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Coal Industry (South Wales)

Volume 978: debated on Monday 4 February 1980

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Motion made, and Question proposed, That this House do now adjourn.—[ Mr. Berry.]

11.37 pm

It is in some ways unfortunate, but perhaps in more ways fortunate, that the subject matter of this Adjournment debate should have been touched on in the main debate today. I shall, of course, try not to cover ground already covered by my right hon. and hon. Friends, but if I do my apology will be muted, for the future of the coal industry in South Wales in the wake of the British Steel Corporation's announcements relating to Llanwern and Port Talbot is of the highest possible importance. We are debating not only the very life expectancy of a great industry but the future of thousands of men employed in that industry and of whole communities dependent—and in many respects solely dependent—upon it.

I believe that if the BSC's proposals in their present form are implemented and, further, that if no measures are taken to prevent the import of foreign coking coal, the coal industry in South Wales will be decimated. Literally, the effect on South Wales will be catastrophic. The Secretaries of State for Wales and for Industry—I am delighted that the Under-Secretary of State for Energy is to reply to the debate—will be remembered in Wales as the men who not only passed the death sentence but were the executioners.

South Wales has literally the best coking coal in the world. I say that because earlier today some of us heard what the Under-Secretary of State for Wales said about the quality of that coal. I want to emphasise that we have the finest coking coal in the world and that we have the most experienced and the most responsible miners in the world, 80 per cent. of whom have never known any other job. These men are now at the mercy of a bunch of bungling incompetents at the head of the BSC, aided and abetted, it seems, by a Government who not only lack compassion but are devoid of common sense and even business sense.

I reiterate what was said by my right hon. Friend the Member for Rhondda (Mr. Jones) at the beginning of the Welsh debate. What the NCB in Wales is asking for is £24 million spread over four or five years. In terms of redundancy and other payments if these plans go ahead, we are talking about £24 million a year. I emphasise to the Under-Secretary the fact that the NCB in Wales is injecting £47 million into the Welsh economy each year. That is why, without hesitation, I say to the Government that to go along with these proposals is inconsistent with economic common sense and good husbandry.

I quote from an article in the Western Mail for 21 January. It was written by its industrial editor, Garrod Whatley, and in many respects it sums up the difficulties and dangers that now confront us. He said:
"It is likely that few aspects of Welsh life will be unaffected by the ripples of cuts set off by 11,300 steel job losses—with mines, transport, local authority services and shops all at risk.
The sheer scale and speed of the planned British Steel Corporation reduction are breathtaking, with 6,883 jobs to go at Port Talbot and 4,454 at Llanwern Steelworks near Newport…
The spin-off effects in Wales, where steel and coal are still the economic cornerstones, are hard to assess in detail at this stage. Some estimate that as many as 50,000 jobs could be lost in total…
At the moment the BSC employs about 46,000 people in Wales. But as important is that steelmaking is a major customer for a vast range of other businesses.
The future of South Wales pits is highly dependent upon the area's steel industry. About a half of the 36 collieries in the area produce coking coal…
Much of this coal is for Llanwern and Port Talbot steelworks and the corporation's decision to halve production capacity would have a swift and harsh effect on the coalfield.
In the current financial year the BSC in Wales used 3·3 million tonnes of coking coal, most of it from South Wales pits."
The article continues:
"If the corporation goes over totally to imports, it means about 20 pits and 15,000 jobs will be axed in the coalfield. Like the BSC, the mining industry is a major buyer for services such as engineering and transport…
Spin-offs could include less cash in the economy so shopkeepers, restaurants, cinemas and other leisure time activities will be hit.
Local authority rate incomes will fall as pits and factories close, and this could cause lowering of standards of services and fewer public sector jobs.
About a third of the 800 firms which are South Wales members of the Road Haulage Association depend heavily on carrying steel products. Some companies rely entirely on the BSC for work.
The South Wales ports are linked with the steel industry. Iron ore made up a half of total imports in the first 10 months of last year. Steel formed about a ninth of exports.
About a third of British Rail's freight in Wales is generated by steelworks and this is important in the economics of running all routes in the region."
I hope that that gives some indication of the depth of the problem stemming from the corporation's latest announcement.

I wanted to highlight that because at certain stages of the earlier debate some doubt was cast on the figures of the number of pits which would be adversely affected and, indeed, the number of men who would be made unemployed. No figures were produced by the Government as to what they understood, and nothing was given in answer to our challenges on how many men would be put on the dole, but aspersions were cast on the figures given by my right hon. Friend the Member for Rhondda.

