In a tale from Oop North we're told that the destruction of manufacturing employment and the coal industry now costs the Treasury some £30 billion a year in extra welfare benefits and lower tax revenues. This comes as some of the resultant unemployment is disguised as incapacity benefits and then the various top ups to incomes resulting from those lower paid service jobs. The Treasury here meaning of course our own pockets as we must pay tax to support those who used to support themselves through making things and paying tax as they did so.
This is not a convincing analysis of recent events. No, not even when The Guardian reports on it:
The enduring impact of closing factories and shutting coalmines in the 1980s has been revealed in new research showing that the drain on the exchequer from former industrial areas is responsible for up to half the government’s £55bn budget deficit.
In the first comprehensive analysis of the cost to the state of the de-industrialisation that began three decades ago, Sheffield Hallam University said the annual bill was at least £20bn and was perhaps as high as £30bn.
The economic cost of something, whatever it is, is the net cost of something, not the gross. With climate change there's damage to the future from emissions – and benefits in the present from making those emissions. It's the net cost that Lord Stern spent all that time calculating. The net cost of inequality is the difference between the impetus to strive it provides minus the damage, if any, inequality itself does.
So it is with manufacturing or coal mining. What were the costs of supporting these activities so that people worked and paid tax? What is the net cost to the Treasury, or our wallets, not what is the gross?
At this distance we're not going to be accurate about such costs of supporting those industries. But as a guide:
Taxpayers were subsidising the mining industry to the tune of £1.3 billion annually. This figure doesn’t include the vast cost to taxpayer-funded industries such as steel and electricity which were obliged to buy British coal.
Using the ever indispensable Measuring Worth we find that that £1.3 billion is some £5 billion a year now. And that is, again we should note, just the direct subsidy to coal mines, not the amount also picked from our pockets by higher input costs to British industry and our electricity bills. We can all have the most lovely arguments about how much further we want to go in adding the costs of supporting that industry – as someone around at the time I would want a hefty addition for people having to drive Morris Marinas. But it is indisputable that the net cost was very much lower than the gross cost being offered to us in this report.
All of which is a pity really for as the report itself, from the Centre for Regional Economic and Social Research, says:
Second, there is an urgent need to discuss the role of evidence in the formulation of public policy. Policy making rooted in evidence and analysis is out of favour. Political debate appears more interested in appealing to emotion, speculation and imagery. Facts are seen as irrelevant and experts as dour pessimists. This rejection of evidence in favour of supposed ‘common sense’ thinking in practice risks distancing policy from the lived realities of the people and places it should be serving. The result is policy that misunderstands what is going on, does little to make things better and can often make them worse.
Yes, that would be both interesting and useful, wouldn't it? An analysis of the costs and benefits of political plans, of economic policy choices. Perhaps we should look to that generously supported academia of ours to produce it.
But perhaps not at Sheffield Hallam as whatever it is that they're doing up there it doesn't appear to be economics. Nor hugely useful if we are to be candid.