§ 11 am
§ Paddy Tipping (Sherwood)
The energy sector in the United Kingdom faces a period of difficulty and profound uncertainty. As the Minister knows, some energy companies are in crisis. There are severe problems at British Energy, TXU, AES Drax Power and UK Coal, but they are merely symptoms of a deeper, underlying problem. The Government recognised that there was a problem and commissioned the performance and innovation unit energy review, which was published last February. Even in its opening lines, the review clearly acknowledged the underlying problems. In the foreword to the review, the Prime Minister wrote:Energy underpins our daily lives … That's why securing cheap, reliable and sustainable sources of energy supply has long been a major concern for governments".In a sense, three goals are thus set out: cheapness, reliability and sustainability. However, those three goals do not sit easily together—for example, there is real tension between cheapness and sustainability. There are those who argue—I have done so myself—that if we want sustainable sources of energy, we need to consider energy that is more expensive, rather than progressively cheaper. In fairness, the wholesale market price for energy has fallen by 40 per cent. since 1998. However, the knock-on effect for the consumer has been very limited—perhaps just over 1 per cent. off bills. That is a clear demonstration that the market system is not working properly. Furthermore, the problems that energy companies now face show that the progressive policy of squeezing assets has run out of juice.
The PIU report is good on questions but, unfortunately, short on answers. The question of nuclear energy is left for another day. I wonder what we should now make of the statement in the report, which was published some months ago, that:Because nuclear is a mature technology within a well established global industry, there is no current case for further government support.Well, a lot has changed since then. Just last week, for the third time in three months, the Secretary of State for Trade and Industry had to roll on a £650 million loan to British Energy. Most significantly, it was backed by a grant from Government of between £150 million and £200 million over a 10-year period. That is a significant investment in maintaining an energy sector not through the consumer, but directly, through the taxpayer.
For my part I felt that in some ways, the PIU report showed complacency. Do we really want 80 per cent. of United Kingdom energy needs to be met by gas, 70 per cent. of which will be imported by 2020? What do we mean, post-11 September, by security of supply, if such a scenario is included in the PIU report? The real difficulty is that although the Government acknowledge the problem—I know very well that the Minister works extremely hard on such issues—the planning, policy and market cycles are out of sync. Immediate decisions need to be taken in the market, but the White Paper will not be published until early in the new year. Uncertainty in the market is leading to problems for companies such as British Energy and UK Coal.
The past few months have been extremely difficult for the deep-mined coal industry, witnessing the closure of the Prince of Wales colliery and the rundown—which I 199WH think will become quicker—of the Selby coalfield. If urgent action is not taken, worse is yet to come, because England's largest coal producer, UK Coal, is currently reviewing every colliery. Daw Mill, for example, is a pit with enormous potential, yet it has huge geological problems; the work force and the management are trying to work through those problems, but things are difficult and Daw Mill is proving to be an enormous drain on the finances of UK Coal.
§ David Taylor (North-West Leicestershire)
Daw Mill employs approximately 450 people, a good number of whom come from my constituency. Does my hon. Friend hope that the Government will learn from the serious mistake made in respect of Asfordby in north-east Leicestershire, where more than 800 million tons of coal were left sterilised by a decision not to support the working through of geological problems? Will he therefore urge the Government to reflect on that case and to give Daw Mill and other collieries the support they need at relatively low cost?
§ Paddy Tipping
The Government need to reflect on the fact that Daw Mill, Harworth and Maltby have long-term strategic reserves of 20 years. We must not lose them, even though there are short-term problems at Daw Mill. A pit that might not have such long-term reserves is Clipstone, in my constituency—it has had a long, good history, but, in fairness, I have to say that it is coming to the end of the reserves. However, its life could be lengthened if closure aid were available for some of the limited reserves, or, in the longer term, if UK Coal were to dispose of it and pass it back to the Coal Authority, and a new owner and manager came in who was prepared to invest in access in the black shale—although that would be a multi-million pound project, I admit.
There are problems at Harworth and Maltby. The men who work in those pits are extremely concerned about the future, so they are in discussions with the management and UK Coal to keep those pits open, and they are prepared to consider new working practices and new methods of investment to do so. At best, the solution will be that UK Coal comes back and cuts costs—in effect, reduces the work force. At worst, it will announce the closure of both collieries, even though they have long-term strategic reserves that we would do well to safeguard. The crunch is that UK Coal is determined to make an announcement about Harworth and Maltby before Christmas.
UK Coal's problem is that it simply does not have the resources to invest in the future. Development of new kit, new faces and new seams is a £1-million project, and UK Coal's short-term funding problems inevitably mean that it is not investing in the future. That will mean progressively more closures in a domino effect. I think that UK Coal is currently funding its operations by closing down one colliery after another, and using the money from the pit that is designated for closure to support the rest of the company. Announcing the closure of a pit is not investing in the future—there is no longer any need to safeguard that pit, and the income from sales keeps the company and the rest of the group going. However, a domino effect has a consequence: at 200WH some point, UK Coal will run out of pits to close. I fear that that day may not be far off. Collieries can be used as cash cows, raped and pillaged in the short term, but that cannot go on forever.
§ Mr. Michael Clapham (Barnsley, West and Penistone)
Does my hon. Friend agree that the old formula for privatisation of the industry from 1994 was flawed? When it was privatised, the whole industry was beyond the critical mass; that had implications for the financial market, which will not invest in an industry that it sees is beyond the critical mass. Therefore, it weighs heavily on Government to provide an aid scheme to allow the mining of a strategic resource to continue.
§ Paddy Tipping
That is a strong point. My hon. Friend and I go back 10 years on that argument. The mass of the pits has shrunk far too much. The key problem for UK Coal and other energy companies is that they need to borrow money but they are borrowing against short-term contracts, and the financial markets are not prepared to support that. In that context, decisions need to be taken immediately about whether coal has a place in a balanced, diverse energy policy. I have no doubt that it has, and I think that the Minister believes that coal has a future. Put bluntly, coal is the only source of energy that has the flexibility to meet the peaks and troughs of energy demand.
The question then arises do we want indigenous British coal or imported coal at a cheaper price? If we are interested in long-term solutions, we need to maintain our coal industry for reasons of security of supply. In fairness to UK Coal and to the men who work for that organisation, costs are coming down. Project 105 has been difficult but we are achieving closer parity between the costs of imported coal and home coal. Of course, the market is cyclical, and at the moment, we have a relatively strong pound. Things will change, but if we decide that we need a coal industry, we must support it.
