Mr. Andy StewartTo ask the Secretary of State for Energy what recommendations Rothschilds have made about the future size of the coal industry and the impact of privatisation.
§ Mr. WakehamAs is generally known, Rothschild's has been asked by my Department to analyse possible options198W for privatising British Coal. One of the key criteria of this work, which is being carried out in close conjunction with British Coal, is the Government's objective of achieving the largest economic United Kingdom coal industry in the longer term. Clearly, Rothschild's task can only be done against a background of a range of assessments about the potential future United Kingdom market for coal. Rothschild's has not been asked to make recommenda-tions on the future size of the industry, or on the number of pits, or on the future of individual pits. As we have made repeatedly clear, decisions on the form and timing of the privatisation of British Coal will not be taken until after the next general election.
The future size of British Coal's operations will depend on the size of the United Kingdom coal market and the share of that market that it can win. This is the key issue, which recent ill-informed and mischievous press specula-tion has obscured. Given that sales to the electricity industry account for around 80 per cent. of British Coal's market, the contracts with the electricity generators will be crucial to its future. British Coal's success in this market will depend on its ability to improve productivity and to reduce its unit costs to enable it to sell profitably into that market at competitive prices. British Coal has made great strides in increasing productivity—up by over 100 per cent. compared to pre-strike levels. More needs to be done if the corporation is to compete with its major competitors, but I am confident that it will be able to achieve this.
The negotiation of the post-1993 contracts with the electricity generators has not yet started, and therefore speculation about the future size of the United Kingdom coal industry is premature.
British Coal will have to face the challenge of the market whether it is in the public or private sector. Coal privatisation is not the issue.
Speculation about the future size of the industry is damaging to British Coal's drive to increase the competitiveness of its business and undermines the objective of creating the largest economic United Kingdom coal industry in the longer term.