University of Durham
Department of Geography and International Centre for Regional Regeneration and Development Studies
Durham DH1 3LE
Paper presented to the Conference, Confronting Change: North East England and East European Coalfields, Newcastle upon Tyne, 12-13 November 2001
1 Introduction: the Decline of King Coal
Since the second World War, the British coal industry has undergone dramatic changes. From a position of dominance and seeming security in the national energy market, the coal mining industry has declined to a marginal position. Commonly described as King Coal in the post war period, as the end of the century approached its status was far from regal, employing fewer than 10,000 workers (Table 1). This decline has been linked to changes in national energy policy, in the structure of the national energy market and in the unprecedented internationalisation of markets for coal.
2 Changing Markets for Coal
In 1947, when the coal mining industry was nationalised, with the exception of the road and marine transport sectors, coal provided the basis for all the energy needs of the country, industrial and domestic. Consequently, in the 1940s and the early 1950s energy supply centred on the coal mines, while the periodic "energy crises" of these years referred to any shortfall in domestic coal production and the "coal gap" (Fuel Efficiency Committee of the Ministry of Fuel and Power, 1948; Hall, 1981). Ten years later the position of the coal industry and the coal districts had weakened considerably. The smog that had engulfed London and the Northern cities prompted the passing of Clean Air Acts in 1956 and 1968 with the creation of "smokeless zones" and the conversion of many homes and factories to fuels other than coal (Science Research Council, 1976, 12). The dominance of coal was further weakened by the prospect of cheap oil, imported from the Middle East. The nuclear programme for electricity supply was seen to have an even greater significance. The early Magnox reactors seemingly promised a future of increasingly cheap fuel. The vision of increased use of these two fuels drew upon an increasingly optimistic view of economic change, technological development and social progress, one that was contrasted with a conservative traditional past. In this way, economically and politically, coal became relegated to a bye-gone era.
The effects of these changes were dramatic. Although the nuclear promise failed to materialise, cheap imported oil quickly replaced coal as a domestic and industrial fuel. Increasingly too, from the late 1960s, natural gas from the North Sea entered the market for fuel. As a consequence coal lost ground. In 1955, it accounted for 85.4% of UK energy consumption. By 1975 the share of coal in UK energy consumption had fallen to 36.2% (Table 2). Although decline was halted in the 1970s and 1980s, it proved to be a short-lived reprieve. In this short space of time, therefore, the position of the National Coal Board (NCB) changed from that of monopoly producer to one amongst many in an increasingly competitive market place.
During the 1950s, with the national economy effectively a single fuel economy, national government pursued policies to prevent alternative male employing industries from locating on the coalfields. Governments thereby sought to ensure that national economic performance and recovery were not prejudiced by fuel shortages or increases in the price of coal as a result of miners wages increasing, despite the deleterious effects that this had in reinforcing the mono-industrial character of the coal districts (Hudson, 1989). In the 1960s, as the supply of coal was adjusted to the changes in the market, large numbers of collieries were closed, and over 400,000 miners left the industry. Despite some success in replacing mining jobs on the coalfields via strengthened regional policies, these areas remained blighted by high unemployment. Furthermore, many thousands of other miners moved from one place of work (and home) to another coalfield via managed labour migration schemes, as both the inter-regional and intra-regional geographies of the industry altered. Inter-regionally there was an increasing concentration of investment and output in the central coalfields of Yorkshire and the midlands whilst decline was disproportionately concentrated in the peripheral coalfields such as south Wales, Scotland and north east England. The collieries that remained open were technologically transformed to become the most mechanised in Europe (Hall, 1981). In this situation the NCB operated as a broker with successive governments to facilitate the processes of change, arguing for social infrastructure support for labour migration (mainly house building), the attraction of new industries to the declining coal districts and investment funds for the potentially successful mine development projects. The complex social arrangements and conflicts associated with these changes have been detailed elsewhere (see Beynon et al., 1991; Hudson, 1989). In the older coalfields especially they created a pronounced social division between the districts with "long life" collieries, and those in which coal mining was coming to an end.
Durham represents a particularly clear example of this process. As the deep mines of the south west of the coalfield were closed down, those on the east coast were expanded with new districts and faces being developed out under the North Sea. In a period of unbounded optimism, the Chairman of the Coal Board, Lord Robens, encouraged the miners to drive their tunnels eastward - "all the way to Norway". In contrast, in the west of the Durham coalfield, while some miners travelled to work in the expanding mines, many more left the industry and began to build new lives for themselves. Despite increased unemployment some jobs could still be found in the public sector and in the variety of light engineering and clothing and textile companies that had been attracted to the area (Bulmer, 1978; Austrin and Beynon, 1978).
