HC Deb 14 June 1956 vol 554 cc772-83
The Chancellor of the Exchequer (Mr. Harold Macmillan)

With your permission, Mr. Speaker, and that of the House, I should like to make a statement on the affairs of the Trinidad Oil Company.

As the House is aware, the Texas Oil Company has offered to buy the entire issued ordinary stock of the Trinidad Oil Company. The assent of the Government is required for this transaction and we have now had an opportunity to consider the many and complicated issues involved.

The Trinidad Oil Company Limited has interests in a number of undertakings, of which the most important are the following. First, in Trinidad itself it has oil leases from which it produces just over a million tons of oil a year and a refinery which processes nearly 4 million tons of crude oil a year, including some on behalf of the Texas Company. The products are distributed mainly in the Caribbean area and this country.

The Company has marketing subsidiaries in the Caribbean, in Jamaica, in Puerto Rico and the Dominican Republic. Elsewhere in the Caribbean, the Company markets on a 50:50 basis with Shell. It also holds one-third of the shares in Trinidad Northern Areas Limited. This company engages in oil exploration including marine drilling. The other shares are held equally by Shell and British Petroleum interests.

In addition, the Trinidad Oil Company has a 50 per cent. share in the Regent Oil Company Limited, which at present distributes about 6 per cent. of all petroleum products used in the United Kingdom. The other half is owned by Caltex (U.K.) Limited, a wholly-owned subsidiary of the California-Texas Corporation, which, in turn, is owned as to 50 per cent, by the Texas Company and as to 50 per cent. by the Standard Oil Company of California.

Finally, the Trinidad Oil Company owns 89 per cent. of the shares in the Regent Refining (Canada) Company, which is concerned in refining and marketing petroleum products in Canada. This Company's present production of crude oil from its concessions in Alberta is negligible.

As the House will see, the crude oil production of the Trinidad Oil Company is very small—about one-sixth of 1 per cent. of free world oil production. But it represents about one-third of the crude oil production of Trinidad and, with the refinery, constitutes a considerable part of the oil industry there. The Company has stated publicly that it has not the financial resources to maintain its position in an expanding oil world.

In considering this matter, Her Majesty's Government are concerned with the interests both of Trinidad and the United Kingdom. As I informed the House on 7th June, we have been in close touch with the Government of Trinidad on the effect of the proposal on the interests of the island. Prosperity in Trinidad is closely bound up with the oil industry. The Government of Trinidad have made it known that what they want to see is exploration intensified, existing oil resources exploited at the maximum economic rate, and the refinery operated at full economic capacity and, if possible, expanded.

At the same time, they are concerned that the existing established practice in respect of industrial relations should be maintained, that existing personnel should be treated fairly and that as many local men as possible should be trained for high positions. In view of the multiracial character of the community, they are also concerned that there should be no racial discrimination in any of the Company's plants or camps and that the rights of local persons should be respected.

Subject to safeguards on these matters, I am informed that general opinion in Trinidad is in favour of this transaction.

In consequence, Her Majesty's Government are under an obligation not to let this deal go forward without ensuring that the conditions made by the Government of Trinidad are met. On the other hand, we must bear in mind that if we use our powers to prevent the transaction we run the risk of denying great material benefits to the island.

I now come to the interests of the United Kingdom. First, I deal with the need to ensure our oil supplies and to safeguard our balance of payments position. From what I have said about the production of the Trinidad Oil Company, it will be seen that the supplies which come to us from this source are very small indeed in relation to our total needs.

Moreover, in time of war or national emergency, the Governor of Trinidad has power, under the mining leases, to preempt all oil works and products thereof, and, if necessary, to take entire charge of the works.

As regards the balance of payments, we would, if we permitted this transaction to take place, make it a condition that the marketing operations should be carried on under arrangements comparable with those which we already have with other American oil companies. In this way any oil which comes to the sterling area would continue to be paid for in sterling; at the same time, dollars, would have to be found for profits remitted to the parent company in the United States, while we should not recieve any profits earned and remitted by the Canadian undertaking.

For many years to come, however, all this would be more than counterbalanced by the continued investment which the parent company would have to make both in the United Kingdom and in Trinidad, while, at the same time, of course, we should benefit from the dollars received in the purchase price. We should, of course, lose some tax revenue, but, this can hardly be a determining factor.

If, on the other hand, we were to refuse permission for the transaction, we should, as I have said, be under a moral' obligation to see that the necessary capital was forthcoming to expand the undertaking. The provision of this capital from private sources, even if it could be obtained, would represent a considerable burden on the resources of the United Kingdom, and, since much of the expenditure would be overseas, an additional strain on the balance of payments. The same would apply if the capital came from public funds, and do not think that this could be justified in the present circumstances.

