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Tin Mining (Cornwall)

Volume 130: debated on Tuesday 29 March 1988

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Motion made, and Question proposed, That this House do now adjourn.— [Mr. Ryder.]

2.26 am

I welcome this opportunity to discuss a matter of great importance to all of us who live in Cornwall, but especially to the families who rely on the employment that the tin mines provide in Cornwall. As a relatively recently elected Member, this is my first opportunity to raise the issue of tin mining in Cornwall, and I regret that it should be in such circumstances.

As I look back at past debates, I am impressed by the all-party effort to save what is recognised as a community lifestyle and a tradition in Cornwall that must not be lost. I regret the absence of the hon. Member for Falmouth and Camborne (Mr. Mudd), who, I understand, is unwell and unable to attend. Although he may not agree with everything that I shall say, I am sure that he would join me in regretting the loss of 200 jobs and in seeking assurances for the future of a valued Cornish asset.

Some may question how far the Government are responsible, and perhaps I can enlighten them a little. We are not here to discuss the efficiency of the work force or of the management. If we were, we would hear nothing but praise. Equally, the internal dynamics of the tin market are not the immediate problem. The expectations of 1986 have been largely fulfilled. I understand that the investment programme and productivity and cost-cutting are on target and, although the dollar price remains low, that is not out of line with the projections on which the 1986 package was put together. I hope that the Minister can confirm all that.

Does the hon. Gentleman accept that the price of tin is much lower than most people forecast at the time of the crisis? The price is down to £3,755 a tonne, which is way below what many thought it might be at this stage. Does the hon. Gentleman agree that that is the dilemma facing Rio Tinto Zinc and the tin industry in Cornwall?

If the hon. Gentleman will allow me, I shall answer that point later. The hon. Gentleman has highlighted the fact that something has gone astray. The cause, as I believe that the Minister can confirm, is essentially the exchange rate between the dollar and the pound for a commodity priced in dollars. The Prune Minister's commitment to a free market exchange rate has dramatically increased the company's losses. With the costs wholly in sterling, but with tin traded at dollar prices it is almost wholly that element of the calculations which has gone wrong. There is nothing that the work force or the management could have been asked to do.

The central problem is the Government's decision to allow the pound to appreciate significantly. The Minister will know that the world price of tin is set in dollars, so the effect of the Government's exchange rate policy has been to force RTZ to sell Cornish tin at artificially deflated sterling prices. Equally, the Minister will be aware of the disagreement within the Government about exchange rate strategy.

Even given all that, obvious questions arise. Did the Department of Trade and Industry project exchange rate values in 1986? If so, what were the projections on which the package was based and—crucial to the future of the mine—on what projections is the new package based? Does the current rescue operation assume that exchange rates will stay at present levels, that they will rise or that they will fall? On what basis is there a prospect of exchange rates allowing continued viable tin mining? If the Minister answers nothing else, I hope that he will put that essential piece of the jigsaw into place.

Whatever the answers, one thing seems clear: RTZ's difficulties and the prospective loss of 200 jobs are due not to inefficient labour, restrictive practices or incompetent management but to exchange rate policy. Had the Government followed our advice and joined the European monetary system this might not have happened. I cannot say that definitely would not have happened, but the stability of the EMS and lower exchange rates would have been of considerable help to the mine. The reality is that the experiment in free market exchange rates policy has affected the viability of the mine. As I understand it from all sides involved in the agreement, that is the key difficulty that has arisen.

I regret that it is not possible, in the early hours of the morning, to get a response direct from the Chancellor of the Duchy of Lancaster. I always welcome the opportunity to hear from the Under-Secretary of State, as I did in my last Adjournment debate, but the agreement has been negotiated line by line by the Chancellor of the Duchy of Lancaster and it would obviously help if he could respond to my comments. However, he is not here, so perhaps the Minister can help the miners in one particular respect, which concerns consultation.

