§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Nicholas Baker.]
1.22 am§ Mr. Matthew Taylor (Truro)The last Adjournment debate that I secured on the Cornish tin industry, in 1988, began at 2.26 am. It is a relief that tonight's debate is not starting quite so late.
I thank the Minister for being present. The hon. Member for St. Ives (Mr. Harris) is here and I know that the hon. Member for Falmouth and Camborne (Mr. Mudd) will be here shortly.
In the debate in 1988, we regretted the loss of 200 jobs in the industry. It is always tragic when jobs are lost because of the suffering that is caused, not least to the individuals involved. Tonight, we are debating the loss of 415 jobs; 415 families will be devastated.
We are probably now discussing the end, at least for the foreseeable future, of tin mining in Cornwall, purely as a result of a Government decision. It is a tragedy for those who will lose their jobs and for the surrounding communities and it is an untimely death blow to a tradition of mining in our county which goes back 2,500 years. I have no hesitation in blaming the Government for that.
I blame the Government because Carnon has been operating on the basis of a support scheme to which the Government were apparently committed and on the basis of money already promised. The Government have reneged on that commitment. They have broken their promise in a disgraceful manner, informing the company without warning late on Friday afternoon, and without letting hon. Members know what was coming.
The most extraordinary point about the decision is that it defies all logic. The Government had promised a further £1.7 million loan to the mines and RTZ was due to invest, on the back of that, a further £2.4 million, which it is withdrawing as a result of the Government's decision. Having invested £23 million of public funds so far, for the Government to pull out now to save £1.7 million is senseless and a tragic letdown for the people.
Let us remember that the package came about by agreement and set certain targets. The company had to keep to those targets. Had it not done so, the Government decision might have been justified, but the company did keep the targets—indeed, it exceeded them—so what justification can we find for the Government's decision?
The Government might have argued that they could not afford it, but that patently is not the case. Apart from anything else, the money was earmarked and the company asked for not a penny more than it had been promised.
The Government might also have argued that the company had not met its targets for cost cutting, but that is not so. The company had been successful in beating the cost reduction targets set by the Department. The break-even point in 1988 was £6,734 per tonne. For 1990, it was down to £4,340 a tonne. For the last quarter for which figures are available, it was down to £3,703 a tonne and it was still falling dramatically, week by week, day by day. Tin is currently being sold at £3,000 per tonne, so the company is getting close to the break-even point. As most analysts predict that the price of tin will rise in the next year, the company could soon be in a position to make profits once again, as it was only a few months ago.
432 Why would the Government not give the company a chance? The projected break-even point in the Department of Trade and Industry plan was £3,500 per tonne by 1993. That has already been more than surpassed, as the figures that I have given make clear, so how can the Government justify their decision? The only people who did not meet their targets were the Government themselves. When the deal was agreed, exchange rates were projected at under $1.50 to the pound. If that were so today, the company would be highly profitable. If anything has failed to meet targets, it is Government economic policy.
Another possibility occurs. Perhaps the Government do not believe that the area needs the support that tin mining provides economically and socially. Perhaps they believe that the area is wealthy enough, or sufficiently full of job opportunities. Let me put the record straight. Carnon has a loyal labour force who have not received a pay rise for four years, precisely to improve the chances of making the company a success. The job losses come at a time when employment prospects in the area are particularly bleak. In the Redruth-Camborne area—the hon. Member for Falmouth and Camborne, who represents the area, will seek to intervene in a moment —unemployment is running at 15.7 per cent. and nearly one in four males in the area are unemployed. Unemployment in Cornwall as a whole has reached a percentage in the teens and is rising more rapidly than anywhere else in the south-west, or in almost the entire country. So it cannot possibly be that the area does not need the support that the Government were in a position and had pledged to provide.
The Government might have argued that the decision was to save taxpayers' money, but in truth they cannot justify such an argument. The costs of unemployment benefit to those losing their jobs will amount to £1.2 million per year, and the indirect knock-on effect on other jobs—on previous occasions the Government have talked about the other jobs supported by the investment—means that the figure is more likely to be £2 million per year. That discounts the loss of tax and national insurance payments. Even if we assume that not all the people will join the unemployment queues directly, it is certain that there will be no net financial gain to the Treasury.
More than that, the Government are in the process of writing off not just a £1.7 million loan but the whole £23 million of public money that has so far been invested in the mines. That is short-sighted, mean-minded and an ill-thought-through waste of public money.
As I speak, the water level in Wheal Jane mine is rising. As it does so, it guarantees that that mine will never be reopened. It is an extraordinary, wasteful and despicable action that the Government have taken. I refuse to accept that it saves the Treasury money in any respect. It may save the Department of Trade and Industry money, but it simply costs the Department of Social Secirity and other Departments money.
