EU clears coal aid package

The aid package is expected to safeguard thousands of jobs

The European Commission has approved a UK government aid package for the coal industry worth up to £110m ($157m).

The move was expected to safeguard several thousand jobs.

However, the commission later said in a statement that while production costs had fallen in recent years "several factors might nevertheless make pit closures inevitable in the very short term, in particular the sharp fall in coal prices on the world market in 1999".

"Some production units, although viable in the long term, will not be able to survive the current temporary problems unless proper restructuring measures are carried out," it added.

First aid since 1995

The UK Trade & Industry Secretary Stephen Byers, who had earlier announced the EU decision, also said the government was lifting stricter controls on natural gas-fired power stations.

The rules had been put in place to support the coal industry while electricity markets were reformed.

Mr Byers said the new coal package was intended to help the industry "respond to the challenges of the new market conditions that arise from the lifting of the stricter gas consents policy".

To be disbursed over two years, the aid will be the first the industry has received since 1995.

Most of the UK's mines are now owned by RJB Mining, which earlier this year said it was in talks about being bought.

Speculation over the identity of the possible buyer centred on the US-based Renco Group.

New gas power stations

As part of the proposals announced on Wednesday, Mr Byers said construction would now go ahead of six new gas power stations in areas needing regeneration.

They will be at Fleetwood in Lancashire, the Isle of Grain in Kent, Partington near Manchester, Plymouth, Raventhorpe near Scunthorpe and Spalding in Lincolnshire.

Mr Byers said the projects would involve investment of up to £2bn and 8,000 man years of employment.

They would "bring more competition to the power generation market and so put downward pressure on electricity prices for everyone's benefit," he said.