Select Committee on European Scrutiny Eighth Report


STATE AID TO THE COAL INDUSTRY


(21417)
9886/00
COM(00) 380

Commission Report on the application of the Community rules for state aid to the coal industry in 1998 and 1999.


Department: Trade and Industry
Basis of consideration: Minister's letter of 8 February 2001
Previous Committee Report: HC 23-xxvii (1999-2000), paragraph 8 (25 October 2000) and HC 28-ii (2000-01), paragraph 6 (10 January 2001)
To be discussed in Council: No date known
Committee's assessment: Politically important
Committee's decision: Cleared (decision reported on 10 January)

Background

  18.1  On 10 January 2001, we reported on the application of state aid to the coal industry. In clearing the document, we asked the then Minister of State for Energy and Competitiveness in Europe (Rt. Hon. Mrs Helen Liddell MP) to report on the outcome of discussions that were taking place between the Commission and the German Government on the proper application of state aid rules to German coal undertakings.

Minister's letter

  18.2  Mr Hain, who replaces Mrs Liddell, replies on her behalf in his letter of 8 February 2001. He reports that:

    "On 21 December 2000, the Commission announced that it had authorised German State aid to the coal mining industry for the years 2000 and 2001 as follows:

    "—  operating aid of DM 3.847 billion and DM 3.433 billion respectively

    "—  aid for reduction of activity of DM 3.138 billion and 1.889 billion respectively

    "—  aid linked to measures intended to secure the jobs of the underground workforce in the mines of DM 71 million and 67 million respectively

    "—  aid to cover exceptional costs of DM 2.124 billion and DM 2.740 billion respectively."

  18.3  The Minister says that following protracted negotiations with the Commission, the German government proposed that operating aid be reduced by DM 1.2 billion and aid for reduction of activity[41] be increased by the same amount. The Minister adds that the agreed package represents a 25% reduction in operating aid compared with the amount (DM 5.1 billion) provided in 1999 and a significant reduction compared with the grant of DM 5 billion that Germany had originally proposed for 2000 when it notified its intentions to the Commission.

  18.4  As regards aid for reduction of activity, the Minister says that there is already considerable unemployment in the regions affected by the decline in coal production. The Commission agreed that the new reductions in activity which will result from the redistribution of the DM 1.2 billion will not take effect until after 2002.

  18.5  As regards timing of closures, the Minister adds that no decision on the precise timing has been taken but it is intended that such decisions will be made in 2003. These decisions will be taken under whatever regime is in place after 2002 when the European Coal and Steel Community (ECSC) Treaty expires and with it the Coal State Aids Decision.

  18.6  The Minister comments that the amounts of aid agreed are still high, but UK producers should not be affected directly. Finally, the Minister welcomes the general thrust of these developments, in particular the shift away from operating aid for mines without a viable future and towards providing support for reducing the level of activity.

  18.7  We are grateful for the Minister's response.


41  Aid for the "reduction of activity " is funding that is intended for undertakings that have no prospect of economic viability, but face a progressive and continuous reduction in the level of activity.  Back


 
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