The Minister has worked extremely hard in Europe to develop proposals for an investment aid scheme. That is an important step forward because it will allow investment in the future. There has been consultation on the scale and scope of that proposal. I hope the Minister will listen to the responses to the consultation and deepen and widen the scheme, because the total quantum currently envisaged is insufficient, as is the amount available for each pit.
§ David Taylor
Is not the gap between the cost of imported coal and UK coal wafer thin—a gap that can be bridged at relatively little cost to the Exchequer? Is it not the case that, during the past two and a half years, the average UK production cost per tonne has been about £33, whereas the average cost of imported coal has been about £30 per tonne? Would it not be astonishingly short-sighted to let an industry collapse for want of such a small sum?
§ Paddy Tipping
I am sure that the Government are aware of that argument. That is why they have stepped in to support British Energy at a cost of £650 million, with progressive annual payments of £150 million to £200 million. They believe in long-term security, which is what the investment package from Europe is all about.
201WH The Minister needs to do two things. First, he needs to ensure that the package is ready to go at the beginning of 2003—not confirming the arrangements until later in the year simply will not do. He also needs to look further at the point that my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) made about long-term borrowing against short-term contracts. Europe will provide 30 per cent. grant in some cases, but the company will have to raise 70 per cent. from the private sector. I have seen advice, as I guess the Minister has, that suggests that the Government could loan the other 70 per cent., provided that they did so at commercial rates. We might need to examine that proposition, because I do not believe that the market and the banking sector will provide the other 70 per cent.
The Government have, of course, given the coal industry aid over the past three years, including £150 million under the existing coal operating aid scheme. UK Coal's problem is that it has had its perceived "share" of the money. Its funding is capped at £75 million, but it has made bids to the Government for £137 million. I simply do not believe that the new investment package will make a difference on its own. I know that the Minister has listened to discussions about rolling the coal operating aid scheme out further. It will probably have to finish at the end of the month, and I suspect that it could operate until the end of the year. I hope that the Minister will look at that. If the Government seriously want to keep the coal industry going, they must lift the cap from £75 million to £137 million. That would cost £60 million, for which we would get a commitment from UK Coal—it has already made this commitment to several hon. Members present—to keep collieries open for four more years.
§ Mr. Bill O'Brien (Normanton)
I am following my hon. Friend's speech carefully. The figures that he is using should be compared with the £650 million loan to British Energy. We should also consider the budget for renewables, which will cost £870 million by 2010. We must put those figures side by side. The coal industry is asking for less than £200 million, but the significant funding proposed for British Energy and renewables is far in excess of that.
§ Paddy Tipping
It is true that renewables have a market advantage—that is why the renewables obligation was set up as it was. The market is already rigged in favour of renewables.
As hon. Members have said, the £650 million for British Energy is simply astonishing. I accept that it is a loan, but we are talking about the possibility of a Government grant of £1 50 million to £200 million over 10 years. That takes some explaining in coalfield communities in Nottinghamshire and Yorkshire. I ask the Minister for a commitment simply to look again at whether the current coal operating aid scheme can be rolled forward, and at whether the cap on UK Coal can be lifted to allow an extra £60 million into the coal industry. I believe that UK Coal will honour its commitment to keep all UK collieries open for a further four years. I say that in the secure knowledge that it has honoured such commitments in the past at Clipstone and Ellington.
202WH I have not spoken about the environmental pressures on the coal industry, but in the long term, they will be the force that sounds its death knell. I ask the Minister to work closely with ministerial colleagues in the Department for Environment, Food and Rural Affairs and with the Environment Agency in respect of European legislation such as the large plant directive, which is now on stream. I simply point out that advances in reducing emission levels have been made on the backs of the coal industry and the people who live and work in coalfield communities. If further limits on emissions are needed, other sectors should be considered—for example, the transport sector, which has contributed nothing—rather than the coal industry.
The men who work in British collieries are the most efficient miners in Europe. They can face tough decisions—after all, they lived with the consequences of tough decisions for many years. However, what they, the coal industry and the wider energy sector, find most difficult is uncertainty, which can be dysfunctional and can lead to the postponement of decisions. Financial decisions necessary for the longer term will simply not be made in the short term on the back of short-term contracts. The essential test of the forthcoming energy White Paper will be whether it injects a sense of direction into our energy policy.
§ Mr. Clapham
Does my hon. Friend agree that if the industry is to be tied to short-term contracts, it could result in a change in the method of working coal? That would add to the cost, as bringing the revenue stream on more quickly would entail moving from retreat mining to advance mining. That, in turn, would result in collieries being closed sooner.
§ Paddy Tipping
That is exactly right. One of the things that UK Coal is exploring is how to reduce costs. Retreat mining needs long-term investment for greater long-term profit. Advance mining means that short-term decisions are made because of the need for profit. My point is that because of uncertainty in the market, long-term decisions are being postponed. An energy policy is needed now. It should be published very soon to ensure that coal has a real stake, a real place, in an energy policy that is diverse, balanced and secure for all communities.
§ Mr. Deputy Speaker (Mr. Frank Cook)
Order. I remind hon. Members that this is a 90-minute debate. The convention is that the Chair is required to commence the winding-up speeches of the three Front Bench spokesmen 30 minutes before the conclusion of the debate. That leaves those seeking to make a contribution about 38 minutes. Protocol advises Members to forewarn the Deputy Speaker that they intend to try to catch his eye. I have received five requests this morning, so we do not have much time. I ask those who are called to be pertinent and brief and to try to resist taking interventions, which, so far, have been far too frequent. I call the hon. Member for Selby.
§ Mr. John Grogan (Selby)
It gives me great pleasure to take part in this debate, and I congratulate my hon. Friend the Member for Sherwood (Paddy Tipping) on 203WH securing it. He referred to last week's historic announcement on British Energy. He knows that the Secretary of State for Trade and Industry held a briefing for Back Benchers after that statement. I shall not breath a word of what was said at that briefing, but I shall paint a picture. It was held in Room almost as big as this Chamber, but there were only three parliamentary private secretaries, one distinguished Government Whip, my hon. Friend and myself present. There were no Members representing nuclear constituencies in sight. That is because all their problems have been solved—Christmas has come early for them, and there is nothing much to do for the next 10 years. That is not true about the coal industry. We are appealing for a degree of balance and even-handedness and a sense that justice has been done.
