Pit closure package costs pounds 1bn: Nearly half coal industry to be shut by Christmas as chairman predicts dearer electricity

MORE THAN 40 per cent of Britain's mining industry will be shut down by Christmas in what the chairman of British Coal called his 'saddest day'.

The speed of the run-down shocked unions and politicans; six pits will close on Friday, another six by the end of the month and a total of 19 by the end of December.

The closure programme will cost pounds 1bn of public money, none of which is accounted for in existing spending plans. The Treasury was forced to concede more generous redundancy payments by Michael Heseltine, President of the Board of Trade, Kenneth Clarke, the Home Secretary, who has a pit in his Nottinghamshire constituency, and Lord Wakeham, Leader of the Lords and a former Secretary of State for Energy. It will add to Treasury pressure for spending cuts elsewhere.

Mr Heseltine said the closures had been the toughest decision of his life.

More than 30,000 of British Coal's 53,000 jobs are to disappear by next March with employees being made compulsorily redundant for the first time. They will qualify for severance payments of up to pounds 37,000. Anyone taking part in any industrial action will forfeit severance payment, the company warned.

Only four of the 31 collieries earmarked for closure will be 'mothballed' so that they can be reopened. The closures mean the end of deep mining in Lancashire, north Staffordshire, North Wales and north Derbyshire. Scotland and South Wales will be left with one pit each.

On Friday 5,000 jobs will go in the North-east (Vane Tempest/Seaham), Yorkshire (Markham Main), Nottinghamshire (Cotgrave, Silverhill), South Wales (Taff Merthyr) and Staffordshire (Trentham).

Mr Heseltine promised regional assistance on top of severance payments - but any extra cash will have to be fought for in the review of public spending.

Neil Clarke, the chairman of British Coal, blamed the sudden surge in gas-fired power generation for the company's fate. He denied claims by Mr Heseltine that the new gas-fired power stations would cut electricity prices. Many would produce electricity up to 16 per cent more expensively than modern coal-fired plant, he claimed.

'The bear squeeze on the demand for coal, not just our coal, has been scant reward for the efforts which have seen productivity double in the past six years. A sizeable proportion of the market is being shut off to coal. The closure of so many of our mines and the loss of so many jobs will be grievous.'

Electricity generation accounts for the bulk of British Coal's output. Pit closures have been accelerated because around 47 million tons of coal is already stockpiled.

Sales to the electricity generators, National Power and PowerGen, are expected to fall to a maximum of 40 million tons next year from 65 million. The volumes will then fall further as new gas-fired plants are built. Mr Clarke said that gas could soon be replacing 30 million tons of coal.

But Mr Heseltine said the closures were inevitable and followed a century of decline.

He added that there were very few examples of such a generous redundancy programme, adding: 'This is the toughest decision I have ever had to take. This is a dreadful thing to have to do but it is the right thing to do.'

Arthur Scargill, president of the National Union of Mineworkers (NUM), accused the Government of vandalism and economic madness. He called on Mr Heseltine to intervene to save the industry, while calling on miners to resist.

British Coal's mining workforce has already dwindled to 41,000 from 220,000 in the middle of the last decade and from 700,000 in the early days of nationalisation. Mr Heseltine said that the remaining coal industry will be well placed to secure a profitable future. He said that savings to electricity consumers of around pounds 300m would mean the average bill would be 3 per cent lower than it would have been.

Existing government-imposed supply contracts with the electricity industry expire on 31 March and have yet to be replaced in spite of months of protracted negotiations. Unless contracts are signed, ministers believe that more pits might have to close.

Nottinghamshire Tory MPs described the pit closures as 'catastrophic' for their constituencies, and feared they would alienate the Union of Democratic Mineworkers, which helped to break the NUM strike. Indeed, Neil Greatrex, president of the Nottinghamshire area of the UDM, called on the TUC to co-ordinate protest action against the loss of jobs, adding: 'Things are not going to change until we get rid of this pigging government.'

Robin Cook, Labour spokesman on trade and industry, said the rest of Europe must think Britain was mad: 'These closures add up to a bad energy strategy and a worse economic policy. Britain has the biggest coal reserves in Europe, but today's closures shut the door on most of them.'

(Photograph omitted)