The miners who are about to lose their jobs have a great deal to be angry and uncertain about, and I ask the Government, RTZ and the new management to make every effort now to make amends for the lack of consultation. The work force has not created insurmountable difficulties; it has not brought about a breakdown in negotiations. In fact, at a meeting tonight, the work force again held back from any action that might put the rescue in jeopardy. Cornwall is renowned for its good industrial relations, but there are limits even to the patience of our Cornish miners.

A wage freeze, followed by redundancies, followed by an 8 per cent. reduction in salaries for the remaining work force would in many other parts of the country be a surefire recipe for industrial chaos and discontent in subsequent months, yet the Cornish miners have reacted with restraint. Tonight I was telephoned by a miner who was obviously distressed by what he has been told he has to accept, on which he has not been consulted. He has been offered a redundancy package of £3,300. In 1986 he was offered £4,500 and other miners who have dedicated more years to mining are likely to lose £5,000 to £6,000 as a result of not accepting redundancy when they were fighting for the survival of the mine. If that is what is necessary, so be it, but at least the details could be spelt out, to explain to the work force why it is necessary.

The miners clearly worked hard to save their industry in 1986. They approached the European Community and agreed a freeze in their salaries. They were involved throughout with management, the DTI and their MPs. They feel let down and left out in the cold on this occasion.

In his announcement the Chancellor of the Duchy of Lancaster said:
"Over the past few weeks, I have had several discussions with RTZ and my officials have been holding detailed talks with RTZ and the management of Carnon Consolidated Ltd."—[Official Report, 22 March 1988; Vol. 130, c. 63.]
There is no mention of discussion with the work force or the unions. They were not even told the scale of the problem that was being faced.

While one can understand some of the industrial logic, one must also recognise its impact and the difficulties that it will cause the workers their distress and the feeling that they have been let down, given their past record.

The work force and indeed, most of Cornwall were aware of rumours regarding their future employment, even before the management had talked to them, but even then it was not open to negotiation. There was no consultation at any point with them. The work force should now be reassured—and I hope that they can now be reassured —that there will be negotiations in the future and, more immediately, told just how much room for negotiation they have before the April deadline for agreement.

In particular, we have been told that this is a management and employee buy-out. I ask the Minister to give details in his reply of the 20 per cent. interest to be purchased on behalf of the employees. What rights will the employees have over those shares? Will that give them voting rights in the future running of the company?

I understand that the shares will be held in a trust. As I am sure the Minister knows, the Liberal party has long supported employee share ownership. I should like to be convinced—I am sure that the workers would like to be convinced — that that is what we will see at Carnon Consolidated, but we do not even know the details of the package.

What of those details? Where are they and can the Minister elaborate on them? Also what of the future and the 200 jobs that are likely to go? Is it the case that a total of 200 jobs must be lost, and if that is so, are there no alternative ways of making the cost savings that the job losses are meant to produce? If we are to accept job losses on something approaching that scale, what special efforts will the Government direct to helping those unemployed people? In London 200 job losses may not sound a lot, but in an area of rural deprivation, with opportunities that are few and—quite literally—far between, 200 job losses are a major blow. As the Minister well knows, for every job that goes directly in mining, one or perhaps two more are lost in associated areas, from corner shops to commercial suppliers of the miners.

This afternoon I asked the Minister of State, Department of Employment what special help was being directed to areas of rural unemployment, compared to the sums being poured into areas of urban deprivation as the Prime Minister frequently repeats. He answered:
"my Department is playing its part with other interested Departments".
Later, the Secretary of State for Scotland came forward with yet more special proposals for urban areas. There is a stark contrast between the special proposals for the urban areas, and not much more than good words for the rural areas. The true answer, I fear, is that there is precious little directed specifically to rural areas of deprivation by comparison.

However, it is possible to remedy that, and a start could be made by reviewing the assisted area status boundaries. The Minister will recall that this is the point I raised in our previous debate. I do not propose to reopen the question for the whole of Truro and St. Austell, but I do make a special plea for the area around the mines, and especially in relation to the United Downs industrial site which was on the verge of success with council backing when the grants were withdrawn. This seems an opportune moment for reassessing that.

