House of Commons
Wednesday 10 November 1999
The House met at half-past Nine o'clock
PRAYERS
[Madam Speaker in the Chair]
Coal Industry
Motion made, and Question proposed, That this House do now adjourn.--[Mr. Clelland.]
Madam Speaker:
Before I call the hon. Member for Barnsley, West and Penistone (Mr. Clapham), it has been indicated to me that many Members wish to participate in this debate. I would like brief speeches so that we can have wide participation.
9.33 am
Mr. Michael Clapham (Barnsley, West and Penistone): I am grateful for having secured this debate on the coal industry because it is at a very important juncture. It is once again at the crossroads. I am pleased to be debating it with the Minister, as I know that she has empathy with the industry and mining communities because she represents one and understands the issues. I hope that we can encourage that empathy to translate into positive action to support the coal mining industry.
Last week, there was an announcement by RJB, the largest mining company in England, that Ellington colliery, the last in the north-east, would be closed in February 2000 with the loss of 400 quality jobs. There is a shadow across the whole of the English coalfield because some 5 million tonnes are already on stock and imports are penetrating some of the markets that United Kingdom coal previously had. I hope that this debate will play some small part in trying to find a way forward that will retain what remains of the industry within a secure, diverse and sustainable energy framework.
Government policy was contained in the October 1998 White Paper on energy, which was supposed to pave the way for a level playing field that would help the coal industry. It is fair to say that one year on, it is clear that that policy needs reviving if we are to save the coal industry. Collieries are closing, employment in deep mines is falling and the future of the entire English coalfield is threatened. However, it is not only the English coalfield that is affected, as we shall see.
Only 18 of British Coal's former deep mines are operating. There is one colliery in Scotland--the Longannet complex--two in Wales and 15 in England, soon to be cut to 14. We are fast approaching the point of losing the industry's critical mass. It is not only the English coalfield that is suffering; the Welsh and Scottish coalfields suffer from the same problems.
Since this debate was announced, I have received several letters. The chairman of Tower colliery, Tyrone O'Sullivan, says that it pays £5.4 million per annum to
the Exchequer and has kept 400 people in quality jobs, thus reducing the cost of state benefits. He says:
It is not only jobs in mining that are threatened. For example, I received a letter on Monday from the Association of British Mining Equipment Companies expressing grave concern about developments in the UK coal industry. Those companies export about £300 million of mining machinery and have been selling £200 million of equipment into the English coalfield, although that has declined recently. Every pit that closes reduces orders and threatens manufacturing jobs.
I refer the Minister to what Philip Deakin, the association's director general has to say. His letter states:
When we examine the British coal mining industry, we find that the industry's development and the cost reductions it has achieved suggest that, with a little aid, it is quite capable in the short term of reaching a point where it can stand on its own two feet. In 1994, imports into the UK cost between £1.20 and £1.30 per gigajoule, whereas UK production costs were between £1.40 to £1.50 per gigajoule. The UK industry has been able to reduce its costs and dramatically decrease the gap: now, it has got its price down and is signing contracts at £1.15 per gigajoule. However, import prices have also fallen dramatically: they now come in at between 70p and 75p per gigajoule.
How are we to react? Costs in the UK industry are falling and there are indications of further opportunities that might prove beneficial. In such circumstances, it is fair to ask the Minister to consider seriously action to assist the industry, perhaps formulated through regional selective assistance.
Mr. William Cash (Stone):
I congratulate the hon. Gentleman on choosing to debate this subject. On the question of aid, he will recall that those of us who voted against the pit closure programme were deeply concerned about the fact that Germany's industry receives a multi-billion pound annual subsidy, authorised by the European Commission. With all the current noise about Europe, does the hon. Gentleman agree that it is about time we sorted out that issue, as the Select Committee on European Scrutiny has chosen to do shortly?
Mr. Clapham:
I am asking my right hon. Friend the Minister to consider what can be done to give aid to the UK coal industry. My right hon. Friend is, of course, aware that massive aid is paid to the German, French and Spanish industries.
I believe that the simplest way to give aid would be to pay the generators the difference between delivered international coal market prices and the UK price, so that the subsidy went to generators in the short term, until the industry was able to find stability. Assistance to preserve the industry is required because it is accepted that UK coal mining is the most productive in Europe. It is perverse that the French, German and Spanish coal industries should receive about £3.5 billion in state aids when they have no chance of becoming competitive.
In the Gallery this morning are miners from some of the threatened collieries. They are disappointed that help is given to other UK industries, but that the plight of their industry is not currently being taken into account. Their disappointment is all the greater because they know that coal prices will rise in future and that the absence of a competitive indigenous coal mining industry will make us less secure and far more dependent on imported fuels.
