HC Deb 26 May 1988 vol 134 cc232-3W
Mr. Favell

To ask the Secretary of State for Energy what deficit grant to British Coal was accrued in the corporation's accounts in each financial year since 1979; when it was paid; and what further deficit grant the Government intend to pay.

Mr. Parkinson

Deficit grant to the British Coal Corporation was accrued and paid as shown in the table.

approval for the additional grant. I am also considering the implications for the corporation's external finance limit. I will make an announcement to the House in due course.

The Government have agreed that, subject to Parliament's approving any necessary provisions, adequate funds will continue to be made available to enable the corporation to meet its financial obligations as they fall due during the corporation's financial year ending 25 March 1989. The Government have also renewed their guarantee in respect of limited overdraft facilities at United Kingdom clearing banks for 1988–89.

The House was told on 8 March that the loss for 1987–88 (after net restructuring charges) was likely to be higher than originally expected. Following the extra redundancies late in the year referred to above; the loss will be still greater.

As the House was told on 2 March, at column 1075, British Coal has for some months been precluded from access to longer-term funds from the national loans fund (NLF). The corporation's current financial position and uncertain business prospects make it inappropriate for the NLF to continue to make new loans of any duration to it. It is therefore proposed, subject to approval of the necessary Supply Estimate, to refinance from loans on vote under section 2 of the Coal Industry Act 1980, the whole of the short-term and overnight NLF debt expected to be outstanding at the time of approval of the Estimate, together with longer-term debt maturing in, and net new borrowing requirement for, the remainder of 1988–89. A Supplementary Estimate for a sum expected to be of the order of £1.8 billion will accordingly be submitted in due course. Of this, only the projected £280.5 million mentioned above represents net new borrowing in 1988–89; the remainder is to refinance existing NFL debt. The £280.5 million is already within the current EFL, and therefore the new arrangements do not represent an increase in public expenditure.

The Coal Industry Act 1980 provides that the Secretary of State, with the approval of the Treasury, may issue directions as to the rates of interest payable on loans on vote; and that the interest may be deferred. It is intended that the rate of interest, at least initially, shall be at the same rate, and paid at the same time, as would be due on equivalent NLF loans. This will be kept under review in the light of British Coal's developing financial position. I would inform the House of any decision to soften the terms of future loans or defer the payment of interest.

The corporation remains committed to the objective of achieving breakeven for 1988–89 after full interest charges and net restructuring costs; achieving an increasing surplus on revenue account in following years; and contributing increasingly to self-financing. These represent challenging targets, but are attainable provided the industry continues its drive towards greater flexibility and competitiveness and avoids damaging industrial action.