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Westminster Hall
Wednesday 9 March 2005
[Mr. Edward O'Hara in the Chair]
Coal Industry
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Ainger.]
9.30 am
Mr. Denis Murphy (Wansbeck) (Lab): I should like to thank the House for allowing me this debate.
On 26 January this year, UK Coal stunned everyone in the north-east by announcing the premature closure of Ellington colliery, with the loss of 370 jobs. The behaviour of the company in the run-up to that announcement and subsequently has been scandalous—I shall return to that later.
Electricity generation in Britain is currently fuelled by coal at 34 per cent., gas at 36 per cent. and nuclear at 22 per cent., with oil, hydro and renewables contributing the remaining 8 per cent. Those figures vary slightly depending on price and availability, but that is the general market share.
We are moving away from the dash for gas, but are in the midst of a dash for renewables. Although there is no doubt that renewables will make a contribution and now command all the political and public attention, there are genuine question marks against their efficiency. Unit costs for renewables are high per kilowatt installed, production is variable, they are unreliable for base load production and it is doubtful whether they will ever deliver value for money. Nevertheless, they are required in order to broaden our energy base. However, I doubt whether we will meet our ambitious targets in the proposed time scale.
The nuclear industry is regarded by many as holding the key to Britain's long-term electricity requirements. However, it does not offer a quick fix. There is a long lead-in time for project implementation and the lack of smaller and more flexible units makes the nuclear option expensive. The nuclear industry can and should continue to play an important role in the medium term. As a nation, we need to debate whether we want a new generation of nuclear power stations to provide a longer-term solution. Everyone recognises the need for secure electricity supplies, yet no one wants to live near a nuclear power station. The debate promises to be interesting.
Over the past 15 years, the dash for gas—the fuel seen then as a more efficient and cleaner energy source than the alternatives—has resulted in a significant decrease in the nation's gas reserves. It is well known that domestic UK gas supplies are diminishing, and that we will need to import large amounts of gas to feed the new generating capacity. There will be huge capital costs, as well as high gas prices to be paid. Liquid natural gas requires capital-intensive transport infrastructure, which requires liquefying plants, refrigeration and pressurisation ships, and gasification stations at UK ports.
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Jon Trickett (Hemsworth) (Lab): I am listening carefully to the powerful case that my hon. Friend is making, but has he noticed where the imported gas is likely to come from? It will come from thousands of kilometres away, through areas that are subject to civil disorder, earthquake zones and so on. The pipelines will be vulnerable to attack, will they not? Is that not a further factor in considering an energy policy that relies largely on gas?
Mr. Murphy : My hon. Friend makes a fair point.
Coal-fired power generation constitutes some 34 per cent. of the total in this country—surprisingly, 2 points up from the use figure in 2002—and requires some 53 million tonnes of coal a year. Of that, approximately 20 million tonnes is produced in the United Kingdom. In my view, we will continue to need upwards of 50 million tonnes of coal each year for the next 20 years. The argument, therefore, is not whether we use coal or another fuel; rather, it is whether we use British coal or source coal from surplus world supplies.
The greatest number of job offers that the unemployed miners at Ellington have received have not come from the new business parks on Tyneside 12 miles away, as one would have expected. Rather, they have come from 12,000 miles away, from New Zealand, a nation desperately short of skilled miners as it seeks to expand its mining industry. An article in The New Zealand Herald stated:
because of the company's rapid expansion and because
"it doesn't have time to train New Zealanders . . . Solid Energy is due to visit Northumberland in the next few weeks"
to interview miners from the 150 responses that it has received. Chief operating officer Barry Bragg said:
and the company intended to offer a fresh start down under to those miners
Solid Energy's chief executive Don Elder said that
"known global oil and gas reserves would be largely exhausted within 20 to 50 years, but abundant and accessible coal reserves would last more than 200 years."
That should surely send a warning to us all.
Every country with a coal-mining industry is expanding coal production and, in some cases, coal burn. In the United States, both main candidates in the 2004 presidential election proposed major investment in the US coal sector, especially for clean coal technology, in order to protect energy security and upgrade the environment. Similar proposals for expanding coal production are being made in Germany, where the cost of production is far higher than in the UK. However, such decisions are not being left to market forces. Energy security lies at the heart of the German Government's energy policy.
China and India require vast amounts of power to fuel their predicted growth. Most of that energy will come from coal. China alone wishes to build another 20 large coal-fired power stations. Had we as a nation invested in the development of clean coal technology, we
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could have sold those countries that technology. Instead, we have watched our research and development wither on the vine, where once we led the world.
What then of Britain's largest and most reliable source of fuel, coal? The first question must be: what on earth happened to an industry that 20 years ago employed 180,000 people at 200 sites? Have we learned anything from the mistakes of the Thatcher and Major Governments? They virtually threw away the bulk of the UK deep-mined industry, at enormous cost and in the face of the definitive run-down of UK oil and gas reserves. The cost amounted to £30 billion in today's money, in redundancy and pit closure costs, written-off investment for closed mines, and wider economic and social costs.
Some major costs persist even to this day, including long-term unemployment and ill health. A report recently published by Sheffield Hallam university highlighted the problem, particularity in south Wales and my own area, Northumberland, where it has not been possible to replace the massive number of jobs lost from mining.
I would, however, congratulate the Government on the many initiatives that they have put in place to address those problems. Such initiatives are genuinely making a difference in former mining areas. Without the operating aid and the investment aid, I doubt whether we would have an industry left to debate. However, has that aid been too little and, as far as the industry's owners are concerned, too late?
That brings me to the company that owns the bulk of the remaining surface and deep-mined sector, UK Coal. In my view, and, more surprisingly, in that of many in the City, UK Coal is not able to carry out its mining functions. It is a company rapidly turning into a land and property developer, and it will use any excuse to rid itself of its responsibilities and, if necessary, its contracts.
The work force at Ellington experienced at first hand what was, at best, the incompetence of the directors, or—what is more likely—a deliberate act of industrial vandalism not seen for decades. There is no doubt that the coal face was flooded. There was never any doubt that the face could have been pumped dry and production commenced quickly and safely. Every person at the pit, many of whom had more than 30 years' experience, knew that to be the case. They were horrified when Mr. Spindler, the chief executive, visited the mine and, within three seconds of speaking to the trade union, announced its closure.
I am indebted to my hon. Friend the Minister for Energy and E-Commerce and to my right hon. Friend the Prime Minister for their personal intervention in trying to persuade UK Coal to allow the work force a few more days to prove that they could recover the coal face. I am afraid that those requests, along with many more, were rejected. UK Coal refused point blank, saying that if the pit was not unsafe, it was uneconomic.
UK Coal cannot be allowed to sterilise any more of the nation's reserves. It currently mines coal that provides 20 per cent. of Britain's electricity. It has invoked force majeure at Drax power station, and there are serious doubts as to whether it can fulfil its contract
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at Alcan's power station in my constituency, at which 1 million tonnes of coal a year are burned, and which was previously supplied from Ellington colliery.
