................................................................................ ON THE RECORD RECORDED FROM TRANSMISSION BBC-1 DATE 31.1.93 ................................................................................ JONATHAN DIMBLEBY: Good afternoon and welcome to On The Record. Today - the climb down over coal; the budget; and the dole queues. On Thursday Michael Heseltine and his colleagues will wrestle again over how many pits should be saved and at what cost. As the government prepares to make a spectacular U-turn, the conflicting views of three Tory backbenchers suggest that the Cabinet has no easy way of escape. ******* We start with coal. The Government is now committed to a U-turn, forced on it not by any market imperative but by the will of the electorate, forcibly expressed in Parliament, not only by the Opposition, by a host of Tory backbenchers as well. Had Michael Heseltine pressed ahead with his original plan to close thirty-one pits, the Government would certainly have been faced with a humiliating defeat at the hands of its own supporters. Last week the Select Committee came up with a way of escape for a beleaguered Cabinet, but will it work, or does the solution to one problem simply cereate another in its place. With me now, three Conservative back-benchers: Keith Hampson, a member of the Select Committee and, incidentally, one of those who helped run Michael Heseltine's campaign for the leadership against Margaret Thatcher; Raymond Robertson, whose Aberdeen constituency contains a good many voters who work in the oil and gas industries and John Marshall, a member of the No-turning Back group and a convinced advocate of market forces. Keith Hampson first. With the subsidies that you propose to put into the coal industry, with seventy-eight thousand or more jobs originally at risk, how much of that gap do you expect to close. How many jobs will be saved if the Government adopts your scheme? KEITH HAMPSON MP: Well, the report specifically doesn't get into the numbers of pits, which pits, or overall the jobs. We started from a different angle which is, can you increase the market for coal, then it's up to British Coal the operators to decide how you can best do that, because British Coal has always had a favoured position. When electricity was privatised the companies were required to have huge volumes of coal which they had to buy at very large prices and that's why now that the contracts are over, they don't want to proceed with those volumes. So we've got to in a sense, re-rig the market a bit. DIMBLEBY: Yes, but given that you were driven by the political imperative of jobs and communities - that's why people were up in arms - you must have come up with some notion of how many pits are likely - say people talk about fifteen to twenty pits - how many jobs roughly, what ball-park figure have you got in your mind? HAMPSON: We didn't go into that. I honestly with ...... DIMBLEBY: You ignored it altogether? HAMPSON: We have here great depth. How many jobs overall, not just in the pit industry, but in the equipment manufacturers, in the gas industry, the nuclear industry. The employment consequences are heavily and thoroughly examined, but we do not say what our recommendations would have in consequence on those jobs. DIMBLEBY: Would it be fair though, Mr Hampson, to say that we are talking about if your proposals were taken up, saving some tens of thousands of jobs, don't be specific, but we're talking about saving tens of thousands? HAMPSON: I think at the lowest end, if these proposals are adopted, you could save about thirteen pits, possibly in my view about seventeen. I think it's really raising expectations too far when people say twenty-odd, because what that means is simply you're rippingout the coal in the short term for about the next year or so before you actually close the pits.
DIMBLEBY: Okay. So we're talking about tens of thousands of jobs, maybe thirteen to seventeen pits. Raymond Robertson, amongst your constituents, oil workers and indeed many gas workers. What do make of the proposals? RAYMOND ROBERTSON: Well, I'm concerned that the Select Committee is asking the Government to fundamentally change the balance between coal and gas in favour of coal. Why was it right for those members who have mining constituencies to say to their people, "Do not.. it's wrong for us to go back and say to you, prepare for unemployment, yet it's right for me and other colleagues in Teesside and East Anglia to say to our constituents, it's perfectly alright for me to go back and say to them, prepare for unemployment". Well, I'm not prepared to do that. DIMBLEBY: And that's what you think you're facing if they pick up - if Heseltine picks up these proposals? ROBERTSON: It's not just me that saying that. The United Kingdom Off-shore Operators' Association has estimated that over a five to seven year period fifty-five thousand jobs in the Northern gas sector would be at threat, and .. DIMBLEBY: And do you buy that figure? ROBERTSON: Oh that's backed up - it's not my figure, that is backed up by other consultants like County Nat-West with MacKenzie who have said something in the region of thirty to forty-thousand jobs. DIMBLEBY: Keith Hampson. HAMPSON: Well, it's not the case, if you accept these recommendations. It could have been, but I - the interesting thing is that all the Labour members signed up to this report and in this report we say you do not go back on the dash for gas. There will be at least twelve stations, that's about eighty - eight thousand milliwatts of electricity generated by gas, that's about getting on to twenty odd per cent of the market. We reckon you could actually, probably