Leading Article: Hard heads, soft hearts

FROM A political tactician's point of view, Michael Heseltine's statement to the Commons on the coal industry yesterday was well judged. He offered enough money in direct subsidies to keep open a dozen of the 31 mines that British Coal wanted to close last October, and to keep another six in mothballs. The industry is to prepare for full privatisation, however, and the subsidies will taper off in the two years before British Coal can be sold. The first of these announcements was a bid to win back the support of angry Tory backbenchers who put the Government in such peril five months ago. The second was a clear attempt to show that, despite its indecisiveness over the crisis, the Government does have an energy policy after all.

Behind Mr Heseltine's statement lies the calculation that the public fuss about coal is likely to dissipate. Voters reacted angrily to British Coal's announcement that it would lay off 30,000 employees and close down more than half of its capacity partly because of the abruptness of the news - and the incompetent way in which it was presented. The public was also influenced by timing, however: the news came just after the Government's humiliating sterling crisis and just before the tidal wave of the Maastricht treaty was due to hit the House of Commons. Now that tempers are cooler and economic prospects better, the President of the Board of Trade must think that his hand is stronger. He is probably right.

Whether his White Paper makes economic sense is a different matter. Broadly, it represents a welcome and overdue reassertion of two important principles in British energy policy: that it is right for the country to continue to rely on a mixture of energy sources, including not only domestic coal but also oil, gas, coal from abroad, electricity imported down a cable from France, and nuclear power; and that the mix between these sources should broadly be determined by the market.

It was this thinking that led Mr Heseltine to decline to bow to Labour's demands: he had been asked to give an artificial boost to coal demand by reneging on Britain's commitments to buy electricity from France, by forcing electricity generators to increase their already bloated stocks of coal, or by refusing planning permission for new gas power stations. The only concession the Government has made to the anti-market lobby is to have raised duties on orimulsion, a dirty black sludge that is imported cheaply from Venezuela and burnt in Britain to generate electricity.

It is doubtful, however, whether the decision to keep the 12 pits open for two more years will do anybody much good in the long run. Coal mining is a capital- intensive industry; setting miners at work underground when their labour does nothing more than produce something for a far higher price than it will fetch on the open market is an extraordinarily expensive way to keep them off the dole queues. The spending of several hundred million pounds of taxpayers' money on the pits is likely to produce a succession of hard-to-refuse demands for similar bail-outs in other industries.

There is, nevertheless, a special case to be made for coal miners. They often live in communities where the pit is the only employer, and the social blight caused when that pit shuts down is often far greater than the effect of more redundancies in another industry. Remarkably little has been done for those communities so far. All Mr Heseltine could come up with yesterday was a mere pounds 20m more to mitigate the social impact of the inevitable. His announcement that a 'flagship business park' is to be set up in Nottinghamshire and minor inducements given to businesses to invest in the East Midlands will do little to dull the blow.

In fact, the Government could justify spending far more on coalfield communities: not just on investment incentives and retraining, but also on extending the job subsidies offered in the Budget from employers who hire the unemployed to those who hire redundant miners, too. Such a package would be fair to taxpayers, energy consumers and miners alike. By attaching the subsidy to the person rather than the product, the Government would prove itself to have both a hard head and a soft heart.