I do not trust UK Coal to be the guardian of the nation's coal reserves. It does not value its employees; it must be the only company in Britain that produces a comprehensive annual report in which it does not even mention the contribution of the people who work for it. It is time that someone investigated UK Coal's real agenda, to enable us better to determine a future for this industry. I am pleased that the National Union of Mineworkers has started to do just that. It commissioned a report by a team of City energy and finance experts to provide an overview and assessment of UK Coal plc.
The report makes interesting reading. It looks in some detail at the UK power generation and distribution sector and explains the changes that have taken place since the privatisation of the industry in 1990: the buy-outs, the distress sales and the spectacular collapse of British Energy in 2003. It also explains the huge losses made by high street banks and financial institutions through underperforming loans. Although accurate figures are, understandably, hard to come by, the City informally estimates the losses to be in the order of £4 billion to £6 billion through bad debt. I am sure that more noises would have been made were it not for the huge profits that the banks were making in other operations.
The losses have left their scars on investors, who now take a much shorter-term view of opportunities in the sector. Earnings per share and positive short-term cash flows are a much higher priority than long-term prospects or social issues, and quick-exit strategies are usually part of the investment plan, which tends to favour smaller, more flexible power plants and gas instead of coal or nuclear power.
Structural changes to the market have allowed 50 per cent. of it to be bought by non-UK state-owned enterprises from Germany and France, which operate in a protected market at home. Another consequence of the short-termism of financiers has been the reduction of reserve capacity in the system. Many observers say that it has dropped below prudent levels. Electricity cuts could well occur in the United Kingdom before any new major generating capacity can be installed. The report states:
"The scenario as described portrays an inherently unstable resource system. The general public remains blissfully unaware of the risks being run, and are themselves happy as the price of electricity has been reduced by 30 per cent. in real terms since privatisation. But today much of the UK's power system, comprising essentially of long term assets is being funded by relatively short term money. Not a good recipe for long term stability."
On the mining industry, the report comments on both open-cast and deep-mining. On open-cast, it draws the logical conclusion that planning constraints are a problem in expanding the sector. On deep-mining it says:
"The question now is not just can coal production recover, but given its present outlook is it sustainable at all"?
It is useful to reflect on the sector's financial characteristics, and the Selby closure is a classic example. Riccall colliery, the last mine at UK Coal's Selby complex, mined its last coal in October 2004.
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When the closure plans were first put forward, the Aire valley marker was 95p a gigajoule—a long way below the levels of 1994. Since then, spot prices have climbed even higher to 170p a gigajoule. Although I am sure that the Selby complex would have had to close at some stage, its closure in 1994 was in many ways premature. The low spot price coupled with the big mine infrastructure hastened its demise. It is hard to believe, however, that there are not recoverable coal reserves at 170p a gigajoule.
In preparing the report, the authors interviewed an engineer who had spent a decade in the design and management of mines in the Selby complex. He no longer works in the industry, but he believes that considerable value could be unlocked from some of the coal deposits in the Selby area with relatively small new investment.
Of course, another factor in the closure of the Selby complex was the anticipated redevelopment value of the land on the surface. Finance brokers' notes in August 2004 talked of Gascoigne Wood having 270,000 sq ft of undeveloped land, which could be of use to a company wishing to set up a distribution operation, especially as it has 8 miles of sidings. That was only a small part of the land bank.
The report concludes by discussing the strengths and weaknesses of the three chief executives that the company has had since privatisation. It concludes that it is too early to judge Mr. Spindler's reign, and says that he appears to be taking a hard-headed and unsentimental approach to UK Coal's mining operations. It continues:
"UK Coal is now seen in the City as a company whose principle assets are land holdings and were it not for the coal operations—the financing of which are rather opaque and bring with them some scary potential liabilities—the Companies shares would probably trade much higher. The property holdings were very conservatively valued in 2002 at £174 million, virtually the same as the entire market value of UK Coal in February 2005 of £190 million. The property assets should in time be worth a great deal more than this, so where does this leave coal mining?"
"It is clear that UK Coal has suffered from some adverse geological conditions in some mines, but that is all part of the deep mining business. What really seems to have hit recent performances are somewhat curious management decisions."
"Why did UK Coal sell so much output to Drax their most important customer which in turn is owned by a consortium of banks and then declare Force Majeure on the sales contract?"
"Why does UK Coal work only one face at a time in each mine, resulting in big production and financial losses during face gaps?"
I ask my hon. Friend the Minister to intervene at Ellington once more. The NUM has secured the services of a mining engineer, Mr. Kenneth Johnson from Ashington, who is an expert on the coal seams and geology of the Northumberland coalfield. He is preparing a business plan to mine a section of coal at the Bewick Drift area of Ellington. We need time to develop that plan fully, and I ask the Minister to prevent those reserves from being sterilised by UK Coal's rush to close
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the pit in record time. We have a ready market on the doorstep, and that coal could be mined safely and profitably.
I conclude with a final quotation from the financial report. It says:
"From a national security perspective, the deep mining industry in Britain is too important to be allowed to wither under UK Coal's dubious stewardship. A credible alternative needs to be created. This should be possible using the considerable expertise available in Britain to operate these pits which can produce coal at or below the current market price."
UK Coal has demonstrated that it is first and foremost a property and land development company. When it comes to a decision on mining coal or closing and developing the valuable land resource, it will always choose the latter. The City puts no cash value on its mining operations, and it is well known that the value of its shares will rise dramatically if it is rid of mining. That is not a company in which the nation's coal reserve should be vested.
I urge the Minister to examine the setting up of a new company for which the only priority is the mining of coal and which will pay huge dividends to the British people through a long-term supply of coal to the power stations. Network Rail is an excellent example of the type of company that could deliver the nation's coal supplies for many years to come.
9.49 am
Mr. Brian Wilson (Cunninghame, North) (Lab): I am very pleased to take part in this debate and support what my hon. Friend the Member for Wansbeck (Mr. Murphy) has said. I assure hon. Members that anything I say about Government policy or the Government's attitude towards coal is based on experience and is in no way critical of colleagues, because I have been there, got the t-shirt and know the difficulties for people such as my hon. Friend who try to argue the case for coal in an environment that is essentially not well-disposed towards it.
I want to see a change of approach to coal. After the next election there has to be another fairly major review of energy policy and the energy mix that this country is moving towards, which will give us the opportunity to cast aside the legacy of attitudes that still exist towards coal. In my experience, coal was always viewed as a problem; it was always looking for subsidy, and giving rise to short-term problems at particular pits. Somehow it was never possible to get out of that morass long enough to look forward to see what coal contributed, could contribute and—for the reasons outlined by my hon. Friend—must contribute to the energy needs of this country for a very long time to come.
