Britain in Crisis: The real costs the closures

David Utting finds some of the answers that ministers were unable to provide.
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The Independent Online
THE economic case for throwing 30,000 miners out of work in a matter of five months is, according to Michael Heseltine, 'unanswerable'. Yet, when a cross-party group of MPs from mining constituencies asked Tim Eggar, the Minister for Energy, to reveal the details last week, answers were precisely what was missing. What will redundancy payments and increased unemployment benefit cost the taxpayer? How much will be lost in tax and National Insurance contributions, how much spent on physically shutting down 31 mines?

Mr Eggar, to whom the questions had been faxed in advance, could provide none of the cost-benefit analysis that the MPs were seeking. 'Where are the papers that explain why all this is being done?' asked Bill Cash, Tory MP for Stafford.

But outside analysts - notably Andrew Glyn, an economist at Corpus Christi College, Oxford - can provide some answers.

Job losses. At the 31 pits being closed, about 23,800 miners and 7,600 other staff will lose their jobs. About 7,000 employees of private contractors also work at the mines and 73,000 other workers are employed in supply industries. On the evidence of past pit closures, Mr Glyn calculates that 31,500 of these jobs will be lost.

The effects do not stop there. The redundant workers will have reduced spending power and that means fewer jobs for other people. Mr Glyn's conservative estimate of this knock-on effect is 15,700 unemployed.

His working total of lost jobs is, therefore, 78,600. Even that could be an underestimate. It takes no account of fears that up to 7,000 jobs will be shed at coal-fired power stations over the next three years, nor of up to 5,000 jobs said to be risk at British Rail coal depots.

Costs to the taxpayer. The pay- offs will depend on age and experience. Estimates of the average range from pounds 15,000 to pounds 24,000. Mr Glyn inclines towards the higher figure, giving a total cost of pounds 756m. He says that for every redundant worker, inside and outside the industry, an average of about pounds 8,000 should be added to take account of unemployment benefit (payable for up to a year) and lost taxes, including income tax, National Insurance contributions and VAT. These costs, he calculates, come to pounds 621m. Then there are the costs of clearing and sealing the 31 pit sites at pounds 5m each - pounds 155m in all. Finally, British Coal Enterprises, the subsidiary that helps redundant miners to find new jobs, expects to spend about pounds 40m over the next 18 months. This gives a total, on the debit side, of pounds 1.57bn.

Savings to the taxpayer. Mr Heseltine, accepting British Coal's advice that its sales to the electricity supply industry will fall to 40 million tonnes from 65 million this year, says that the cost of keeping the 31 pits open to produce coal that is no longer needed would be pounds 100m a month. That implies a notional saving of pounds 1.2bn a year.

However, DTI officials confirm that the figure assumes that the pits produce coal that cannot be sold to anybody. At worst, it could be sold at the world market price. So the annual loss to taxpayers would then be nearer pounds 300m.

Net effect for the taxpayer. These calculations suggest that the taxpayer will lose more than pounds 1bn from the effects of last week's announcement. Costs in subsequent years will fall but, in a recession, miners will only find new jobs at the expense of someone else in the dole queue. Thus the cost of benefits and lost taxes remains substantial at pounds 600m a year.

In the final reckoning, pounds 2.5bn could be added to the public sector borrowing requirement over three years. The result, Mr Glyn warns, is likely to be public spending cuts, leading to further job losses.

Balance of payments. In the immediate future, coal imports are expected to rise. Mr Glyn estimates that the cost to the balance of trade of importing fuel instead of using British- mined coal will be pounds 500m to pounds 1bn over the next three years. This will create a wider trade gap and force the value of sterling further down. That, in turn, will raise the cost of imports across the economy as a whole.

The present cost of imported coal is pounds 30 a tonne. But Mr Glyn argues that the burden to the economy as a whole of using imported rather than home-mined fuel raises the 'real' price to as much as pounds 50. The nation - if not the electricity generators - would therefore be better off with British coal at pounds 43 a tonne.

Health. Ill health is associated with loss of earnings. Dr Richard Smith, editor of the British Medical Journal, says suicides in unemployed men are twice as common as in the general population and the premature death rate one-third higher. Mortality is also higher among wives of men without jobs. Other studies suggest that the unemployed are much more likely to visit the family doctor than when they were working - especially men over 40. Chronic illness has been found to be more common among the unemployed than among the working population.

Environment. According to the DTI, gas-fired power stations are responsible for one-third fewer emissions of carbon dioxide - the main 'greenhouse' gas - than coal-fired stations. They also emit less sulphur dioxide and nitrous oxide, the pollutants that contribute to acid rain. Desulphurisation plants, to give 'cleaner' coal-fired plants, would cost pounds 250m each.