It is the luck of the draw that that industrial estate is on the wrong side of the boundary. I hope that the Minister will be prepared to pursue the possibility of reviewing that anomaly, as the Minister of State said earlier that he will look into the matter with his colleagues. Proceeding with such a change would show that the Government are concerned not only for those who continue at the mine, but for the future of those who may lose their jobs. The cost to the Government would be tiny compared to the recent tax cuts or privatisation of Rover or, I greatly suspect, compared to the money that has already been put into the mine.

While the Minister considers his response, perhaps he will tell me whether the Government made any approach to Europe at any stage to establish whether any help might be available from the Community. Surely there may be European funds available both to help the mine and to help those who may lose their jobs. I hope that the Minister can confirm that he has pursued all possibilities and what the response has been.

Above all, I hope that the Minister can elaborate on the Government's long-term view of the future for tin production in this country. Specifically, do they stand by their view in 1986, that tin mining in this country is of strategic importance, and, of course, vital to jobs in my county? I hope that the Minister will reaffirm the Government's commitment to, and long-term interest in, the future of Cornish tin mining.

The Minister may be inclined to respond with a list of previous investments in tin mining, and to tell us that this is not a cut but a saving in jobs. Or he may be inclined to do what he did in the last Adjournment debate to which he responded, and reel off figures for national unemployment and so forth. That is not what we are looking for, or what the work force is looking for. We want specific answers, clarifying what are still many mysteries. The point was made repeatedly tonight at the meeting of the unions.

The fact remains that the joint Government-RTZ agreement for a five-year programme has been stopped short. The exchange rate policy has proved too great a burden. Many angry miners met tonight to ask, why, after their co-operation and acceptance with minimal negotiation, and their struggle to stick to an agreement for a full five-year programme — which they have done — the Government have apparently sold them short in that longterm commitment.

2.40 am

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs
(Mr. John Butcher)

It is customary to congratulate an hon. Member who has secured an Adjournment debate, and who has had the good fortune to do so through winning a ballot. Tonight, I congratulate the hon. Member for Truro (Mr. Taylor) not only on his success in securing the debate, but on being able to follow up so quickly last week's announcement of the management buyout of RTZ's Cornish tin-mining operations.

As the hon. Gentleman rightly said, this has been an all-party issue from the outset. The representations made to the Department of Trade and Industry—some two years ago, when the original question became a crisis, and subsequently—have been carried forward by members of all parties. Few individual industrial issues have been addressed with such intensity — in terms of time, commitment and concern, and in terms of hard cash—by the present ministerial team at the DTI, and indeed by their predecessors when the crisis came to a head. The hon. Gentleman referred to several of the matters that he identified in his application to you, Mr. Speaker, on 23 March for a debate under Standing Order No. 20, and in his early-day motion 879.

Before I turn to the specific points raised by the hon. Gentleman about the new arrangements, I should like to recall briefly the arrangements made in 1986, which form a backdrop to the current position.

The collapse of the International Tin Council's buffer stock operations in October 1985 led to a rapid drop in the price of tin. Tin-mining companies around the world were faced with some very difficult decisions, and within the United Kingdom Cornish tin operations were curtailed. Several approaches were made to the Department or Trade and Industry for financial assistance to enable companies concerned to see their way through the period of difficulty before tin prices recovered. Attention was focused on capital projects that would reduce unit costs. After careful consideration of several proposals which companies put to the Department, it became clear that only the proposals by RTZ's subsidiary Carnon Consolidated Ltd. offered an acceptable prospect of long-term success.

That was the background against which the then Secretary of State for Trade and Industry, my right hon. Friend the Member for Southend, West, Mr. Channon, now Secretary of State for Transport announced on 8 August 1986 a package to assist Carnon with a capital programme aimed at the reduction of its production costs. That programme was estimated to cost £31 million over a period of five years.

I ask the hon. Gentleman to keep that figure in mind when he talks about the number of jobs that have been preserved, and the number of jobs that we hope will still be preserved. It is an immensely generous settlement, in recognition of the very special conditions of Cornwall and the tin mines, and also in recognition of the all-party support, not least for the strong social reasons put forward.