I agree with what my hon. Friend says about UK Coal. It makes no sense whatever to leave such a massive national asset as our coal reserves in the hands of a single private company, no matter how diligent, let alone a company that has the somewhat mixed record of UK Coal. A major asset that may or, arguably, may not be needed at present cannot be sterilised in the short term on the basis of random commercial decisions when it is absolutely certain that it will be needed in future. That issue does not relate simply to the current behaviour of UK Coal; it must surely be a philosophical principle that no commercial interest can sterilise a national asset.
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If we accept that as a starting point, other things flow. We need not only an audit of the nation's coal assets, but a clear assessment of the measures necessary to safeguard future access to them. That can be done only as one comprehensive project; it cannot be done in an isolated way from case to case as crisis after crisis arises. After the election, if there is to be a new look at where our future electricity supplies will come from, I hope that the question of preventing the sterilisation of the nation's coal reserves will have a high priority.
I shall explain quickly why coal should matter and should be viewed in a much more positive light than has been the case in the past. My hon. Friend the Member for Wansbeck touched on the fact that whatever happens in the United Kingdom, coal will continue to be burned on a gargantuan scale in the world as a whole. As he knows, in my role as a trade representative, I was in China recently and the Chinese were talking merrily about increasing production from 1.6 billion tonnes to 2.2 billion tonnes in order to fuel economic expansion. Incidentally, they are also going to build 20 nuclear power stations—sound people, the Chinese.
The question is not whether the Chinese are going to burn coal, but whether they burn it in the old way, which would be an environmental disaster, or whether they burn it using clean coal technology, much of which, as my hon. Friend said, could be supplied—in fairness, some already is—from the UK. The other question is whether they are going to burn it in a way that continues to kill 10,000 miners a year, or whether they will benefit—I am pleased to say—from the contacts that they now have with our Health and Safety Executive.
Whatever happens in this country, coal will be the major source of fuel globally. China, India, the Philippines and most of south-east Asia will burn coal, and America will continue to view coal as its major fuel source. That creates the opportunity for our manufacturing and technological industries to develop clean coal technology, which we are very good at. The UK's strength could be in carbon capture and allying the needs of the coal industry with the resources and accommodation available in the North sea.
The Government have to play a part in that. I am not criticising them, because I faced exactly the same problems that they do, but there has to be some Government money to kick-start the process. It is unrealistic to think that there can be a global, clean coal technology industry in the UK without also having a domestic market, including demonstration plants and so on. We need just enough to get things going to serve the needs of our coal industry, and we need to create the base for manufacturing industry and our very important exporting industry. If we consider the statistics for coal use and the demand there will be for clean coal technology if coal-burning countries are meet their Kyoto obligations, we can see that there is a corresponding massive opportunity for manufacturing and exporting in the UK.
The other reason why coal is important and why we should be positive about it as we look to the future is that, as my hon. Friend said, a third of our electricity still comes from coal. Most people would find that a surprising statistic because all publicity about coal is
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unremittingly negative and suggests that coal is somehow a thing of the past. Even more crucially, at periods of peak demand that figure rises to around 45 per cent. In other words, if we do not have coal for the foreseeable future, the lights will go out; coal is as important as that.
The two questions are where coal comes from and how it is burnt. The question of how it is burnt has to be rhetorical because we simply cannot go on burning coal in an environmentally unhelpful manner, as is still the case in many power stations at present. We cannot switch on dirty old coal-powered stations when we need extra supply without taking account of the environmental consequences. The reason why our carbon emissions have risen in recent years rather than fallen, as one would like to see them doing, is probably the reliance not only on coal but on dirty coal stations. Coal will have to be burnt cleanly, and there is no point talking about a future for coal without linking it to clean coal technology.
We cannot and should not go much below that 33 per cent. figure of energy from coal if we are going to maintain a balanced energy policy. The message I preach is that it is a false argument to pit renewables against coal, coal against nuclear or nuclear against renewables; those are all subsidiary arguments. The only argument that matters is how dependent we are prepared to become on gas, and when we talk about gas, we now mean imported gas.
Based on the Government's projections, 70 per cent. of our electricity will come from gas by 2020, and 90 per cent. of that will be imported. I do not think that the great British public have latched on to that; it is something that will not happen by accident, but through a strategy that is being pursued as desirable. I know the arguments—they may be true—for saying that everything will be all right on the night: the gas will be there, the liquefied natural gas terminals are being built already, pipelines are being planned, and there is also the Orman Lange treaty, which I was delighted to see my hon. Friend the Minister conclude.
All those are reasons why the gas might be there, but there are two questions. First, there is the question of overdependence on strategic policy decisions taken in one country—Russia. Secondly, the gas will be there but at what price? Twice during my time as the Minister there were massive spikes in the price of gas, with very serious consequences for industries in this country that are heavily gas dependent. I tried hard, as I am sure my hon. Friend the Minister has done since, to get to the bottom of those spikes, but was told, "We don't really know. It happened in the interconnector". That is interesting but not very impressive as a basis for a future energy policy based on much of our gas coming into the market through interconnectors.
Do we want 70 per cent. of our electricity to come from gas? Do we want 90 per cent. of that gas to be imported? If we do not, we must maintain a more balanced energy supply. That supply must fit with our environmental obligations. Therefore, we come back to using renewables—yes, I am in favour of renewables—but we also come back to nuclear power and to clean coal, which is, in the context of the debate, the most relevant point. In other words, we must try to maintain an indigenous energy policy.
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I do not think that it has been noticed to the extent that it should be that since the start of the industrial revolution, Britain's prosperity has been based on the fact that we are not only a massive energy producer but a massive exporter to the world. If we head the way that we are going, we are contemplating becoming a massive energy importer in a short time. Circumstances change, and people will say that there is no problem being an energy importer. Like many G8 countries, for example, Germany is an energy importer. However, do we want to go that way on such a scale, in such a short time? If not, we need coal and nuclear industries and we need to do our bit on renewables. Of course we depend on some imported gas, but let us not put all our eggs in one basket.
I hope that after the election, when things can be considered in a more rational and long-term manner, the strands will be brought together and we will return to the concept of a balanced energy policy in which deep-mined British coal will continue to play a significant part.
10.2 am
David Hamilton (Midlothian) (Lab): Life is full of changes. I am 54 years of age and have changed my position a number of times based on the circumstances in which I find myself. When I started in the pits in 1965, there were 450,000 miners in Britain. When I left the pits in 1984, there were about 130,000 miners. We are talking about the demise of the coal industry. My right hon. Friend the Member for Cunninghame, North (Mr. Wilson) said clearly that the big issues that we face are about security of supply and what we want to do with all other energies.