If the Government seriously argue, as they argued this morning, that they do not justify their actions in such terms and that it is not for the DTI to consider other costs, perhaps it is time for the Prime Minister or someone more broad-minded and with a little more sense to reverse the decision that has been taken.
Lastly, the Government may argue that the tin price will not pick up, that current low prices will stretch far into the future and that Cornish tin mining will never be profitable. Where is the evidence for that? I do not believe 433 that the decision is based on sound reasoning. It is purely political, and bad politics at that. Most analysts predict that the price of tin will rise in the next year. It is hard to argue that it will not rise sooner or later, given that most mines around the world operate at substantial losses.
Even if Ministers are right, the company believes that if the rest of the loan had been paid, the investment would have allowed South Crofty to break even within the year and would have paid for Wheal Jane to be kept on care and maintenance until a rise in the price of tin occurred. Even if we accept that the current price will not increase, there is no logic in pulling out the investment because if it had been allowed to go ahead we could still have seen the company at least on an even keel for the foreseeable future.
The company's figures might have been wrong, but those involved with the company had a lot to lose personally if the figures were wrong. Surely the betting was good enough to put in £1.7 million of Government money, which had already been promised, especially when the cost of not doing so was to write off the £23 million Government investment so far and to put 400 or more people on the dole at a yearly cost in excess of the £1.7 million involved. The mines could have been kept open, men could have been kept in jobs and Cornwall's tin mining tradition could have been kept alive.
For a Government who claim to favour business-like practice, they have adopted an appallingly short-sighted and extremely unbusiness-like approach. I return to my original question: what possible justification is there for their decision? I believe that there is no possible justification.
In response to my Adjournment debate in March 1988, the then Under-Secretary of State for Industry and Consumer Affairs, the hon. Member for Coventry, South-West (Mr. Butcher), said:
The Government are convinced that Carnon can win through—that is why we have continued our support—but it will require considerable—and I emphasise 'considerable'—efforts by all those concerned with the company. I feel sure that this effort will be forthcoming."—[Official Report, 29 March 1988; Vol. 130, c. 1064.]The truth is that the effort was indeed forthcoming. The targets were met, but the Government let us down all the same. They did not stick with it when the company and the people there stuck with it through thick and thin.Do the Government have the courage to make the change to help now? Will they help first and foremost by reversing the decision? If not, will they at least help by suspending the loan rather than pulling out of the deal altogether? Will they at least give the company and the men the chance to come back and make it work? They should not rule that out. I know that everything will be done to protect South Crofty so that it might open again if the price of tin revives sufficiently. Will the Government at least consider renewing support if that happens? Will the Government help not just the company but also all the men who fear for their redundancy compensation, as well as the supplying firms that fear for their debts, by guaranteeing tonight that the outstanding Government loan will not be called in?
At our meeting with the Minister this morning we learned that the Government have decided only for now not to call in the loan—apparently to see if the company will survive, subject to a satisfactory scheme. Can the Minister suggest what such a satisfactory scheme might be? What is meant by the words "satisfactory scheme"? At this morning's meeting the Minister said, "At a point in 434 time, if the company failed, we would have to put in a submission"—a submission to call in the loan. That would bankrupt the company, and it could also bankrupt many of its suppliers and rule out much-needed redundancy payments for the work force. That is a crucial aspect of the Government's position.
What we were told earlier today was more worrying than the indications that had been given publicly up till then. Can the Minister give a pledge that the loan will not be called in? If the jobs do go, will the Minister help by investing the money that the DTI has already set aside in new jobs in this area—an area of high unemployment in a county where wages are already below the national average? Will the Minister pledge to invest the money withdrawn from the mines in job creation measures for the area?
In response to my Adjournment debate in March 1988, the then Minister, the hon. Member for Coventry, South-West, said:
I think I can say that Cornishmen have a good friend in the Government, and that our generosity, while not necessarily unprecedented—that would be too strong a word —was certainly considerable".—[Official Report, 29 March 1988; Vol. 130, c. 1060.]This week, the Cornish have found out just how lacking in generosity the Government really are. They have discovered the pain of betrayal. They have discovered that they have no friend in the Government.All Cornwall Members feel outraged by what has happened. I know that the hon. Member for Falmouth and Camborne wants to speak, and I look forward to his contribution.
§ Mr. David Mudd (Falmouth and Camborne)I shall not repeat the arguments that the hon. Member for Truro (Mr. Taylor) has put forward so eloquently and succinctly. I endorse his every word and his every sentiment. I must however, question some of the seeming inconsistencies in the reasons given by the Department of Trade and Industry over the past 10 days for its decision to end support.
It has been said that the depressed price of tin is a factor. Yet, as has been pointed out by the hon. Member for Truro, the Government's friends in the City—the commodity analysts—have come up with a totally different prediction. It is amazing that the DTI will accept some advice from these people but, when it suits, reject other advice.