I think that I can say that Cornishmen have a good friend in the Government, and that our generosity, while not necessarily unprecedented — that would be too strong a word—was certainly considerable.

As one who took part in the consultations leading up to that offer, and as the person who arranged the meeting with my right hon. Friend the Prime Minister, will my hon. Friend accept from me that without that help there would be no mining of tin in Cornwall today? That is an undoubted fact. Talk about the Government having sold the miners of Cornwall down the river does not stand up to examination.

I agree with my hon. Friend. We start tonight's debate against a figure of 700 jobs. I am sure that the hon. Member for Truro and my hon. Friend the Member for St. Ives (Mr. Harris) regret the potential loss of 200 jobs. However, we would not have had those 700 jobs to consider tonight had we not been so immensely generous with the package of measures that was put together with considerable support from the predecessor of the hon. Member for Truro, from my hon. Friend the Member for St. Ives, and from our colleagues representing Cornish seats.

The assistance was to be provided in the form of an interest-free loan of up to £15 million, together with Government guarantees of commercial loans of up to £10 million. The commercial loans and the Government loan were to be repaid from the profits to be generated by Carnon Consolidated Ltd. if the project proved successful.

When the scheme was announced, redundancy notices had been issued to the 760 employees who remained at the two mines out of 1,000 or so employed at the start of the tin crisis. The assistance was expected to secure the employment of at least 640 people. In fact employment has continued at a higher level—some 720 in recent weeks.

Both RTZ Corporation and the Department have been watching closely the development of the project and the course of the tin price. The hon. Member for Truro was right to focus on that as a major factor. The capital works envisaged in 1986 have progressed and, as a result, there has been progress towards achieving the necessary cost reductions incorporated in the 1986 project.

The critical factor for the long-term future of the operations has always been the balance between costs and the price at which the mines are able to sell their tin. Regrettably, the sterling tin price has not shown a sustained recovery from the low level of £3,420 per tonne, which it reached in 1986. Having recovered to £4,670 per tonne in December 1986, the price has since fallen back and is currently below £3,800. I have to say that currency changes are on the margin of the totality of that movement. As the hon. Gentleman will appreciate, that has put the business under considerable pressure.

I am hoping to reply to all the hon. Gentleman's points. I will give way to a brief intervention.

The Minister has explained the fluctuations in the price, but can he elaborate on what the expectations of price were in dollar and sterling terms? Is it not the case that, compared with the projections on which the proposals in 1986 were accepted, the only sanction that is out of line in a major way is as a result of the exchange rate?

I hope to come to that point and to look at the question of stocks and the effect that they have had on the price. I shall do my best to make my own informed hunch—I put it no stronger—on what the pundits are saying might be the expected movement of the price in the immediate future.

As the hon. Gentleman will know, tin ores are found in a number of countries around the world. Some of the deposits are exploited by alluvial methods, which tend to be relatively low cost. Others are found in hard rock and have to be worked by mining methods that are relatively high cost. The Cornish tin deposits are of that kind.

The currency factors flow from the fact that tin is widely traded in dollar terms. The sterling tin price has fallen latterly in response to movements in the dollar-pound exchange rate. In the longer term a significant recovery in the tin price, both dollars and pounds, is widely expected. The timing remains uncertain.

It is against such a background of tin prices that RTZ has reassessed Carnon's prospects. Moreover, from RTZ's standpoint, Carnon is a small mining operation which has required considerable senior management attention, without showing the potential rewards to merit the continuation of this degree of attention. This led RTZ to the view that the best chance for the long-term survival of Carnon is to be found in the management buy-out proposal.

Both RTZ and Carnon saw clearly that there had to be changes in the scope of the capital programme put forward in 1986 and that steps should be taken to reduce the costs of the operation. This perception led to a period of intensive discussions between RTZ, the DTI and the Carnon management in which my right hon. and learned Friend the Chancellor of the Duchy of Lancaster took a direct part and committed a lot of hours, personal effort and attention. The outcome had been the arrangements announced last week for a management buy-out. I must make it clear to the hon. Gentleman that cost reductions, including wage reductions, are a necessary part of the project.