I am pleased that my hon. Friend the Member for Wansbeck (Mr. Murphy) was able to introduce this debate, which is overdue. I well understand why he raised it—it is specific to his area. However, many of us have, for a long time, thought that a major problem will face us in the not too distant future. A few years ago, it looked as though that problem was a long way away. I think that the day of reckoning is coming. I remember that an oil price hike in 1974 created major problems throughout the world, but have we forgotten about that? If we put all our eggs in one basket, in terms of how we receive our energy, we are creating a major problem for ourselves.
I am talking from a Scottish perspective, which is sometimes different from the UK position of the National Union of Mineworkers. There is an old saying in my neck of the worlds: we are an island of coal, surrounded by fish. We have all those benefits. People are right when they say that other G8 countries, and other economically viable countries, can import energies, but those countries wish that they were in our position. I cannot think of many countries that are giving away what they have so that their fuel prices are determined by what comes to them.
The EU directive on emissions comes up on a regular basis. It is interesting, because Europe has a habit of making decisions and applying them differently to each country. I will watch with interest when that EU directive is applied to Poland, because I reckon that the EU will turn a blind eye to how best the issue can be dealt with there.
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I said that I would talk about Scotland, which has always had the view that we must have a balanced energy supply. One of my predecessors, Alex Eadie, signed—as Energy Minister—a paper to open Torness nuclear power station under a Labour Government. A person called Tony Benn opened one of the power stations.
Mr. Wilson : He opened many power stations.
David Hamilton : Indeed, but I do not think that that is in his diaries.
I have moved from a position in which I always opposed nuclear energy. I opposed it not because I was a miner, but because of nuclear weapons. That has always been my view. However, many of the power stations that we are talking about building do not have that ingredient. Along with many of my colleagues and comrades, I take the view that there is not a competition between coal, nuclear power, gas, oil and renewables. Only two weeks ago, the energy unions all met in London. My hon. Friend the Minister spoke about what is required at that meeting. There is no competition like there was some years ago. There is enough for everyone. I strongly believe that we must address the issue on that basis.
The point has been made that we can make any decision that we want. That will not stop the United States of America, India, Africa or Australia expanding their coal industries. During the presidential election, both the Republican party and the Democrat party talked about investing £10 billion in the coal industry and in clean coal technology. The USA is driving forward because it does not have the alternatives that we do. It has got to use the coal industry to develop its proposals.
China gets 8 per cent. of its energy requirements from coal. It has one colliery that produces 10 million tonnes of coal and has 3,000 people involved in it. The expansion programme that it is talking about is not for 20 coal-fired power stations. It is talking about establishing 20 nuclear power stations and 500 coal-fired power stations. It will make clean coal technology a major ingredient of that expansion, because it recognises that it has major problems of deserts and so on. Climate change is a big issue for the Chinese—it is happening in their country. That does not stop them driving their energy requirements and their economy forward. They see coal as an integral part of that.
I believe that we, as a Government, are making a major mistake. All Governments, previously and now, have taken the view that coal can be dispensed with and that we can get it from elsewhere. I do not believe that our future lies in the middle east or in Russia. Security of energy supply is something that the people of the United Kingdom will want, and the price is worth paying. It is something that our people will work flexibly to achieve. Indeed, the miners have been working flexibly in a host of areas. A week does not go by in which the NUM does not sit down with UK Coal and others to talk about changing the flexibility of work.
It surprises me somewhat, however, that, at a meeting with the Union of Democratic Mineworkers on Thursday 24 February, my hon. Friend the Minister said that, under current working practices, he would
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find it difficult to go to the Treasury to ask for more money to be put into Thorsby colliery. He can clarify that point, but that is the information that we have. That suggests to me that negotiations can take place between employer and employee, but, when a Government get involved, it becomes difficult.
I suggested that we in Scotland have taken a different view. We have always taken an optional view across the board. We have always balanced open-cast mining with deep mining. One was developed to protect the other. We have always worked on that basis. Even now, 8 million tonnes of coal is produced in Scotland in open-cast mines. I do not oppose open-cast mining, but I reject the changes in planning applications that are being considered by politicians in the Scottish Parliament. They are trying to make open-cast mining more difficult. We must consider the bigger picture. The people who oppose windmills being established in Scotland will also oppose open-cast mining. We must take a bigger view. We must consider renewables, which I encourage and support. However, we must also consider open-cast and deep mining as part of the process that we are developing.
Longannett power station will come to an end in 2015, unless it can make adaptations. The Scottish Affairs Committee is taking evidence on that. The industry will make long-term investments if it can get long-term proposals from Government that will afford it the stability to invest, but it will not invest in an industry that the Government are saying has no future. That point is extremely important.
I realise that a number of my hon. colleagues wish to speak. I believe that it is imperative that this country develops a balanced policy for energy security. The people of the United Kingdom will not thank any of us in this Chamber when the power goes off and the lights go out. We must develop a strategy that ensures that the lights will not go out in the UK, and we shall continue to support our coal industry and the people working in it.
10.11 am
Paddy Tipping (Sherwood) (Lab): I am delighted to follow my hon. Friend the Member for Midlothian (David Hamilton), not least because I can put the record right. I was at the meeting with my hon. Friend the Member for Bassetlaw (John Mann) on 24 February, and there was no question of Government aid being contingent on flexible working practices; I know that my hon. Friend the Minister will respond to that when he gets the opportunity. We were there to argue for Welbeck colliery: we followed the path trodden by my hon. Friend the Member for Wansbeck (Mr. Murphy), who argued very strongly for Ellington colliery. I want to reinforce some of the remarks that he made about the way that UK Coal treats its work force.
UK Coal wanted new flexible working practices at Welbeck colliery, and forced them through by saying, bluntly and simply, to the men, "Unless you change the way you work, we will close the colliery at the end of this year." At Welbeck and across the United Kingdom, we have the most efficient miners in Europe, and we should be backing them, as they are prepared to take the challenge and make the change. The Government are
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prepared to help them make that change by ensuring that Government money is available for long-term investment in, and the sustainability of, the British deep-coal industry. The Government have made available £57 million now, of which £7.1 million is available at Welbeck—so the curious situation is that the men are prepared to back the company and work more flexibly, as my hon. Friend the Member for Midlothian said.
The Government are prepared to back the industry with real money. The real problem—the third side of the triangle—seems to be the company, UK Coal, the biggest coal owner in the country. My right hon. Friend the Member for Cunninghame, North (Mr. Wilson) made a very strong point about whether market forces and the needs of the private sector should sterilise an energy reserve. We are right to question the commitment of UK Coal, not just in its relationship with the work force but in its commitment to the industry. There are Ellington and Welbeck, but the prevailing view is that the British coalfield will soon consist of a rump of four or five pits. We must do better than that.
I say quite simply to UK Coal that it must change its attitude and the way that it works, because the issue is not just about the company but the future energy policy of this country. The company faces real difficulties: its own accounts showed a loss of £38 million in the deep-coal sector last year. Output slumped to £12 million. Production costs rose and there was a loss of £3.15 for every tonne of coal produced.