have another two stations. We do not say that there should be no more stations. What we do say is, that there are twelve consents sitting in the Government at the moment, another twelve, which almost all the evidence was that the economics of the market will not now require, people will not want to go on with them, but we do say, they could go on if you, as the Government, take real care as to how and why you need those stations. DIMBLEBY: Reassured not! ROBERTSON: No, the economics of the market obviously will take coal if coal is being subsidised. The gas industry is not being subsidised, we have more gas than we have coal, it's cleaner and it more environmentally friendly than coal. HARRIS: But the Labour Party members would have liked to have said, close down what is going to happen. Stop these gas stations coming on stream. They signed up to the logic, which is there is a big industry there, it is successful and we're saying that gas will take twenty-four per cent of the energy generation market. ROBERTSON: So I have to be thankful we're not closing it down, when we're merely turning it back. Well, I'm not thankful about that, and that's unacceptable. DIMBLEBY: When you say it's unacceptable are you also saying there is no way, if the Government comes up with something of the kind that Keith Hampson and his colleagues are proposing, you won't be able to go in the lobbies and say Aye? ROBERTSON: I'm not saying that, because they were too far down that road. What we've now to got to do is to impress upon Government colleagues who represent the gas industry like myself (INTERRUPTION) ... have now got to press upon the Government that we find that aspect of this report unacceptable. DIMBLEBY: How many of you roughly are there, d'you reckon? ROBERTSON: Well, in the North-East of Scotland there are a clutch of members, Teeside and East Anglia. I mean we failed to put the case for gas because coal is emotive, coal is sexy and really the Government and I'm afraid the DTI has like (INTERRRUPTION) has allowed itself to be conned by the coal lobby. DIMBLEBY: Now let me bring in you John Marshall -
no turning back group; thorough believer in the free market, representing, as it were, a group of MPs who may not be specificlaly involved as Mr. Robertson is, but have a broad overall view. How do you respond to what the Select Committee's come up with? MARSHALL: I think first of all, what the Select Committee has shown is that when Michael Heseltine put forward his proposals he did so because the alternative wasn't easy. The alternative would cost jobs elsewhere and we've actually seen a very interesting discussion between our two colleagues.. HAMPSON: Not in gas though - not in gas. MARSHALL: They will cost some jobs in gas - of course they will. What we've seen is a very interesting discussion which is when you re-rig the market, to use Keith's words, then you cost jobs elsewhere, and you always cost jobs in the more successful industries in order to help the less successful, and this is what's going to happen as a result of this report. What concerns me first of all is that we're going to see more money being spent over the next few years than would have happened under the Heseltine proposals. At a time when the Government should be cutting back public expenditure - the net effect of this will be increased public expenditure - and I also feel that any system of subsidy never has the beneficial consequences that people imagine. We are told, for example, that one of the consequences - one of the necessary conditions of this - is that working practices in the pits should be improved and costs should be reduced. I think one has to look back at the history of British shipbuilders, British Leyland and other industries which have received huge subsidies, always on the promise that this is the last time. Don't worry - in future working practices will be better. It hasn't happened in the past, I doubt if it will happen now. DIMBLEBY: Mr. Marshall, are you saying this is basically back to "lame duck" strategy if we're not careful? MARSHALL: Well, I think there must be that risk involved. I'm sure Mr. Scargill is sitting perhaps watching this programme, but I can't believe that Mr. Scargill is thinking of ways of cutting costs in the Coal Industry. DIMBLEBY: Let me ask you Mr. Hampson, to deal with this point about the borrowing. The charge is that this is going to cost the Exchequer - the cost of borrowing far more when already it is ballooning almost out of control. HAMPSON: Well, first, productivity in British Coal has gone up by over two hundred per cent in the last seven years. We reckon - and every expert we've had come to us said - that they could go on improving productivity over the next five years. That would enable them to get their prices down to the level of imported coal prices. That is sensible, because fifty-five per cent of all accessible coal reserves in this country - this country only has twenty-five years of coal available to it from present pits - fifty-five per cent of that coal is in these thirty-one pits. It's lunatic... in the national interest it must be right to try and get that out. DIMBLEBY: Be good enough to deal with the question Marshall raises....... HAMPSON: But that is the reason why you should, in the short term, give them a breathing space to get their costs down so that those energy reserves can be got at. Now in terms of the PSBR, we're proposing subsidies of about a hundred-and-eighty million this first year, tapering off over five years to a total of about five hundred. The cost to the PSBR of the redundancy package, the re-training measures and everything else, is over