Michael Heseltine – 1994 Speech on the Coal Industry Bill

The speech made by Michael Heseltine, the then Secretary of State for Trade and Industry, in the House of Commons on 18 January 1994.

I beg to move, That the Bill be now read a Second time.

In our election manifesto, we pledged to privatise British Coal. Last spring, in our White Paper “Prospects for Coal”, we renewed that pledge. Before I deal with the specific measures in the Bill, it is worth spending a few moments on the wider issues of nationalisation.

The British coal industry is one of the last major industrial sectors left in the public sector. Nationalisation of our industries was a central feature of post-war Labour Governments. It was resisted fiercely by the Conservative Opposition of the day, and there are few people left who would deny that, as a policy, it imposed intolerable economic and legislative burdens on our country and contributed to the decline of our regional economies.

The policy was designed to transfer the commanding heights of the economy to state control. The naive political rationalisation at the time was that control would be vested in the people. In reality, power rapidly shifted to monopoly providers and monopoly producer unions. What power the people possessed was exercised by civil servants, who rapidly became both protector and confidant of the industries’ self-interest, and, worse, by the political convenience of the party in power.

The traditional—and, in the end, the only effective—disciplines of the marketplace were replaced by ill-disciplined compromises and cash-consuming delay. The objectives of enhanced efficiency, increased productivity and a high quality of service played little part in the day-to-day practices or assumptions.

Industrial management, hitherto widely dispersed throughout the regions of the United Kingdom, was replaced by top-heavy bureaucracies that were located largely in London. Perhaps most damaging of all, in virtually every case our key industries withdrew from or were denied access to the markets of the world. I say this to reinforce the case for the Bill, if such reinforcement were necessary. Today, the concept of state ownership is bankrupt. Across the world, country after country is turning to the discipline of the marketplace as each seeks to dispose of its nationalised industries.

Even the Labour party has lost the will to fight for this arcane concept of industrial organisation and management. Of course it parades and re-parades the weary arguments that a tiny body of its constituents, and of course its union paymasters, want to hear, but it knows that the tide of freedom that we have brought to the nationalised industries is now as irreversible here as it is in so many countries, under Governments ranging from the socialists of China to the right-wing Government in France.

Mr. Dafydd Wigley (Caernarfon)

Does the Secretary of State accept that one of the worries of many ex-coalminers and miners’ widows is that the benefits and agreements that they had with the National Coal Board will not be continued after privatisation? Will he give a categorical assurance on the matter?

Mr. Heseltine

I shall deal with the specific objects of concern case by case, as I consider the detailed contents of the Bill.

Before I leave the overwhelming case in favour of privatisation at large, which rests behind the Bill, I must point out that, as hon. Members will know, the facts are stark. In 1979, the nationalised industries were costing the taxpayer £50 million per week in losses. Today, they pay £60 million per week in taxes on the profits that they earn as private sector companies and, most chilling of all for the Labour party, 6 million shareholders are willing to testify and to vote for the success that privatisation has brought.

What are the facts about the nationalisation of the mines? At the time of nationalisation in 1947, there were 720,000 mineworkers employed by the National Coal Board. By 1980, that figure was down to 230,000—a reduction on average of around 15,000 a year. The rundown was as much a characteristic of Labour as of Conservative Governments.

The number of operating pits also declined throughout that period. Opposition Members will recall, for example, that between 1964 and 1970, and between 1974 and 1979, the number of producing pits fell by 313. Indeed, since 1979, it is a Conservative Government who have injected by far the largest support for British Coal in the history of British Coal—nearly £20 billion.

Mr. Ronnie Campbell (Blyth Valley)

That was redundancy pay.

Mr. Heseltine

Yes, the Conservative Government made very generous redundancy payments. However, the hon. Gentleman is not prepared to face up to the fact that £8 billion of that £20 billion was capital investment in the industry. So, since the war—

Mr. Campbell

I can give the Secretary of State one example of what happened in my colliery. A transport system, which cost £300,000, was bought, put in the timber yard, set up and kept there, and charged to that colliery when it closed. That is only one example. What happened at the other collieries in which the Government invested?

Mr. Heseltine

The hon. Gentleman can quote his £300,000 example, but does the House seriously believe that it stands up against the £8 billion that has flowed into capital investment in the Coal Board since 1979? The Opposition talk as though they cared about the industry, but they ran it down. There has never been such a large investment programme in the coal industry as under Conservative Governments since 1979.

Mr. John Evans (St. Helens, North)

Is the Secretary of State aware that, at Parkside colliery in my constituency, a £6.5 million investment in a new face, which was in production for a fortnight before it was closed down under his regime, is now rotting in the ground?