In that context, I am very pleased that the company has cut its dividends: it must be right that shareholders take some of the pain. I am pleased that, at last, it has a chief executive who comes from a mining background, and that it is going to renegotiate coal contracts. The price of coal is going up, but UK Coal is still dependent on contracts that were negotiated at a lower price two years ago. It needs to demonstrate that it will invest in the industry. The company tells me that it will invest £150 million between 2004 and 2006. There is a commitment across the company, particularly from the work force, to get those costs down. So, we have a committed work force and a committed Government, so we must now see real, substantial commitment from UK Coal.
Looking at the company's accounts, its cash flow—£400 million of it—comes from the deep-coal industry. In reality, only £4 million currently comes from property transactions. However, there is a view that it is a property company so it must change its image and show commitment.
The company must change its image because as other hon. Members, particularly my right hon. Friend the Member for Cunninghame, North, have said, we face an energy crisis: perhaps not this year or next year, but there are real problems on the horizon. Perhaps my hon. Friend the Minister will remind us when we shall see the third annual review of the energy White Paper: it is due now. Perhaps he will give us a commitment, as was angled for earlier in the debate, that after the election—whenever it comes—we shall reconsider energy policy and make coal a centrepiece.
I am concerned that our renewables targets are, quite frankly, ambitious. I think that we shall achieve 10 per cent.—not by 2010, but we shall get there. However,
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20 per cent. by 2020 is really challenging. I note that the nuclear energy industry is going to run down. Whatever we say, there is currently no sign of any private sector investment coming in. We shall need that in the future. However, the most significant point has already been raised. Do we really want, by 2020, 70 per cent. of our electricity to be generated from gas, 90 per cent. of which will be imported? That would be a crazy situation to work ourselves into.
There will be a place for coal, and I hope that it will be British coal, produced by the most efficient miners in Europe. We must burn that coal cleanly, and invest in new clean coal technology. It hurts me enormously that Japan, which has no indigenous coal industry, spends more on clean coal research than we do in the UK. We can get the economics right and have an energy policy, but we must also protect the environment. That means that the way forward is Government stakeholding in investment in clean coal technology.
It has been a good, powerful debate, and I hope that we shall return to the subject as a Labour Government later this year, and come forward with new, better, and more thoughtful plans for a policy for the 21st century that has coal as its centrepiece.
Mr. Deputy Speaker : I remind hon. Members that the contributions from those on the Front Bench must start not later than 10.30.
10.18 am
John Mann (Bassetlaw) (Lab): I should like to thank my hon. Friend the Minister for Energy and E-Commerce and the previous Minister for their help in keeping Welbeck and Harworth collieries working in my constituency, although at Welbeck, it is at a price. It might be all right for those on the surface to favour 12-hour days underground, but those who work underground are not too keen on it, so my constituents and others are paying a large price to keep coal at Welbeck.
I met a gentleman not that long ago who sat down with me here and told me that he saw the future of his country based in particular on its coal reserves. I have heard the case for coal put before, from politicians and union leaders in the industry, in my area and across the country over the years. That gentleman was rather different: he is the chief executive of Bechtel, the largest contractor working in Iraq, securing oilfields, and one of the largest nuclear companies in the world. It came as a bit of a surprise to hear him so enthusiastic about coal, so I asked him why he was. He gave two reasons: first, as has already been outlined—so I will not repeat it—he mentioned the security of supply in the long term, which is as obvious in this country as it is in the US.
It is the second reason, however, that I want to put on the agenda today, because it has not been raised. It relates not to the future of electricity supply, but to the future of the car. Hidden in Kerry's manifesto, and other manifestos in the US—and now adopted in the gas-guzzling car state of California by Schwarzenegger—is an attempt to become non-reliant on oil for the future of the car. In that context, Bechtel sees coal gasification as a fundamental part of future car
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energy consumption and energy requirements. That is in addition to electricity supply. We should not miss out on that. The other country that is considering it is China, which is probably already the largest producer of cars in the world—or it will be, if not next week, then next month. To be reliant on oil for the future of the car does not give it a very long future according to anyone's horizons.
I hope that we will see a delegation in the near future, before decisions are made on the future of nuclear. It should consist of MPs and unions going to see what is being done in the US in relation to coal gasification, how it is being done, the consequences and the economics of it and the investment and Government decisions required. I can suggest a potential sponsor of such a delegation: one of the solicitors—perhaps Thompsons—that have had a good deal out of the Government in terms of the coal health claims. They would probably feel it appropriate to contribute to the debate on the future of the coal industry. The timing will be everything because of the imminence of decisions on nuclear.
I want to make an important side point. The chairman of the finance and economic committee in China stated last week that China is now a net importer of coal and is desperate to import clean coal technology. Why are we not continuing to develop that clean coal technology here in a practical, everyday way and then export it to the Chinese? Shanghai is holding the Expo 2010, which is one of the biggest world trade fairs that there will ever be. That could be a centrepiece of what we are saying to the Chinese: we will help them by selling them our technology to help their environment at the same time as development takes place.
I have two final points. First, we know what the problem is. If someone nobbles people at EDF Energy in my constituency, they are pleased to explain, in reality, in a roundabout way, what the problem is: people in UK Coal have been selling coal too cheaply for too long. The electricity suppliers are laughing all the way to the bank with the contracts that they have got. That started with Budge's mentality and how he viewed the pricing of the commodity, but UK Coal has continued that. If it was selling the commodity at the right price, in terms of the current contract, it would have plenty of profits pouring in. But that one mistake is threatening the future of the industry.
Secondly, if we are returned as hon. Members in a few months' time, we will be expected to vote through an expansion and renewal of nuclear policy. There are a lot of people on the Labour Benches who will see the price of supporting nuclear as a clear guarantee from the Government that there is a future for the coal industry.
10.23 am
Mr. John Grogan (Selby) (Lab): It is a privilege to make a brief contribution to this debate, which was introduced with such passion by my hon. Friend the Member for Wansbeck (Mr. Murphy). That passion has been reflected throughout the debate, but we have also had a lot of thoughtful analysis.
I want to make three brief points. First, I want to make a suggestion to the Minister about the role of the Coal Authority. There is widespread fear across coalfields that we must get value for money from the
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investment aid, which is a large amount of money—nearly £60 million. It would be good to have an enhanced role for the Coal Authority—first, in managing that investment aid and approving any further tranches—rather than leaving things to one or two officials in the Department of Trade and Industry who might not have the same expertise or the same day-to-day contact as the Coal Authority. After all, the Coal Authority is basically the regulator that licenses the mines. In terms of ensuring that UK Coal fulfils its promises on investment, an enhanced role for the Coal Authority would be good. That role would be better sitting with the Coal Authority than as an adjunct to the Department of Trade and Industry's work.