I want to reinforce the case for lifting the cap on UK Coal. As my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) said, we have 28 days to save the critical mass of the industry—that is 28 days before the scheme runs out of operating aid. We have 28 days to lift the cap on UK Coal, which would give it another £60 million to support the pits.
Ministers and officials have raised three objections, questioning whether that can be done. One objection centres on whether Europe would allow it. Hon. Members might remember that the same sorts of objections were raised when we instituted the scheme in the first place. Many civil servants argued that Europe would not allow the scheme, that we were starting too late and we should have started in 1993 if we wanted to start at all, but those objections were overcome. I rang the European Commission yesterday. I was told that, except for Christmas day and Boxing day, someone would be standing by the telephone, and the Commission would be prepared to entertain an application to lift the cap, although, obviously, it would not give a decision on that to me, and I was told that arguments would have to be made about changed circumstances.
I remind hon. Members that the cap of £75 million on UK Coal was instituted when the cap on the overall scheme was £120 million. Since then, the cap on the overall scheme has been lifted to £170 million, while no adjustment has been made to the cap of £75 million on UK Coal. The scheme has been extended for a further six months, so one could argue that the figure of £75 million was time specific to the cap of £120 million. There are therefore good arguments for raising it.
The second argument relates to what UK Coal will do in response to the lifting of the cap. The Government should ask UK Coal about that. As the hon. Member for Sherwood said, we have received assurances from the senior managers of UK Coal that in return for lifting the cap, the future of the three collieries under threat would be secure for four years, and Selby would be seen through until spring 2004. That is extremely important if we are to make effective the work of the Selby taskforce in retraining people and finding them new jobs.
The third question raised is about money. Sixty million pounds is a significant sum, but if the investment aid scheme is to mean anything, one must have something in which to invest—for example, places such 204WH as Daw Mill. It is essential that in the next few weeks we do everything possible to lift that cap. I do not think that Europe would be a barrier to that.
Moving on swiftly to the situation in Selby, even if the cap is lifted, £60 million will not save the Selby coalfield. However, it will ensure that its life is prolonged until spring 2004. We in Selby have had some good news in the past week. AES Drax, which owns Drax power station to which most of Selby's., coal is delivered, has reached a six-month standstill agreement with its banks and will continue to take Selby coal at the price agreed for those six months. That is encouraging news for the Selby coalfield, and I pay tribute to the management of UK Coal and AES Drax for continuing to talk to each other during the past weeks. A worse situation could easily have developed, leading to Selby coalfield closing very precipitately.
Three things are on the minds of men in Selby coalfield, which they tell me about most forcibly. One is a real hunger for training and retraining. Some have already started: 50 men have started further education courses, and many others have had interviews and are making plans. It is essential that the Government respond to the request of the Selby taskforce for various pots of money as quickly as possible. That would, for example, allow for the day release of miners.
The second factor high on the agenda of Selby miners, particularly the younger ones—the average age of the men in the Selby coalfield is 45—is the chance of working elsewhere. The new National Union of Mineworkers leadership should be congratulated on beginning to talk about flexible working at Kellington and Rossington. I know that it is a controversial subject and that agreement has not been reached, but I am told that there is potential for extra weekly payments of £200 a man if agreement can be reached. Many Selby miners hope that there is a future for them at Kellington.
The third thing on the minds of Selby miners is that ordinary miners are not entitled to a full pension at 50 if they are made redundant, whereas pit deputies are. That is a source of continuing injustice, which I have discussed with the Minister before.
In summary, we must make every effort in the next few days throughout the coalfields of Great Britain to persuade the Government to apply to Europe to lift the cap. That would give a breathing space to the industry and enable us to maintain a viable industry so that there is something on which to build when investment aid begins next year. December will be the decision month for the future of the British coal industry.
§ Adam Price (East Carmarthen and Dinefwr)
I congratulate the hon. Member for Sherwood (Paddy Tipping) on making the case for coal. Perhaps there should have been a question mark at the end of the title of the debate—if only the Table Office would allow it. We have been here many times before. The Government have dramatically changed their position from that of a year ago, when they said that they were not minded to continue with any form of state aid. I am glad that we won that argument as a result of pressure from coalfield Members of Parliament, the industry and the Coalfield Communities Campaign. We should be talking about 205WH details, but yet again, as the hon. Member for Selby (Mr. Grogan) said, we are talking about the whole future of the industry.
§ The Minister for Energy and Construction (Mr. Brian Wilson)
May I correct the hon. Gentleman? He said that a year ago we had no intention of doing anything to support the industry. I assure him that since I came into this job I have never said that.
§ Adam Price
I am, as always, grateful for the Minister's support. We hope to hear more in that vein when he winds up the debate.
Yet again, we are not talking about 28 days to lift the cap, but 28 days to save the British coal industry. Why is that industry important? As we have heard, the European Commission's Green Paper on energy said that EU coal is vital to security of supply. As for economic arguments, the coal industry supports employment in some of the most disadvantaged communities across the length and breadth of the UK, including 2,000 people directly employed in Wales. As it stands, the package is inadequate—indeed, some industry insiders say that it is an insult to the industry. In the words of the Coalfield Communities Campaign,The UK coal industry faces the threat of wholesale closures. Without action from the Government, most of the remaining pits will close within the next 12 months or so—abandoning access to at least 20 years of reserves.
The declining amount of aid year on year is unacceptable. The upper limit of £20 million and lower limit of £1 million offers too little for large companies and, in effect, excludes small mines that are vitally important in terms of anthracite coalfields. The Government's aid proposals focus exclusively on investment aid, but EU rules allow investment aid, operating aid and closure aid. The Welsh Office's 1998 document, "The Future for Welsh Coal", argued that a key principle was to secure a level playing field for the British coal industry. If we are to achieve that, we need the flexibility to ensure that operating aid, closure aid and investment aid are available for our mines.
Apart from the wider debate, there is specific concern about Betws colliery in my constituency, which, like other anthracite producers—including Aberpergwm in the constituency of the new Secretary of State for Wales—will be excluded under the Government's proposals because it produces anthracite for the domestic fuel market. Why is it excluded? What is more sustainable than producing local clean coal for the local domestic fuel consumption market? That anomaly must be addressed. There is no sense in importing Chinese anthracite into west Wales when we have productive mines in which productivity has risen enormously over the past 10 years against the backdrop of difficult times for the British coal industry.