It has been suggested by some that Shell or British Petroleum might be interested in making an alternative offer. As I have explained, the Trinidad Oil Company Limited has a variety of interests, including producing, refining and marketing. Inasmuch as many of these duplicate undertakings owned by Shell and British Petroleum, it is obvious that the purchase of the Trinidad Oil Company's undertaking as a whole would have no attraction for them.

Thus, if this transaction is considered by itself, the arguments are clearly in favour of our giving permission for it to go through, provided, of course, that the very important conditions mentioned, both those concerning Trinidad and those concerning the United Kingdom, are met.

There are, however, wider considerations. This country is dependent for almost all its raw materials, including oil, on overseas sources. It is also—the two things go hand-in-hand—a major overseas investor. By our investment abroad we have secured for ourselves access to many of the supplies on which our livelihood depends.

This process brings great benefit both to ourselves and to the peoples of the countries where the resources lie waiting to be developed. It does, however, require the willing co-operation of those peoples and it must be a two-way business. British enterprise has built up and is continuing to build up valuable assets overseas, not only in the sterling Commonwealth, but also in North America.

We have also benefited not only in the United Kingdom, but in many parts of the Commonwealth from United States enterprise and capital. If we approach this deal from too narrow a point of view, we not only take upon ourselves the burdens I have mentioned but also expose ourselves to the risk of discrimination against us in other countries.

For these reasons Her Majesty's Government have decided that they are, in principle, willing to give permission for this transaction to go through, subject, of course, to the ordinary law, both here and in Trinidad, being complied with, but more particularly subject to the following conditions and undertakings:

First, that the following specific conditions are complied with in any rearrangement of the present company structure:

  1. (a) the marketing operations are carried on under arrangements satisfactory to Her Majesty's Government, on a basis comparable with those already 776 existing with other American oil companies;
  2. (b) the production and refining operations in Trinidad are carried on by a company registered in Trinidad.
Secondly, that Her Majesty's Government and the Government of Trinidad receive satisfactory undertakings on the following matters:
  1. (a) the Trinidad refinery is operated at full economic capacity and, if possible, expanded;
  2. (b) exploration in Trinidad is intensified;
  3. (c) existing oil resources in Trinidad are exploited on the basis of sound operating practice at the maximum economic rates;
  4. (d) industrial relations are maintained on the basis of existing and established practice;
  5. (e) there is fair treatment of existing personnel and training of as many local men as possible to take high positions in the Company;
  6. (f) there is no racial discrimination in any of the Company's plant or camps and the rights of local persons are respected.
In view of the complicated nature of the interests involved, which cannot be given in detail in a statement—even in a statement of this length or any reasonably short statement—Her Majesty's Government will lay a White Paper setting out the factual basis on which their decision has been reached.

Mr. H. Wilson

The Chancellor's statement will be received with dismay in more than one part of the House and in all parts of the country. Is it not clear from the figures which he has quoted that the real bait in this transaction is not oil production in Trinidad but the very big prospect of expansion in Canada, which he is surrendering, and, even more, the desire of another American oil interest to get a still bigger grip on the internal United Kingdom market for petrol distribution?

Are not the size of the take-over bid and the very large tax-free capital gains made on the Stock Exchange in the past fortnight an indication of the profits it expects to be able to make at the expense of the British consumer? Will the right hon. Gentleman give an undertaking to the House that this decision, which, I understand, is so far a decision in principle which has not yet taken effect, will not be put into effect until the House as a whole has had an opportunity, not only of considering the White Paper, but of debating all the issues involved?

Mr. Macmillan

The right hon. Gentleman asked, first, whether, in my opinion, the attraction of this purchase to the purchasers is not so much the oil in Trinidad or the prospects of the extraction of more oil in Trinidad but, perhaps, the possibility of large developments in Canada and, secondly, the share in the distributive market in the United Kingdom. I agree that the oil production, present or potential, in Trinidad is very small compared with the production of the great oil fields. On the other hand, it is very important for Trinidad.

I think that what is also attractive is the possibility of the new owners using the refinery to a greater extent than the present company is able to do because it will refine, especially if it is expanded, oil brought either from the United States or from Venezuela. It is already doing 4 million tons as against 1 million of local production, and that is, of course, no doubt an attraction to a company of the size of the Texas Company. It is for a company of the size of the Trinidad Oil Company difficult to expand it. That is possibly one attraction in Trinidad.

