PART I.-DEMAND AND UTILISATION.

CHAPTER I. GENERAL STATEMENT.

The paramount importance of the coal mining industry in the economic and social life of this country is a commonplace, and it is unnecessary for us to dwell upon it. With the exception of agriculture, to which it is a close second, the industry employs more men than any other; not less than one-twelfth of our population is directly dependent on it. It is the foundation of our iron and steel, shipbuilding and engineering trades and, indeed, of our whole industrial life. The value of its product is in the neighbourhood of £250,000,000 a year. It provides one-tenth of our exports in value and about four-fifths of them in volume. By furnishing outward cargo for a large amount of shipping, it cheapens freights for the imports on which we depend for our vital needs.

In 1800 our output of coal was about ten million tons. Throughout the nineteenth century, and up to the outbreak of the war, the history of the industry was one of rapid and uninterrupted expansion both in output and in exports, culminating in the year 1913; when 287 million tons were raised and 98 million tons exported.*

That year, up to the present, marks the climax of the industry's prosperity. Essentially dependent as it is on its foreign markets, it was particularly susceptible to the disorganising influences of the war. For about five years it was under Government control; exports were limited in order to conserve the necessary quantities of coal for our own essential needs; export prices rose to enormous heights; markets were lost, and a sharp stimulus was given to the development of foreign coalfields and the use of substitutes. By 1920 output had fallen to 230 million tons and exports had been cut down to 43 millions, or considerably less than half the pre-war rate. It was not until the advent of the trade depression at the close of that year that the approximation of the free export price to the controlled inland price made it possible to remove the restriction on exports. It was not until July, 1921, that the industry was free to set about the task of recovering the export trade that is vital to it. In the circumstances, as we shall show, the degree of success that has been attained is remarkable. But this is partly because, until a year and a half ago, it has been singularly favoured

* Inclusive of 21 million tons shipped as bunkers on foreign-going steamers and as coke and manufactured fuel.

by fortune. As was pointed out to us in evidence by Mr. Gowers, the Permanent Under Secretary for Mines,

"ever since the end of 1920 the depression that then overtook the other heavy industries has been lying in wait for the coalmining industry, but has been warded off by a series of accidents. For the last half of 1921 the industry was busy filling the gaps made by the three months stoppage in the summer of that year. In the first half of 1922 the depression actually laid its hand on the coal mining industry, but the great strike in the United States of America came to our rescue. After that came the French occupation of the Ruhr, and it is only during the last 15 months that the industry has not been helped by the temporary cessation of some normal sources of coal supplies. Without this its present difficulties could hardly have failed to come upon it four years earlier."* For this reason it is difficult to select any post-war period that we can say with confidence is typical of post-war conditions, and the position has been further complicated by the fact that there has recently been some recovery in our export trade at the lower prices that followed the grant of the subsidy. Whether we take the year 1924, however (which opened while the stimulus of the Ruhr occupation still had its effect and which ended in depression), or the year 1925 (which opened in depression and closed with a subsidy-fed revival) we are led by a comparison with pre-war conditions to the same general conclusions.

Foreign Demand.

The material figures for a comparison of the state of the industry before the war and in the last two years are as follows :—

These figures make clear-what is indeed notorious-that it is the export trade rather than the home trade that is the seat of our present troubles. We will make a brief analysis later of the causes that account for the change in the home demand, and also of the position of the bunker trade, but we will first examine in greater detail the more important question of the contraction in foreign trade. How far are we to regard it as a permanent change, to which the industry must adapt itself as best it can? How far can the position be retrieved by lower prices or other means?

Gowers, para. 16.

† Here, and throughout our Report, we shall (whenever possible) regard the average of the five years 1909-13 as the proper standard of comparison for pre-war conditions. Single years are not a safe basis for statistical comparison, and 1913 was a year of exceptional activity.

Have we lost trade because coal is supplied from other sources to consumers whom we used to supply? If so, can we hope to recapture the markets? Or have we lost it because less heat and power are being consumed, owing either to industrial depression or to political upheaval If so, may we look forward to an improvement when these temporary causes pass away? Or again, have we lost it, not because less heat and power are being consumed, but because they are supplied from other sources than coal? If so, must we regard this as a permanent loss ?*

The answers to these questions cannot be precise. But we will endeavour to set out concisely the relevant facts that emerge from a study of the evidence laid before us.

The following table analyses our loss of markets in the countries that were our principal customers before the war. (It is on a pre-war territorial basis.)

† Including the Argentine, Uruguay, Brazil and Chile.