It has been suggested that the DTI's precipitate decision was based on an unseemly scramble for safety when it was pointed out that, as Carnon Consolidated was technically insolvent, the Department would be acting illegally in making any more money available.
There are two basic tests of insolvency. The first is cash flow—the ability to pay debts as they fall due. Certainly, for the last three years Carnon has paid all its bills on time, and it continues to do so. It therefore cannot be argued that Carnon is insolvent on that score. On the basis of the second test—whether liabilities exceed assets—the company is technically insolvent because it has £31 million of loans on the balance sheet. However, this peculiar status was arrived at through the DTI's suggested rescue package of 1986. So if that technical argument is put forward, the Department made it inevitable that the company would operate while insolvent and quite improperly advanced it 435 £23 million. Either way, it seems that over a period of four years there was a leisurely acceptance or accommodation of convenience, which culminated in a mad-dash disengagement decision—a decision taken, and announced, on the evening of 22 February.
I may be a simple soul, but I see a possible scenario which might explain that strange situation. The Treasury wants immediate savings from the DTI; the DTI looks at its books, and Carnon emerges as the most convenient instant victim. The DTI does not want to pull the plug, but is reminded that the alleged failure to comply with the package gives it a let-out. Of course, if the DTI still wants to carry on with the finance, a word to the Public Accounts Committee might be awkward and embarrassing. Afraid of the Treasury heavies on one side and the PAC nasties on the other, the DTI rushes into instant disengagement. Whether that is fact or fantasy, time alone will tell—I suspect that we shall not know tonight.
Something else nauseates me about the Department's attitude and position. It claims that, six months ago, it was beginning to consider suspending support to Carnon. In six months it could have at least prepared contingency plans to offset the predicted loss of jobs and the already recognised worsening economic situation in Cornwall, but it did not and still has not. It claims that since west Cornwall already gets every permitted form of assistance, everything possible is already being done.
Even now, I would like my hon. Friend's assurance that he will consider a few suggestions. First, that the withdrawal of finance should be regarded as a moratorium on payment rather than a cut-off. Secondly, that during that moratorium, the Department of Trade and Industry loans will be restructured to be of a low principal, high premium nature, thus getting the loan off the balance sheet and opening the door to external investment if that is what the Department wants. Thirdly, that during the moratorium, the Department will help meet the costs of keeping South Crofty's pumps operating. Fourthly—the hon. Member for Truro (Mr. Taylor) touched on this—if £1 million or £1.6 million is theoretically being saved, it is money that has already been allocated to jobs and industries in west Cornwall. I would like an assurance that that money will be allocated immediately to the regeneration, sustaining and attraction of more industrial opportunities in west Cornwall.
In the meantime, for reasons that have still not been explained to my satisfaction or that of many other people, two tin mines, more than 400 jobs, countless small enterprises and the communities that lie between Camborne, Redruth and Truro are under a death threat because, if I am correct, the DTI is scuttling away from what it fears could have been an embarrassing squeeze between the Treasury and the Public Accounts Committee.
As I waited to see my noble Friend the Minister for Industry, I picked up a brochure in the lobby of the Department of Trade and Industry. It lists its objectives, thus:
Our objectives will be to produce a climate which promotes enterprise and prosperity. In all our work we will take account of the differing circumstances of the region and of the inner cities to enable those who live there to help themselves.436 Once, that remark would have caused a ripple of ironic laughter in Cornwall, but tonight, tragically, there is no laughter in Cornwall's mining communities.
§ The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Edward Leigh)The hon. Member for Truro (Mr. Taylor) and my hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) are much concerned about the state of Cornish tin mining and the effect on the local economy. I regret the current situation, and appreciate their concern. I pay tribute to the assiduous way in which they argue on behalf of their constituents. I also pay tribute to the assiduous manner in which my hon. Friend the Member for St. Ives (Mr. Harris), who is present tonight, acts on behalf of his constituents.
The Department has strongly supported the South Crofty mine in Camborne and the Wheal Jane mine near Truro since 1986. Geology has made Cornwall a land of great beauty. Likewise, geology gave it great mineral wealth. That has been exploited over the years for arsenic, copper, tin, and china clay. I understand the pride Cornishmen feel in their mineral industries, and the way "Cousin Jacks" have spread their mining skills around the world. Trade in metals has long been international. Today, international competition is at the root of the Cornish tin problems.
Hon. Members have expressed concern at the number of jobs lost. Until the recent redundancies, Carnon Holdings Limited employed 415 workers, 160 of whom were to be made redundant anyway from the closure of Wheal Jane announced last year and reductions at South Crofty. The extra number of tin miners losing their jobs is therefore about 255. Most of the workers live in the Camborne and Truro travel-to-work areas. We are advised that some 150 workers are being re-engaged temporarily to run down the South Crofty-related operations on to a care and maintenance basis.
