Ellington colliery welcomes Byers' £100m subsidy

Government support expected to secure 3,000 jobs by helping firms compete with cheaper imports

Stephen Byers, the Secretary of State for Trade and Industry, provided a reprieve for Britain's closure-threatened deep coal mines yesterday by promising up to £100m in state subsidies to the industry over two years, thus saving 3,000 jobs.

RJB Mining, which owns 13 of Britain's 17 surviving deep mines most at risk, said the immediate futures of Ellington colliery in Northumberland and Clipstone, Nottinghamshire, were secure. It had threatened to close them, in the face of cheap imports, if a £73m subsidy was not forthcoming.

The last man to offer Ellington salvation was Giovanni Di Stefano, a businessman linked to Serbian warlord Arkan and Saddam Hussein, five months ago. His £10m bid never materialised but the fact he won a local audience demonstrated the desperation which has engulfed the Northeast's last deep coal mine since RJB marked it down for closure in November.

The latest offer was double edged, though, coinciding with an announcement that the moratorium on building new gas fired power stations would be lifted in October, creating new competition for coal.

The subsidy would help coal through "this period of transition," said Mr Byers. It would be invested in mines and underwrite output against subsidised foreign imports which have fallen in price by 40 per cent in the last five years.

"Germany, which has the largest coal industry in the EU, produces about 20 per cent more coal than we do with nearly 10 times the labour force that we have," said Mr Byers. "The Government's policy remains that it is for the coal industry to find its own place in a competitive energy market. However, it is the task of government to lead people through this process of change."

The Government would now be "investigating urgently" with the European Commission a scheme to provide state aid for the British coal industry.

The subsidy - the first Britain's mining industry has received since privatisation five years ago - is a shadow of the £2.32bn German producers receive while Poland's economic hardships currently make its subsidised coal cheaper in Britain than at home.

But union leaders at Ellington, which has known many false dawns in the last four years, said it was enough to cover the £10m costs of new roof support equipment needed to mine in thick sandstone beds and develop new seams beneath the North Sea. RJB, which cut costs by 25 per cent between 1994 and last year but still saw cheap imports eat into its markets, said it could not afford the equipment when it put Ellington up for sale.

Richard Budge, RJB's chief executive, welcomed Mr Byers' announcement and confirmed that Ellington's future is secure for at least four years. "We will be reviewing manpower levels," he said. An RJB spokesman said 50 to 60 more men may be recruited at Ellington, though unions wanted to build the workforce back up to the November level of 429, since when140 men have been laid off.

The 90-year-old pit is proving astonishingly durable. It had been mothballed by British Coal when RJB bought it in 1994 for £800m and was consigned to closure again when RJB said geological problems made mining too expensive and unsafe. "It's going to be hard for people," said one miner at the time. "Most of the men are over 40."

Mr Byers' announcement owes much to unrest among some left-wing MPs, including Denis Murphy, the MP for Wansbeck. The former Ellington miner has lobbied hard for the subsidy, and against the Government's failure to address the concerns of the party's "heartlands." It may help the perception and will take pressure off Mr Byers, who has been facing criticism because of his handling of the Rover affair. The DTI is understood to have feared another blow to British industry so soon after the BMW affair.

Ian Lavery, the secretary of the Northumberland NUM, said yesterday: "Only five months ago, people here were facing a lifetime on the dole. Now we believe there's a future."

It would take time to make the colliery profitable since it had been run down in anticipation of closure, Mr Slavery said. A priority was to recruit and begin exploiting new seams. "We would hope that all the men who have been laid off will be given the opportunity to return."

Despite the relaxation on gas-fired power stations, coal industry analysts said the two-year period of aid may buy crucial time for anticipated trade agreements which should open up new export markets for British coal and secure longer-term viability for the nation's deep coal mines. A deal opening up French markets is expected to be signed within two years and it is also hoped that inequalities in the markets for British gas-fired and coal-fired power, will be resolved, creating further coal markets.

"There are lots of ifs and buts to these agreements," said Dave Parry, a research officer at the Coalfields Community Campaign yesterday. "The coal industry is by no means out of the woods but we hope they will be resolved in the interim."

The campaign, an association of coalfield local authorities, has argued that private mining firms cannot see beyond immediate profit because they only lease the pits from the state Coal Authority, an arrangement which, it says, does not foster loyalty.

RJB confirmed the aid would also reprieve its pit at Selby, Yorkshire, enabling it to finalise negotiations on a five-year 25.5-million-ton supply deal to American-owned Drax power station in Yorkshire.