As regards the Canadian attraction, I would not have said the possibility of large development of oil production in Canada in the hands of Trinidad Oil could be very large. It is not the practice to give the proportions of the money which we have authorised to be spent in that kind of development, but I told the House the other day that about 100 million dollars has been authorised for oil development and the registering of claims, and so forth, in Canada from British sources. Of that, I can say without unfairness that less than one-twelfth has been on behalf of this company, and far the greater part, of course, by Shell and the British Petroleum.

There is no difficulty at all in obtaining in Canada possibilities of developing. There was plenty of operation open. It was limited, if at all, by the amount of dollars which we are able to provide from our resources to the large British prospectors. This is tiny compared with the work being done by Shell and B.P. in Canada and, therefore, I do not quite agree that this is the attraction.

I agree that it is no doubt the possibility of acquiring the other 50 per cent. —it already owns 50 per cent.—of the Regent distributing agency here which is attractive to the purchaser, but the fact that it is attractive to the purchaser means that it is not attractive to anybody else. [HON. MEMBERS: "Why?"] As the only two potential purchasers, the B.P. and Shell organisations already have 60 per cent. of the distribution in England.

If the right hon. Member for Huyton (Mr. H. Wilson) speaks of the protection of the British consumer, what would he have said had I encouraged B.P. or Shell to buy this and to create something like a monopoly of the distribution? The only people who could have bought it would have been either B.P. or Shell. First, it would have been a very uneasy partnership, with 50 per cent. of the shares belonging to B.P. and 50 per cent. to Caltex. It would have been a very difficult partnership to operate. The only possible object of buying it would be to close it and create something like a monopoly position, because there is no purpose in B.P. and Shell, with their great expertise in the distribution of petroleum products in the United Kingdom, having this company, which at present does only 6 per cent. of the work.

Mr. H. Morrison

On a point of order. Are we in the course of a full-length debate, with speeches of considerable length, or was the Chancellor answering a supplementary question?

Mr. Macmillan

I was trying to answer the supplementary question of the right hon. Member for Huyton, because it raised the three main features of the difficulties. If I have been long in answering, I apologise, but these are the three major points of the dispute. It is not for me to say when a debate shall take place. I want to make clear what I have done. I have indicated to those who wish to be the vendors the conditions, which I have read to the House, which Her Majesty's Government will insist upon before any negotiations can be concluded.

Sir B. Baxter

Does my right hon. Friend not agree that this is a moment when the voice of Canada, not merely a Canadian, should be heard? Is he aware that there is now in London a Cabinet Minister from the Ontario Government? He happened to lunch with me today. This Cabinet Minister said, "The policy of the big oil interests of the United States is to achieve a monopolistic control of the natural oil in the English-speaking world, which can create a stranglehold on the industrial development of the Commonwealth."

Mr. Macmillan

I should like to make clear that it would be quite improper, of course, for a British Government to correspond with any Government except the Federal Dominion Government of Canada on what is clearly a Federal matter. It was just for that reason—and, to answer the complaint of dilatory methods, it was necessary to take a week to settle this question, and a week is not a very long time—that I thought it right to inform the Canadian Government of all that is going on.

Mr. Snow

When the Chancellor says that public opinion in Trinidad appears to be largely in favour of this sale, what does he mean by public opinion and how has it been ascertained? Is the right hon. Gentleman aware that if the Tories give away the Commonwealth at this rate there will be nothing left of it in 10 years?

Mr. Macmillan

The method of my right hon. Friend the Colonial Secretary, with whom, of course, I have been in consultation all through, was to consult the Governor and the Government of Trinidad. The Government, I understand, has elected members and so is a body, I believe—and I do not want to enter into details—which is likely to move into larger spheres of self-government. It is for that reason that I had thought it very important that we should not appear to be forcing our views, contrary to the interests of the people of Trinidad.

Mr. Bevan

Is the right hon. Gentleman aware that, quite apart from the merits of the general proposal, we on this side of the House are delighted that one of the conditions attached to the transfer is the maintenance of no racial discrimination among the employees, because this is not merely a transfer of a piece of property but of a large number of human beings from the control of one lot of people to that of another lot of people? In any articles drawn up afterwards, will there be a firm clause written into the contracts so as to protect the people there from racial discrimination?

Mr. Macmillan

There are these general undertakings. How exactly they will be written into a precise contract I have, of course, to study. The real protection is the second demand, the requirement that the company shall be a company registered in Trinidad. That gives a tremendously strong position to the Government of Trinidad because it is a Trinidad company which must conform to Trinidad law. It is a registered company of Trinidad. That is an absolute condition. Secondly, any present lease can be transferred only to the new company if and when a new company comes into being, and the Government have a right to renew a lease as they think fit and make all kinds of conditions in it.

