The economy in crisis: Economists reject market forces theory: Experts refuse to put blame on market forces

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The Independent Online
ECONOMISTS and industrialists have attacked the Government for blaming market forces for the rapid shut-down of pits.

Both British Coal and Michael Heseltine, President of the Board of Trade, have blamed a 47 million ton stockpile for the company's sharp drop in sales.

However, Dieter Helm, director of Oxford Economic Research Associates, says that the Government set deliberately high coal requirements in contracts imposed on the generators three years ago. This was to protect the coalfields in Nottingham, which are staffed by members of the Union of Democratic Mineworkers.

According to Dr Helm: 'These contracts were cynically put in place to protect the UDM miners, giving the impression they were being looked after. The jobs may have gone in any case but the way this has been handled and the timing is all wrong.'

Dr Helm also believes the duration of the three-year contracts, which expire on 31 March next year, was set to take the Government beyond the last possible date for a general election.

The generators, National Power and PowerGen, blame the stockpiles on coal contracts imposed by the Government in spring 1990. Those contracts forced the generators to buy 70 million tons a year for two years, dropping to 65 million tons this year.

A source at the generators said that when the Government set the contracts it enormously overestimated the requirement for coal.

That still begs the question of how the old Central Electricity Generating Board could burn 75 million tons a year in the days before privatisation, yet stocks have soared in the last three years.

Malcolm Edwards, the former commercial director of British Coal, says that the Government allowed unfair changes in the market. The most obvious change is that electricity generated by nuclear power has increased its market share to 22 per cent from a little over 16 per cent despite its high generation costs.

Nuclear Electric, which is still state-owned, is subsidised at over pounds 1bn a year by a levy on electricity bills.

Mr Edwards believes that coal imported by the two major generators increased from under 2 million tons to about 7 million over the last three years.

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