Carbon Price Support (Land Reclamation)

Tuesday 6th January 2015 Westminster Hall

17:02

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

Thank you, Mrs Main, for calling me to speak. It is a pleasure to speak under your chairmanship today.

Before the demise in 2013 of the two principal operators—Scottish Coal and ATH—the East Ayrshire coalfield produced 25% of all UK surface/open-cast coal, and 50% of that produced in Scotland. Given the history of deep mining, the communities of East Ayrshire have a long standing commitment to the coal industry. So, when the companies went into liquidation, the effect on East Ayrshire was greater than on anywhere else in Scotland, with the resultant environmental dereliction across the coalfield communities of the area extending to almost 20 sq km of disturbed and unrestored land, including 22 voids, 16 of which were water-filled. To put that into some context, the whole of the City of Westminster is just under 21.5 sq km. That gives some indication of the huge extent of the problem in East Ayrshire.

In mid-2013, East Ayrshire council commissioned an independent assessment of the true cost of restoring the land to the level required under the original planning consents; that restoration work should, of course, have been carried out, but was not carried out. The cost was £161 million and Hargreaves has estimated that, as of today, in excess of £300 million of restoration work is required across Scotland. However, the bonds available to carry out such restoration work in East Ayrshire totalled just over £28 million, so clearly in that area alone there is an enormous funding gap. That is the legacy that these communities have been left with, through no fault of their own.

Before I go any further, I would like to say to the Minister that when his right hon. Friend the Secretary of State for Defence was an Energy Minister he was given a map showing the dereliction in East Ayrshire and he was completely shocked. To his credit, he immediately recognised the scale of the problem. So I invite the Minister who is here in Westminster Hall today to visit the area to see the devastation for himself.

At this point, I would also like to say that the Under-Secretary of State for Scotland, the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell), has been involved in this issue from day one. His constituents are also affected and he has been extremely helpful throughout. No doubt he will wish to discuss this matter with the Minister himself, but I know that he also believes that it should be given urgent consideration.

This is not and should not be a party political matter, although I fear that we have the usual pattern of the Scottish Government seeking to point the finger at Westminster, to take the focus away from their responsibility in this area as far as funding is concerned. I previously secured a debate about the proposal for increased freight charges, which would have adversely affected the coal industry and cost jobs, and I am pleased to say that the Government listened to that argument.

I have also pressed the Government to return funding to Scotland from its contributions to the coal levy. From recent correspondence, we know that the Government do not see that as a possibility, arguing that the matter of restoration is devolved. That is true, but I do not see how it prevents a contribution being made from the coal levy, which Scotland has paid into. Equally, however, it is clear that the Scottish Government should also consider funding for restoration.

[Mr Mark Spencer (Sherwood) (Con)]

I congratulate the hon. Lady on bringing this topic to the House, and I sympathise with her for having to wrestle with the Scottish National party. However, I hope she recognises that of course this issue affects England as well. The Department for Business, Innovation and Skills has been quite supportive, but it is the Treasury where the real challenge lies. We need to get the Treasury to recognise that changing this situation can lead to regeneration of these coal tips and the creation of some nice country parks and other pleasant areas for our constituents.

[Sandra Osborne]

Indeed, that is entirely true and I hope that the Minister, in his response, will refer to what can be done in that regard.

I am part of the coal taskforce that was set up by Scottish Government and I welcome the work being done by the various bodies involved, which I hope will go a long way towards ensuring that there is better regulation and financial insurance in the future, so that this situation can never happen again.

As I have outlined, however, the bottom line is that substantial funding is required, and so far it has not been forthcoming from the Scottish Government or from anywhere else. East Ayrshire council is working with the two current operators to ensure that restoration is maximised. So far, around 43% of the bond money has been achieved, and to date there has been a success rate of around 80% of the upper total values. However, it is vital to recognise that the remaining balance will be much more difficult to achieve and will undoubtedly result in much lower awards.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I congratulate my hon. Friend on securing this debate on an issue that also affects my constituency, which is also part of East Ayrshire. Does she agree that constituents in our local areas have indeed made a huge commitment to the coal industry over the years and now expect to see everyone—the Scottish Government, the UK Government and indeed the local authority—working together to find a solution? Also, does she agree that it would be very helpful indeed if the Minister would consult with his colleagues in the Treasury to see what solutions might be possible to ensure that the necessary funding is provided?

