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From Militant, No. 715, 7 September 1984, p. 6.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
ANDREW GLYN exposes Tory lies about the cost of producing coal on the basis of the NCB’s own accounts (in table below). Below that he indicates some of the costs of the strike which the government conceals.
NCB’s own accounts |
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Accounting for subsidies AS PART of its propaganda campaign against the NUM, the government has quoted huge figures for the amount of ‘subsidy’ it pays to the coal industry. Peter Walker, the Energy Secretary, said that the taxpayer contributed £1.3 billion last year, or nearly £130 per week for each miner. If the NCB really is “insolvent”, as he alleged, it is not surprising to hear Chancellor of the Exchequer Lawson claiming that the cost of the industry not working during the strike is “only” £300–£400 million. In fact both these figures are entirely misleading. The NCB is not bankrupt and the cost of the strike is many time greater than the government admits. The government “subsidy” for 1983 covered the NCB’s operating losses (£385 million), its interest payments (£467 million) and around £500 million of “social costs”. The accounts for 1983–84 allow each of these items to be considered in turn. |
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‘Operating losses’ “Operating losses” sounds as though it means the excess of the costs of producing coal over the NCB’s revenue from sales. Yet included here are a number of items which are not costs of production at all. The biggest of these is £245 of provision for payments of “surface damage”, the costs of meeting claims for subsidence in mining areas. The near doubling of this item in 1983/84 reflects a rush of claims in the Mansfield area. But it does not reflect the estimated costs arising from this year’s mining; rather it is the historical legacy of past coal mining operations. Another major item is £130 million of pensions and other payments to retired miners. In no sense can a pension paid to a retired miner, or compensation to people whose houses suffer subsidence damage, be regarded as costs of getting out coal now. Certainly they have to be paid but there is no reason why they should be met (via higher prices or worse wages) by those who now use coal or produce it. It is perfectly fair for the taxpayer (via government grants) to cover these payments; in no sense does this make them a subsidy to the production of coal. These two items more than account for the NCB’s operating loss. If they are left out then the NCB made an operating profit in 1983/84. And, but for the £200 million or so effect of the strike and the overtime ban, the NCB would even have financed practically all of its £698 million investment programme out of its own revenue. |
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“Social costs” “Social costs” is the next chunk of “subsidy”. These are “costs in respect of the closure of uneconomic capacity or redundancy of employees which are wholly or partially met by government grants”. Again, they are not a cost of producing this year’s coal; indeed, they are a cost of not producing coal! The costs of maintaining workers who are put out of work by pit closures make up part of the economic argument for not closing pits in the first place (see my article in Militant, no. 705). They do not, as the NCB’s accounting suggests, represent an additional charge making the existing pits less economic, thus seeming to justify more closures. |
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Interest payments Interest payments is the final item which has to be “subsidised” by the government. This represents £467 million (£400 million of which goes straight back to the government). This huge figure directly reflects both the high interest rate policy of the government and the fact that so much of the NCB’s investment has been financed by fixed interest loans. It actually represents a return of 6.3% on the NCB’s capital employed. This is nearly double the corresponding rate of profit in private manufacturing industry in recent years. So this part of the “subsidy” is mainly paid by the government itself. It gives itself an inflated rate of profit and the NCB an inflated loss. |
This analysis (above) shows that production of last year did not require any government subsidy at all. The value of coal produced, some £4,150 million, more than paid the miners and for the cost of the inputs actually used in coal production.
It is the loss of coal production, put by the NCB at some 1.7 million tonnes per week, worth some £73 million, which is the biggest cost of the strike. This is not the end of the story, for the reduction in the take home pay of miners, and those in industries supplying inputs into mining must amount to some £20 million per week.
Their reduced spending must lead to reduced production in industries making the consumer goods they would otherwise be buying. In addition the NCB is forced to postpone part of its investment programme (which was running at £14 million per week) which again means a fall in the output of the construction industry and others involved. So leaving aside any effects on the production of steel, from fuel and ore shortages, it is likely that the total cost of the strike in terms of lost production is running at around £100 million per week.
Finally the CEGB is using more expensive oil in its power
stations, reckoned by stockbrokers Simon and Coates to be costing an
additional £18 million per week as compared with using coal. This
cost too will eventually have to be borne, probably by electricity
users in higher prices, and this must be added to the loss in
production to reach the total cost. This total must be well over £100
million per week, and probably as much as £120 million.
Considering all this how can Lawson possibly come up with a figure of £20 million per week as the cost of the strike?
First of all he is concerned only with the cost to the government (NCB and other nationalised industry losses, lost tax revenue from miners, social security and costs of policing).
It is not surprising that he does not bother to count the cost of the strike to miners and other workers, preferring not to see the miners as part of society at all. But still his figure is only one-third of that suggested by Simon and Coates.
Their explanation is that he has not counted the cost of running down coal stocks as a cost at all. His ‘cash flow’ estimate of the government’s real costs is no real guide to the true cost of the government, let alone to the real cost to the country which is at least five times his figure.
The government has been cooking the books on the balance of payments as well. Whilst Tebbit told the House of Commons that the effect of the strike was “minimal”, Simon and Coates reckon the extra coal and oil imports as “at least £237 million per month, without making any allowance for higher imports in other industries such as steel. There appears no way that these estimates can be squared with the government’s own indications of the strike’s losses”.
The government likes to pretend that the costs of the strike are a modest investment required to reorganise an insolvent industry. In fact it is imposing massive costs in lost production and higher priced oil. These average out at around £2 per week for each person in the country. Even looked at in narrow financial terms workers are paying an enormous cost for the government’s attempt to smash the NUM.
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