the policies now being pursued by the National Coal Board in the coalfields are fraught with danger, both for the coal industry and the national economy. They stem from the government’s fuel and power policy, which in the name of ‘competition’ produces a tangle of conflicting and unco-ordinated decisions. One thread runs through all. The oil companies benefit. Oil-coal ‘competition’ in particular is a game played with loaded dice (e.g. the oil companies may discriminate; coal cannot).
The coal industry’s situation is a complex one and requires detailed analysis. The impact on the national economy is by contrast starkly obvious. By the mid-1960’s, total fuel consumption in Britain will be rising past 300 million tons of ‘coal equivalent’ p.a. If current policies in the coal industry are persisted in, it is unlikely that the coal industry will be able to supply more than 200 million tons of coal, even if that much can be sold (of which there is no guarantee) in face of deliberate under-cutting of prices by oil. Atomic energy will provide scarcely 20 million tons of coal equivalent p.a., secured at the expense of an extremely costly programme of power station construction. The fuel and power ‘gap’ will be filled by oil.
The additional cost of oil imports (net) at such a level of consumption would already be about £200 million p.a. more than in the late 1950’s, and increasing rapidly. This is an amount of the same order as the balance of payments surpluses of recent years. Yet the government that contemplates this situation without concern, is the same one that argues the need for a balance of payments surplus of £450 million p.a., particularly to allow scope for investment and assistance abroad. When, in a few years’ time, the government explains that our economy cannot ‘afford’ to find capital on a scale sufficient to help under-developed countries, that our balance of payments position ‘unfortunately’ does not make this possible, the rapid increase in our dependence on oil will almost certainly be the main reason.
Criticism of the National Coal Board’s current policies would be one-sided without an explanation of the responsibility of Tory governments for the dilemma of the coal industry. Past policies play their part. When coal was scarce in the early and mid 1950’s, the government deliberately held down coal prices to a level which never even made possible adequate provision for depreciation, (I argued the case against this policy three years ago in the New Statesman, January 19, 1957, Policy for Coal). The arrangement by which the Minister did this is known as a ‘Gentleman’s Agreement’, presumably because it rests on no statutory authority nor is the Minister accountable to Parliament for what are in fact his decisions. This meant, on the one hand, that the National Coal Board emerged from a decade of coal shortages without any financial reserves, and instead with greatly increased capital liabilities. On the other hand, holding down coal prices delayed the conversion of British industry to efficient fuel using equipment. This changeover could have been hastened in the early 1950’s, using the stick of higher coal prices to the inefficient, and the carrot of tax allowances on new equipment. Industry would then have used coal, but used it more efficiently. Instead the changeover has been delayed until aggressive selling of fuel oil, now relatively cheaper, uncertainties as to the impact of the Clean Air Act, and more attention to production costs in the years of deflation, have combined to precipitate the installation of modern oil-burning equipment.
At the same time, the railways have swung away from steam, not to electrification but to diesels. In electricity generation, the decision that was taken, in face of the coal shortages of the years 1954–55, to convert a number of power stations to oil burning, led to a sizeable jump in oil-use only by 1958, when oil displaced 4 million tons of coal, and when—ironically—the coal shortage had disappeared. The contraction in demand for coal was reinforced by the effect of the long drawn out stagnation of industrial production. Meanwhile, oil imports rose 15 per cent between 1956 and 1958 despite the recession. In the first three quarters of 1959 they were over 20 per cent higher than in the first three quarters of 1958.