Moreover, despite the decline in the coal industry, the strikes of 1972 and 1974 to secure higher wages made clear that coal remained a critical fuel, particularly in the electricity supply industry (ESI). The increase in the price of oil, initially in 1973/4 and then again in 1979, brought this home to the coal miners and the National Union of Mineworkers (NUM) which set about organising to job security and higher wages for miners in the new conditions. This was the context in which the incoming Labour administration put forward the tripartite document Plan for Coal.
3 Plan For Coal, 1974
The 1974 Plan for Coal was a blithely optimistic document, which argued (with very little evidence) that the decline of coal in the 1960s would be reversed and by the end of the century coal output and demand would almost match the levels of the 1950s. Specifically it was proposed that output should be increased from 110 million tonnes (Mt) to 135mt by 1985 with the prospect of expansion toward 200mt by the end of the century. It was assumed that demand for coal would increase as part of a general movement away from oil as a source of fuel and with the development of coal-based petrochemicals. (Schumacher et al., 1985, 90-4). Furthermore, it was assumed that this increase would further concentrate production in the central coalfields.
For coal demand to increase at the rate anticipated in the Plan two things were necessary. First there would need to be a prolonged and general increase in demand for energy, and electricity in particular. Secondly, positive steps (directly in shaping the market and indirectly through other political decisions) would need to be made to maintain and increase the share which coal took of total UK energy demand. Neither of these things happened. By 1974 coal was firmly located as a supplier to the ESI (see Table 3). With the nationalised steel industry, it (accounted for over 80% of its market. For this position to have been sustainable (and for the Plan for Coal to have had any veracity) these markets needed to be developed (for example, by electrifying the railway system or withdrawing support for nuclear energy). In the absence of such initiatives, and given the slowing down of the economy, the demand assumptions of Plan for Coal became untenable. However, coal production continued to increase and millions of tonnes were being stockpiled; the new Selby mines, with the potential to produce many millions of tonnes per annum, were yet to come on stream. This growing surplus capacity and production raised difficult issues that would not be easy to resolve.
During the 1970s the relationship between the state-owned Central Electricity
Generating Board (CEGB) and the NCB was gradually transformed and became
more antagonistic. At this time the supply of coal to the CEGB
was governed by a series of "Joint Understandings". Although
non-contractual, these Understandings established a framework of joint
intent as the basis for formulating the annual plans of the two Boards
and negotiations for changes in pricing structures. Under the 1979 Joint
Understanding the NCB was bound to "use their [sic] best endeavours to
supply 75 million tonnes per year of suitable coal" to the CEGB. The CEGB
also identified three major management changes that it considered the NCB
should undertake. First, the NCB must improve the quality and consistency
of the coal that it supplied to the CEGB. Secondly, it must reduce costs
and pass on the reduction to coal users via lower prices. Thirdly, it must
introduce a rational pricing policy for coal sold to the electricity generating
market. However, the NCB failed to reduce its costs and prices, leading
to tension between the two industries (Cox, 1987). Even so, by the end
of the 1970s the deep-mined industry had established itself on a stable
footing with a reduced number of productive mines supported by new capacity
coming on stream in Yorkshire. Nevertheless, despite this it was soon shown
to be highly vulnerable.
4 Changing international markets and trade patterns and the political economy of Thatcherism
This renewed vulnerability was partly a product of declining national demand for coal. This, in turn, related to quite dramatic changes that had begun to emerge in international markets and the international coal trade. Historically international trade in coal, a low cost high volume commodity, had been marginal. However, in the 1970s, the enormous expansion of steel production in Japan and the Pacific encouraged the exploration of new coking coal deposits in Australia and the transformation of South Africa into a major coal exporter. This coal (of high quality and low price) was increasingly mined through large opencast sites, with surpluses offered for sale in Europe. In the early 1980s, under enormous pressure from the government to restructure its operations, British Steel switched its ordering policy away from British coking coals. This was facilitated by a loosening of previous government restrictions on allowable levels of imports. One by one the deep coking coal mines of Durham, Yorkshire and South Wales began to close.