The most striking reductions are in the exports to Germany and Russia. It will be seen from the figures given in the Survey that in both these countries the reduction is more than accounted for by a reduction in consumption. Germany is estimated to be consuming some six million tons less annually than in the pre-war period; Russia, 13 million tons less. But the causes of the changes are very different. The cause in Russia is economic dislocation, and it may be that at some future date she will again become an important market for our coal. In Germany the causes are more complex, but the most important single reason for her reduced

The facts and figures on which the following paragraphs are based will be found in the detailed "Survey of Foreign Production and Markets," which is printed in Section 2 of the Annex.

consumption of coal is undoubtedly her increased production of lignite (used for generating electricity, for the nitrate and other industries and for domestic purposes) which is equivalent to an addition to her resources of at least another 15 million tons of bituminous coal. We were also told that greater economies in the industrial use of coal have resulted in a saving of about 10 per cent.*, and it appears that a substantial advance has been made in the use of water-power for the generation of electricity.

Next in order of importance amongst the lessened markets comes Italy. Here there is no question of reduced consumption. It is a remarkable fact that, in spite of an intensive development of hydro-electricity, the total amount of coal imported by Italy has not decreased. The truth is that, whereas before the war 90 per cent. of this was British coal, only about 63 per cent. of it is so to-day. The gap is filled almost entirely by Germany, who before the war supplied Italy with less than a million tons of coal, but now sends two or three times as much. To what extent responsibility for this must be placed on the Reparations provisions of the Treaty of Versailles is a question on which witnesses before us differed. The opinion of Mr. Leith Ross, Deputy Controller of Finance in the Treasury, was that: "Viewing the situation as a whole, it is difficult to maintain that the Reparation deliveries have directly affected the volume of the British export trade, the depression in which must be attributed to other causes. The most that can be said is that Reparation deliveries have to some extent affected the direction of our coal exports. This applies especially to the Italian market."† In reply to a question whether it was his opinion that, if there had been no Reparation Clause in the Treaty at all, the British coal trade, in volume, if not in direction, would be much the same as it is now, he said, "I think it would be much the same, except in the case of Italy. Exports to Italy might have been slightly higher than they are at present."‡

The Mining Association shared the view that the effect of Reparation coal was only a matter of readjustment, not of loss, but the Coal Exporters' Federation considered that, in practice, this readjustment could not be made without loss.

Next in order of importance is the South American market, where our loss amounts to between two and two and a half million tons. In the pre-war period upwards of seven million tons were exported annually to the Atlantic States of South America. Ninety-three per cent. came from this country and 7 per cent. from the United States. At the present time these States take 5 million tons, of which our share is 85 per cent. There has been a small increase in the production of coal in Brazil since the pre-war period. But the decrease in our exports to these

* Leith Ross, Q. 2045.

Leith Ross, Q. 1965.

† Leith Ross, para. 9.

markets (apart from the fact that we have lost ground slightly to the United States) is chiefly accounted for by the substitution of oil fuel. There is now, however, a reaction; it appears, for example, from a table* given in the Annex that, although for six years up to June, 1924, the proportion of coal used by the Argentine railways steadily diminished and the proportion of oil increased, the process is now being reversed.

The position of France, our principal customer, is interesting. The destruction of the mines in her northern coalfield has led to their re-equipment with modern plant and machinery, and her production is now three million tons a year more than in the pre-war period. She uses three times as much hydro-electricity as she did then. Yet she imports six million tons more coal, for her consumption has increased by nearly ten millions. France, therefore, like Italy (and, as we shall see, Scandinavia), affords confirmation of the view expressed to us by more than one witness, that the development of water-power, if it brings with it increased industrial activity, need not necessarily lead to a diminished consumption of coal. The British share of her imports is, however, (in 1925), rather less than in the pre-war period, when it was 45 per cent. of the whole. In France, it appears, our loss is due not to reduced consumption but to competition by Germany. The possible effect of reparations has already been discussed.

It is not necessary to refer in detail to the other countries included in the table given above. Full particulars will be found in the Annex. Spain has developed her own coalfield, which holds its own with difficulty, and with the help of a tariff against our cheaper production. In Holland the output of coal (now seven million tons) has more than quadrupled. In Egypt the decline in our exports (about a million tons) is attributable chiefly to the substitution of oil for bunker coal. The present industrial prosperity of Belgium leads to her taking more coal from us than before the war, notwithstanding that she has developed an important new coalfield, which is already producing over a million tons a year. Scandinavia and Denmark, in spite of a considerable development of water-power, imported 2 million tons more in 1924 than in the pre-war period, and a million tons more in 1925. In the former year we secured the bulk of the increased imports, but in the latter we lost ground heavily to foreign competition.

From this short review of the position of Great Britain's customers we will turn to consider briefly the position of her competitors, almost all of whom, like her, are undergoing a period of depression. The principal exporting country after Great Britain is now, as before the war, Germany, in spite of the loss of coalfields producing 48 million tons (in 1913) in the Saar, Alsace-Lorraine and Polish Upper Silesia. Her exports, including reparation coal, are now at the rate of about 35 million tons a year. Her principal markets before

* Table 26, p. 258.