Many hon. Members have mentioned the post-electoral situation, and I hope that I will still be in a position to discuss that after the election. The Government have never been short of five and 10-year plans across a range of policy initiatives. In fact, probably only in the heyday of the Soviet Union were there so many five and 10-year plans. I am not knocking that—it is a jolly good idea. A five-year plan—at least—for coal would give some certainty. As one crisis has followed another over the past seven or eight years, many of my hon. Friends and I have beat our way to ministerial doors, which have always been open to us. Often we have seen the Prime Minister—on perhaps half a dozen occasions. We have had operating aid and investment aid, but it would be good to give a little more certainty to the industry over a five-year period about what is likely to happen in terms of aid.
It would be remiss of me not to mention, briefly, the situation at Kellingley and Selby, which was mentioned by my hon. Friend the Member for Wansbeck. It is worth putting on the record, in relation to Selby, the tremendous efforts of DTI officials, and, more importantly, of ordinary miners and many representatives of local bodies, who got stuck into the Selby taskforce. As he said, I and many people in the coalfield would have loved Selby to have just a few more years, but, regardless of that, it is worth recording the tremendous efforts that people made. Many members of the National Union of Miners were involved. Only about 50 miners, out of 1,600, are on the dole. That did not happen by accident; it happened because a lot of training took place. Every man was entitled to time off for a day's training each week, on full pay. Over two years, that made a real difference.
What happens at Kellingley will be a real test, and the situation is under review. Nearly 700 men are employed there. The NUM is negotiating for no compulsory redundancies. Certainly, Kellingley should have a bright future. It has proven reserves of 24 million tonnes, and its output this year is about 1.5 million tonnes, but there are plans to increase that over the coming years. The future of Kellingley is a litmus test for the future of the coal industry. I hope that the negotiations and discussions will be successful and will give the mine a future.
Finally, I want to reflect on clean coal technology, which has come up time and again in debates over the past seven or eight years. It is useful to look back at the various papers, some of which predate the time when my right hon. Friend the Member for Cunninghame, North (Mr. Wilson) was Minister. I was
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reading a summary of energy paper 67, a Government paper from 1999, only last night. It stated that Government support for the demonstration of clean coal technology
"is not perceived to constitute value for money in a country with surplus coal-fired capacity that is moderately efficient. However, the Foresight Task Force has identified a case for demonstration after about 2005, and the Government will re-examine the position in about three years time."
That re-examination was in 2002. We are now, happily, in 2005. It is make-our-minds-up time. Are we just going to continue with the research? As various hon. Members have pointed out, if that is all we do, we will never be credible in terms of selling technology to other markets, such as China. Kellingley was one possible demonstration plant and Hatfield another. In the third term of a Labour Government, it is surely time to get that demonstration plant up and running, given, for example, the resources that are going into wind energy and other forms of renewable energy.
10.29 am
Mr. Andrew Stunell (Hazel Grove) (LD): I congratulate the hon. Member for Wansbeck (Mr. Murphy) on bringing this subject before us. He has shown great passion and knowledge, as have other contributors. I bring the apologies of my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) who would dearly have liked to be here. Many of his constituents are workers at the Ellington colliery. Unfortunately, he has other parliamentary business.
The debate gives us a welcome opportunity to consider a much wider range of issues than simply the closure of Ellington. I hope that the Minister will respond to the specific criticisms raised by the hon. Member for Wansbeck about UK Coal and its approach to the closure of Ellington, the loss of the 370 jobs and the loss of 1 million tonnes a year of coal capacity.
I would like to discuss some wider issues that have also been raised. When I did my GCEs, which was a number of years ago, I scored full marks for knowing that the UK's coal production capacity was 200 million tonnes; last year, I think that it was down to 28 million tonnes. The change in the coal industry, which has been referred to, has been very dramatic and painful, particularly for the communities directly affected. Almost half the coal produced comes from open-cast production rather than from deep-mine production. That, too, is a tremendous change in the balance of the coal industry. We must remember that consumption now runs at more than twice production. So, instead of being net exporters of coal, we are importers; the figure was about 34 million tonnes last year.
That is in a context where the price for coal internationally, although it has fluctuated, is now back towards being at an historic high, and consumption is rising at the international level, too. There has been about a 19 or 20 per cent. increase in coal consumption over the last decade worldwide. Some figure show that last year was the first year in which the north American zone became a net importer of coal. It is not just China and the UK that are importing, but north America. There is every sign that there will be continued growth in worldwide consumption in years to come.
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Given that context, the Minister must consider how far he is prepared to allow the UK coal production industry to shrink and whether he is satisfied with both the current situation and the one that appears to be unfolding. He may be able to respond to some questions about what future he foresees for maintaining our deep-pit work force and expertise in the UK and the mining equipment industry. Specifically, what future does he foresee for clean coal technology?
A number of speakers have pointed out that it has been frustratingly slow work to reach the point of having an effective pilot plant that demonstrates technology that would be exportable. Yet, we have heard, even in this debate, plenty of evidence that across the world, with coal production growing and increasing pressure to reduce greenhouse gas emissions, there is an increasing need for clean coal technology to be widely available at an economic price. The opportunities for the UK to provide such technology are growing.
The hon. Member for Wansbeck made the case, and I would certainly support it, that the idea that coal is dead as an energy source worldwide—or, indeed, as far as the UK is concerned—is wrong. We must concentrate on ensuring that coal's use is less damaging to the environment nationally and internationally. The idea that we are simply dealing with a declining, closing industry and that it is a matter of washing it up as neatly and cleanly as we can is mistaken. We must have a long-term perspective on where we are going next.
I am not sure that the hon. Member for Wansbeck and the right hon. Member for Cunninghame, North (Mr. Wilson) did their cases much good by attacking gas. The UK will be quite dependent on gas for a long time into the future. I do not think that anybody would really regard Norway as deeply unstable or, for that matter, subject to earthquakes. We must have some sense of perspective about what the alternatives are. There is no doubt that, for the foreseeable future, coal will form part of both our energy mix and the international one.
Mr. Wilson : Is Liberal policy committed to an energy policy based on 70 per cent. of Britain's electricity coming from gas and 90 per cent. of that gas being imported? That is clearly the spirit of the hon. Gentleman's comments. He may be right, but it would be interesting to know if that is the policy.
Mr. Stunell : One does not have a policy. One sets a direction in which policy goes. We have made it clear what we think the balance should be between renewables, gas and other sources of power generation. Indeed, when the right hon. Gentleman was a Minister, he and I debated this matter on a number of occasions and I have previously recommended that he read the book that we have produced on the topic.
Broadly speaking, I agree with what the right hon. Gentleman said today. I hope that the Minister will take time to respond to the powerful case made by the hon. Member for Wansbeck about the behaviour of UK Coal and the specifics of that situation. I also want to hear the Minister's answers about the Government's response to the balance between UK production and imported coal over the coming years.