The Western Mail referred to the National Coal Board, and I am authorised by the area director of the National Coal Board in Wales to say—I quote from a letter which I received today:
"We could lose as much as 2¾ million tonnes of business for coking coal.…As a rough guide, each 0·2 million tonnes is equivalent to a pit and about 700 men."
I hope that that spells it out, and I hope, too, that it puts the matter beyond dispute, because we are not making a party or partisan point. We are trying to put these extremely serious facts before the House for the Government's attention.

The spectre of the 1930s has been revived. I venture to say that the situation will be far worse even than the 1930s when Gwyn Thomas could say that the gravestones in the cemeteries of the Rhondda were marked "Not dead but gone to Slough Today there are no Sloughs left. There are no other jobs to go to elsewhere in the country. Indeed, if Welshmen went to other parts of the country they could not afford to buy houses because of the way house prices have risen. They could not afford a mortgage or the outrageous interest rates, and of course they could not obtain council houses because they would have been sold off on the instructions of this Government. The prospect is stark. It means that if these proposals are accepted men anxious and able to work will be condemned to a lifetime on the dole.

Will Ministers, please, ask themselves certain questions? How really cheap will imported coal be in three or four years? To put it another way, how cheap in real terms is the foreign coal if we add the cost of closed collieries, the decline of our communities, the social and economic cost of unemployment and the loss for ever of millions of tonnes of coal reserves? It is estimated that in North Gwent alone there are some 35 million tonnes of reserves of coal.

What will happen when the oil runs out, which, of course, it inevitably will? It would be folly of the highest order to sacrifice the long-term energy needs of this country and the future of the South Wales coalfield on the altar of Tory dogma and in the hope that the BSC will be able to balance its books.

As a matter of urgency, the Government and the NCB should consider refurbishing nuclear power stations and converting them to coal. That is one practical thing which they could do at once. As a start, they could let the proposed Portskewett power station be a coal-powered instead of a nuclear one. What are the Government and the National Coal Board doing about research into obtaining oil from coal? I understand that a system is already well advanced in South Africa.

We must have an inquiry into the British Steel Corporation and, in particular, its commercial management, which leaves a great deal to be desired. The cutback proposals are plainly not only unacceptable but unreal and impracticable. We say that any decision about imports of foreign coke must be held up for at least two years while discussions are going on.

I do not want to develop this matter at this stage, but one of the things that worries me is that there is some confusion and conflict between the views of the Department of Industry and those of the Department of Energy. I look forward to hearing the Under-Secretary in a few moments, because perhaps he can clarify the position and make plain what is at present somewhat confused.

It is vital for the Government to look again at the whole question of coking coal subsidies. In his winding-up speech earlier this evening, the Under-Secretary of State for Wales referred to Gemany. Not only do the German Government give massive help, subsidy and support to the German coal industry, but they restrict the importation of foreign coke. When we hear about the success of the German industry, we must bear these matters very much in mind.

I realise that time is passing. However, I should like to refer briefly—and I hope that I shall not be accused of being selective if I so do—to certain parts of a letter written to The Timesof 17 January by the hon. Member for Canterbury (Mr. Crouch), in which he said:
"As a mere politician, I confess to wondering if the management of the BSC is fit to solve the problem after such an inept approach. But the Government has said they are on their own and they will not intervene.
Not intervene? But that have intervened in the strongest way possible. They have tied the hands of the BSC with a rigid cash limit of £450 million. Rationalise or bust is the Government's message.…
It would be easy if we could leave it to the management and the unions. But can we? How can we stand aside and watch a harsh economic plan take its effect on the loyal workers of a great industry? They have not been on strike for over 50 years. There are no other jobs to offer them. This is not just an economic problem with an industrial answer. It is a social question in which the Government will have to play a major role. It is a vital industrial relations question that will determine the climate of government-union dealings for the decade."
The hon. Member went on to refer to Disraeli, saying:
"When Disraeli saw the gulf between the owners and the workers, he did not stand aside. Rather, he hoped that toryism would 'rise from the tomb … to announce that power has only one duty; to secure the social welfare of the people'."
I hope that the Conservative Party will bear those words in mind, because never were those words more apposite than at present, particularly concerning the South Wales coalfields.

The Government cannot stand idly by in this situation. There is all the difference in the world between non-intervention and non-involvement. We are all involved, including the Secretaries of State and the Prime Minister, whether or not they like it. The Government are meant to represent the whole nation. Unfortunately, at the moment, they choose to turn their backs and abrogate their responsibilities to the people of Wales. Far from cutting a firm figure, the Secretary of State for Industry appears as a Nero-like figure, fiddling while the country burns.