Mr. Heseltine

The hon. Gentleman might ask himself whether the decision to invest such large sums of money was justified in the face of a falling market for the product. That is an example of precisely the lack of discipline that I have been referring to—a lack that was characteristic of nationalised industries throughout the post-war period.

Mr. Eric Clarke (Midlothian)

The accounts of the National Coal Board show that it repaid to the Government, at a very high interest rate, loans that it had received over some years. The money that the right hon. Gentleman was crediting the Government with investing in the industry was paid back before the so-called profit was decided. The Secretary of State can investigate that fact if he likes.

Mr. Heseltine

The hon. Gentleman must understand that most of the £20 billion invested in the National Coal Board since 1979 will be written off, which means that it will be charged in perpetuity to the taxpayer. I admire the fact, however, that he is now a director of a private sector coal company. I know that the House will wish him all the very best good fortune.

Mr. Clarke

I am not a director of a private company: the right hon. Gentleman has been misled. I am an adviser to a company which has the involvement of the Scottish trade union movement.

Mr. Heseltine

I would not wish to misrepresent the hon. Member. If his advice is successful, however, he might soon be a director of the company.

Since the war and nationalisation, the coal industry has lost its market for producing town gas, it no longer sells coal to the railways or mines coking coal, and it has lost the greater part of sales of coal for home heating and industrial use. During the debates of the past year or so, we have been all too familiar with the fact that British Coal is now very dependent on sales for electricity generation, and we are equally and starkly aware that it is coming under increasing pressure in that market as well.

Mr. Derek Enright (Hemsworth)

If there is no market whatsoever for coal, can the President please explain why five applications are being processed for opencast coal mining in my constituency, when the opencast coal will be dearer than that from Grimethorpe?

Mr. Heseltine

The explanation is entirely a matter for those people who have submitted the applications to carry out the mining. It seems extremely unlikely to me that people are bidding to take on onerous responsibilities for mining coal in an opencast field when they could get it cheaper from the deep-mined industry. However, that is a judgment for those people who are prepared to invest their money in the process.

The Government’s position is clear. We have given an undertaking to ensure that the Coal Board offers to license the deep mines to the private sector, and I am glad that there are a number of cases in which agreements have been reached or the negotiations are well advanced. I much admire all those Opposition Members who are playing a role in facilitating negotiations and encouraging the prospects that those pits might find an alternative life in the private sector.

Several hon. Members rose—

Mr. Heseltine

I cannot give way to three people at once, but the lady must of course have preference.

Ms Joan Walley (Stoke-on-Trent, North)

Will the President tell us exactly why he is not prepared to set up a target for the amount of opencast mining, and why it is that in, north Staffordshire, Trentham and Silverdale have been closed, and we now expect even more opencast mining to go ahead? Why are not environmental issues at the heart of his energy policies?

Mr. Heseltine

The hon. Lady mentions a most important subject, and she must be aware that consultation is now under way on mineral planning guidance 3. It is a matter for my right hon. Friend the Secretary of State for the Environment, but it raises important issues of balancing the environmental and economic arguments that are—superficially at least—in conflict. I have great sympathy with the hon. Lady’s arguments.

Mr. John Cummings (Easington)

The right hon. Gentleman has confused me. I agree with him that successive Governments, Labour and Tory, have invested heavily in the mining industry during the past 30 years. Indeed, with the closure of Easington colliery, tens of millions of pounds of taxpayers’ money have been left in a flooded mine. Is it not obligatory for the President to underpin that £20 billion-worth of taxpayers’ investment by assisting in working a market for the benefit of a British industry, providing British coal?

Mr. Heseltine

The hon. Member has obviously missed the point: that, with the approval of the House, we offered to put more taxpayers’ money behind the production of deep-mined coal if people would come forward and find an additional market for that coal. In some cases, negotiations have been concluded or are proceeding. It would be wrong for me to give artificial assurances that I can sustain economic activities for which there is no market justification.

Mr. Terry Lewis (Worsley)

Will the President explain the logic of taxpayers’ money subsidising the acknowledgedly inefficient Spanish coal industry through the European Union?

Mr. Heseltine

I challenge that logic constantly. My department, as the custodian of much of the trading interest of this country, has the responsibility of constantly challenging the existence of subsidies. The aim is not for us to introduce them into our economy; it is for us to try to eliminate them from the rest of the European Union. That is the task in which we are engaged.

