Coal Industry (State Aids)

Part of Opposition Day – in the House of Commons at 10:26 pm on 5th February 1986.

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Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian 10:26 pm, 5th February 1986

No. I want to be brief. We are fully aware of the background to these proposals. Current Community provision for the industry expired on 31 December 1985. The Minister explained why there had to be a new proposition. The House must be made aware of the fact that this is an attempt by the Commission to get control of member countries' coal industries. Apart from the usual stranglehold of a bureaucratic structure it has not made a very good job of it. I call in aid the Minister who had some reservations about the outline of the document.

The Commission has not made a good job of the draft directive, because its analysis is faulty on so many points. It merits the criticism that has been heaped on it by some member states. My information is that this is the fourth or fifth draft of the proposals. We could not have a better portrayal of uncertainty than that.

A report in the Financial Times on 25 September 1985 stated: The United Kingdom Energy Secretary has made it clear that because there is virtually no intra-Community trade in coal there is no case for Brussels control. To some extent, the Minister expressed that same sentiment in his speech tonight.

It would not be unfair if I expanded what the Secretary of State expressed through the Financial Times. The EEC countries produce coal for their local markets. British coal does not compete for the German market, and vice versa. Therefore, it is hard to understand why Brussels should intervene.

I had a word with the Secretary of State before the debate. He assured me that when the matter comes before the Energy Ministers Council on 3 March, he will stand by what he expressed in the Financial Times and will not accept control by Brussels of the United Kingdom coal industry. On that basis, and because we are considering only a take-note motion, the Opposition will not divide the House. That is reasonable.

The House should be aware of the turmoil caused by an earlier draft of Commissioner Mosers' proposals. It resulted in a political dressing down for him from the Federal Republic of Germany, which threatened to use its veto. The draft report would have resulted in 500,000 Europeans landing on the scrap heap by the 1990s. The argument was that it would have resulted in a saving of £2 billion a year in state subsidies for coal. But that would have to be set against a £2·4 billion a year increase in social costs. That is lunatic economics. The net result would have been a drain of almost £ million on European treasuries each year.

In Germany, the loss of one third of mining jobs would have added 20 per cent. to the Federal Government's borrowing requirement. In Belgium, the closure of the industry would have increased the Government's budget deficit by 30 per cent. It was a false belief that Europeans would be freed from the web of state subsidies.

The Coalfield Communities Campaign sent me a good paper, which shows how low is the United Kingdom subsidy per tonne compared with other countries. The subsidy in Belgium is £15·47 per tonne; in France, £19·19; West Germany, £12·06; while in the United Kingdom it is £8·41 per tonne.

The Coalfield Communities Campaign posed a good question. It asked me whether this money would be saved by devastating coal field communities. The fallacy of the Commission paper was that miners who became unemployed would be absorbed into an expanding EEC economy. That contradicts the Commission's report of 1984–85, which said that a rate of growth above the present short-term trend of 2·5 per cent. would be necessary to improve substantially the unemployment situation in the EEC.

Some hon. Members will be aware of the fact that at the moment the EEC unemployment level is 15 million. Current Commission predictions of Community economic growth to the end of the 1990s of 2·6 per cent. are hardly sufficient to reduce current levels of unemployment never mind absorb another 500,000 if such coal plans are implemented.

So much for the argument that the social costs of unemployment are only short term. It is a patent nonsense. Any number of coalfield local authorities are still suffering from unemployment and the social, environmental and general economic effects of closures —I can name a few, such as Durham county, the south Wales valleys, Scotland, or west Barnsley in Yorkshire. The coal communities have one of the highest unemployment rates in the country. I am advised that the Coalfield Communities Campaign has produced a figure of nearly 2 million unemployed.

I suppose that we shall want to test the framework of the qualified continuation of state aids suggested in the proposals. We must question and challenge whether it could remove some of the genuine concerns expressed throughout the community vis-a-vis the originally proposed regulations. As the Minister hinted, we need to amend the way that we test such proposals.

We should welcome the late conversion of the Commission to the theory that state aid is indispensable, especially for producing the volume of coal required in the Community to maintain the impetus for a reduction of import dependency. However, we must criticise the absence of state aids for the extension of the market for coal, both in industry and in electricity utilities.

Tonight, the House will want to express further concern that the document and arrangements for state aid relate to two basic assumptions that are challengeable. First, when it refers to competitively produced coal and pricing levels, there is an assumption that the accountancy methods of each of the coal industries are comparable and that the final selling price of coal is based on the same component parts of the accounts. Normal depreciation and normal rates of interest may vary considerably between industries, as does accountancy for tax, subsidence costs and so on. It is illogical that a major part of the EC budget, where there is comparative cost accountancy, is devoted to the common agricultural policy. But that principle does not seem to be relevant to our industries.

The Commission, in a reference to state aids and other proposals on energy requirements, assumes that all coal imports in the Community are fairly priced for production and transportation costs, although it has agreed to examine import prices. Tonight it must be reinforced that more than 50 per cent. of coal imports to the Community are categorically unfairly priced. According to the Commission's statistics, during the first six months of 1985, 31 per cent. of imported coal came from South Africa and 14 per cent. from Poland. Polish coal is subsidised so that Poland earns foreign currency. The apartheid system in South Africa ensures low wage costs, which, together with coal for oil swaps, means that South African coal is unfairly priced.

The present deliveries of Colombian coal do not provide the Colombian Government with royalties. Because of a generous system of tax concessions Exxon can sell Colombian coal as a loss leader to secure a future market. Foreign coal is being dumped on European markets. The European Commission usually takes strong retaliatory anti-dumping measures when other products are being dumped, for example Japanese typewriters or Brazilian shovels. This dumped artificially cheap foreign coal is being used to denigrate the European coal industry. When foreign coal is dumped below cost, it is being subsidised.

We often hear the phrase "security of supplies". The Commission knows that it strikes a chord of anxiety after the events of the 1970s when the oil price quadrupled. For coal it originally meant marginal coal imports to supplement domestic production. The Commission embellished that, and redefined it to mean the availability of cheap coal from external sources. While domestic producers and trade unions argued for the necessary support measures, the Commission, in a piece of skulduggery, was involved in negotiations about contractual supplies with Colombia, Australia, the United States of America and Canada.

I said that I intended to speak briefly, and I shall fulfil that promise. The House could give a guarded welcome to the continuation of state aids, and the Minister's assurance that Brussels will not dictate to our indigenous coal industry. But we must express anxiety about the lack of detail regarding application.