Outlook: Coal puts Labour in a hole

THE GOVERNMENT's apparent determination to save the British coal industry is turning into an interesting test of its commitment to free and open markets. The choice lies between fixing the electricity generating market to ensure a guaranteed tonnage of coal sales or sticking with the idea that competition between energy sources is the best means of achieving lower prices.

Somewhere between these two positions, there is also a debate going on about energy policy. Should Britain allow itself to become as dependent on natural gas for its electricity generating needs as it once was on coal? The arguments for guaranteeing coal a fixed share on grounds of security of supply and diversity of supply are weak. Gas is plentiful, it is not vulnerable to interruption through industrial action and gas- fired plant is capable of being modified to burn coal.

Despite this, ministers seem inclined to do something for coal. And it is leading them into dangerous territory. The idea of a moratorium on any further gas-fired power stations, say for five years, now appears to be common ground between the Treasury and the Department of Trade and Industry. What now appears to have been added to the agenda is the idea of withdrawing consents which have already been granted for gas-fired plant.

In the short-term, this will do little for the coal industry. There is already enough gas-fired capacity actually under construction to displace the output of five or six large pits. But what it would do is halt the march of gas and guarantee at least a residual market for coal. Ministers should think very carefully before intervening in this way. Apart from making their environmental targets harder to achieve, it would send out all the wrong messages about the government's attitude to inward investment and open markets. Miners jobs would be saved for a while but at a much greater cost to Britain's longer-term interests.