Coking coal made up less than 10% of British coal output, however, with steam coal dominant in terms of overall tonnages. As these terms imply, coking coal is used in the steel and foundry industries for the production of coke. Steam coal is cheaper and of lower quality. It is suitable for burning in boilers to heat water and produce steam to heat buildings or to generate electricity. In a fundamental sense, the future of the British coal industry in 1980 was tied to that of the electricity generating industry. However, this industry was increasingly looking toward the international coal market, following the trend in coking coals.
In 1973, the world trade in steam coal stood at 14mt; by 1989 it had reached 172mt, exceeding the international trade in coking coal. Following the oil price increases in the early 1970s international oil corporations diversified into coal production, opening up new large export-oriented mines (many being opencast or strip mines) in the USA, Australia, South Africa and Colombia. Subsequently they extended these operations to other countries, including Venezuela and Indonesia. By 1988 three oil transnationals were selling over 100mt of steam coal per annum on the international market (Shell 39.6mt; Exxon 32mt; BP 29mt). Gradually, this coal began to arrive in Europe in increasing quantities, with much of it transhipped through the "ARA ports" of Amsterdam, Rotterdam and Antwerp. It began to exert a powerful influence over the European coal industry. In Britain, the CEGB made frequent reference to ARA spot prices, which contrasted sharply with those offered by the NCB.
This situation was accelerated toward a crisis by the determined policies of the newly elected Conservative Government, led by Margaret Thatcher. Coal, and the coal miners, were seen as the clearest example of a monopoly interest, subverting market forces and undermining the public good. Consequently developments in the international coal trade were welcomed and buyers encouraged to use this market to pressurise the coal monopoly. Furthermore, alternative sources of electricity supply were enthusiastically considered. Immediately following its election victory the government committed itself to the expansion of nuclear power. Talk of a new "family of PWRs" (pressurised water reactors) led to the announcement of plans for a new station - Sizewell "B".
These developments generated considerable opposition. The reinvigorated nuclear programme stimulated the growth of an environmental movement in Britain. It brought together groups and individuals involved in the Campaign for Nuclear Disarmament with local groups deeply concerned about the implications of a nuclear power station sited on their doorsteps. These groups drew upon the experience of Windscale in Cumbria and raised questions (on health and economics) at public inquiries and political meetings. Consequently, the new "family" was limited to Sizewell "B", and that only after an epic public inquiry. However this did not prevent the CEGB from investing in a cross channel link with the French electrical supply industry (EdF), resulting in the routine import of electricity from French nuclear stations into the UK; equivalent to 6mt of coal annually.
Significantly the opposition to nuclear power involved the NUM, with its newly elected President Arthur Scargill as a key activist and debater. More generally and not surprisingly - the NUM opposed Thatcherite energy policies and Scargill was determined to oppose colliery closures. This set the scene for the major strike of 1984-85. This mobilised large groups of people around the idea of supporting communities that had no future without coal mining. However, the determination of the Government ensured that the NUM would be defeated. During the strike, significant amounts of coal were imported, especially along the east coast while electricity supplies were maintained by running the Magnox nuclear reactors at full capacity and through the dramatic replacement of coal with imported oil (Beynon and McMylor, 1985; Lane, 1996;). This vulnerability of coal in its major (and previously secure) market presaged an uncertain future. Furthermore, "a constant theme of CEGB policy, amounting almost to an obsession, has been the desire to reduce its dependence on British Coal" (Prior and McCluskey, 1988, 9).
5 A New Strategy for Coal
Following the 1984-5 strike the newly named British Coal Corporation (BCC) (usually referred to as British Coal) adopted a radically different approach to industrial relations and the business of producing coal. Collieries were closed and the language of tonnage and production was replaced by that of costs, especially "cost per gigajoule" (GJ), a measurement of energy, in managerial discourse. This change in terminology was a realistic and symbolic recognition of the fact that the coal industry was firmly located in increasingly competitive energy markets. Having lost out in the coking coal market BCC was determined to avoid the same fate in the steam coal market. In 1986, Malcolm Edwards, BCC's Director of Marketing was optimistic about the viability of the Corporation and enthusiastic about its new hard-headed approach. In the Review of the Horden colliery (a coking coal mine in East Durham) he argued that:
the coal industry needs a reduction in its costs. That is the way to increase sales so that we can confidently price at what the market will pay at the margin without falling over our feet or accumulating losses like we had before the strike. That is the best thing that can happen to the coal industry in this country. We are well equipped to exploit that situation.