The policy now being deployed by the BSC, with the horrendous and catastrophic effects that it will have on the Welsh economy, is economic and social madness. I look forward to hearing what the Under-Secretary has to say on this vital matter.

11.54 pm

The whole House must be grateful to the hon. and learned Member for Abertillery (Mr. Thomas) for raising this issue. He need make no apology for reiterating points which, quite rightly, were made earlier in the day. No one can mistake the importance of this issue to the life of South Wales, above all in the communities directly affected. For my part, I welcome the opportunity to explain our position and perhaps, even at the end of a long day largely devoted to these very issues, to clear up a few points.

I want to make clear at the outset that we are not debating the need to protect individual workers and their families from hardship. That point is not at issue between the two sides of the House. I, my right hon. Friend the Secretary of State for Energy and, indeed, the whole Government understand how harshly inevitable social changes can bear on the individuals who are caught up in them, and we mean to do what we can to soften the blow. My right hon. Friend the Secretary of State for Wales has already spoken in today's main debate of the range of remedial measures which the Government might take in South Wales. Apart from that, in the context of the coal industry, we shall continue to work within the framework of special social aids which has been established by successive Governments and, I think, welcomed on both sides of the House.

What we are debating is the need for us to face reality and to adapt productive capacity to meet changing circumstances. In that matter the coal and steel industries in South Wales are only an extreme example of the difficulties which face the whole country. There is no need for me to weary the House, at this hour of the night, by reminding it of the history leading up to the statement made just over two weeks ago by the board of the British Steel Corporation of its intention to seek the agreement of the steel unions to a "slim-line" operation at Port Talbot and Llanwern, which will reduce liquid steel output at those two works to about 2·8 million tonnes a year and lead to a consequent loss of rather more than 11,000 jobs.

I must, however, bring out three points which are essential if we are to understand the implications of that decision for the coal industry in South Wales. First, we all know that, while some of the NCB's coking coal is fully competitive, once account is taken of differences in quality—I am talking about quality for the whole of the United Kingdom, and I take the point that was made earlier—the NCB cannot supply the BSC's needs for coking coal at a price which can match that at which the BSC can import coal. In the light of this, both sides of the House have accepted that the BSC must not be handicapped in its struggle to put the industry on its feet by being denied access to the cheapest and most suitable raw materials.

Secondly, as the BSC's production of liquid steel has fallen, so has its need for coking coal—

I have a great deal to get on the record in my answer. I have only 14 minutes in which to speak, and I shall continue. The share of the NCB's output going to the iron and steel industry has now fallen. In 1970–71, the BSC bought 16·7 million tonnes of coal from the NCB, equivalent to 11 per cent. of its coal production. In the financial year 1978–79, of the 10 million tonnes of coking coal that it bought, 8·5 million tonnes came from the NCB, equivalent to 7 per cent. of NCB coal output. In 1979–80 the BSC is expected to take 7·8 million tonnes, about 6·5 per cent. of NCB coal production. In 1980–81, taking account of intended closures, its purchases may be about 5 million tonnes, assuming that its imports of coking coal remain at the level of its present commitments.

Thirdly, we cannot now expect this relative decline in the BSC's purchases of coking coal to be reversed in the foreseeable future. It is instructive to reflect that in the 1973 White Paper the BSC envisaged a liquid steel capacity of 36 million tonnes to 38 million tonnes by the early 1980s. Now it expects to achieve continuing profitable production at a level of no more than 15 million tonnes a year. Those few facts show how dramatic is the change in the BSC's position and prospects. What we have to realise tonight is that no supplying industry, nationalised or not, here or elsewhere, can possibly hope to be unaffected when one of its main customers meets with such an upheaval.

Both in this debate and in the main debate earlier this evening, hon. Members have quite reasonably asked for details of the impact of the BSC's planned cutbacks in South Wales on the coal in-industry and on their constituencies. The sort of detailed information necessary to satisfy their concern will be available only when the BSC has finally settled, in consultation with the steel unions, details of the reduction in steel-making capacity and when the NCB has been able to assess the change in demand and to take account of the possibility of redistributing coal, at present supplied to the BSC, into different markets.

The NCB is nowhere near the end of that process yet, and no decisions have been taken, although I recognise that the anxieties expressed by the NCB local management about the scale of the review that is necessary have given rise to speculation. Since 35 per cent. of deep-mined output from South Wales has been sold to the BSC for coking, the area is peculiarly dependent upon coking coal, and it would be idle to pretend that it will not suffer.