[Sandra Osborne]

I thank my hon. Friend for that intervention and I totally agree with everything she said. I also thank her for the work she has been doing, alongside me, on this issue from the very beginning.

Even with the moneys now banked with the council, only restoration schemes of a greatly reduced quality will be delivered. Therefore, additional funding is vital and that is why the Hargreaves request for a technical change to extend the coal slurry carbon price support exemption to include coal derived from schemes supporting restoration projects is worthy of serious consideration.

It is not possible to over-emphasise the urgency of the situation that we face. The objective is to achieve remediation and the avoidance of long-term blight; already, the existing blight is getting worse with each passing month. The sites also present an ongoing health and safety risk. They are so large they cannot be effectively secured from trespass and they are dangerous places. Unstable head walls and extremely deep water bodies with vertical drop-offs make for dangerous playgrounds, and they are often quite close to villages and houses. I, for one, live in dread that an accident could occur at any time.

Recent wet winters have accelerated the rate of flooding of voids, making ultimate restoration longer, harder and more expensive. The longer we go on without a planned and properly funded restoration, the worse this will get, and in the meantime there are two restoration schemes progressing in East Ayrshire that are far from ideal. An early decision on this proposal would mean that abortive work might be avoided.

The Minister is only too aware that the coal industry is on a downward spiral at present, given the importing of cheaper coal, which will mean that in 12 to 18 months annual UK coal production will have fallen to less than 4 million tonnes, with no prospect of recovery in the immediate future. This can only lead to cessation of production thereafter, with no betterment of these legacy sites—and other sites—and indeed their potential abandonment a second time.

Of the 311 East Ayrshire people made redundant in 2013, 167 are now in employment, but these are not all within the coal sector and not all are within East Ayrshire. Depopulation of our rural areas continues. According to the Hargreaves proposal, we could see the legacy sites across the country all restored effectively to their original quality within a five-year period. Providing an incentive for an industry-led solution would make the difference in East Ayrshire in particular to the value of around £161 million, against less than £20 million at best recovered from bond moneys and a poor level of restoration not worthy of the name. For that five years there would be guaranteed employment of a local work force. Hargreaves estimates 1,000 plus indirect employees, but to be honest, in the position we are in, any and all employment opportunities are most welcome and badly needed.

Rightly, questions have been asked about the impact of such a proposal by the Scottish Opencast Communities Alliance and others. It is hardly surprising that people are suspicious of the motivations of operators, given how much we have been let down in the past and the way that our priority to bring jobs to the local area has undoubtedly been manipulated; for example, with planning extensions being applied for in the full knowledge that planning conditions would not be met. I bow to no one in the anger I feel about this and I will continue to seek justice for the community regarding those who were guilty of it. However, Hargreaves is not the culprit and thus far it has been the only show in town. If there is even a chance that this could provide a solution, I am willing to grab it with both hands.

There are those who think that no taxpayers’ money should be spent on clearing up the mess, that no funding should be directly applied, and that no tax incentive should be solely for restoration. In saying that, I am aware that if an exemption was applied to the completion of the restoration, this could be regarded as tax hypothecation, a practice not generally adopted by the Treasury. I welcome the Minister’s views on this.

I am clear about this. I have raised requests for funding from both the Scottish Government and here at Westminster from day one and I still do so today. However, in reality there are no clear alternative funding sources forthcoming, so I think we must look at each and every option. We must do so with the proviso that the bottom line for support of any kind is that there should be no opportunities for companies to profiteer, use any support to substitute for their ongoing restoration responsibilities or escape adherence to an upfront restoration plan with transparent and appropriate independent monitoring.

I refer the Minister to the position of Coalpro, which as he knows represents the majority of the UK coal producers. It supports any mechanism that assists in restoring both the sites left behind by former operators and the reputation of the responsible operators who remain and have continued to work in Scotland throughout this period of falling coal prices. Although opposed to the carbon price support mechanism, it is in favour of an exemption in the short term, if this would enable abandoned and orphaned former mine sites to be restored to beneficial future use. So the industry supports this, which is obviously very important.

According to Hargreaves, a targeted carbonyl sulfide exemption would have no overall impact on coal burn and CO₂ production—only a small substitution effect, with imports from Russia and Columbia—and the measure would not overly profit or extend the life of the UK coal extractive industry, but would merely enable it to clear up its own mess before winding down. However, it would help maintain capacity for the next five years: a major benefit if the UK is to consider pursuit of carbon capture and storage projects.

