Up to 21 pits still face the axe: MPs seek five-year subsidy for electricity generators to buy 19 million extra tonnes of coal

The main points

Five-year subsidy worth pounds 500m for generators to buy 19 million tonnes extra of coal.

Restrictions on new gas-fired power stations.

Reduction in the pounds 1bn-plus annual nuclear subsidy - in future to be paid into a trust.

UP TO 21 pits could still close despite ambitious proposals by the Commons Trade and Industry Select Committee to expand British Coal sales.

In a report published yesterday the committee called on the Government to subsidise electricity generators for five years to buy extra coal, at a total cost of about pounds 500m. The MPs say a market could thus be created for an extra 19 million tonnes of coal a year.

The committee believes that the pounds 500m should be borne by the taxpayer or by taking a slice from the pounds 1bn annual subsidy for nuclear power, raised by a 10 per cent levy on electricity bills.

In October, British Coal said that without government intervention, as many as 31 deep mines would close with the loss of up to 30,000 jobs.

The committee estimates that the pounds 500m would allow National Power and PowerGen to buy an extra 16 million tonnes of coal a year, with a further 3 million sold to other industries. As things stand, sales to the generators are set to fall from 65 million tonnes this year to 30 million tonnes by 1998. The replacements are imported coal, natural gas and nuclear power.

The Cabinet's coal committee will consider the MPs' report next week, and a White Paper could be ready within the next fortnight. That document will contain a subsidy compromise on which ministers can bury their strong differences, in the hope that it will win public acceptance and the backing of Conservative backbench rebels.

However, British Coal will also have a say, and it believes that a subsidy of pounds 500m will create a market for only 15 million tonnes. Neil Clarke, the company's chairman, said yesterday: 'Fifteen million tonnes would provide a market for the equivalent of at least 10 more deep mines next year.'

That would mean up to 21 pits closing. Gerard McCloskey, a coal industry expert, said that the committee's proposals would save between 10 and 15 of the 31 threatened mines.

Lord Wakeham, Leader of the Lords and a key figure in the Cabinet debate, said in Leeds last night that competition between various sources of energy was essential to keep prices down - but 'most of the restrictions, limitations and transitional arrangements' that had followed electricity privatisation would not have been phased out until 1998.

Having left the door open for a five-year coal deal, he added: 'The decisions the Government has to take are about the extent of further support and the period over which to phase it out.'

Michael Heseltine, President of the Board of Trade, last night defended his claim in October that the closure of 31 pits was 'unavoidable'. He told Channel 4 News: 'Nothing that has happened since then has changed my mind about that.'

It was because of the force of public and political reaction that the Government was reviewing its decision and looking for a 'more acceptable' way forward.

Keith Hampson, a Tory member of the committee, warned that achieving the extra sales would not be easy. 'All the committee members are agreed. There is a limit as to how far you can stretch the power generation market and I think we have reached that limit.'

But Labour and the Liberal Democrats said last night that all the pits threatened with closure could be saved. Robin Cook, Labour's trade and industry spokesman, said that having said closure of 31 was unavoidable, and having had that view repudiated by a Conservative-dominated committee, Mr Heseltine should lose his job.

Arthur Scargill, president of the National Union of Mineworkers, said: 'The report . . . is unacceptable. We find it incredible that the Select Committee has refused to recommend the phasing out of expensive nuclear power which is costing the taxpayer pounds 1.3bn in subsidies.'

Richard Caborn, Labour chairman of the committee, said that members had tried to balance the effect on miners' jobs with those in other industries which could be hit by keeping pits open.

He hoped mining communities would see the proposals as a firm foundation to build a strong coal industry for the future.

Mr Caborn said it was up to British Coal to decide which pits could survive in the enlarged market. He said he was convinced the company will be competitive by 1998, when the subsidy would end.

(Photograph omitted)