The Government must clarify their energy policy. The new Secretary of State for Wales, the former Minister for Energy and Competitiveness, recently said in Wales that the future of the Welsh coal industry was secure. I should like to know on what basis he made that statement. Apparently he has the ear of the Prime Minister, so perhaps he knows things that no one in this Chamber knows. He says that he is against nuclear energy and wants a future for coal and renewables, and I wholeheartedly support him in that, but we need clarity 206WH from the Government. We need them to give a commitment that coal has a role to play in future energy strategy. We need an improved aid package that focuses on opportunity, not restriction. Above all, we need a far more flexible approach if the Government are to do what they said all along that they wanted to do—to support the future of the British coal industry.
§ John Mann (Bassetlaw)
I congratulate my hon. Friend the Member for Sherwood (Paddy Tipping) on securing the debate. I thank the Minister for agreeing at short notice to meet a couple of weeks ago a delegation from every union with members at Harworth colliery. He will be pleased to know that since then, output at Harworth has hit record levels. Indeed, according to the latest figures I have, it was the best within UK Coal—Yet UK Coal says that Harworth is not productive. My hon. Friend the Member for Sherwood mentioned project 105 and the unit price at UK Coal. The figure last week for Harworth was 83. That figure is matched by some of the surrounding collieries—in fact, some of them scored less than that. There is no question but that there has been efficient and improved production across British coalfields in recent times.
The issue of nuclear industries and waste has been raised. I strongly disagree with my hon. Friend the Member for Selby (Mr. Grogan), who said that it was like Christmas for the nuclear industry constituencies. We have touched only the tip of the iceberg of the problems of nuclear waste and nuclear reprocessing. The long-term costs to the taxpayer, the Exchequer and the country are only just beginning to be revealed. I have not been anything other than supportive of the nuclear industry—as in solar energy and other sectors, I would like to see the industry developed—but I have always argued for a balance and a security of supply across all sectors.
The sort of subsidy that has been handed out to the nuclear industry will be greatly increased in forthcoming years—I am talking about the real costs and real subsidies, over not only the next two or three years, but the next 30, 40 or 50 years. We can compare the sums involved with the minute amount of money—most estimates put the figure at about £100 million or £150 million—required to maintain the UK coal industry at its current levels. That sum would be a drop in the ocean compared with the cost of the nuclear industry. Is this the end of subsidy of the nuclear industry, or is there more round the corner? How can we possibly not compare the modest amount that the coal industry requires with the enormous amount that the nuclear industry requires?
In my constituency this week, Cottam power station unveiled its new advanced technology, similar to that found at West Burton, which is also in my constituency. I visit both power stations regularly and I invite the Minister to join me. Those power stations are investing for the future. As energy suppliers, they see the future, but where will they get their energy supplies from?
Just after I met with the Minister, a delegation travelled to Brussels to meet Christian Cleutinx, the head of the coal unit within the European Union. We questioned him about operating aid, investment aid and the future of the industry. Some of his answers were 207WH convincing: there is no question but that there is sufficient flexibility within the existing rules to allow the UK coal industry as it exists at the moment to be maintained. He left us in no doubt whatever about that, but I challenge the European Union on another issue. As a key objective, the European Union wants to have a stake in the future of every other sector of industry—that is almost its ethos. In the coal sector, there is a degree of madness and convenient short-termism. We in this country have the opportunity to absolve ourselves from that.
Is it not the case that, as Mr. Cleutinx outlined, the European Union can provide the sort of subsidies that we require, should we apply for them? How much coal will be produced in the UK in 2020? The issue is far bigger than UK Coal plc. Frankly, I do not give a damn who runs the coal industry, so long as they run it well. I want this country to have the security of supply that it will need in 20, 30 or 40 years.
In 2020 or 2030, will we be reliant on Chinese coal and Russian gas for British energy needs? If so, what are the security implications for this country? That is the nub of the question. Of course, jobs are an issue—I have as many working miners in my constituency as any other hon. Member—but the overall issue is far bigger than that: it is about British national security. Are we going to leave ourselves open to the political intrigues of whatever regimes or Governments are running China, Kazakhstan and Russia in 20 years' time? Will they be determining what energy we have in this country? That is not in our economic interests, nor is it in the interests of national security.
Short-term, modest assistance to the coal industry would allow us to expand the seams at Harworth to make 30 years-worth of coal available—with a similar amount in other collieries. That would mean that we would still have British coal going into our power stations in 20 years' time.
§ Mr. Denis Murphy (Wansbeck)
I congratulate my hon. Friend the Member for Sherwood (Paddy Tipping) on securing this timely debate.
Each colliery in UK Coal's portfolio has vast reserves of coal, which is the reason why the collieries have survived. They were the crème de la créme of the former British Coal, and billions of pounds of public money were invested in them prior to privatisation to make them world-class operations. However, UK Coal has stated openly and honestly that it cannot run the industry at its current size. It has announced the closure of Selby, and three other major collieries—Harworth, Maltby and Daw Mill—are under review. As I understand the position, such is the fragile state of the company that each individual unit is under review.
I am not attacking UK Coal. It is in a difficult situation. It is a plc and under pressure from shareholders to return profits; to that end it must make commercial decisions. However, its decisions are having a detrimental effect on the United Kingdom's energy reserves, and that cannot be right. Each and every remaining colliery is at risk. A major geological or technical problem can mean immediate closure, with the company unable in the short term to sustain such a financial loss.
208WH The coal industry needs a period of stability. My hon. Friend the Minister has faced—and is, I hope, overcoming—a major crisis in the nuclear industry. Many argue that the crisis has been created by the wholesale price under NETA—the new electricity trading arrangement—falling by some 36 per cent., which makes it difficult for companies to compete in an open market. The Government have, rightly, intervened with a massive injection of public money, and British Energy has appointed a new chairman. The company remains a plc, but the Government's package will cut its costs, deal with its liabilities and raise cash. One industry analyst said:The key point is the Government now owns 65 per cent. of British Energy's cash flow. That is 65 per cent. of the economic value of the company and when you look at the appointment of Adrian Montague as chairman it is clear the Government is calling all the shots.What works for British Energy should work for the British mining industry. Such a deal would keep Selby mining coal for many years to come, and it would permanently protect redundancy payments and pension rights. It cannot be right to force men into making decisions on their future or to sterilise millions of tonnes of coal by introducing an arbitrary cut-off date to qualify for payments.