These people have worked hard, justifying the position taken by the Department in 1986 when it offered Carnon, then owned by RTZ, a loan of £15 million. In 1988, at the time of the management buy-out, the £15 million loan was continued and a further £10 million loan was offered. Both loans are interest-free. Repayments are due only if profits rise above a threshold, so the management buy-out received further substantial advantages. The loans were for a project of capital works to lower costs, but they were not automatic. To safeguard the taxpayer, the Department had to be satisfied about the future viability of the company—I stress those words.
As part of the management buy-out in 1988, RTZ offered an interest-free loan of £10 million. In all, the Department has lent Carnon £23.35 milion, and RTZ £7.7 million. Under the buy-out, a workers' trust received 20 per cent. of Carnon's equity. It also has a seat on the board. Two non-executive directors served on the board for a period. In spite of all this, the company has been unable to achieve what it set out to do when the loans were offered to the buy-out in 1988.
In January 1990, the tin price was £4,000 per tonne, although the previous year, 1989, it had averaged –5,300. There was concern that the tin price had shown no sign of recovery even though experts had been taking bullish 437 views late in 1989. By the end of 1990, the price had not even maintained its January 1990 level. On the contrary, it had dropped to £2,900.
From early 1990 therefore, the company's officials sought to bring new equity and other finance into the Carnon group. Their aim was to gain a buffer to secure the tin business's long-term future. They sought our help in this. We agreed in principle that, as one element of any acceptable deal, we would restructure our loans.
In the middle of last year, it was apparent to us that, without additional finance, tin mining on the then proposed basis was no longer viable. I remind hon. Members of the stress that I laid on the viability of the company. We were therefore compelled to declare the project in jeopardy. Under the loan agreement, this meant that we were not obliged to make further loan advances. Nevertheless, despite serious and growing doubts about the project's future, we took the view that a prospect of loan repayment remained and, at the company's request, we advanced more money during the second half of 1990. We advanced another £400,000 to the company and RTZ more than £800,000 to give the company every chance successfully to finalise its negotiations to raise further equity finance. However, in spite of its efforts, it was, in the event, unable to do so.
Given this situation, and after careful study of Carnon's latest plans, we had to conclude that the project was not viable in the longer term. I stress that this was a decision that took account of all relevant facts, including payment of the remainder of the DTI and RTZ loans.
Today—as I have shown, we have been here before—experts expect the tin price to rise, a point made by the hon. Member for Truro. The question is when, by how much, and sustained at what average level. Brazilian producers increased their output from around 7,000 tonnes in 1978 to 44,000 tonnes in 1988. That was out of world totals of 200,000 tonnes in 1978 but only 155,000 tonnes in 1988. Prices have dropped. Other producers have had to cut their output. The upside for prices is limited by the ability of producers overseas to produce more if prices rise, and by the existence of sizeable stocks.
Costs are the other side of the picture. Tin is the company's only substantial revenue-earning activity. It 438 has a number of outgoings to support. Costs can vary depending on how much is spent on capital works and how much is spent on mine development necessary to replenish reserves of ore as they are consumed. It should be possible to cut costs per tonne in the short term at the expense of the longer term. The analysis of South Crofty's position is certainly not straightforward. Moreover, many other tin producers have been under the same acute pressure to reduce their costs. Carnon's efforts, including the wage deals accepted by the workers, have not therefore given Carnon the relative advantage for which one might have hoped.
All those and other factors were studied before we decided that it would not be a proper use of public funds to advance more money for the project. I hope that I have convinced the House that we have made every effort to secure the future of the Cornish tin industry—short of spending taxpayers' money in a financially improper way.
Hon. Members raised some wider issues about Cornwall. Despite our five years of support, we have been accused in the local press and elsewhere of bad faith and of ignoring the needs of Cornwall—a point made by the hon. Member for Truro. I accept that unemployment in parts of Cornwall is—as regrettably it is elsewhere—far too high. My hon. Friend the Member for Falmouth and Camborne made that point. Trying to keep unemployment down by sustaining jobs in uneconomic areas of activity is no answer. It has been tried before—in steel, shipbuilding and the motor industry. Inevitably it failed.
The only answer is to provide jobs producing goods and services that people want to buy and to do so at a profit. For that reason, my Department tries to help business to improve its competitiveness. We have done much in Cornwall in recent years to that end. In the past two years, more than 1,000 Cornish businesses have sought our help under the enterprise initiative. More than 330 small companies have received a total of more than £2 million in support under regional enterprise grant schemes, and £3.5 million in regional selective assistance has been offered. We will continue to give all the regional aid help that we can.
§ Question put and agreed to.
§ Adjourned accordingly at nine minutes to Two o'clock.