SCOTLAND

HC Deb 27 July 1972 vol 841 cc2080-122

Mr. Speaker

Before calling upon an Opposition Front Bench spokesman to move the Motion in the name of the right hon. Member for Huyton (Mr. Harold Wilson) and some of his right hon. and hon. Friends, I would inform the House that I have selected the name of the Amendment in the name of the Prime Minister and his right hon. Friends.

4.29 p.m.

Mr. Bruce Millan (Glasgow, Craigton)

I beg to move, That this House records its alarm at the highest July post-war figure of unemployment in Scotland—138,544; and condemns the failure of Her Majesty's Government to take timely and appropriate action to stem the rise in Scottish unemployment, to maximise the benefit to Scotland of the discovery of North Sea oil, and to ensure a modernised and expanding Scottish steel industry consistent with the skills and facilities uniquely available in Scotland. The background to the debate is the appallingly high number of unemployed in Scotland. We have given it in our Motion. The figures for July, which have just been published, show that the more favourable trend over the last two or three months from even more catastrophic figures has not been sustained, yet the only prospect for any kind of relief from a winter of utter disaster in Scotland could come from the maintenance of that trend. It is now clear that, whatever happens over the next few months, there will be an appallingly high rate of unemployment and hardship in Scotland during the coming winter.

As the result of a recent Question by my hon. Friend the Member for South Ayrshire (Mr. Sillars), we have the unemployment figures covering a fairly long period. From these figures it is plain that we have experienced in Scotland recently, and especially over the last two years, 1971 and 1972, unemployment on a scale such as we knew only in the years before the war.

The consequences for Scotland would be unthinkable if there were any sense of acceptance of these very high figures, and the debate today is another indication of the seriousness with which the Opposition regard the situation and of our determination to have everything possible done by the Government to reduce the figures.

The solution to our high rate of unemployment depends, in the last analysis, on the overall success or failure of the Government's economic policy. Since we have many other things to discuss today, I shall not comment on the Government's economic policy in general, but I must say that the exchanges which we have just had with the Minister for Transport Industries demonstrate, first, the frivolous attitude which a certain number of Ministers have taken to some of our important industries and some of our serious problems, and, second, the failure of Government policy in the whole field of economic management. The state of industrial relations as we see it this week and in prospect over the weekend and the next few weeks is another demonstration of the Government's complete failure in their general handling of the economy.

The first essential from the Scottish point of view is that we have successful economic management which produces a strong and expanding economy. But, even if that were there—and it is conspicuously not there at the moment—the need for a strong regional policy would remain. The Government have a sorry record on this since June, 1970.

In October, 1970, they reversed the Labour Government's incentive policy, a decision which they took without proper study of the consequences, without proper study of how the regional incentives previously applied had operated in practice, and without completion of a study which had been set up by the previous Labour Government into the whole question of regional incentives. It was a decision taken only for doctrinaire reasons. We warned at the time that the result would be an appalling increase in Scotland's unemployment problem, and it is no comfort to us to say once again that our forecasts and warnings in October, 1970, have proved all too well founded.

We now welcome the reversal of the present Government's policy, in the Budget and the Industry Bill which is still going through the House, but in the two years since October, 1970, Scotland has suffered badly from the changes made at that time. Of the measures in the package which we particularly welcome, I mention, first, the reintroduction of investment grants. The Government have re-established the Labour Government's policy on that matter. I remind the House that a feature of the October, 1970, measures to which we directed special criticism was the abolition of those investment grants. We welcome also the measures for selective assistance, and the Government's general conversion to interventionism in the economy.

There is some doubt about the Government's package because of Britain's proposed entry into the European Economic Community, a matter which some of us hope to pursue at rather greater length tomorrow in the remaining stages of the Industry Bill. There is that shadow over the package of investment and regional incentive proposals now introduced.

The Government boast that expenditure on the new package of proposals will be greater than ever before. There are three comments to be made about that. First, in terms of incentive, while the new package is certainly better than that which it replaces, it is little different from the pre-October, 1970, situation which the Government inherited from Labour.

Second, what matters is not so much the total expenditure on regional incentives as the effectiveness of the measures adopted. I shall say something about that later. The point was made by the Expenditure Committee in a report just available when it made the criticism which I have made, that the Government changed their policies in 1970 without any real study of the situation and the effectiveness of different regional incentive measures.

Third, one naturally expects a far greater effort from the Government today, since unemployment is so much worse. It is not much to the Governments credit that they should now be able to say that they are spending more on regional incentives, when it is they who have produced easily the worst post-war unemployment figures on record. Not only that; the areas in the United Kingdom covered by regional incentives are now more extensive than ever before, again because of the substantial deterioration in the unemployment situation. Therefore, one would expect any Government incentives to be more expensive than before.

