Letter: Pit closures cannot create jobs

Sir: Just after the 13 October announcement of the 31 pit closures, you printed a letter from me pointing out the disastrous effects of the decision on the broader economy and, in particular, on unemployment, government borrowing and the balance of payments. The Government's 150-page White Paper on The Prospects for Coal fails completely to address these issues.

The vital question of the impact on total unemployment is brushed aside with the statement that

Over time, as the economy adjusts and redundant workers find new employment, the loss of jobs from pit closures would be broadly matched by compensating developments elsewhere. New jobs might be in different industries, and to some extent in different areas, but overall employment would return broadly to its previous level.

(para 5.14)

Or, as Michael Heseltine put it more succinctly in his evidence to the Employment Committee,

the cost of unemployment is a temporary process as people find their way into market sustainable jobs.

If the economy were likely to expand rapidly over the next few years, so that firms were constrained by labour shortage, it would be reasonable to assume that shedding jobs in the coal industry would allow employment in other industries to expand faster. But no serious economic forecast, including the Government's own projections in the Budget, foresee the economy growing enough to lead to much, if any, fall in unemployment, let alone to labour shortage. How on earth then will loss of jobs in the coal industry cause more jobs to be created elsewhere so that 'employment would return broadly to its previous level'?

The White Paper points out that maintaining jobs in coal would adversely affect jobs in other fuel industries. But much of the substitute fuel is imported (coal, orimulsion and electricity), and of the rest both UK open-cast coal and UK gas is one-half or less as labour intensive as deep-mined coal. Thus the net, continuing effect of pit closures on jobs is still enormous (some 50,000 if all 31 end up closed, as seems all too likely).

Such unemployment implies costs on the public-sector borrowing requirement far exceeding any operating subsidy required to keep the pits open, not only in the first year when redundancy payments are made, but in the longer term as benefit continues to be paid and tax lost (some pounds 10m per year per pit). So the White Paper's argument that maintaining the pits will worsen the public finances, leading to cuts in spending and loss of jobs elsewhere, is the reverse of the truth.

Once these broader costs of pit closure are taken into account, the case for a serious restructuring of the energy market to preserve a much larger market for deep-mined coal is as overwhelming as it appeared on 13 October.

Yours sincerely,

ANDREW GLYN

Fellow and Tutor in Economics

Corpus Christi College

Oxford

27 March