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The decision to allow British Coal to close 31 pits with up to 31,000 job losses (or double that with knock-on effects) at a time of deepening recession is simply a monumental blunder. It should be shelved immediately until an independent inquiry can sort out the mess of the Government’s so-called energy policy. Whitehall claims these closures are the result of post-privatisation market forces. Nothing of the sort. The energy market is a byzantine stitch-up. While subsidies have been progressively withdrawn from coal, the nuclear industry receives £1.2 billion a year, equivalent to £50 per tonne of coal - and enough to show coal imports the way home. Even if UK coal was the cheapest in the world, it could not displace nuclear stations, which have to be run 24 hours on “base load”. Amazingly, this is also happening to gas-fired stations.
Gas has been purchased on 15-year contracts where the generating authorities agree to pay for it even if they don’t use it - so that (imported) gas, too, is being burned on base load displacing coal. A straight case for the Monopolies Commission.
You might presume that gas is self-evidently cheaper than coal. Not at all. Even the generating authorities admit that electricity can be burned more cheaply in existing coal-fired stations than in gas-fired ones. They are burning gas partly to diversify from over-dependence on coal (even though the monopoly power of the two coal unions is nothing compared to that of the two generating companies) and partly to duck the 1988 legislation requiring power stations to install Continental-style desulphurisation equipment. The regional companies are building gas-fired stations because privatisation enables them to pass on the extra cost to the consumer even if it is dearer than coal. That too, should, be dispatched to the Monopolies Commission, as should the decision not to offer threatened pits to new buyers before closure.
Where is all this leading? Oxford Economic Research says that the rush of new entrants into the market may - in the short term - force generators to give power away. But in the longer term consumers may be forced to pay more for electricity because of the way high-cost gas turbines are driving out cheaper coal. Meanwhile British Coal has done all a government could wish, increasing its productivity by 12 per cent a year. It is now the most efficient, least subsidised coal industry in Europe. In Germany, where subsidies reached £3.5 billion last year, they require electricity companies to support pits and miners. If there was a European policy for coal then British Coal would be able to gain markets at the expense of other less efficient countries.
Above all, has the Government done a proper cost benefit analysis comparing the cost of closing the coal industry with that of keeping it open? If not, it should be required to produce one before a single pit is closed. Apart from the redundancy cost of up to £37,000 per miner, there is the ongoing cost of keeping an extra 60,000 unemployed people (at £8,000 per person) with scant chance of another job in communities devasted by yesterday’s decision. And has the Government worked out by how much manufacturing industry will have to increase its exports to pay for increased imports of gas? Does it care? If this is the start of Michael Heseltine’s much vaunted industrial strategy, then heaven protect us from the end of it.