Mr. Paddy Tipping (Sherwood) rose—

Mr. Heseltine

Will the hon. Gentleman forgive me? Madam Speaker, you introduced a ten-minute limit, and I suspect that I am beginning to intrude into rather more speeches than I would wish to do. I must ask hon. Members to allow me get on to the detail of the Bill.
There is one last point that I wish to record about my judgments on the industry. I have not the slightest doubt that our coal industry would be in a much healthier position today if the adjustment which has taken place under every Government, and too late, had taken place in the post-war period of economic expansion, when the diversification of the economy could have proceeded faster and when the highly desirable employees of the coal industry could have found jobs in growth industries of that time.

I will go further. I have little doubt that, if the coal industry had had to face the challenge of the marketplace much earlier, it would have achieved productivity gains which recently, and under pressure, it has begun to achieve, but it would have achieved those productivity gains in time to head off at least part of the dash for gas, and thus it would have secured for itself a larger share of the marketplace than is today realistic.

Mr. Simon Hughes (Southwark and Bermondsey)

If the President is arguing that a secure future for coal required privatisation some time ago, there have been 14 years of his government during which that could have happened. Is not the criticism the same—that a lack of strategic energy policy has been the consistent feature of every year of his Department and its predecessor since 1979? That is why coal is in difficulty; it has never known what place it would have and never been given any security as part of a diverse market supply, as the best resource that we have available.

Mr. Heseltine

That was an interesting intervention by the hon. Member from the Liberal party. I do not pretend to have been shadowing with great care Liberal policy statements for the earlier part of the past decade, but I do not remember, Madam Speaker—perhaps you do, and perhaps I owe the hon. Member an apology—the Liberals making a major demand in all those years that we should privatise the coal industry.

Indeed, if the Liberals had ever come forward with any firm demand at all, especially one that might contain any element of controversy, it would have come as a surprise to me. The Liberals would demand privatisation of the coal industry only in sections of industry, or of the electorate, where there was no coal industry, for fear that otherwise they might offend someone. That is a classic example of the Liberal Democrat party waiting until all the policy options have been closed, and then asking, “Why don’t you do it some other way?”

Mr. Dennis Skinner (Bolsover)

Will the President of the Board of Trade give way?

Mr. Heseltine

I cannot resist.

Mr. Skinner

The right hon. Gentleman has not been following Liberal policy closely enough. I know that he has been ill and has been missing, and that for a long time he was not a Cabinet Minister. However, if he would check the facts, he would find that, in true Liberal Democratic fashion, that party was in favour of privatisation before the general election, but is now against it.

Mr. Heseltine

The hon. Gentleman reveals the sort of inconsistency on doctrine that we have come to expect from the modern Labour party. I congratulate him on having read the documents. It shows that he is preoccupied with “back to basics”, and has learnt to read effectively after all this time.

Mr. Bill Etherington (Sunderland, North)

I took great note of the right hon. Gentleman’s long diatribe against nationalisation. Is he prepared to tell the House how many private companies have made as many gains in productivity as the Coal Board has made over the past two years?

Mr. Heseltine

The hon. Gentleman will know that British Steel is now a world-class company, that British Gas is trading in more than 45 foreign countries, that British Airways is now one of the most successful airlines in the world, and that our electricity, our power and our telecommunications industries are straddling the world in the best interests of Britain.

Why? It is because we privatised the companies that have made that possible. Let us remember that we did that in the teeth of the opposition of the Labour party. If it had had its way, we would still have huge bureaucracies of politicians and civil servants suffocating the entrepreneurial zeal that the Conservative party has let loose on the world market.

Mr. Jack Thompson (Wansbeck)

Will the Secretary of State give way?

Mr. Heseltine

For the last time.

Mr. Thompson

I have followed the right hon. Gentleman’s argument closely for the last few minutes, and he rightly claims that £20 billion has been put into the industry in the period concerned—£8 billion in capital investment. But does he recall that the Conservative party has been in power for the past 15 years, and that he and his predecessors were responsible for policy? Surely policies could have changed over those 15 years so as to accommodate the situation that has developed now.

Mr. Heseltine

If I had to plead guilty to the hon. Gentleman’s accusations, I would have to say that I wish that we had privatised the coal industry in the early 1980s. I must make that clear. However, the implication is that, in doing so, we would have gained the serried support of the Labour party, whereas actually it was encouraging the National Union of Mineworkers in any obdurate political action that it could devise to stop the modernisation of the industry. The coal industry has found itself at the end of the queue. More’s the pity, and, I suspect, more’s the price that the coal industry has paid as a result.

The Bill contains the Government’s proposals for restructuring and privatising British Coal. It sets out the necessary provisions for safeguarding pension rights and concessionary fuel entitlements, and those affected by mining subsidence. It also reflects our determination to ensure that the high safety standards in the industry are maintained or improved in the light of the advice of the Health and Safety Commission.

