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British Coal (Grants)

Volume 129: debated on Thursday 10 March 1988

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To ask the Secretary of State for Energy how, in the light of paragraph 69 of the Select Committee on Energy's first report of the 1986–87 Session, the non-deficit grants paid by him to the British Coal Corporation in 1986–87 were accrued in the corporation accounts.

In accordance with orthodox accounting principles, social cost expenditure is brought into British Coal's profit and loss account as it is incurred; the associated non-deficit (previously "social") grants towards the expenditure are brought into the profit and loss account on the same basis.On that basis, the amount brought into the 1986–87 profit and loss account for non-deficit grant was £594 million.But the whole amount was not paid in 1986–87. Payments were delayed mainly because some grants towards the cost of early and enhanced pensions are made in 10 annual instalments (which include an element of interest). In addition, a proportion of non-deficit grants is withheld until the grant claims have been audited.In accordance with these limitations, the amount actually paid to British Coal in 1986–87 was £279 million. This amount is composed as follows:

£ million
(a) At the beginning of 1986–87, the Corporation were owed £618 million of the non-deficit grants which had been included in earlier years' profit and loss accounts. £86 million of this was paid in 1986–87 (leaving £532 million carried over for payment in a subsequent year)86
(b) Interest of £33 million on pension-related grant was also owed to British Coal at the beginning of the year; this was paid in 1986–8733
(c) Of the £594 million for 1986–87 referred to above, £160 million was paid in 1986–87, leaving £434 million carried over for payment in a subsequent year160
(d) Total279

To ask the Secretary of State for Energy how, in the light of paragraph 69 of the Select Committee on Energy's first report of the 1986–87 Session, the deficit grants paid by him to the British Coal Corporation in 1986–87 were accrued in the corporation's accounts.

British Coal incurred a deficit of £288 million in 1986–87. It was therefore entitled to claim that amount of deficit grant from the Government and, following orthodox accounting principles, this was shown as an "income" item in its 1986–87 profit and loss account.However, the maximum amount of deficit grant payable in any year is limited to the cash needs of the corporation (defined as the external financing requirement less non-deficit grant payments). As a result, deficit grant is sometimes not paid until a later financial year than that in which the deficit occurred.In accordance with this limitation, the Government actually paid British Coal £546 million in 1986–87. This amount is composed as follows:

£ million
(a) At the beginning of 1986–87, the Government still owed British Coal part of the deficit grant which had been brought into earlier years' profit and loss accounts. This balance was paid off in 1986–87.472
(b) Payments of grant towards the 1986–87 deficit of £288 million were also made in 1986–87 (leaving £214 million carried over for payment in a subsquent year).74
(c) Total546