Major's figure for pit losses deemed absurd

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The Independent Online
JOHN MAJOR'S assertion that the 31 pits the Government intends to close are costing the taxpayer pounds 100m a month was dismissed yesterday as 'absurd' by economists and energy experts.

The figure, used repeatedly by both the Prime Minister and Michael Heseltine, President of the Board of Trade, relates to the production costs of the doomed pits. But for it to be a burden on the taxpayer, the coal they are producing would have to be valueless.

Malcolm Edwards, British Coal's former marketing director, now an independent energy consultant, said: 'It is an absurd calculation. There has not been a single penny in production subsidies for British coal mines for two years. The way the Government has worked out the pounds 100m is to suppose that the 31 pits continue in full production but that the coal from them is worthless. That is the kind of thing civil servants come up with when ministers are going frantic looking for answers.'

The 31 pits produce about 2 million tons of coal a month at a cost of pounds 50 a ton compared with a world market selling price of pounds 25 a ton. 'On that basis the cost to the taxpayer, at worst, would be only be 50 per cent of the size claimed by ministers,' Mr Edwards said. 'I would be happy to buy some of that 'worthless' coal at pounds 1 a ton and sell it at the world market price of pounds 25 a ton.'

Andrew Glynn, an economist at Corpus Christi college, Oxford, also disputed Mr Major's figures and his assertion that unwanted coal was mounting up at the rate of 1 million tons a month. The 31 pits had a combined loss of pounds 9m last year, he said, while only a quarter of their output was being stockpiled. The average at which stockpiles were growing was nearer half a million tons a month. 'The Government has used totally misleading figures for the current financial situation of the pits to justify its policy,' he added.

A spokeswoman for the Department of Trade and Industry said the pounds 100m figure had been calculated on the basis that the output of the pits amounted to 2 million tons a month of excess production at a cost of pounds 50 a ton. 'From a commercial point of view, it makes more sense for British Coal to close all the pits. As the pits close then the amount will go down.'

In Germany, the government is providing pounds 1.1bn next year in state aid for deep-mined coal. The German coal industry is thus guaranteed an electricity market of about 40 million tons and an industrial market of 15 million tons or more.

A spokesman for British Coal said: 'The German government spends more keeping its coal industry going than this government is prepared to pay making 30,000 men redundant. But at the same time we subsidise nuclear power.'

In the UK, Nuclear Electric, the state-owned power producer, receives a subsidy of about pounds 1.2bn a year from an 11 per cent levy on power generated from coal and oil-fired plant. The subsidy, which is paid by electricity consumers, is to cover the decommissioning and fuel reprocessing liabilities of the nuclear industry.

However, British consumers effectively have to pay the same subsidy for nuclear-generated power from France, which supplies about 6 per cent of the UK's electricity requirements. Critics claim that the subsidy, worth about pounds 150m year to Electricite de France, indirectly subsidises power produced from the 6 million tons a year of unprofitable coal mined by the French.

Although Nuclear Electric contracts to supply electricity at 3p a unit or less, the cost of producing it is estimated to be 7-8p. The company argues that the high costs include historic liabilities and says that pressurised water reactors built in future could produce power at less than 3p.