This new approach was outlined in the New Strategy for Coal. Dated 11th October 1985, it was drafted by Ken Moses, the then chief of mining operations, and begins with the memorable sentence: "A great deal has changed since the launch of the Plan for Coal in 1974". This corporate planning document outlined a new future for the industry, to be built around the following goals. First, to phase out the industry's dependence on subsidy and to break even by the end of the decade. Secondly, to achieve conditions in which the industry could sell coal at competitive prices, abandoning fixed production targets and adopting a more flexible approach to meeting market requirements.
Instead of production targets, mine managers faced cost targets. £1.50p/GJ was set as the cost target for all collieries and £1.00/GJ for all opencast sites. The linking of the deep mines with the opencast sites confirmed that BCC was aiming for an integrated plan based upon its entire production system, maximising output from low cost collieries and opencast sites as a means of reducing average costs. Whilst opencast had initially been no more than a war-time supplement to deep mined production, and had been seen as a marginal increment to deep mined production over most of the post-war period, it was increasingly becoming a replacement to deep mined output (Table 4). In part this reflected improvements in opencast mining technology, allowing deeper and larger workings. Moreover, this increase in opencast output was heavily concentrated in just a few locations, generating growing protests. Three Districts (Amber Valley, Cannock Chase and Castle Morpeth) contained 25% of opencast reserves in England and Wales, whilst 11 Districts contained 56% of such reserves (Beynon et al., 1999).
Under this approach, further large numbers of collieries closed. In a situation in which the scope of regional policy was being heavily cut back, the creation of specific job creation agencies such as British Coal (Enterprises) had, at best, a marginal impact in countering the rise of unemployment on the coalfields. Those collieries that remained were the most productive ones and were further dramatically reorganised to allow them to compete with ARA coal and international coal market forces which was rapidly growing in significance. A key element of the reorganisation would be the increasing use of heavy duty faces and retreat longwall mining under the so-called "Wheeler Plan" (named after Albert Wheeler, who later became BCC's Operations Director and Joint Deputy Chairman).
In implementing this new strategy with its "robust management rules", BCC rejected the view that the international coal trade (increasingly dominated by the international oil and major mining corporations) was being organised in ways which would destabilise domestic producers. Rather, it took the view that (NCB, 1986, 18):
the implementation of these rules will, not withstanding the external uncertainties, (a) make it very unlikely that collieries which might have a viable long term future would be closed prematurely and (b) minimise the chance of unprofitable expenditure on new capacity.
It is deeply ironic that this approach, radical as it seemed, was incapable of preserving a stable deep-mined coal industry.
6 From Management Rules to the Rule of Markets
As a consequence of the growth in the international trade, the downward pressure on steam coal prices continued, and with it the pressure on BCC. This led Malcolm Edwards to take a rather less sanguine view of the world energy markets, and especially the role being played by the oil corporations. In his view, they had:
... moved into coal just as robustly as they had moved into heavy chemicals in the 1960s and with even more disastrous results ... too large, too fast, too grand to listen, far too optimistic about the response of the market. All those overnight cuckoos crowded into a very small nest.
The nest, of course had once been the sole preserve of the NCB, and it is fair to say that it, and its Marketing Director, had in the past been vulnerable to similar kinds of criticism (too large ... too grand to listen). By 1989 however the position of BCC was becoming critical. Despite defeating the NUM and pushing through draconian reforms, it was still in considerable difficulty and felt bitter about the competition from the oil companies, which it regarded as unfair. Malcolm Edwards again (Financial Times, 28 June 1989):
When it became clear that the market for traded coal was not going to expand to order, the reaction of the oil companies was what came naturally to them - to rely on their great cash flows to push down hard to drive out the competition. Coal prices became disengaged from every other fossil fuel price, but all that the resulting price war did was to drive out other coal producers.
In Britain the market for steam-raising coal (never before threatened by internationally traded coal) was drawing in more and more imports. While energy experts in 1984 had been predicting net exports of steam coal with imports as low as 1.4 Mt the new reality was very different. Steam coal imports had, in fact, risen to almost 10mt by 1987, outstripping imports of coking coal and pushing deep mined production from the market. Opencast production remained buoyant and throughout the 1980s took a growing share of the British market (Table 4). These changes were welcomed and encouraged by the government.
7 Privatisation in Stages
There is no doubt that the Conservative government came to regard the privatisation of BCC as the pinnacle of its achievements in industrial and economic policy. As Cecil Parkinson, then Secretary of State for Energy, said at the Conservative Party Conference in 1988, it was to be the "jewel in the crown" and "the ultimate privatisation". However it never achieved these grand ideals. It was messy and unsatisfactory, a product of external forces and expediency, rather than a major ideological achievement.