The people who mine Britain's coal deserve the very best that the nation can afford. Investing in a new company would allow the Coal Authority some influence on the way in which coal is mined and on preventing the sterilisation of the nation's vast reserves. By extending operating aid and introducing a more generous investment regime, we could assist the mining industry, but that would be like applying sticking plasters when major surgery is required.
I know that my hon. Friend the Minister genuinely wants to help the mining industry. He understands its strategic value, and the important role that the pit plays in mining communities. I therefore urge him to use the example of British Energy to restructure the British mining industry completely. For a fraction of the cost, we can retain the mining industry at its present size for many years to come.
§ Mr. Kevin Hughes (Doncaster, North)
First, I congratulate my hon. Friend the Member for Sherwood (Paddy Tipping) on securing the debate and running through a detailed analysis of where the industry stands today.
I also pay tribute to the Minister. He has done an awful lot of work and produced an awful lot of cash to help save what is left of the British deep-mined coal industry. That should not be overlooked. He has done a lot of hard work to ensure that we are where we are today, but there is still a long way to go.
Last week on the Floor of the House, we saw the Government rescue a botched privatisation by the Tories by stepping in to rescue British Energy, which supplies nuclear energy. We already knew that they had advanced a £650 million loan, but a further £150 million to £200 million a year for up to 10 years is a substantial amount of public funding. Media pundits added up the whole deal, which comes to about £3 billion over 10 years—I do not know how they reached that figure, but 209WH you know what the media are like, Mr. Deputy Speaker. Even if the true figure is only half that amount, it is still a huge sum.
I do not have a big problem with the Government's rescue of the nuclear industry, because they have a duty to maintain the security and diversity of supply in this country. However, I object to the hoops that the coal industry has to jump through to qualify for relatively small amounts of money compared to the sums available for the nuclear industry. The Government must ensure the security of supply, and to do so they must keep their eye on diversity. British deep-mined coal has a big role to play in providing security of supply, and it should not be cast aside.
Some people think that the British deep-mined coal industry should be left to wither and that it is safe to import coal from wherever we can get it. They think that the world markets will stay low for ever and that there will never be political problems in the countries from which coal now comes—my hon. Friend the Member for Bassetlaw (John Mann) alluded to that. They also believe that our gas supplies will be safe in the near future, given the countries from which we will be importing it in 15 to 20 years' time. I do not share that view and think it dangerous to go down that road.
The Government are right to underpin the nuclear industry. They also underpin, with an obligation, renewables, which is right because we need to be aware of the environmental consequences of burning coal in an unclean way. That is a problem that we need to face up to, and my view is that the Government should start pouring money into burning British deep-mined coal via an obligation to the renewables obligation.
§ David Taylor
It is certainly true that over the next 10 years £2 billion or more is to be put into trolleys and pushed towards the nuclear industry. Is my hon. Friend disappointed that the Department of Trade and Industry is suggesting a cap of £5,000 per job on aid to the coal industry, which at a typical pit would amount to perhaps £2.5 million? That is nowhere near enough.
§ Mr. Hughes
I agree. That is why I am arguing that it is high time the Government recognised the role of British deep-mine coal in security of supply and the provision of diversity. It is time that the Government underpinned the coal industry with resources on the same scale as those they will invest in renewables and British Energy over the next 10 years. The Government must ensure that when people flick the switch, the lights go on. They can do so only by underpinning a percentage of our energy supply. The way to achieve it is to underpin nuclear, underpin British deep-mine coal and underpin the renewables obligation.
Coal provides an energy source that we know is available and we know how to exploit. We also know that it is reliable and that it will last for many years to come. Yes, we need to start burning coal cleanly, but it is time that the Government gave proper consideration to underpinning the industry to provide the security and diversity that we need.
§ Mr. Bill O'Brien
I shall refer to the possible investment in a scheme for the coal industry mentioned in a recent consultative document issued by the 210WH Department of Trade and Industry. I submitted a response to the Minister and I invite him to reflect further on it.
We are all arguing in favour of supporting the mining industry. That requires a secure market for coal, and that is a possibility because some power stations are fitted with flue gas disposal systems. If power stations such as Drax and others fitted with that equipment burned to capacity, it would help the industry substantially. Power stations without the equipment could be encouraged to fit it, burn coal smokelessly and reduce the amount of sulphur emitted into the atmosphere. A scheme to do so is already there; it is simply a question of encouraging the power stations to introduce flue gas desulphurisation. Failure to encourage further such installations will make it difficult for the coal industry to obtain venture capital.
We are closing down mines that are capable of becoming viable in the not-too-distant future. People are not investing in new reserves because of the uncertainty in the market. We should recall the scheme offered to the nuclear industry in the first instance—when we had the non-fossil fuel obligation—which was not a charge on the Treasury because it was passed on to consumers. We could work out a similar scheme that would benefit the coal mining and electricity generation industries. The Royal Academy of Engineering and the Lattice Group plc are forecasting higher gas prices, so becoming more dependent on gas generation would have an impact on our local industries and domestic consumers.
The Minister should know that schemes could be introduced—I would be happy to discuss them in more detail—to provide a secure market for coal, to help the electricity generation industry to burn coal and to meet the standards imposed by European directives. That could be done with no real call on the Treasury to contribute. It is a matter of introducing a formula, working out a strategy with the coal and electricity producers, and ensuring that we obtain the proposals for which all hon. Members who have spoken in favour of the coal industry are pressing. That would enable the industry to prosper, and we would not depend on imports of gas, oil or coal.
I plead with my hon. Friend the Minister to give us, in the short time that is available, an opportunity to present those schemes on behalf of the mining and electricity generation industries, so that we can go forward with a substantial programme. We must accept that the energy industry is in a mess. We are therefore obliged to try to get the industry out of that mess, and coal could play a major part in solving the problem.
§ Brian Cotter (Weston-super-Mare)
I have listened to many hon. Members who obviously know much more than me about the coal industry. The hon. Member for Normanton (Mr. O'Brien) spoke about the need for a strategy, which is a key point. We need a clear strategy for our energy policy, be it on coal or other forms of energy.
