of the term is sufficiently understood.

    We thank the Government for responding to the representations that we made in Committee. The Minister acknowledged again today that Opposition raised these matters in Committee. The amendment clarifies considerably the import of the Bill.

    Amendment agreed to.