The situation facing BCC was exacerbated by the projected privatisation of the ESI, as the sale of the CEGB was a central objective of the third Thatcher administration. The CEGB had been prepared for sale over a period of years. In 1985, it had entered the international spot market, paying £30 a tonne for 120,000 tonnes of Colombian coal to be delivered to the Fiddlers Ferry power station on the Mersey (Financial Times, 24 July 1985). It continued with this policy of international purchases in subsequent years, supplying Fiddlers Ferry and its power stations on the Thames.
These moves were geared to the paramount political need - finding ready purchasers for the state owned utility. The Electricity Act 1989 outlined the processes whereby the ESI would be privatised and the form that its regulatory framework would take. However, the costs of decommissioning the nuclear power stations deterred any prospective buyer. As a result they were removed from the sale and given the vast majority of a new Fossil Fuel Levy (initially 10% on top of electricity bills) to pay for decommissioning. More importantly, they were given a guaranteed market for all their electricity, consolidating their position. Ironically, given the costs involved, nuclear stations became the central source of the industry's "base load" generation. Should there be a future slump in electricity demand, they would be the last to shut down.
In these ways (through nuclear power, opencast coal and imported coal) the ESI was gradually removing its dependence upon British deep mines. When, in 1991, the generating stations in England and Wales became the property of the private duopoly of PowerGen and National Power, the stage seemed to be set for the final act in the tragedy of King Coal. However, a General Election was in the offing and in John Major the Conservatives had a new leader. Consequently, in an industry driven by political considerations, the end-game was delayed. As part of the privatisation, the new generating companies agreed to purchase significant, yet declining deliveries from BCC for the first three years of their operations. In 1986 the CEGB had agreed to buy approximately 70mt per financial year for a five-year period. The new agreement specified an initial purchase by National Power and PowerGen of 65mt - declining in the second and third FYs to 60mt. This represented a significant reduction in the market for coal from British mines. But this agreement was a transitional one for three years only, after which deep mined coal would have to take its chance in the market
As 1993 approached, further (and even more damaging) threats to BCC emerged. The European Community had adopted strict new sulphur dioxide (SO2) and nitrogen dioxide (NOX) emission targets in order to reduce acid rain throughout the continent. Meeting the NOX emission targets mainly involved the fitting of low NOX burners at power stations. However meeting the SO2 targets presented the power station operators with a far greater challenge. When the electricity generating companies were privatised in 1991 only three power stations in England (Drax, Ratcliffe and Ferrybridge - totalling 8GW of capacity) were planned for flue gas desulphurisation (FGD) equipment. Later one station in Scotland (Longannet) was added to the list. PowerGen refused to have FGD installed at Ferrybridge and the installation of more FGD was ruled out by the generators. Burning cheaper imported low sulphur coal was seen as one possible option - but converting to other low/non-sulphur fuels became the main option adopted by the generators in 1990s, building new generating capacity and using "cleaner" natural gas as the fuel. This strategy fitted neatly with the British Government's desire to present the new electricity industry as more than simply a private monopoly replacing a public one.
These forces worked like a pincer on BCC. In its concern to "compete", increasing emphasis was placed upon enhancing the productivity of the mines, thus adding yet more coal to a situation of chronic over-supply. Energy sector analysts, coal miners and even BCC management viewed this potentially disastrous. After trying for some months to agree new contracts with the generators and persuade the Government to intervene, on 13th October 1992 BCC's management announced that 31 collieries would close or be mothballed. The announcement caused massive protests, both in and outside Parliament, which produced a temporary change in policy. This involved a stay of execution for some mines, plus a detailed investigation of the markets and an Inquiry by the House of Commons Select Committee on Trade and Industry. That Inquiry confirmed that the markets facing BCC had been organised in ways which disadvantaged the deep mines, and suggested that steps be taken to contain competitor fuels. It was also clear in its view about the advantages to be gained from pegging back opencast production. But the Report (House of Commons Select Committee on Trade and Industry, 1993) was not discussed on the floor of the House of Commons, and none of these recommendations were adopted. The Government finally published a White Paper (HMSO, 1993) in which it outlined its limited additional support for the industry. Nevertheless, BCC continued to rundown production. In an extremely complex and confusing set of decisions, some BCC collieries were closed, others were "mothballed" or classified as "market testing" units and offered for sale to the private sector. By 1994, on the eve of privatisation, just fifteen BCC deep mines remained in production.