It is difficult to be as positive and optimistic about the coal industry as one would like. As with any other industry, we would like to be able to give help, as has been given in the past. However, it is rather unfortunate 211WH that the Government have given so much help to nuclear power and British Energy. As has been said, considerable amounts are being given, but it is likely that those amounts will be increasingly a drain on our resources. As the hon. Member for Normanton said, we need a strategy to ensure that we are not just investing money in one direction and neglecting other forms of energy.
We must help the coal industry in any way that we can, as with any other industry. There is no question but that help should be provided for research and development with regard to cleaner forms of coal and productivity measures. That is discussed a lot in the paper, and the coal industry has taken tremendous steps forward in that direction. However, as those of us who have worked in the industry as opposed to the services know—I can say this modestly as I have worked in it all my life—the pressure to improve productivity is there all the time, year on year. The Government need to help in any way possible, whether by pulling together both sides of the industry, if that is appropriate, or through research and development and other ways of helping with the productivity of the industry.
I have to draw the unfortunate conclusion that such measures should be supported, but we cannot continue to support operating costs in any significant way. In the past, there have been many initiatives in that direction, but we must now develop a strategy that makes the industry sustainable and creates a future for energy provision in this country.
It is regrettable that there are to be, and have been, closures. We certainly support all that can be done to help communities affected by closures.
§ David Taylor
Will the hon. Gentleman clarify whether the Liberal Democrat policy is to accelerate the closure of the British coal industry?
§ Brian Cotter
No, certainly not. As I said, we need a proper strategy on energy policy. In their economic policy, the Government—not necessarily the Minister here—must address certain issues related to the exchange rate. Their policy has not helped in obtaining the exchange rate needed for businesses in the United Kingdom to export and to cope with imports. I could speak at length, although I will not, on the subject of the euro and exchange rates.
If we cast our minds back to November 1997, we felt strongly that a greater commitment to the idea of the euro would have helped to keep the exchange rate down. Hon. Members may disagree with that—we are all entitled to our views—but the exchange rate is an important issue.
We are not saying that closures should be accelerated or that the coal industry should be wound down. We are supportive of that industry, and of policies on productivity measures, cleaner coal and the exchange rate.
§ John Mann
Sorry. Is the hon. Gentleman saying to workers at Harworth colliery, who have been threatened 212WH with the closure of the colliery by the employer, that they will have to wait for Britain to join the euro, or does he support operating aid going to that colliery in the next few months to keep it open?
§ Brian Cotter
No. The hon. Gentleman is looking for a solution to be produced today, and he is right to do that. I must also address why we are in our current position. I am not proposing an instant solution for tomorrow, but I seek a strategy from the Government—I have sought such a strategy for a long time—that would put us in a better position. That is all I am saying to the hon. Gentleman.
If the European Community can be prevailed on to provide assistance—that has been discussed and seems possible—that should be the route forward. We will back any significant help to the industry that we can get. However, we cannot go down the route taken by British Energy of pumping in more and more money. I look to the Government to produce a strategy that takes into account the whole of the industry, including investment in renewables and investment for environmental reasons. More should have been done in those areas in the past.
I bow to hon. Members here who know much more about coal mining than I do. I have been down a coal mine once, and that is all. I bow to them in that respect, but wonder whether more could not have been done in the past to help produce cleaner coal to ensure that we did not face our current problems.
I hope that the Minister will reply on the coal industry specifically and, more generally, on a clear strategy for energy in the UK. Such a strategy should give stability and a future for people in the industry, and should enable them to see the direction in which the Government are going. At present, that direction is not clear. The Government have distorted the market, particularly by helping British Energy.
§ Mr. Roger Gale (in the Chair)
Order. I appreciate that the hon. Member for Bolsover (Mr. Skinner) represents a mining constituency, but he did not enter the Chamber until the debate had been running for an hour. I call Mr. Bellingham.
§ Mr. Skinner
On a point of order, Mr. Gale. Is it a new rule of Parliament that if someone is not in the Chamber when a debate begins, they cannot be called? Every day in the House of Commons, people wander in and out of debates and take part in them. I have been busy in Parliament on other business and, to be frank, the rule 213WH that has just been announced is wrong in principle. It is not in "Erskine May" and, if applied generally, many people—especially Privy Councillors—could not speak.
§ Mr. Roger Gale (in the Chair)
I appreciate the hon. Gentleman's difficulty in trying to be in two places at once, but hon. Members are now making their winding-up speeches.
§ Mr. Skinner
Further to that point of order, Mr. Gale. I asked you whether you would apply that ruling generally? I will ask the Speaker what he thinks.
§ Mr. Roger Gale (in the Chair)
The hon. Gentleman knows perfectly well that other hon. Members are unlikely to be called when the debate has entered the winding-up period. If he catches the eye of the Minister or a Front-Bench spokesman, he will be able to intervene if he so wishes. However, as a matter of courtesy, custom and practice, Members who wish to take part in debates usually notify the Chairman first, and then do other Members the courtesy of listening to the debate before they seek to intervene.
§ Mr. Skinner
Further to that point of order, Mr. Gale. You are taking a new tack. You are now saying that I was not here before. In fact, I stood up before the Liberal spokesman got to his feet, as the Clerk knows, but I was not called. I am not complaining, but it is not true to say that I was not here before then. The Liberal spokesman had not stood up at that point. As for the subsidies about which the Liberals are complaining, why do the Liberal Democrats take subsidies in the form of Short money? Why cannot the coal industry receive some?
§ Mr. Roger Gale (in the Chair)
Order. The hon. Gentleman is merely detaining the Chamber and delaying the debate.
§ 12.6 pm
§ Mr. Henry Bellingham (North-West Norfolk)
I shall try to be brief, as the more time the Minister has, the more time there will be for interventions from various hon. Members, including the hon. Member for Bolsover (Mr. Skinner). I also wish to pass on the apologies of the hon. Member for Reigate (Mr. Blunt), who is the Conservative spokesman on energy. He is currently visiting oil rigs off the coast of Aberdeen.
I congratulate the hon. Member for Sherwood (Paddy Tipping) on securing the debate. I have great admiration for his efforts in fighting for his constituency and his community, as I do for the efforts made by the hon. Members for Selby (Mr. Grogan), for East Carmarthen and Dinefwr (Adam Price), for Bassetlaw (John Mann), for Wansbeck (Mr. Murphy) and for Doncaster, North (Mr. Hughes) in fighting for theirs. They are right that our miners are not only the hardest working miners in Europe, but are, without doubt, the most productive. They want some clarity and certainty about the future, for which the forthcoming White Paper will be pivotal.
