British Coal (Hansard, 24 July 1989)

§ 1. Mr. Andrew Mitchell
To ask the Secretary of State for Energy what is his estimate of the date upon which British Coal will break even.

§ The Secretary of State for Energy (Mr. Cecil Parkinson)
I will be reviewing British Coal's financial prospects with the corporation once its current negotiations with the generating companies are concluded. I cannot anticipate the outcome.

§ Mr. Mitchell
Does my right hon. Friend accept that the contracts will be inextricably linked to British Coal's ability to break even? Does he agree that it is important to apply both the carrot and the stick to an industry whose productivity has risen by nearly 50 per cent. during the past three years? Did he notice the enthusiasm and dedication of the Nottinghamshire mineworkers when he visited the county last week, and is he aware of the considerable approval of and gratitude for his visit that is felt among mineworkers generally and by the miners of Thoresby?

§ Mr. Parkinson
I thank my hon. Friend for his kind remarks. I enjoyed my visit to Thoresby. I was impressed with the enthusiasm with which the men there are using the new equipment and the big investment that has been made. They are doing the very thing that is guaranteed to safeguard a good future for them. They are an outstanding example of how the industry can secure its future.

§ Mr. Allen McKay
When does the Secretary of State expect to write off the interest charges—before or after privatisation?

§ Mr. Parkinson
Of course, one cannot anticipate the Queen's Speech, but I expect proposals to come forward in the very near future—certainly later this year—for the restructuring of British Coal's finances.

§ Sir Trevor Skeet
May I re-emphasise to my right hon. Friend the need to have a capital restructuring, which is absolutely vital for the industry? Is my right hon. Friend aware that we have been talking about breaking even for the past 20 years, but that we have never been able to achieve it?

§ Mr. Parkinson
One reason for that is the high interest charges borne by the industry. It has received nearly £10 billion in deficit grant and subsidy in recent years. However, its capital structure is not satisfactory. It has no reserves. Every time a pit closes, the cost is added to the negative reserve. The answer is restructuring and, as I have already said, I expect the Government to come forward with proposals.

§ Mr. Barron
When the industry is restructured, will the Secretary of State make sure that comparisons of the costs of British coal are not made against the marginal cost of coal on the international markets, in view of the answer that he gave me in 1987—that if the international markets were to supply the Central Electricity Generating Board, it would substantially increase the cost? Will he assure the House that the actual costs of production will not be compared with the marginal costs of international coal?

§ Mr. Parkinson
The hon. Gentleman is absolutely right. It is a mistake to take the lowest price at which one can buy coal on the spot market and say that that is the world price. As he knows, if the CEGB were to go into the market for 80 million tonnes, it would shift the world price considerably. I am glad that on this occasion he and I can agree.