The scheme would only relate to “orphaned” restoration liabilities, where owner and operator were bankrupt or liability has fallen back on the state, so there is no breach of the “polluter pays” principle, and the exemption would be limited to the amount of restoration coal necessary to make the scheme viable.

The proposal is that this is policed by the local authorities and the Coal Authority independently. There are plenty of examples of and precedents for using taxes to incentivise environmental benefits across a wide range of taxes, including low road tax on CO₂-efficient cars; lower VAT rate for the supply and installation of energy saving materials; and recycled aggregates being exempt from aggregate tax levy. There are plenty of examples where tax has been used to promote restoration and remediation schemes, such as the obvious precedent that coal slurries have been exempt from carbon price support since 2013, with about 1 million tonnes per annum, which is about the same as the estimate for restoration coal. That exemption has worked well and has caused no ripples or issues in the markets. Most deep mine slurry ponds are already capped off: they are inert and present nothing like the environmental and health and safety risk presented by the orphan open-cast sites, so it seems a simple and logical extension.

The Minister will be interested to know that Hargreaves has received legal advice on competition law and state aid on restoration-related coal and will not be surprised to learn that it believes there are compelling arguments about why the proposal would not give rise to concerns about these matters. I do not have time to go into detail about that. In any case, this is clearly something the Government would wish to assess for themselves.

There are many questions from the community and the companies, and many questions that the Government would have to consider, but I do not have time to go into those in this short debate. My main purpose today is to emphasise the extent of the environmental and financial problem, the fact that it needs to be dealt with as a matter of urgency and the absence of any clear alternative, and to make a plea for this proposal to be considered seriously and as soon as possible. We have already lost another winter, but I am realistic: an announcement at the Budget—if not before—would be extremely welcome.

Although arguments continue about how this all came about in the first place—the negligence of the operators involved and the lack of monitoring by the planning authority and how they should be held to account—no one can argue that this should not be fixed, and fast. This is a national environmental disaster for Scotland, the extent of which has never been seen before. In the medium to longer term, this will take several years of concerted and focused effort, but big problems need big, bold, decisive and effective solutions. I hope the Minister will agree that this could potentially be the answer we have been looking for. I look forward to his response.

17:17

[The Minister for Business and Enterprise (Matthew Hancock)]

It is a pleasure to serve under your chairmanship, Mrs Main. I congratulate the hon. Member for Ayr, Carrick and Cumnock (Sandra Osborne) on securing this debate on an important issue in her constituency and other surrounding constituencies. I know that this has been a significant concern since the 2013 failure of the two major open-cast operators in Scotland.

I recognise the enormous contribution made to the coal industry north of the border and its historically vital role in respect of the UK’s wider energy needs. Scotland has a proud deep-mining heritage, brought to an end in 2002, when flooding closed the last remaining deep mine. Since then, the torch has been carried for many years by a vibrant surface mining sector. However, over the last year and a half it has become all too apparent that operators of considerable significance within that sector have not been managing the full range of their responsibilities with the care and rigour that could reasonably be expected of them.

Healthy production levels had been masking a growing backlog of unfulfilled and inadequately underwritten restoration obligations. At the same time, it emerged that in some cases those tasked with monitoring the compliance of operators had fallen short in their duty of care towards open-cast mining communities. Against that backdrop of an industry making an important contribution to local economies where alternative job opportunities are often limited, it would appear that more weight was sometimes given to retention of employment than to ensuring that operators were properly keeping their houses in order. The root causes of the significant problems that have emerged as a result have been independently and comprehensively examined by a team led by the Scottish Government’s former chief planner, Jim Mackinnon. Its report, published in January last year, looked into the particular circumstances in east Ayrshire.

Since the events of April and May 2013, action has been taken. I pay tribute to my counterpart in the Scottish Government, Fergus Ewing, for the prompt action he took in establishing and convening the Scottish coal task force—as the hon. Lady said, many of these issues are devolved—which brings together a broad range of stakeholders including not only those affected by the industry’s collapse, but those in a position to mitigate some of the immediate impacts and offer solutions for the future. The task force has met seven times since May 2013 and has been a catalyst for positive action. Many of its members have worked hard in other forums, not only to address the employment and environmental consequences of the 2013 events, but to look at how safeguards can be put in place to ensure that the same circumstances do not arise again.

[Sandra Osborne]

As I said in my speech, I am a member of the task force and I fully appreciate all the work that has been done, not least to try to prevent such things happening again. That does not, however, substitute for the amount of funding needed to deal with the problem. I have raised that point several times in meetings of the task force. It is the elephant in the room. We still do not get a positive answer. Does the Minister agree that we need to look at the funding situation?