one point three billion this first year. The Treasury, therefore, saves on this sort of subsidy as against what otherwise the closure programme would cost. DIMBLEBY: Money saved, Mr. Marshall. MARSHALL: Well, that just will not be true. As Keith full well knows a number of pits are going to be closed this year - they will have the full cost that they would have had under the Heseltine package. What he also knows is that the pits we're talking about will probably be closed at the end of the subsidy period, so that, in fact, there will be their redundancy costs there as well. What we also - what I suspect and what the press suspects is that the subsidy will be much higher than he indicates and, finally, this report isn't about productivity and keeping costs down as much as possible, because you know full well Keith that the cheapest form of producing coal is by open-cast mining. Yet your report recommends that open-cast mining should basically be ended. HAMPSON: No we don't sir.. MARSHALL: Oh yes you do. Oh yes you do. HAMPSON: I wish people would read the report. We say that open-cast is declining anyway in the next five years and it would go down to ten million tonnes - well, it would go to twelve - we're saying it should go down to about ten, a small decrease. However, the levy which is already paid to the nuclear industry we reckon is being overpaid to the nuclear industry and we're proposing that this subsidy for coal should be sliced off that. So there's no actual cost to the PSBR in the subsidies at all. DIMBLEBY: It's cost free, you're saying? HAMPSON: It's cost free to the Treasury. It is coming off the electricity consumers who are already paying it, already paying it for nuclear. We're suggesting some of it should go from nuclear into helping coal. DIMBLEBY: If the cost of coal is reduced internationally over the timespan of these subsidies, is your subsidy open-ended during that period to ensure competitiveness? HAMPSON: It is specifically tailored to the condition that British Coal lower their costs over a five-year period as they've said they could do. It tapers off from the first year of a-hundred-and eight right down to the odd twenty million at the end of the five-year period - a total of around five hundred million, provided they reach the productivity levels. MARSHALL: That's the same story we've heard with every subsidy in the past. HAMPSON: We believe it's worth giving them a chance because fifty-five per cent of this nation's coal reserves are locked into those pits which you otherwise wouldn't get unless you pursue this policy. DIMBLEBY: Let me ask you Mr. Robertson and Mr. Marshall - if the Government listens to you on this and ignores what the Select Committee are saying altogether, there clearly is (because of the number of coal concerned Tories) serious risk that the Government would lose the vote. Do you feel so strongly about that that you are prepared in principle to challenge that and face that prospect? ROBERTSON: I honestly think that those of us who represent constituencies which have a gas interest didn't speak out loudly enough in October when all this was heppening. As I said earlier, I'm frightened and I'm fearful that the Government and then the Select Committee really did allow themselves to be conned by the coal lobby, and that can't be allowed to happen again. DIMBLEBY: Mr. Marshall next. Mr. Marshall - on the substantial point, are you prepared to say "No" or in the end do you bend because you want to stay on that nice warm Government bench? - or back-bench behind the Government? MARSHALL: I didn't know that back-benches behind the Government were particularly warm, particularly nice, or particularly cosy. We're in the situation where the Government is seeking to make up its mind, it's right that all of us should be part of that policy creation process, and until the final policy is determined it's not for any of us to say whether we will support it or not. DIMBLEBY: Let me ask - it is, however, I suspect for Mr. Hampson to say, and I'm sure he's happy to say it - if the Government falls far short of your recommendations, will it face the prospect of upheaval as it clearly faced before it decided to change course? HAMPSON: Yes. Can I just say that we weren't conned. In here there's a whole section with at least oil companies in the industry citing the facts and figures, and we did on balance decide - can I just correct this though because we decided that the arguments of Robin Cook and others, that this whole crisis was to be blamed on gas was not the case. Labour members signed up to that. There's going to be a huge gas industry supplying a quarter of our energy generation in five years' time. DIMBLEBY: Right. Now answer my question if you'd be so kind, briefly. Have we got to get pretty close to what you're saying to be confident of getting it through? HAMPSON: If Arthur Scargill and the Unions can bring about these productivity changes, then there's a real future of getting prices down to import levels and British Coal will have a future but, if we don't, we'll face this crisis again and the Government will have to consider closing pits again. DIMBLEBY: Mr. Hampson, do I take it that you don't wish to answer my question, because if you don't do it right now you're not going to have a chance to. Yes or No? HAMPSON: I think the Government will have to close pits later on unless we can get productivity down and the cost of British coal down. DIMBLEBY: Still doesn't answer my question unless.. We'll see what happens. Thank you all three for demonstrating it is indeed going to be more fraught than some may so far have assumed. ***************************************