Even before this major decline in demand from a prime customer, the coal industry in South Wales faced formidable problems. The House will remember that, early last year, under the previous Government, a sub-committee of the coal industry tripartite group, formed from the Government, the NCB and the unions, examined the special position of the South Wales coalfields. It identified fundamental problems. The costs, as we know, are high. The geology is difficult and complex. The field is old, with one-third of the pits more than a century old. Many of the easiest and most accessible seams have been worked out.

In 1978–79—the latest complete year for which figures are available—overall productivity in South Wales was 1·37 tonnes per man shift compared with 2·22 tonnes for the NCB as a whole. Of pits in South Wales, 51 per cent. had an OMS below 1·4 tonnes, against 18 per cent. for the NCB as a whole.

These operating difficulties are reflected in the area's financial position. Operating losses rose from £15·2 million in 1975–76 to £41·7 million in 1977–78, although there was a welcome, if slight, improvement to a loss of £35 million in 1978–79. The low volatility of Welsh coal makes it difficult to burn in power stations outside Wales. Despite its valuable special properties, therfore, it is not easy to place in the general coal market.

Because of all those problems, even before the question of the BSC's cutbacks the sub-committee saw that it would be necessary to reduce the area's losses, although it pointed out that the position of the area could not be considered in isolation from that of the NCB as a whole.

When the Chancellor of the Exchequer and some of my right hon. Friends and I saw representatives of the TUC last week, a proposal was put forward under which the BSC's coking coal imports in 1980 would be held at the level of last year's commitments at a cost of £33 million, and £15 million of this, it was said, could be found by the NCB. The remaining £18 million, it was suggested, would have to come from the Government.

The Government do not accept that proposal. In the first instance, the price and quantity of coal sold to the BSC must be a matter for commercial negotiation between the NCB and the BSC. In this context, it must be for the NCB to decide how far it feels able to offset transitional support to the coking coal market, in the face of major reductions in the demands of the BSC, and especially in the light of any potential headroom that it may now see in its other markets created by the recent sharp rise in oil prices.

At the recent tripartite meeting between the Government, the NCB and the mining unions, it was clear that all were convinced that the coal industry could enjoy a prosperous future and make a crucial contribution to the country's energy needs, provided only that it could supply the amounts of coal—[Interruption.]

Order. The Minister has not been allowed his full 15 minutes. The hon. and learned Member for Abertillery (Mr. Thomas) went over his time. The Government must have heard many things which they did not find acceptable, yet they did not intervene. I ask hon. Members to be a little better behaved. I appreciate their feelings, but it is discourteous to shout across the Table when the Minister is speaking. If the Minister does not give way, I have no alternative but to ask the right hon. Gentleman not to intervene.

On a point of order, Mr. Deputy Speaker. I do not wish to be discourteous to the Chair or to the hon. Gentleman. However, many of the decisions announced by the hon. Gentleman—

Order. With the greatest respect, that is not a matter for me to decide.

I am trying to get on the record, in a short time, important comments from the Government.

The coal industry, as I said at the tripartite meeting, can enjoy a prosperous future and make a crucial contribution to the country's energy needs, provided only that it can supply the amounts of coal that we need at a competitive price.

To that end we have agreed an external financing limit for the NCB this financial year of £709 million, compared with external financing needs of £607 million in 1978–79 and £312 million in 1977–78. Of this year's £709 million, £255 million will be grants, as my right hon. Friend announced in a written answer on 13 December.

Within its substantial total, which is, as I say, higher than last year, the NCB must decide how to manage its affairs in the long-term interests of the industry. It may take such measures as it thinks right to maintain its sales of coking coal to the BSC and to assist the coal industry in South Wales. Indeed, to assist the NCB in directing aid to coking coal pits we have said that we will make it a coking coal grant this year, within the fixed total of £255 million for grants and subject to ECSC rules.

It is within that framework and that level of support that the NCB has the opportunity to seek, as I indicated earlier, the extra fraction of 1 per cent. of its turnover, which it has been suggested might come from the Government. My right hon. Friend the Secretary of State for Energy and I today met the chairman of the NCB to assure him, once again, that the Government will support any solution that he is able to reach in the long-term interests of the industry within that framework.

There have been suggestions that, over and above the support given by the Government, the ECSC could provide some additional crock of gold that could be tapped to support the coking coal industry. That is not the case. ECSC rules provide for two sorts of coking coal aid. The first is sales aid from a fund of about £30 million—

The Question having been proposed after Ten o'clock on Monday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at seven minutes past Twelve o'clock.