214WH The year 2001 was cathartic for the United Kingdom coal industry; it was the first year in our industrial history in which we imported more than 50 per cent. of our total coal requirements. In 2001, imports exceeded domestic production. I hope that, in the White Paper, the Minister will discuss the 33 per cent. of electricity that is generated by coal and its future. I also hope that he discusses the 51 per cent. coal imports and what will happen to that. The White Paper needs to make very clear statements about the future as the Government see it, and what the Government want to happen.
Hon. Members have asked what formal risk assessment had been made of the potential for disruption to the coal supply to the UK. Before 11 September 2001, the accepted wisdom in the European Union was that the risks of disruption to the supply were minimal, such was the geopolitical diversity of coal supplies. Will the Minister still say whether this is the case, or will it be addressed in the forthcoming White Paper?
Several Members rightly touched on the coal aid operating scheme extension, which expires in 28 days, and almost every hon. Member who has spoken in the debate asked about the new investment aid scheme. In July this year, the Minister announced the start of a full consultation on the new scheme to help the UK coal industry to compete in the global energy market. The consultation will examine several key areas, not least whether the coal industry needs investment aid, whether the safeguarding or creation of jobs should form the basis of a scheme, which mining projects would qualify for aid and how to judge the quality of different mines. Will the Minister comment on how that consultation is going?
§ Mr. Bill O'Brien
The hon. Gentleman referred to the consultative document issued by the Department of Trade and Industry. Will he explain what the Conservative party has contributed to it?
§ Mr. Bellingham
I shall discuss that with my hon. Friend the Member for Reigate, and I shall write to the hon. Gentleman to let him know.
§ Mr. O'Brien
Do I take it that the Opposition spokesman has come to the debate without any information on the document on future investment in the coal industry? Has he come unprepared to make any contribution about it?
§ Mr. Bellingham
The hon. Gentleman is being a bit unfair, as I have the document with me. I am not dealing with it; my hon. Friend the Member for Reigate is, and I will let the hon. Gentleman know exactly what he has done.
Several hon. Members have made clear their views that the sums involved in extension of the scheme are minor compared with the money that has gone into British Energy. I hope that the Minister will think about that. It is vital that there be no hiatus after 1 January. We should now know how much money will be forthcoming.
The hon. Member for Selby spoke movingly about the impact of the local pit's closure on his constituency. He mentioned what is being done with the multi-agency 215WH taskforce headed by Lord Haskins. We welcome the £1.5 million funding for it. Obviously the terms of reference are ambitious, but we especially welcome the requirement to galvanise existing resources and identify new opportunities for support from Government and European sources. The taskforce was to make its recommendations by 20 October 2002. What news is there of those recommendations?
The hon. Member for Normanton (Mr. O'Brien) made a vital point about the environment. The debate on cleaner fossil-fuel technology is crucial to the future of coal-fired power stations. Huge progress has been made on sulphur dioxide and NOx emissions. He mentioned that the flue gas desulphurisation scheme—FGD—is making progress. It removes a staggering 90 per cent. of SO2 emissions but only two power stations have FGD in place, including AES Drax Power.
The scheme costs about £30 million a year to operate, and it strikes me that most UK power stations are avoiding that cost. Following the standstill agreement that AES Drax Power secured with its banks and bond holders, it is generating at well below capacity. We are in a ridiculous situation whereby less coal is burned at Drax, which has that extremely environmentally-friendly system in place, but more imported coal is burned elsewhere, which harms the environment.
Will the Minister comment on the work on CO2 emissions? A great deal of research and development is being focused on cleaner coal technologies. Much of that work is on the reduction of CO2 for improved boiler efficiency. He recently announced that the case for supporting a cleaner coal technologies demonstration plant would be made. What progress has been made on the subject?
A great deal of uncertainty faces the industry, some of which is beyond the Minister's control. However, a lot of it is not. We need clarity and a new sense of purpose from the Department of Trade and Industry, because we are at a critical moment. We need to know exactly what will happen after 1 January, and we need a clear idea of what will go into the White Paper. I look forward to his response.
§ The Minister for Energy and Construction (Mr. Brian Wilson)
I congratulate my hon. Friend the Member for Sherwood (Paddy Tipping) on securing the debate. I will try to answer as many points as possible and I will write to those hon. Members whose points I do not answer.
For reasons that have been touched on, the debate is very timely. On the other hand, it is slightly premature because many of the wider issues that we have discussed will form the substance of the White Paper. None the less, I recognise the urgency with which these matters are viewed in some quarters.
It is clear from a lot of what has been said that, even after five years of Labour government, much of our time is still taken up with dealing with the follies of the 1990s. That is particularly true of the ideological privatisations that took place, and I would categorise the privatisation of the nuclear and the coal industries as ideological.
216WH I should say something about the analogies that have been made with the nuclear industry. I do not think that it is good for the debate to go down that road. I am sometimes characterised as being pro-nuclear or pro-renewables and I hope that I am sometimes characterised as being pro-coal. However, I would say that I am pro a balanced energy mix. It is a mistake to say that someone who is for one form of energy is against another; that is a divisive argument.
On British Energy, there are two reasons why we have taken the steps announced in recent months—security of supply and the need to guarantee the safe operation of nuclear power stations. I do not think that anyone in the Chamber would oppose either of those objectives, and I want to add three subsidiary motivations. One is the need to maintain an indigenous energy source, and, again, I do not think that anyone present would disagree with that. Secondly, whatever else nuclear energy might be, it is non-carbon, which is crucial to our environmental obligations. Thirdly, it would cost more to shut nuclear power stations than it does to keep them open. There is an interesting historic argument about whether we should have nuclear power, but we must address the objective circumstances. In that context, it is misleading, mischievous and, n o doubt, tempting to draw a comparison between coal and nuclear power. From what I have said, however, people will understand that we have done the right thing and that not one penny would have been released for coal or anything else if we had done something different. Indeed, we would have to spend more on mopping up the nuclear industry than we would on sustaining it. It does not, therefore, make for a good analogy, however superficially attractive it might be.