We believe that a competitive energy market is the best guarantee of secure, diverse and sustainable energy supplies in the forms that people and companies want, and at competitive prices. Electricity and gas privatisation have changed the nature of the energy market from a producer-led to a consumer-led market. We have made it a priority to establish a range of substantial privately owned energy companies free to take strategic decisions within a proper framework of regulation. The time has come for the coal industry to enjoy the same freedom.

We examined the prospects for coal within the energy market very carefully during the coal review. On the basis of all the evidence that was presented to us, we had to conclude that there was every prospect that the market would continue to be difficult.

Despite that, it remains the case that coal accounts for over half of all fuel used for electricity generation. On any calculation, coal will continue to be one of the chief sources of energy for the electricity supply industry in the years ahead. The House will remember that we accepted the key recommendation of the Select Committee and have introduced a subsidy for additional sales for electricity generation from deep mined coal. However, the real test is the rate at which the industry can improve its competitiveness.

The industry, as Opposition Members have said, has made considerable strides in improving productivity over recent years. It is only by building on those gains that the industry will compete effectively in future. Privatisation will best ensure that prospect. Time and again, privatisation has demonstrated the ability of industries which had previously lagged behind their international competitors to catch up and, increasingly to set the pace. That is true whether one looks at the docks, at steel, or at a whole range of public utilities. There is every reason to expect that the coal industry will do the same.

Mr. William O’Brien (Normanton)

Will the President give way?

Mr. Heseltine

If the hon. Gentleman will forgive me, I think that I have given way enough.

Our intention is to offer British Coal’s assets for sale in five regional businesses. Those will be based on Scotland, Wales, the north-east, and two parts of the central coalfield. Potential purchasers will be able to bid for one or more packages, and all bids will be considered on their merits. Our proposals will attract new outside management, and they will give the industry’s existing managers and employees the chance to make proposals to take over their own industry.

The Government have made it clear that we are prepared to offer financial support to help potential management and employee buy-out teams to carry their proposals forward.

Mr. William O’Brien

Will the President of the Board of Trade give way?

Mr. Heseltine

No.

On receiving Royal Assent, the Bill will end immediately the existing statutory restrictions that limit the scale of operations of private sector mines that can be licensed by British Coal. It will provide for a new Coal Authority to carry out those functions of British Coal which would not be appropriate for the private sector.

The new Coal Authority will be based in Nottinghamshire. Its main functions will be licensing of coal mining, owning and granting access to our coal reserves, carrying out British Coal’s responsibilities for the physical legacy of past mining to the extent that they are not taken over by the private sector, and making available mining records and geological information.

The Coal Authority must be fully impartial in carrying out its licensing duties, so it will not, therefore, be allowed itself to participate in commercial mining. British Coal will become a licensee of the Coal Authority prior to privatisation. The Bill contains scheme-making powers, similar to those in previous privatisations, for the transfer of property, rights and liabilities of British Coal to other parties as necessary for the privatisation of the business. The Bill provides for the dissolution of British Coal in due course.

I turn now to the critical issue of safety. The coal industry in the United Kingdom has one of the best safety records in the world. I made it clear as soon as I arrived at the DTI that I would do nothing to prejudice that record. I repeat that pledge today. In 1992, we sought—

Mr. Ronnie Campbell

Will the President give way?

Mr. Heseltine

The hon. Member has had a go.

In 1992, we sought the advice of the Health and Safety Commission on the safety implications of privatisation. The commission’s full and considered advice was received in October. The Government published that advice, and accepted it in full.

The essence of the commission’s advice is that it should continue to be the health and safety regulatory body for the coal industry, that the Health and Safety Executive should be the enforcement authority, and that the framework of legislation must be sufficiently robust to command the continued confidence of the industry and to ensure that health and safety standards are maintained or improved.

Mr. Ronnie Campbell

On that point—

Mr. Heseltine

The commission’s advice is that there is already a comprehensive framework of law governing the mining industry, with a rigorous inspection and enforcement regime. The commission believes that the work that it has been doing since 1983 to modernise that framework will make an important contribution to ensuring that it is adequate to the demands of a privatised industry.

The commission has also taken steps to ensure that the best practice in British Coal’s existing owners’ instructions continues to be applied throughout the industry. The work to achieve that is now largely completed. Draft regulations were laid by my right hon. Friend the Secretary of State for Employment on 1 October last year to give legal status to a number of the most important requirements of British Coal’s safety instructions.

