Carbon Price Support (Land Reclamation)

Cathy Jamieson Excerpts

Tuesday 6th January 2015 Westminster Hall

[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.

--- Later in debate ---

[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.