The outcry over the announced closures forced the Government to persuade BCC to keep many of the threatened collieries open on a "care and maintenance" basis. This meant that while few miners were employed in these collieries, they were maintained in a condition that allowed them to be opened again by BCC, or, more likely, by a competitor. In this way the privatisation of BCC commenced. In 1993 and 1994 several collieries were transferred to new private operators under lease and license agreements. RJB Mining took over Calverton and Clipstone in Nottinghamshire, plus Rossington in South Yorkshire. Coal Investments plc leased Hem Heath (part of the Trentham complex) and Silverdale collieries in Staffordshire, Coventry colliery in the West Midlands, plus Markham Main in South Yorkshire. Other management buy-out (MBO) teams took over Hatfield Colliery in South Yorkshire and Betws Colliery in South Wales. The model for this process of buy-outs was the worker-led take-over of Monktonhall Colliery in Scotland, later emulated at Tower Colliery in South Wales. The remaining collieries, which had received no firm bids from the private sector, were closed and abandoned.
At the end of March 1993 BCC finally agreed new supply contracts with National Power and PowerGen. However these involved substantial reductions in tonnages. Only 35mt would be purchased in financial year 1993/94 - followed by 30mt in each year up until 31st March 1998 when the contracts expired. The private mining companies fared little better; only being offered contracts for 3mt in the first two years, with the promise of a possible increase to 5mt for the subsequent three. The generating companies explained that enormous stocks of coal had built up during the last years of public ownership. They planned to run these down and also reduce their coal imports to the contractual minimum - concentrating on imports from a few overseas suppliers (mainly Colombian) plus occasional spot purchases. The weakening position of coal within the generating sector was clear to see.
8 British Coal Fatally and Finally Undermined
The sequence of privatisations had badly affected the coal industry. Had it been privatised prior to the ESI, it would have been in a much stronger position. Left at the end of the queue, the victim of a predatory customer, headed by a supine management reluctant to battle with the government, it had no chance (Independent on Sunday, 28 August 1994).
On this basis, and once the furore over colliery closures had subsided, the Conservative Government proceeded with the privatisation of BCC. With an eye on history and the importance of the symbolic in British political life, it was planned to transfer ownership from the state to the private sector by January 1st 1995. The Government had also decided that BCC would not be privatised as a single entity. In this way a competitive coal sector would be created in the UK. The mining activities of the state-owned corporation (deep-mined and opencast) would be bundled into five regional mining businesses. The few mothballed "stand-alone" collieries would be added to the sale as separate items. It was to be an auction, with companies and mines going to the highest bidder. Initially bidders would need to go through a "pre-qualification process" to assess their capacity and fitness for their new role. This process took place during the early summer of 1994 and was followed by a round of bidding from all the pre-qualified companies.
The names of the successful bidders were announced at the Conservative Party Conference on 12 October 1994 by Michael Heseltine, with RJB Mining the preferred bidder for what remained of the English coalfield. During the period leading up to this announcement Richard Budge had taken a very high political profile. We have been reliably informed by Stephen Byers, MP for Wallsend, that (Hansard, 1995, 234):
On no less than seven separate occasions, Budge met the Minister for Industry and Energy, who is responsible for coal privatisation, to discuss matters relating to that privatisation. Those meetings were all held at important and strategic times: 17 June 1992, 29 June 1992, 1 March 1993, 26 March 1993, 15 April 1993, 15 June 1993 and 7 July 1994. He had access to a Minister that even many Labour Members do not have.
RJB won the auction for the English mines by offering significantly more than its rivals - £900m, subsequently reduced to £815m following negotiations with the DTI. The company claimed that its financial projections for future revenues were realistic, although based upon more favourable assumptions than many people thought reasonable. Much of the disagreement related to the assumed productivity of the mines and the long term stability of the coal market. In the early 1980s BCC's collieries achieved productivity levels of about 700 tonnes per man year. After closing many of its high cost mines it increased productivity to over 2,000 tonnes per man year. In its share prospectus RJB Mining, provided projections for productivity at the mines acquired from BCC. Productivity was forecast to increase from 2,032 tonnes per man year in FY 1992/93 to over 3,300 tonnes per man year in FY 1999/2000. Certainly, if RJB could achieve such levels of productivity gain then it could well maintain its market share in the face of other competition.