[Matthew Hancock]

Of course, I was going to come on to that point. Action has been taken and needs to be taken through the task force, especially on the employment side. We have to recognise the role that the industry continues to play and has to play in the future. As the hon. Lady said, in particular we have to recognise the role that Hargreaves plays and the significant commitment and investment in the Scottish sector that it made in stepping into the shoes of the failed companies. As she said, it is not the fault of Hargreaves. It is part of the solution and should be thanked for its continuing contribution, along with others, to local economies. Hargreaves provides 500 direct employment opportunities where there might have been none, had it not acted as a replacement for the companies that went bust.

[Mr Spencer]

Since the Minister’s appointment, he has built a long record of knowledge of and support for the coal industry, particularly in Nottinghamshire. Does he recognise that the industry can help itself if the Treasury assists in changing some of the tax laws around the carbon floor price? Can we assist him in lobbying Treasury Ministers and getting that message across to the Treasury?

[Matthew Hancock]

I am glad my hon. Friend said that, because I was just about to come on to that issue. Carbon taxes bear down on carbon-producing industries, and that has an impact on coal, which is at the core of today’s debate. The carbon price floor policy sets out the future cost and the trajectory to 2030. We have brought that trajectory down in recognition of the impact on carbon-intensive industries. The carbon price floor is designed to drive the uptake of low-carbon investment.

The question of whether we should look for an exemption is at the core of the debate on the future. There are a number of different issues, including the question of whether using a tax offset to deal with what is essentially a problem of spending is the best solution. I am happy to meet with the hon. Lady, Treasury colleagues and the Under-Secretary of State for Scotland, my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell), whom I spoke to this morning about this issue, in which he takes a close interest. There is also the vital question of value for taxpayers’ money. We are living in times when taxpayers’ money is scarce and there is not much money around.

[Cathy Jamieson]

I am listening closely to what the Minister is saying. If he thinks that a tax offset is not the correct solution, will he commit to exploring other solutions with Treasury colleagues, given that our constituents are left with these massive holes in the ground?

[Matthew Hancock]

I am not ruling out a solution through tax; I am merely saying that there are several ways to tackle this problem. We should work in partnership with the Scottish Government in dealing with it, because the question of where liabilities fall is complex. We should also work in partnership with the local authorities involved, which have already put a huge effort into trying to resolve the situation. I propose that we work with the Scottish Government, local authorities, the Scotland Office and the Treasury. I am happy to set up that meeting with the Members here today to see whether we can find a policy solution that works and is technically feasible, whereby the financial issues can be resolved while being consistent with the need for value for money in public spending. Our estimate is that the tax proposal put forward by Hargreaves would cost the Exchequer a minimum of £200 million. Obviously, we would need to be convinced that it is the most effective way to address the issue.

[Sandra Osborne]

I point out that Hargreaves says that the number of people who would be employed, the tax take from that and the knock-on effects for the local economy would help offset some of those costs.

[Matthew Hancock]

I am thrilled to hear that another Member of the Opposition has been converted to the principle of the dynamic scoring of taxes. On whether a reduction in tax, which is essentially what the hon. Lady is calling for, would have a positive impact on the economy and would feed through positively, perhaps I can persuade her with some good old Scottish Adam Smith—that a low-tax economy is the way forward. However, it is not only the wider benefits for employment and the economy that have to be taken into consideration in the question of value for money; there is also the environmental impact of doing nothing and the question of how we resolve the legacy.

Two hundred million pounds is a lot of money, and there is not a lot of money around at the moment. The issue will require hard work and some lateral thinking. I suggest that the next step is to get together with different Departments in the UK Government and the Scottish Government, as well as local authorities and concerned MPs, to work with the UK Treasury, which I have met on this issue, to try to achieve some kind of resolution. Whether that is this specific proposal or a wider package that can be put together, we should look at all the options. We should work out on whom the liability falls. We should work with the industry and Hargreaves in particular—it plays an important role in this and in mining elsewhere, and I work closely with it—to try to achieve a resolution.

I give the hon. Lady this commitment: I will work towards that solution alongside Ministers in other Departments to see what we can do to resolve what is clearly an unhappy circumstance that has a big physical impact on her constituency, as well as on her constituents and those in neighbouring constituencies.

Question put and agreed to.

17:29

Sitting adjourned.