Government in crisis: Uncertainty over contracts puts more pits at risk

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THOUSANDS more mining jobs are likely to go as British Coal's proposed contracts with the electricity industry shrink further in 1994 and 1995.

If no contracts are signed by the electricity companies, ministers privately admit that they may be forced to privatise British Coal with no more than 10 to 12 deep mines.

The 30,000 job losses announced last week were based on sales to the electricity industry of 40 million tonnes - down from 65 million this year - plus a rundown of some existing coal stocks. But in the following five years the proposed contracts are for 30 million tonnes a year. British Coal equates every million tonnes to 1,000 miners' jobs.

A source in the company confirmed that British Coal has not ruled out further job cuts. He said: 'Clearly with the market for our coal shrinking there must be a risk we will be left with too much capacity. There must be more downside in that. But more important is that the risk is multiplied if there are no contracts.'

There is now mounting concern that the contracts will never materialise. Although the generators, National Power and PowerGen, have agreed the outline with British Coal, the regional electricity supply companies have yet to agree to buy the electricity generated from the coal.

Michael Heseltine, the President of the Board of Trade, indicated yesterday that if any of the 30,000 jobs earmarked for redundancy are to be saved, better contracts than those under negotiation would be needed. During an interview on BBC Radio 4, he said: 'It is possible that the people now negotiating with British Coal for contracts next April will come to views about the quantity of coal they can take.'

But he added: 'What I cannot do legally is to go to those people and order them to take more. One of the things that perhaps ought to come out of this debate is for the question to be put to the generators and the distribution companies why we have still not got contracts even for the 40 million tonnes of coal.'

On Monday, Mr Heseltine said in the House of Commons: 'If contracts for approximately 40 million tonnes are not entered into next year, every million tonnes below that will have an impact on employment in the coal mining industry.'

Keith Hampson, the MP for Leeds North West, said it was a disgrace for the contract negotiations to have dragged on for such a long time.

He said that if there were further job losses beyond the 30,000 already announced: 'The level of public indignation will then rise out of control.'

None of the electricity companies are willing to comment on the protracted coal negotiations, other than to say that discussions continue. Most of the regional distribution companies have a problem in that they have signed 15- year contracts to buy electricity from new gas-fired plants.

The companies are now coming under the scrutiny of the watchdog, Offer, to see whether the gas- fired power plants will be competitive with coal-fired stations.

Offer is particularly concerned that the distribution companies have in many cases invested in the gas projects from which they will buy power.