The hon. Gentleman has expressed his dismay at Carnon's announcement of the loss of some 200 of the 720 jobs at two mines. We all share his regret at those losses. I hope that he will give proper recognition to the fact that the alternative, had the mines remained in RTZ's ownership, was complete closure with the loss of all the jobs.

The hon. Gentleman also commented on the shareholding arrangements negotiated by the new owners with RTZ. Senior managers of the company, led by its present managing director, are to hold among them 80 per cent. of the shares of a company that is being formed to acquire the present group. The other 20 per cent. of the shares will be held on behalf of employees. At this stage the details remain to be worked out fully, but I understand that the present intention is that the shares will be held by a trust through which, in due course, the employees of the company will be able to share in its prosperity. Meanwhile, it is essential for the company to reduce its own costs of production. To that end the management team has announced that it is cutting its pay by 17·5 per cent., and consultations have begun with a view to a significant reduction in the pay of the continuing work force.

That brings me to the support that is being provided by the Government and RTZ to help the new company on its way. RTZ will contribute £10 million in the form of interest-free loan repayable out of future profits. For our part, we are leaving in place the £15 million loan agreed in 1986. In addition, the guarantees of commercial loans of up to £10 million, which were also part of our 1986 package, are being converted into interest-free loans. Both the Government loans and the RTZ loan are repayable out of the future profits of the business. Our money will be released to the company by reference to capital expenditure incurred. Under the 1986 project Carnon embarked on a capital programme costing £31 million over the five years to 1990. In the new situation there is some rephasing of work and some changes in the detailed content of the programme. Expenditure to 1990 is now estimated at £24 million. The programme will continue after 1990 and the total is estimated to reach £27 million during 1992.

I should make it clear to the hon. Gentleman and the Cornish community that the changes to our 1986 package are subject to review by the Commission of the European Communities. The hon. Gentleman will understand that in our exchanges tonight we must be aware of this subsequent examination and so he aware of what we say.

I am sure the House will realise from what I have said that this is a high risk venture. The Government have decided, in recognition of the importance of tin mining and the associated employment, especially in Cornwall, that it is right to make their support available in a different way from that adopted in 1986. If tin prices do not come up to expectations, and I have given my informed hunch of current expectations, and if cost reductions are not secured, the long-term prospect for the new venture is bound to be difficult. I cannot see that there could be any scope for yet further Government assistance in that situation.

That is a rather cautionary note on which to end my reply to the hon. Gentleman, but the realities of the situation cannot be escaped. I am sure that the hon. Member and the House as a whole would wish—

Perhaps the hon. Gentleman will allow me to finish. I have two minutes left.

The realities of the situation cannot be escaped, I am sure that hon. Members and the House as a whole would want to join me in extending their good wishes to management and work force as they embark on this new stage in their company's history. The Government are convinced that Carnon can win through—that is why we have continued our support — but it will require considerable—and I emphasise "considerable"—efforts by all those concerned with the company. I feel sure that this effort will be forthcoming.

The Minister of State, Department of Employment has said that, with his colleagues, he will look again at the area status. Will the Under-Secretary of State for Industry and Consumer Affairs make the same commitment for the sake of those who now look likely to lose their jobs?

The hon. Gentleman will be aware from earlier exchanges that the Department of Trade and Industry does not have immediate plans to review the boundaries or the travel-to-work areas affected or covered by assisted area status. However, I shall ask my hon. Friend the Parliamentary Under-Secretary of State for Industry, who has responsibility for the map and regional policy, to look carefully at our earlier exchanges to see whether they contain anything that is consistent with the DTI's policy on regions and travel-to-work areas. If there is anything that we can refer back to the hon. Gentleman about, I am sure that my hon. Friend will write to him.

Question put and agreed to.

Adjourned accordingly at five minutes to Three o'clock.