Mr. Maclay

Is my right hon. Friend aware that, however much we regret the fact that this problem in its existing form ever arose, had the decision announced in principle today been in the opposite sense it would have been very disturbing to many of us because of the possible implications to the future rapid development of the Commonwealth and the under-developed parts of the world?

Mr. Gaitskell

Is the Chancellor aware that, in our opinion, this is a matter which must be debated at the earliest possible opportunity and, in particular, before an absolutely final decision has been taken? May I, therefore, ask the Lord Privy Seal whether he will give an undertaking that we can debate this next week? May I suggest respectfully that the debate might take a half-day, the other half-day being on the Motion dealing with the Lang case in the name of the right hon. and learned Member for Montgomery (Mr. C. Davies)?

Mr. R. A. Butler

I think that we had better discuss this through the usual channels, because I have had no notice whatsoever of a debate on the Lang case except from the Leader of the Liberal Party today. On this matter, I quite understand that the Opposition will wish to read the White Paper first, before hon. and right hon. Members opposite make up their minds fully on the question, so as to he prepared for a debate. It is, therefore, quite reasonable that we should discuss this proposition. Meanwhile, I reserve the position and note the wish of the Opposition to have a debate.

Mr. Gaitskell

This is not good enough. My remarks about the Lang case were a mere suggestion. The Opposition are of the opinion that there must be a debate very soon indeed, before a final decision has been taken by the Government. There is not the slightest doubt, from the questions put so far, that many suggestions will be made to the Government on this issue, which might be very important for them to bear in mind in further negotiations. Therefore, I must ask the Lord Privy Seal again whether he will not agree that we can debate this matter next week and whether he will make the necessary changes in Government business to make that possible.

Mr. Butler

I have made the only offer that I can make in the circumstances, and that is to discuss this immediately with the right hon. Gentleman through the usual channels. Naturally, we will attempt to meet the wishes of the Opposition for a debate on a matter to which the House attaches great importance.

Mr. H. Wilson

Will the Chancellor of the Exchequer, who has apparently commmunicated the general principle of the Cabinet decision on this matter to the company, make it clear to that company that Her Majesty's Government are subject to the control of the House of Commons, and that whatever has been communicated in principle will not become established fact until the House of Commons has given its approval to what the Government have in mind?

Mr. Macmillan

I want it to be quite clear. I have not been, and I do not intend to be, in any negotiations with the Texas Company. An application is made under existing law for the sale of shares in an existing company. That is merely a matter, ordinarily, of exchange control, but, since it was obvious that it would probably be the next step of the purchasers to wish to change the character of the company—to transfer some assets here and some to another company—I thought it right to make a statement. I shall send, immediately after this statement here, to the vendors a statement to say that, in any negotiations which they may have, these are the conditions—and the only conditions—on which I will give permission under exchange control.

Mr. J. Griffiths

May I ask the Chancellor whether he is aware that the statement he made just now does not meet the wishes not only of my hon. and right hon. Friends, but, I believe, of the whole House? Will he give an undertaking that, whatever he communicates to the Company, he will also communicate that the decision of the Government is subject to debate in and final approval of this House?

Mr. Macmillan

No, Sir. I think that this is an administrative act. If the Government do not have the support of the House of Commons, then, of course, a new situation would arise. [HON. MEMBERS: "0h."] Certainly. I think that right hon. Gentlemen opposite who have held positions like this know that it must be the right thing to make a decision, and then the decision of the Government is either upheld or overthrown.

Several Hon. Members


Mr. Speaker

Order. I do not think that we can carry this further. We are a long way behind the clock today.

Mr. Braine

On a point of order. The right hon. Member for Llanelly (Mr. J. Griffiths) has attempted to speak for the whole of the House, when he had no right to do so, because at least half a dozen hon. Members on this side of the House wished to put constructive questions to my right hon. Friend the Chancellor, and did not get the opportunity to do so. May I ask, in the circumstances, Sir, whether hon. Members on this side can have an opportunity of putting those questions?

Mr. Speaker

What we are having now is not a debate. We have had a statement, and there were some questions upon it. I must be given a discretion as to how long that process shall go on. No doubt, this matter will be debated at another stage, when there will be plenty of opportunities for hon. Members to make their points. There is no point of order at all in what the hon. Member has said.

Mr. Peyton

There is a point on which I should like to ask for your guidance, Mr. Speaker. An important statement of Government policy has been made, and a great many remarks about it, and objections, have been made from the other side of the House while no hon. Member on this side has had the slightest chance of expressing his view on the statement.

Mr. Speaker

I called the hon. Member for Southgate (Sir B. Baxter), and I also called the right hon. Member for Renfrew, West (Mr. Maclay), so that is not true. I have to be given a discretion in conducting these matters.