What was indisputable, was that coal in was going to remain a difficult industry in which to survive. Enormous competitive pressures (from major international corporations and from different fuel sources) would have an effect upon both the new private companies and the older ones that had been expanding profitably in the opencast sector. In the view of one analyst (Hancock, 1995, vii):
RJB's experience in opencasting will provide it with an economic benchmark against which it will judge the performance of its new deep mines. ... ruthlessness should prevail. The nineteen collieries (plus eight leased to other companies) is significantly more than most commentators predicted for the industry back in 1992. The number can only be maintained by lower rates of production (as has been witnessed in Coal Investment's pits). In the long term RJB should be looking to maximise production at the cheapest pits and reduce the portfolio where markets cannot support it.
9 A Fully Privatised Industry
Markets require public institutions and an appropriate regulatory framework. This was well understood by the government in relation to coal. The Coal Industry Act 1994 created a new regulatory body: the Coal Authority, established in Mansfield, Nottinghamshire. As if to demonstrate its independence from the industry neither the Chairman nor the Chief Executive had prior experience in coal mining. Nor did all but one of the other Board members appointed at the time the exception being Roy Link, previously President of the Union of Democratic Mineworkers (UDM). If the Board members came from diverse non-coal backgrounds, the same could not be said for the Directors and staff of the Authority. The two critical directorial posts (Contracts and Licensing) were held by ex-BCC managers. The "Mission Statement" of the newly established Authority set out its remit (Coal Authority, 1996, 23):
The Coal Authority will manage on behalf of the nation the unworked coal reserves and other property under its control and will encourage economically viable operations to exploit those reserves. It will make information available and will, within its sphere of responsibility, protect the interests of those affected by past and future coal-mining activity.
The 1994 Act specified that the Coal Authority would be independent of the coal mining industry and would be prohibited from carrying out coal mining for commercial purposes, or with the view to itself using any coal mined. Neither could it explore for coal or involve itself in the planning process. Its function would be to vet and inspect applications to mine the coal and carry out related activities, such as the commercial extraction of coalbed methane. Under the new Authority the previous distinction made between the mines of BCC and those in the private licensed sector would cease. All mines (opencast and deep mines) would be of unlimited tonnage and would be licensed by the Coal Authority . Under these new arrangements, RJB Mining, Mining (Scotland) and Celtic Energy would compete for licences on equal terms with the small mine operators, such as those working very small drift mines in south Wales. Ironically, under privatisation, the very small operators, on the margins of the industry, were subject to more severe regulatory pressure than had been the case under the benign gaze of the nationalised corporation. While BCC had been happy to receive a tonnage royalty from them, the new Authority was established through a licensing arrangement and statutory responsibility that made its approach much more stringent. Ironically, and in spite of the rhetoric of "competition" and the "small company", the new regulatory arrangements seemed to favour the larger operators and especially those who had replaced BCC.
10 Conclusions: the Legacy
The privatisation of BCC was conducted with considerable haste, leaving many important administrative loose ends. This was particularly true in the sensitive area of environmental control, with the bulk of liabilities, mainly subsidence problems, mine water pollution and gas emissions, being left ill-defined but within the purview of the Coal Authority. This became a focus of concern for the Coalfield Communities Campaign (CCC) which co-ordinated the concerns of local authorities and other groups of activists worried about the polluting effects of colliery closures. Added to this was the effects of unemployment and redundancy, poverty and social dislocation (for example, see CCC, 1997).
There is no doubt that the privatisation of the British coal industry failed to live up the Conservative Party's expectations. It was not a valedictory moment when the virtues of the market were seen clearly to triumph over the dark forces of the state. Quite the opposite. The rumours and doubts over the process of the sale conjured up images of second-hand car dealers rather than a glorious political triumph. The transfer of ownership was devoid of the symbolic richness that had characterised Vesting Day in 1947. It had been a market transaction; nothing more.
Despite all the misgivings that were voiced about the privatisation of BCC the then Energy Minister Tim Eggar sounded an optimistic note. On the eve of privatisation he told an audience of coal industry representatives that:
Coal remains a major resource for the nation. It will have a significant role to play in electricity generation, as well as other markets, in the years to come. I believe that by freeing the industry from the constraints of public ownership we are offering a great opportunity to those who work in it and depend upon it, to take their place within a truly competitive energy market and, by building on the achievements that have already been made, create for themselves a secure and viable future.
These were fine and almost heroic sentiments from a minister who would soon leave parliament for a new career. With the benefit of hindsight they have a distinctly hollow ring.
