Outlook: So much for the free market

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The Independent Online
DESPITE ITS vastly-reduced size, the coal industry continues to command a horrible fascination among politicians, which in turn enables it to punch way beyond its weight in any debate about energy policy. This week, government lawyers willing, the President of the Board of Trade, Margaret Beckett, will finally unveil the rescue plan for the pits. It will preserve a few thousand jobs short-term in the mining industry at the expense of a few thousand jobs in the gas and construction industries. The bigger cost, however, threatens to be to New Labour's hard-won reputation as the party of business and the Government that favours robust competition.

Before anyone gets too sanctimonious it should be recognised that energy generation has never been a perfect market. Governments of all hues have interfered in it at will for reasons of dogma and political expediency. Generally, the consumer has been the loser. The previous government imposed a nuclear levy on every electricity bill to make sure the country could never again be held to ransom by the miners. Until the coal crisis burst in just before Christmas, the present administration was happy to keep the dash for gas going at full pelt.

Now ministers have given in to the argument that a guaranteed section of the market should be kept aside for coal. Issues such as whether it is price-competitive and the environmental impact of burning more coal come a poor second to the overriding objective of preserving the pits. Thus the generators will have their arms twisted to buy more coal from RBJ Mining, with the threat that a break-up of their cosy monopoly may otherwise be on the horizon. The trade off is that a halt on further gas- fired power stations means no new competition in the generating market.

This is a poor excuse for an energy policy - as the Labour dominated Commons Trade and Industry Select Committee is about to observe. Worse, it is a missed opportunity for Labour to demonstrate that it means what it says when it talks about open markets.