The right hon. Member for Cunninghame, North just challenged me to say what I think about 90 per cent. of gas being imported. Does the Minister believe that it
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would be acceptable to have 90 per cent. of coal imported? Where does he want that balance to be struck? Where does he see the balance between deep-mine production and open-cast production in the UK in five or 10 years' time, bearing in mind representations that I have received from UK Coal about the difficulties of maintaining production of open-cast coal, never mind that of deep-mined coal? He will know that I have asked him some parliamentary questions on that topic in recent months.
When and how do the Government intend to ensure that clean coal technology forms a significant part of the research and development process in this country, so that we have a product that we can both use and export across the world?
The hon. Member for Sherwood (Paddy Tipping) raised the point about the timing of the third annual review of the White Paper. Perhaps that review could encapsulate some of the answers that Members are seeking today about the coal industry and the future energy mix.
This has been an extremely interesting debate. It has perhaps been overdue. It has raised a number of big questions that are often kept out of the mainstream debate about energy. I hope very much that the Minister can respond fully and take these matters forward.
10.37 am
Mr. Laurence Robertson (Tewkesbury) (Con): I, too, congratulate the hon. Member for Wansbeck (Mr. Murphy) on securing this debate. As the hon. Member for Hazel Grove (Mr. Stunell) said, it is a timely one, because we stand at a crossroads in terms of energy supplies.
From the research I have had done, the world will, according to the International Energy Agency, need almost 60 per cent. more energy in 2030 than it does now. The hon. Member for Wansbeck, and, indeed other right hon. and hon. Members, have explained why that is the case. China and India, which I think contain about a third of the world's population, are expanding at a rapid rate of knots and will create an energy need. Much as I would like to think it were the case, it is rather ambitious to expect that energy saving will counter the growing demand. The world will require far more energy. That is the case at a time when our coal industry is under environmental pressures. They largely result from directives from the European Union, but they also come partly from Kyoto and from the fact that we take a very responsible attitude to climate change.
The coal industry is under environmental pressure, and our nuclear industry is in question, because although it currently provides about 22 per cent. of our electricity, that will be reduced to 2 per cent. in only 20 years' time. Given the nature of the nuclear industry, if we do not start planning now for life extensions or for new build, it will die. There is no question about that. We are in danger of losing scientists to companies abroad, because a number of new nuclear reactors are being built worldwide—or there are plans to build them. I think that 23 countries are planning to expand their civil nuclear capabilities. We are in danger of losing scientists to the rest of the world. On 6 May, the next Government, regardless of which party wins the election, will have to look carefully at the future of the nuclear industry.
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Our country's gas supplies are starting to decline. I do not want to be alarmist, but we will probably become net importers of gas next year, or, maybe, the year after that. We last discussed energy in this Chamber on 19 January. That debate focused on the future of gas, and the Minister was extremely candid, for which I pay tribute to him. He said that if there is high demand for gas in the coming winter or the winter after that, our gas supplies could be rather tight. I do not particularly blame the Minister, but that that is the case is a disgrace in a country with an economy as large as ours, because we do not need to be in that situation. We must give a lot of thought to our energy policy.
I entirely agree with the comments of a number of Members, including the right hon. Member for Cunninghame, North (Mr. Wilson), about the need for a balanced energy supply in future. I say with some trepidation that one reason is that we have in the past been over-reliant on a single primary source of energy; the coal industry had too much control over our energy supplies. I say that as someone whose father was a miner, and I am unreservedly sorry that things have worked out as they have for the coal industry, but it is important that we learn lessons from the past, and I do not want our country to be over-reliant again on any one source of energy. The way things are going, with environmental challenges to our coal industry, our country's dwindling gas supplies and the possible withering of our nuclear industry, we could find ourselves in the situation described by the right hon. Gentleman, with gas supplying 70 per cent. or more of our electricity production and a large proportion of it being imported.
As the hon. Member for Hazel Grove said, there is nothing wrong with importing gas from Norway, and the negotiations for securing its gas supplies are at an advanced stage, but Norway will supply only a small part of our future gas import needs. Gas will have to come from further afield. It is possible that the gas supply that we get from Russia or Qatar, or one or two other places, such as Algeria, might not be interrupted because of political instability in those countries or terrorist activity, and I sincerely hope that that is the case. However, if I were energy Minister and we were over-dependent on gas supplies from certain areas of the world, I would not be too confident that I could guarantee to the people of this country that the lights would not go out. Such supplies might never be interrupted, but the Government have to be realistic. We must provide greater assurances. We should not depend too much on any single source of energy when it comes from such countries and from far away.
If our country and the world in general were to become too dependent on gas, there would also be an economic danger. We could well see the development of a gas equivalent of the Organisation of Petroleum Exporting Countries, and I would not want to speculate about what effect that might have on the price of gas. We must bear that in mind.
That brings us back to the question of what our country's policies should be. There must be a debate on the future of the nuclear industry. I pay tribute to those Labour Members who are being open and honest about their views on that. It was a tragedy in the past that the
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Conservative party was seen as anti-coal and the Labour party as pro-coal, and that the Labour party was seen as anti-nuclear and the Conservative party as pro-nuclear. I hope that we can consign such divisions to history, as they are not helpful. The provision of energy supplies should not be a party political issue, and I pay tribute to those Members of all parties who say that we need a clear policy on new build and on the life extension of existing nuclear plants.
What about the rest of our policy? There are opportunities at least to preserve what is left of our coal industry. When we talk about that industry, we should divide it into two sections: the mining industry and the generation of electricity from coal, because they are slightly different things. As the hon. Member for Hazel Grove said, we import more than 50 per cent. of the coal that we burn. There are good reasons for that; it is low in sulphur content, which helps us meet our environmental requirements. However, we must look to the future and explore possibilities for providing clean coal technology. I hope that we can achieve that, although it is not entirely clear how we can do so without writing cheques for massive sums, and I am not going to say that the Government should write cheques for sums that are too large for any section of the industry.
The creation of a free market in energy has led to a fall in energy prices. Paradoxically, that has created a problem in attracting investment, which we must address. I hope that we can move towards clean coal technology at least as quickly as the Government have tried to move towards wind power. That industry has been given £117 million to develop offshore wind farms, the supply of energy from which will be intermittent and unreliable.
The great thing about coal is that it has been a very good back-stop—I do not want that to sound derogatory. The nuclear industry is a base load supplier of electricity, but coal is far more flexible, and it has provided a very cheap source of electricity. If I were to look ahead and see the continuing decline of the coal industry, I would be sad. I accept that we have to address our environmental challenges, but I would be unhappy if the coal industry were to decline in the way that it has done. Members have quoted figures on that, and I will not repeat them, but it was only 1990 when coal provided about 66 per cent. of our electricity generation, and the figure has fallen to below 30 per cent. I think that it has fallen recently for the reasons that we have given, but the Minister will correct my figures if they are wrong. It is obvious that the trend is downward, regardless of whether the correct current figure is 28 per cent. or 32 per cent. We must question whether we want to allow that trend to continue.