The commission has also recommended that there should continue to be a national rescue service. The commission will consult widely about the way forward. The Bill reflects the advice that we have received from the commission.

Another issue of fundamental concern to employees and former employees of British Coal is pension provision. I am determined that the pension entitlements of those who have given their working lives to the industry, and their dependants, should be fully respected and safeguarded in the process of privatisation. A consultation paper on proposals for British Coal pensions after privatisation was published in September last year. Comments were received from the trustees of the British Coal schemes, from the corporation, from industry unions and from more than 1,000 individuals.

After careful consideration of all the responses to the consultation paper, on 2 December we announced our decisions. All pensioners and deferred pensioners of the mineworkers’ pension scheme and the staff superannuation scheme and all currently contributing members will be able to leave their past service entitlements in the schemes, which, on privatisation, will be closed to new members. New industry-wide pension schemes will be created for employees of British Coal and its subsidiaries who are transferred to employment in successor companies.

The Bill provides for the closed schemes to be given a Government solvency guarantee that will ensure that pensions and deferred pensions are increased annually after privatisation, in line with the retail price index by reference to their level at privatisation. In addition, beneficiaries will be able to benefit from any fund surpluses through pension payment increases over and above RPI levels. The new industry-wide schemes will provide the same package of benefits as the corresponding main scheme. Employees transferred to the new schemes will be given protected person status under the Bill.

The Government believe that those proposals meet in full our commitment to protect pensions under the two existing schemes. The proposals will provide security for pension entitlements earned from service with British Coal and will provide protection for pension entitlements from future service with successor companies. The Bill provides the necessary statutory underpinning for all the- safeguards proposed.

Next, I refer to concessionary fuel entitlements. I am again determined that they should be properly safeguarded. A consultation paper on this subject was published in October. My hon. Friend the Minister for Energy yesterday announced our conclusions. Responsibility for meeting the entitlements of former employees and their dependants will be transferred to the Government. Successor companies will be responsible for the entitlements of British Coal employees who transfer to them.

I believe that our policies for the treatment of pensions and concessionary fuel fully meet the Government’s commitment to safeguard entitlements, and are fair to beneficiaries and to taxpayers. They will provide welcome and essential reassurance to many mining families that their hard-earned entitlements will not be jeopardised.

Mr. Eric Illsley (Barnsley, Central)

Will the right hon. Gentleman give way?

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

Will the right hon. Gentleman give way?

Mr. Heseltine

No. I have given many times.

The Bill addresses the issues of subsidence. There must be proper protection for the rights of householders and others who may be affected by coal-mining subsidence. A large part of the Bill is devoted to establishing a strong regulatory regime for that purpose.

The Coal Authority will take over all British Coal’s existing responsibilities for subsidence, except in clearly defined areas where licensees will be responsible. Householders will therefore be in no doubt against whom to claim. It is an enabling power. We have yet to take final decisions as to the extent of the areas for which licensees will be responsible. Obviously, that will need careful consideration, bearing in mind the interests of the industry, the taxpayer, and, of course, the claimants.

The Coal Authority is given a strong duty to ensure that licensees make proper financial provisions for meeting claims, and the power to require that security, possibly in the form of a trust, is provided.

Mr. Foulkes

Can the President give an assurance that the beneficiaries of concessionary coal will continue to receive coal if that is what they wish, and will not be forced to take cash in lieu?

Mr. Heseltine

The answer is yes. But as happens now, there will be arrangements for a financial exchange of those rights if it is agreed with the individuals concerned. The hon. Gentleman’s point is well made.

After nearly 50 years in the public sector, the coal industry has acquired exactly the same myths as those that used to haunt other nationalised industries. It is commonly suggested that they can never match the efficiency of their competitors; that their future lies only in an endless continuation of taxpayers’ subsidies of one sort or another; that somehow or other they cannot attract significantly worthy management for the task in their control; and that, in the end, only politicians are fit to take the strategic decisions affecting their future. Time and time again, all those myths have been exposed and exploded. In case after case, they are myths.

This Bill will give the coal industry the opportunity to demonstrate that it can compete, it can stand on its own feet, it can attract managers who are the best in the world, and it is fit and able to take control of its destiny. I do not have the slightest doubt that the industry will make good use of that opportunity.

I look forward to the day when private sector coal companies will join other privatised companies as free-standing, competitive enterprises, carrying a new entrepreneurial spirit into the marketplaces of the world. To enable that to happen, we will privatise the coal industry. We will set the industry free to meet the challenges of the marketplace, to innovate, to compete and to win its rightful share in the diversified energy market in the years ahead. That is the Government’s policy, and I commend the Bill to the House.