Cabinet rift opens over cost of pit rescue plans

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A CABINET dispute broke out yesterday over the funding of options put forward by Michael Heseltine, the President of the Board of Trade, for rescuing some of the 31 collieries threatened with closure.

Michael Howard, Secretary of State for the Environment, registered his opposition on environmental grounds to saving pits at the expense of clean-burn nuclear, or gas-powered, stations.

Mr Howard made it clear to a Cabinet committee, chaired by the Prime Minister at Downing Street, that any subsidy to keep open the pits should be transparent, and not concealed as some other form of support.

However, the Cabinet committee is edging towards a rescue package for some of the pits by means of subsidies, although no decisions were reached at yesterday's meeting.

One ministerial source denied that Mr Heseltine's demands for a subsidy had been rejected. 'There is no question of Michael's plans being knocked back. It is one of a series of meetings. But let's be clear. They knew when the party, for understandable reasons, said in October it would not accept the closures that it was going to cost more. The only argument now is about who pays.'

Mr Heseltine put his proposals to the wider Cabinet group after discussions with the Treasury last week and a visit to Brussels to seek approval in principle from the European Commission for coal subsidies.

The options produced by Mr Heseltine included a subsidy of up to pounds 10 a ton for coal, which, it was estimated, could add 8p in the pound to electricity bills, unless it was funded by the Treasury. Ministerial sources confirmed it was one of the leading options. It could cost a total of pounds 700m and help to rescue up to 17 pits.

Mr Howard opposed another option to transfer up to pounds 400m from the pounds 1.2bn nuclear levy to the coal industry. Environment ministers insist that the money is needed for the decommissioning of the Magnox nuclear plants.

The Commons Select Committee on Trade and Industry will publish its plans for rescuing the pits on Monday. Labour members believe enlarging the coal market could rescue most of the pits with little subsidy, but Tory MPs are likely to force a compromise.

The options for expanding the coal market favoured by the committee include imposing a levy on the electricity supplied by the link with France, postponing a free market in coal purchase until 1998, and the sale at cost price of some of the stocks at pit heads.

A report by a Brussels-based consultancy, published last night, suggests the future of British pits should become part of an EC- wide policy. It says productivity gains and rises in world coal prices will make some pits viable.

British Coal criticised, page 25