Looking at the other two thirds of the energy mix reveals good reasons why the Minister should consider providing an aid package to the coal industry. Gas reserves are depleting rapidly. The 1998 "Digest of United Kingdom Energy Statistics" shows that on current use, proven plus probable reserves will last for only 14 more years. It is striking to compare that with the 1992 statistics, which predicted their lasting another 24 years. In six years, 10 years supply of gas has been "lost". The Department of Trade and Industry should focus on those statistics and help the UK coal industry in order to ensure that we do not become overdependent on imported gas and that we have a diverse energy mix.
In 1998, coal doubled its price advantage over gas as a fuel for power generation, yet coal burn continues to fall: it fell by 23 per cent. in the first half of 1999 and new gas-fired stations continue to be approved. The UK coal report for October compared the prices of coal and gas, and revealed that coal is a significantly cheaper generating fuel than gas: gas generation costs 1.4p per kWh, whereas coal generation costs 1.16p per kWh, so coal has a fairly large margin of advantage over gas. Against that
background, it is extremely disappointing that section 36 consents and section 14 consents to build more gas-fired power stations continue to be granted. I hope that the Minister will tell us that she intends to ensure that the moratorium is strictly observed in future, perhaps until the proposed changes resulting from the pool review have bedded down.
Nuclear power carries inherent risks and waste storage problems remain unresolved. The recent accident at Tokaimura in Japan reminds us of the enormous risks involved in nuclear energy. Most nuclear stations in the UK are operating beyond their design lives. Earlier this year, the nuclear installation inspectorate expressed concern about staffing levels at some nuclear power stations; the full report, when published, should make interesting reading. It is fair to predict that the next few years will bring the decommissioning of some of the older nuclear power stations. Those factors and a need to avoid overdependence on gas imports are reasons why we should ensure the survival of a UK coal industry.
Viewing the industry in the context of our environmental obligations gives rise to some concern, because the Environment Agency's tight emission policy poses a threat. That policy far exceeds our environmental obligations and unless rationality prevails, it could become another factor that helps to strangle the coal industry. I accept that we have to face up to our environmental commitments and no one suggests otherwise; however, those commitments must be balanced within an appropriate energy framework.
If we are to increase generation from coal-fired stations to make up the loss when the nuclear power stations are decommissioned and to restrict gas, we need more meaningful investment in clean coal technology. Clean coal demonstration plants should be built now to prepare the way for the higher efficiency coal plants that will be required to replace the old, low efficiency plants. The Government must act now if the United Kingdom coal industry is to be retained as a viable part of the energy mix.
The Government could consider taking several actions now. For example, they could end the section 36 and section 14 consents. They could consider bringing forward negotiations on the French interconnector to enable the contracts to be renegotiated. When the Select Committee on Trade and Industry reported on the coal industry in 1993, it suggested that there should be reciprocal arrangements so that as much electricity could be sent through the interconnector to France as was received in this country.
There should be more investment in clean coal plant, and action should be taken to protect the UK coal industry against dumping from eastern Europe. We have heard recently about dumping Polish coal. The letter from Tower colliery mentions the threat that it faces from dumped coal.
"The UK Government needs to decide where the UK stands on Energy needs. The UK Coal Industry is the most efficient by far in Europe.
He then makes a telling point:
The problems we face within Anthracite is the Polish and Chinese. This coal is dumped in the UK. Also subsidies within Europe, Germany, Spain, Poland. We've stopped German coal into UK but it is within Europe affecting our exports to France, Germany and Belgium.
Coal prices are at a 20 year low, this is not sustainable but if UK pits close now . . . we will have no industry to respond in the future."
"Tower Colliery has constantly invested into the future with heavy financial developments of the mine and infrastructure and would like to develop another part of the mine which would produce coal directly for Aberthaw Power Station. But this development is costly and due to present uncertainties we are unable to commit ourselves. This would result in further employment at Tower if this was able to commence."
Tower feels that the uncertainties have been made worse by the Baglan Bay gas-fired power station, which will threaten the market at Aberthaw.
"It is apparent, and has always been understood, that should the UK mining industry cease to be a legitimate and equal fuel supplier to UK energy generators, then the effect on this manufacturing sector will be catastrophic. The loss of up to 8,000 ABMEC member company engineering jobs and over 50 companies to the UK economy will inevitably follow. This in addition to 15,000 direct employees within the mining industry.
That is not an idle threat: if the coal industry were to decline further, members of ABMEC tell me that they would have to consider relocating in countries such as Australia and America, where there is still a deep coal mining industry. Therefore, the threat extends far wider then the core coal mining industry.
Redundancies have and are taking place. Company turnovers have been severely reduced and profit margins slashed. Without the trading foundation of a UK coal mining industry, our drive for export sales, currently in excess of £300 million annually cannot be sustained and will inevitably leave this association's member companies with only one or two options--to cease trading or move abroad."
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