STATE AID TO THE COAL INDUSTRY
Commission Report on the application of the Community rules for state aid to the coal industry in 1998 and 1999.
||Trade and Industry|
|Basis of consideration:
||Minister's Letter of 6 December 2000
|Previous Committee Report:
||HC 23-xxvii (1999-2000), paragraph 8 (25 October 2000)
|To be discussed in Council:
||No date known|
||Cleared; but further information requested
6.1 On 25 October 2000, we reported on the
Commission's report on the application of the Community rules
for state aid to the coal industry in 1998 and 1999. It is an
annual report. The previous report, made in 1999, we recommended
for debate in European Standing Committee C, and this took place
on 9 February 2000. This year's report reached the same main conclusion
as the previous year's that the aid regime is not working
as intended, at least in respect of operating cost. The Minister
told us that the Government would continue to press the Commission
to ensure that operating aid is paid only to those undertakings
which can demonstrate that they can become competitive within
a reasonable period of time, and that undertakings which cannot
demonstrate this should be given closure aid only. We asked the
Minister a number of questions relating to aid given to German
and French undertakings. State aid to coal undertakings is given
under the provisions of the European Coal and Steel Community
(ECSC) Treaty, which expires in 2002. We asked the Minister whether
commitments could be made under that Treaty for aid in subsequent
years and whether consideration had yet begun about any successor
arrangements specific to this industry. We also asked about the
Government's proposals to provide state aid to the UK industry.
6.2 In her letter of 6 December, the Minister
of State for Energy and Competitiveness in Europe (the Rt. Hon.
Helen Liddell) has replied to our questions as follows.
"German operating aid
"The Committee asked whether I was satisfied
that the Commission is properly applying the criteria for operating
aid in respect of Germany; and, if not, what action the Government
"The Government has made it clear that we would
like to see the rules for state aid, including the requirements
properly applied to German coal state aid. We understand that
this is the Commission's policy too. There have been recent discussions
between the Commission and the German Government, and we will
be interested to see the outcome. We have made it clear to the
Commission that we expect to see the state aid rules properly
applied to all coal state aids.
"The UK proposals for operating aid
[The Committee asked about the Government's proposal
to give aid to the UK industry.]
"The UK Coal Operating Aid Scheme, as submitted
to the European Commission on 26 July, was approved by the Commission
on 15 November. Individual subsidy payments now need approval
and the Commission initially has 3 months to consider applications
once we submit them. Four applications (for Longannet, Maltby,
Harworth and Rossington collieries) have already been submitted
and we hope to submit further applications in the near future.
"Following a debate on the floor of the House,
on 22 November the Commons authorised the Secretary of State to
pay, or undertake to pay, by way of financial assistance under
section 8 of the Industrial Development Act 1982, and in respect
of coal mining qualifying for aid under the UK Coal Operating
Aid Scheme, sums exceeding £10 million for each of Hatfield
Coal Company Ltd, Mining (Scotland) Limited and RJB Mining Plc.
In the debate, I also explained that the Government anticipated
paying sums of less than £10 million to a number of other
applicants for aid.
"The Committee noted that the Commission
is still questioning unapproved French aid in 1997-99, and is
reconsidering aid approved earlier from 1994 onwards. It asked
what comments I had on this, and on what can be done to speed
up the Commission's process.
"The Commission is examining this issue and
we fully support efforts to ensure that all aid paid is compliant
with ECSC criteria. However, enforcement of the coal code is a
matter for the European Commission, and we intervene only when
the interests of UK producers or consumers are directly affected.
"The Committee also asked what aid was paid
to the French industry in the years 1997-99. The most up to date
figures that we have are for the 1996-1998 period. In this time,
the French industry received an average of 28.98 million euros
per year subsidy for current production of coal, and a further
195.92 million euros per year for subsidy not related to current
"UK and German coal exports
"The Committee asked what proportion of UK
produced coal is exported, and of that how much goes to other
"Our most up to date figures show that, out
of approximately 33 million tonnes of coal production, the UK
exported around 700,000 tonnes (ie about 2%) in the last 4 quarters.
Approximately 500,000 tonnes (ie about 1.6% of total production)
of this went to the EU.
"Comparable figures for Germany were also requested.
1999 estimates for Germany are that out of approximately 205 million
tonnes of coal production, exports were around 200,000 tonnes
(ie 0.1%). Approximately 194,000 tonnes (ie about 0.1% of total
production) of these exports went to the EU.
"Aid after 2003
"The Committee asked whether I thought that
aid payments made under the present ECSC arrangements could include
commitments beyond 2003; and whether consideration had yet begun
on any successor arrangements.
"The ECSC comes to an end in July 2002, and
with it the existing Coal State Aids Decision. Any aid paid after
that date will have to be on a different legal basis, yet to be
negotiated. Work by the Commission and Member States on a successor
regime is expected to start in earnest next year, informed by
the debate to be initiated by the planned Green Paper on Security
of Supply. As I said in the coal debate in the Commons on 22 November,
the Government is opposed to the continuation of the EU coal subsidy
beyond the end of July 2002; we would like to see an end to operating
aid to the coal industry in the EU after this date. We do not
intend to pay such aid to the UK coal industry beyond this date
and we believe that we should move toward a single market without
6.3 We are grateful to the Minister for
her detailed and helpful reply. We would be glad if the Minister
would inform us in due course about the outcome of the discussions
to which she refers between the Commission and the German Government
about the proper application of state aid rules to German coal
undertakings. We note that virtually all the German coal production
is for the home market. We note also that, although only a small
proportion (2%) of UK production is exported, the vast bulk of
that goes to other EU countries where it has to compete with state-aided
industries, at least in France, Germany and Spain. We were interested
to see the figures for state aid in France for the period 1997-99
(these figures were not in the Commission's report). They are
relatively small by comparison with aid in Germany and Spain.
We note that state aid to the UK industry is intended to be temporary
and that the Government does not wish to see Community provisions
for state aid to the coal industry after 2002, when the ECSC Treaty
6.4 We clear this document.
20 Degressivity requires that any approved state aid
must decrease over time. Back