I again congratulate the hon. Member for Wansbeck on securing the debate and on introducing it in such a passionate and caring way, and I pay tribute to all Members who have contributed.
10.48 am
The Minister for Energy and E-Commerce (Mr. Mike O'Brien) : It is a pleasure to respond to this debate. I congratulate my hon. Friend the Member for Wansbeck (Mr. Murphy) on securing it, and I thank all the Members who have participated. There have been some excellent contributions. My right hon. Friend the
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Member for Cunninghame, North (Mr. Wilson) is well known for his deep commitment to the debate on energy. My hon. Friend the Member for Sherwood (Paddy Tipping) has a deep knowledge of the mining industry. My hon. Friends the Members for Midlothian (David Hamilton), for Selby (Mr. Grogan), and for Bassetlaw (John Mann) have all lobbied me and made sure that coal industry issues are at the forefront of the Government's considerations; in some cases, they have been to see the Prime Minister to raise particular issues.
The hon. Member for Tewkesbury (Mr. Robertson) made an interesting contribution and set out his case very well. As he comes from the Conservative party, which destroyed the mining industry, he speaks with limited credibility. However, he made some comments to which I should draw attention. One was about the gas supply—yes, it has been tight this year; we became a net importer in December. Although the figures will vary from month to month during the coming year, it is likely that we will in future import more gas than we export. In terms of overall energy, the situation may change during the course of next year, because we are still exporting oil.
The hon. Member for Hazel Grove (Mr. Stunell) spoke for the Liberal Democrats, who have the valiant record of having done nothing for the coal industry for a very long time. His admission that the Liberal Democrats have not a policy, but a direction, was fascinating. I should be interested to read the book on the direction that they propose, given that they do not have a policy. I am not entirely sure about the distinction, but it was interesting none the less to hear of it.
Mr. Stunell : Will the Minister give way?
Mr. O'Brien : I will, if the hon. Gentleman really must intervene, although there is limited time.
Mr. Stunell : I shall give the Minister a copy of the book when he leaves the Chamber.
Mr. O'Brien : That is very kind. I shall read it with the deep interest with which I read all Liberal Democrat party documents.
I share the belief of my hon. Friend the Member for Wansbeck in the continuing importance of the coal industry. It is essential that we maintain a coal industry. The Government's view is that it is enormously important to our energy future, and I want that industry to have a long-term future. Of course, I might well say that, given that there is a profitable, good, deep mine in my constituency. When I was first selected for Parliament, there were four mines there, but under a previous Government, three went: my area knew the impact of the closure of those pits.
Last night, I was at a meeting in a mining area in my constituency. The adjoining village lost its pit, and there was a devastating impact on the local community. Many relationships were fractured in Keresley End, where Coventry colliery closed, and we have seen problems with drugs and all sorts of social difficulties. Therefore, the damage done when pits such as Ellington close, and with what has happened in Selby, seems to be a lot better
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than what happened in my constituency. I not only feel, but understand the problems faced by mining communities when pits close.
Our energy future must come from the security established by diversity of supply. That diversity will guarantee our long-term future and it must come from gas, oil, nuclear sources, wind power, solar power, hydrogen power, but also—importantly—the coal industry. As my right hon. Friend the Member for Cunninghame, North said, China, the United States and other countries are ensuring that they develop their coal industries for the future. We need to be sure that we do that in this country, too. Carbon sequestration and clean coal technology are the key. I shall come back to those issues in the next few minutes.
My hon. Friend the Member for Wansbeck raised Ellington colliery and the 370 jobs being lost there. The Prime Minister met MPs to discuss that, and so did I. I also met Gerry Spindler, the chief executive of UK Coal, and asked him to allow the pumping of the pit to establish whether it could be saved. Gerry Spindler and UK Coal took the view that they would not do that. The Prime Minister made the same request, but the industry is privatised and companies can make their own judgments on such matters, as UK Coal did.
If the pit had been pumped, the mines inspectorate could have looked at it, decided on the level of risk and made an informed judgment about the risk of reopening it. UK Coal did not want to carry out that pumping operation, nor give that opportunity to the mines inspectorate. Clearly, the company would have to take responsibility for miners' safety if it wanted to reopen a pit. Our view was that a report from a mines inspector on the level of risk in the pit would have been helpful to some extent in determining the judgment. UK Coal did not share that view.
Mr. Denis Murphy : I have never doubted the Minister's commitment to the coal industry, nor his role in trying to secure a future for Ellington colliery. However, the industry has reached a critical point. Each individual colliery left is a stand-alone unit. What prevents UK Coal from continuing to close the industry down, knocking mines over like a pack of dominoes? That is the very reason for this debate.
Mr. O'Brien : UK Coal has given us reassurances that it plans to invest in the region of £150 million in the coal industry between 2004 and 2007. The Government, too, are investing substantial amounts in coal aid for the industry, and we plan to continue to do so. Coal investment aid to the tune of £57.5 million has already been allocated, and there is more money in the kitty; it is a limited amount at the moment, but there will be ongoing discussions with the Treasury about the future of that investment.
My hon. Friend referred to what looks like an e-mail that he received, which states:
"Mr. O'Brien said that under current working practices, he would find it difficult to go to the Treasury to ask for more money."
That—to use a word that I understand Mr. Speaker has allowed in the House—is crap. I did not say such a thing.
Mr. Deputy Speaker : Order. The Minister might rephrase that.
Mr. O'Brien : Very well, Mr. Deputy Speaker. That allegation is unfounded. There was some discussion about working practices in particular pits, and I made it clear that that was a matter for negotiation between the trade union and the employers, not one for me to raise in that way.
The Government intend to continue to support the coal industry. We want pits to develop in future. As we have discussed, there were reviews of Welbeck and Harworth. Following discussions between the unions and management, the industry has begun to address some of those issues, and some pits have been able to remain open. We want such pits to have a long-term future. Coal investment aid is important, and we want to ensure that it can continue.
As far as the industry is concerned, we are committed to investing in the long term through developing research into carbon sequestration and clean coal technology. We are already putting substantial funding into that. If we can continue to develop such technologies, we believe that they will provide the sort of carbon-free, long-term future that the coal industry wants.
We want the coal industry to continue to provide a substantial amount of our electricity needs. Coal-fired power stations are better able to respond more rapidly— certainly more rapidly than gas-fired plants—to fluctuations in electricity demand. We need to ensure that we keep that capacity.
There are only seconds left, so I shall conclude by reaffirming that the Government firmly believe that there should be a continuing role for coal as part of a varied and balanced energy mix. They are working to ensure that the UK coal industry is given appropriate support to maintain access to reserves and to protect—indeed, create—mining jobs at viable mines in the future.
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