Britain’s nationalisation experiment

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 20 Apr 2015   Posted by admin


The National Coal Board took over mines across the UK on 1 January, 1947.

“I have the profound hope that we can not only put this industry on its feet but we can make it…profitable in the sense that it will pay the nation.”

By Mark Scott

20 April

WHEN the British Government took over the country’s coal mines on 1 January 1947, it temporarily ended decades of debate about private versus national ownership of the mining industry.

Coal was a vital part of the British economy for centuries, fuelling the Industrial Revolution and employing more than a million workers at its peak in the early 1920s.

However from the early twentieth century, Britain’s coal industry began a drawn-out decline.

Strikes among its heavily unionised workforce had the capacity to bring the nation to a standstill, while increased competition from cheaper coal-producing countries and other fuel sources saw employment levels in the industry plummet from the 1920s onwards.

The UK had flirted briefly with nationalisation of its coal mines during the world wars, spurred on by industrial unrest and poor productivity.

Amid the destruction wreaked by the Second World War, the British Government moved to fully nationalise the country’s coal industry in a bid to boost employment and improve efficiency.

From 1947 to 1994, the National Coal Board and its successor, the British Coal Corporation, owned and ran every colliery in Britain.

With the passing of the Coal Industry Act 1994, the administrative functions of the corporation were handed over to a new authority and the 16 remaining operating coal mines were sold to the private sector, ending an almost 50-year experiment with nationalisation.

Despite its lofty intentions, the nationalisation push was largely a failure – at the end of the Second World War, the British coal industry employed 720,000 workers, which had dropped to 230,000 by 1980.

At the time of privatisation, UK Secretary of State for Trade and Industry Michael Heseltine said nationalisation had imposed “intolerable economic and legislative burdens” on the country.

“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 have secured for itself a larger share of the marketplace than is today realistic,” he said.

Road to nationalisation

The British Government had a long history of intervention into the coal mining industry, with militant union activity forcing it to impose rulings on wages and working hours on numerous occasions throughout the late nineteenth and early twentieth centuries.

Britain’s coal mining industry hits its peak just prior to the outbreak of the First World War – in 1913, more than 2500 British mines produced more than 290 million tonnes of coal, 30 per cent of which was exported.

During the war, as labour shortages and continued industrial action plagued the industry, the government took financial control of the mines and responsibility for workplace relations.

The change would prove to be temporary – as a recession struck the industry in 1921, the government moved quickly to hand back financial control to mine owners and wash its hands of potential losses.

A series of strikes over poor wages and working conditions throughout the 1920s prompted government reports recommending nationalisation, but to no avail – policymakers instead pursued ‘rationalisation’, looking to set prices and wages and enforce more efficient production methods.

Regardless, the industry continued to suffer. Mines had to dig deeper than ever before to extract poor-quality coal, while competition from Germany and the US put pressure on exports.

Britain’s share of global coal exports dropped from 50 per cent in 1913 and 30 per cent in 1938, which had a spiral effect; companies could not afford to invest in new production technology and fell further and further behind their German, Russian and American competitors.

When the Second World War struck, the government once again moved towards nationalisation, taking control of coal reserves while leaving the industry itself in private hands.

By the end of the war the industry was so crippled that the Labour Government began to push for nationalisation, and a public that blamed private ownership for the woes of the coal miners was more than happy to accept the plan.

Speaking on the bill to nationalise coal mining in 1946, Fuel and Power minister Manny Shinwell outlined the key reasons for nationalisation: maintaining Britain’s leading position in the global economy; fuelling the nation; and, above all else, ensuring better conditions for mineworkers.

“I can recall with honourable members in all quarters of the House the desolation, the devastation of the interwar years, the misery and anguish in the homes of mineworkers and their wives and families,” he said.

“We must never repeat that. I recognise that we must produce coal, and produce it in vast quantities because of an ever-increasing industrial demand. We must produce coal, and produce it in a right and beneficial atmosphere, with amenities and welfare conducive to the wellbeing of the mineworkers.

“This bill at any rate provides some hope for the mineworkers.”

Mr Shinwell was optimistic about the future of the industry, and believed nationalisation would benefit the entire country.

“I have the profound hope that we can not only put this industry on its feet but we can make it, not in the language of capitalism, but in the understanding of honourable members on this side, profitable in the sense that it will pay the nation,” he said.

“We can afford to give the mineworkers the best conditions and the highest standard of wages, and we can minister to the needs of our national industry and afford to coal consumers coal regularly and at the cheapest possible price.”

On 1 January 1947, named ‘Vesting Day’, the government paid out more than GBP164 million in compensation to mine owners and the National Coal Board took control of 958 collieries as well as coke ovens, power stations, brickworks and other assets across the country.

Almost 800,000 workers were employed by the National Coal Board and, in a letter to workers, Prime Minister Clement Atlee declared “the coal mines now belong to the nation”.

Flyers released on Vesting Day proclaimed “the coal mines now belong to the nation”.

The failed experiment

In the immediate aftermath of nationalisation, coal output soared – from a low of 178mt in 1945 to 230mt in 1952.

However the changing global energy market soon got the better of the industry, and as North Sea oil and natural gas ramped up in the 1960s, coal exports began to plummet.

Through the 1970s production hovered around 120mt per year, propped up by the nationalised electricity industry’s policy to rely mostly on domestic coal.

By the 1980s the government was heavily subsiding coal operations and Prime Minister Margaret Thatcher’s policy of reducing subsidies saw the National Coal Board announce plans to close 20 unprofitable coal mines in 1984.

The move, set to cost 20,000 jobs, prompted the most bitter industrial action in British history, with tens of thousands of coal miners downing tools for an entire year.

In the end the conservative government had its way, marking a turning point in Britain’s industrial relations and signalling the end of nationalisation was near, as the tide turned towards privatisation across the economy.

By 1990 coal production had dropped to 90mt, a number which would halve again across the next four years as the electricity industry was privatised and unshackled from its commitment to domestic coal.

At the end of 1994, the year the bill to privatise the coal industry was passed in Parliament, production had dropped to 48mt and employment to just 7000.

As the bill made its way through Parliament, Mr Heseltine expressed confidence in the future of the industry in private hands.

“[The industry] 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,” he said.

“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.

“There is every reason to expect that the coal industry will do the same.”

The bill was passed and in December 1994, Britain’s mines were sold – RJB Mining claimed the majority in England, paying GBP815 million for 28 deep mines and seven open cut mines. Mining (Scotland) Ltd bought the Scottish operations and Celtic Energy took over mines in South Wales.

By January 1994 the few remaining mines were sold off to smaller players, netting the government a total of GBP955 million.

However Mr Heseltine’s expectations were never met; as of last year Britain’s largest coal miner, UK Coal, employed just 2000 people and operated two coal mines, and the country’s coal mining industry is largely seen as in terminal decline.