The thrust of many of the speeches this morning, and perhaps the reason for the debate's timing, is that there are 28 days to go, UK Coal is in trouble and three pits are threatened. It seems that all we have to do is pick up the phone to Brussels, get the nod and write a cheque to UK Coal for another £60 million. I know that those of my hon. Friends who are making that case are being disingenuous and I know that they know they are being disingenuous.
§ David Taylor
Let me say to my hon. Friend in all comradeliness that the issue is much wider than the future of UK Coal—it is about the future of the British mining industry. The two are distinct.
§ Mr. Wilson
I have no intention of avoiding the wider question, but I have said—quite accurately, I think—that the nub of the debate is the short-term issues and the prospects for three pits, which my hon. Friends have said are under threat. The point that I made at the outset is valid, and some of the issues are very much tied up with the White Paper. No one has suggested that the next 28 days will determine the wider issues, but there are clearly more pressing short-term concerns, which I am as anxious as anyone to address. That is why I took slight exception when the hon. Member for East Carmarthen and Dinefwr (Adam Price) said that someone had suggested a year ago, or at some point since I came to this job, that there would be no more support for the coal industry. I certainly never said that. In fact, virtually every working day during the past 15 months or so, I have been involved in one way or 217WH another in trying to ensure that support for the coal industry continues wherever it is helpful, first under the operating scheme and, now, under an investment aid scheme. Since 1997, the Government have put a lot of money into the coal industry. They have put more than £160 million into the operating aid scheme and have moved on, against considerable odds, to gain approval in Europe for an investment aid scheme.
§ Adam Price
No one doubts the Minister's personal commitment to the coal industry, but I recall its being said that there were "no current plans" to continue the operating aid scheme, which is vital to my constituency.
§ Mr. Wilson
Perhaps it is a translation problem; things can be said much more subtly in Gaelic, as I am sure they can in Welsh. "No current plans" is parliamentary terminology for "It's on its way, but it's not there yet." Of course, at that time, we probably had not received approval from Brussels for an investment aid scheme, whereas we now have. There has been a continuum of our putting ourselves in a position to support the coal industry.
Insufficient attention is paid to the coal industry in the wider energy debate. Given that coal accounts for more than a third of our electricity generation—more than any other energy source—it is remarkable that its contribution to our energy mix is not discussed more often and in more positive terms. That is why I believe that we need a coal industry and why I believe that, within the bounds of what is possible, we should continue to ensure that we have a healthy deep-mined coal industry in the United Kingdom. It is disingenuous to suggest that there are any easy options, especially in the next few weeks, such as extending the operating aid scheme instead of adopting the investment aid scheme. Hitherto, everyone has agreed that we should pursue the latter route rather than sustaining non-viable operations any longer.
I am no uncritical admirer of the market that has been created in electricity, and I sometimes wonder what weighed on my predecessors' minds in introducing certain measures, but whenever I ask that question, I am told that their primary consideration was to create a level playing field for coal. How we got to a situation in which the level playing field for coal further exacerbated the problems of the UK coal industry is a mystery that I have not got to the bottom of yet. I recognise that the current problems in the market are creating further problems for all generators other than renewables and, therefore, for all suppliers to those generators.
§ Mr. Skinner
Does the Minister, like me, think that the subsidy is okay? The farmers get it, the Liberal party gets it, nuclear power gets it and God knows who else gets it. What worries me is that if the pits remain in private hands, the people who own them will eventually shut them on the basis of profit and loss. This Government must deal with the real question; whether, at this late stage, when there are only a handful of pits left, we save them permanently by taking them back into public ownership, so that we do not have to deal with the restraints of the common market, subsidies and the rest. We can do it because we believe in it as a matter of 218WH principle. At some point, the Government will have to wrestle with the problem of taking them back. Instead of handing out the money, we can buy them for a song.
§ Mr. Wilson
Even I do not agree with all of that. It is not productive to keep pits, or any business, going under public ownership irrespective of the cost. However, it is true that if a pit's current operator wishes to close it, the pit reverts to the Coal Authority, and it is possible in some circumstances for somebody else to take over its running. That is what happened to the Hatfield colliery in the constituency of my hon. Friend the Member for Doncaster, North (Mr. Hughes).
In answer to the Opposition spokesman, the future of the industry is tied up with clean coal technology. Coalfield MPs should not make too much of the damage that has been done by legacy issues arising from other energy sectors. Of course, nuclear power gives rise to huge legacy issues. However, I sometimes sit in halls full of miners who have paid the cost of the coal industry with their health. None of us should rest easy with that legacy. The Government are fulfilling their obligations—in so far as they are capable of being fulfilled—to people who have lost their health and the families of those who have lost their lives in the service of the coal industry.
If the industry has a future, it has to be built on clean coal technology. We are supporting a £17 million programme of research and development and technology transfer for cleaner coal technologies as well as developing a project to support retrofitting a supercritical boiler in an existing power station. I hope that we shall do more to exploit clean technologies and the considerable potential for carbon storage that exists in the North sea.
Reverting for a moment to Hatfield, I was also encouraged to hear that Coalpower Limited has secured 75 per cent. of the financial backing for the construction of a 400 MW integrated gasification combined cycle plan projected to be capable of taking 1 million tonnes of coal a year from Hatfield. It will be of interest to the hon. Member for East Carmarthen and Dinefwr that Progressive Energy Limited is about to seek consent for a 450 MW plant in south Wales, which would use local anthracite. The news is not all gloomy; good things happen where there is new technology and clean coal technology.
UK Coal has not announced an intention to shut any of the pits that have been named today. When I was in the constituency of my hon. Friend the Member for Bassetlaw (John Mann), I met the unions from Harworth. I shall be pleased, after the debate, to meet those who are here from Maltby. We are not in a position to take a decision. UK Coal knows well the work that is going into creating an investment scheme and I should be very disappointed if, at this juncture, the closure of any pit were to be proposed. I said at Harworth that the option existed to get round a table and discuss proposals for a viable future. I know that that has been taken forward. I hope that there is the basis for that kind of discussion at Maltby. I stress again that there has been no announcement of a proposal to close Maltby colliery.
219WH I have valued this debate. I acknowledge and share the strength of feeling on the matter. I want to see a continuing role for the UK deep-mined coal industry. Many problems exist, but, because of the history, it is not within the gift of the Government to sort all of them out. I hope that if we work together and proceed with the investment aid scheme and other measures taken to assist the coal industry, when a White Paper is published, there will be a role for coal and for a UK domestic coal industry.