The first few months after the privatisation of BCC's mining businesses were something of a honeymoon period. There was an air of optimism and a feeling that the new owners could address some of the serious problems that they had inherited from BCC. The management of RJB Mining was pleased that the forecasts for coal consumption in its 1994 Share Prospectus turned out to be reasonably accurate. Several forecasts for coal consumption in the ESI, produced after 1993 by other analysts, consultants and leading coal industry publications, for a variety of reasons turned out to be too low. On the other hand, the trend in coal consumption in England and Wales continued on a downward path, bringing casualties in its wake.
The most spectacular collapse was associated with Coal Investments plc. The company had obtained leases and licences from BCC to re-open five of the collieries that had been closed or mothballed after the coal crisis of 1992. It also purchased the Cymgwilli anthracite drift mine in South Wales. With insufficient capitalisation the company soon accumulated huge debts, a situation exacerbated by the low prices obtained for its coal and the changes in mining technology it adopted. The company was forced into administration at the beginning of 1996. Midland Mining Ltd. bought the Silverdale and Annesley-Bentinck collieries for what seemed to be a short life (Silverdale closed at the end of 1998). No buyers could be found for Hem Heath, Coventry and Cymgwilli which were closed permanently. In Scotland, Monktonhall Colliery, after a brave attempt to continue through a worker share ownership scheme, was forced to close in early 1997 after flooding and geological problems made the mine unviable. RJB Mining did not escape unscathed. The company never made a secret of the fact that it would probably close Point of Ayr and Bilsthorpe collieries. However, the closure in 1997 of the new "supermine" at Asfordby in Leicestershire (allegedly for geological and safety reasons) was a strong signal that the industry was once again in crisis. In 1997 there were hopes and expectations that a new Labour government would respond to this situation in ways which would arrest the decline. Initially hopes were raised by the establishment of a Coalfields Taskforce but were soon dashed and seen to have been mis-placed but that is another story (see Beynon et al, 2000).
This paper draws on research carried out collaboratively with various
people over the last 30 years, in particular Huw Beynon. I would
also like to acknowledge financial support for this research from the Economic
and Social Research Council and the Joseph Rowntree Foundation.
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Table 1 Coal mining in Britain Anatomy of the Decline of Deep Mining
Year Collieries Employment (000s) Output (million
1947 958 704 187
1957 650 699 213
1967 483 456 177
1977 238 242 108
1987 101 115 90
1997 15 8 39
Table 2 UK Inland Consumption of Primary Fuels Percentage shares (energy supplied basis)
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1996 1999
89.6 85.4 73.9 63.0
46.6 36.2 35.6 31.3
31.5 22.7 20.2 15.9
Petroleum 10.0 14.2 25.5 34.1 44.6 42.4 37.6 35.5 36.6 34.7 33.9 32.3
Natural Gas -- -- -- 0.4 5.3 17.2 21.8 25.0 23.6 31.9 35.6 40.8
Nuclear Electricity -- -- 0.4 2.3 3.3 4.0 4.8 8.0 7.6 9.7 9.6 8.4
Hydro Electricity 0.4 0.4 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.2
Electricity imports -- -- -- -- -- -- -- -- 0.5 0.6 0.6 0.5
Source: Digest of United Kingdom Energy Statistics, HMSO/Stationary Office, London (various issues)
Figures rounded to 1 decimal place
# - Also includes other solid fuels
Table 3 UK Coal Consumption (million tonnes)
Market Sector 1955 1973 1980 1990 1995 1996 1999
Industry* 50 13 8 6 4 4 3
Domestic/Commercial** 48 17 11 6 3 3 2
Railways 12 0 0 0 0 0 0
Coke Ovens 27 22 12 11 9 9 8
Manufactured Fuel Plants*** 28 1 0 0 0 0 1
Other 2 3 3 1 1 1 1
Total 211 133 124 108 77 71 55
* - Includes colliery consumption
** - Includes Miners Coal and others
*** - includes gas works
Figures rounded to nearest million tonnes and includes consumption of stocks in some sectors
Source: Digest of United Kingdom Energy Statistics (various issues)
Table 4 NCB/BCC Deep-mine and Opencast Output (mt)
Financial Year Deep-Mines
1971/72 135.5 8.1
1975/76 114.5 10.4
1980/81 110.3 15.3
1985/86 88.4 14.1
1990/91 72.3 17.0
1993/94* 42.7 13.5
1998/9 23.7 14.9
Source: NCB/BCC Annual Reports and Accounts
* last full year prior to privatisation