Having made those preliminary comments, I shall now briefly give a number of criticisms of the Government's package. First, the differential between development areas and special development areas, which has been reduced to 2 per cent. of capital grants, means nothing in terms of influencing industry to locate in the special development areas as distinct from the development areas generally.

Coming from a special development area, I am grateful, naturally, for any additional assistance given there, but I believe that a differential as small as that makes very little difference, and I think that it would have been even better if the Government had chosen to have a wider differential, or, if they were not willing to do that, it would almost have been better, I think, to abolish the differential altogether and to use the additional money made available thereby in more effective means of regional assistance. I shall come to one or two examples of that in a minute.

Second, we deplore the change—which has been less noticed than it ought to have been—in industrial development certificate policy. The previous limits, at 5,000 sq. ft. in the South-East, East Anglia and the Midlands and 10,000 sq. ft. elsewhere, are to be raised to 10,000 sq. ft. in the South-East and 15,000 sq. ft. elsewhere. No justification has so far been given for that change. Perhaps the Secretary of State for Scotland will give a justification today. One can only say that it seems to indicate a weakening of intention with regard to industrial development certificates, which we very much deplore.

Third, the incentives as we now have them are very much related to capital projects. In my view, they are too capital-intensive. Indeed, the safeguards in a number of the Labour Government's measures, providing that in certain circumstances payments would be related to employment prospects, have been removed, so that the empoyment criteria have been virtually removed in the Government's new package.

Mr. J. Bruce-Gardyne (South Angus)

I have a good deal of sympathy with the hon. Gentleman's present line of argument about the capital-intensive nature of incentives. But is he saying that the Opposition are opposed to the ending of the employment link?

Mr. Millan

I am not saying quite that. I was about to say that there are certain cases in which it seems that, under the present package, large sums of public money will be expended with no discernible public benefit in employment or in anything else. There should be restrictions placed on the scheme in circumstances of that sort. That is a theme which we pressed in the Industry Bill Committee and which some hon. Members on both sides of the House will be pressing in the Report stage tomorrow. I have not time to go into the details, but the general attitude of the Opposition has been made clear in Committee.

The other side of the penny is the decision to abolish or phase out the regional employment premium from 1974. The decision was first reached in October, 1970, and the first great flush of enthusiasm proved disastrous to the development areas. The decision was then made to abolish REP altogether. We now have a modification of that decision because it will be phased out after 1974. In our view either REP in its present form should continue or it should be replaced by another form of labour subsidy. REP is not necessarily, the best or the only kind of labour subsidy.

The package is too much directed towards capital-intensive projects and it is not sufficiently aware of the need to encourage employment in development areas. Furthermore, it is still far too directed, and indeed exclusively directed, to manufacturing industry and does not take account of the importance of office employment and service employment.

There is another matter which we tried to impress upon the Government in Committee—

Mr. Ian MacArthur (Perth and East Perthshire)

Will the hon. Gentleman give way?

Mr. Millan

No. We have already lost half-an-hour. [Interruption.] The point about selective employment tax is irrelevant to this matter; my right hon. Friend can deal with it when he winds up the debate for the Opposition.

Moreover, the package is exclusively directed towards private enterprise. Private enterprise always has to take the initiative and there are certain regional incentives available, but in the present Scottish situation private enterprise by itself, regardless of the kind of regional incentive packages which we may have under this Government or any other Government, will not do the job.

The case for a State holding company of one kind or another is incontrovertible, particularly in the circumstances in Scotland. The Expenditure Committee Report—an all-party report which has been published only today—emphasises the tremendous advantages in direct Government involvement and expenditure through a State holding company or similar organisation. I hope that point will be taken seriously by the Government because they have not yet done so. It is part of our policy that there should be a State holding company with a pronounced bias towards development in the regions, and particularly in Scotland.

I turn to one or two individual industries. First, may I deal with shipbuilding. I shall not recount the whole history of the UCS situation, except to say that, while we welcome the conclusion of that saga, we make the point that the solution at the end of the day was much more expensive than it need have been. It was the end product of a period of uncertainty, hardship and apprehension which would have been avoided if the Government had taken the right decisions in the first place.

We welcome the extension of assistance to shipbuilding, which is a matter upon which we have continually pressed the Government from June, 1970. However, we still have had no indication from the Government whether they will accept the proposals—or produce their own alternative proposals—of the Chamber of Shipping and the British Shipping Federation to have an incentive to persuade British ship owners to invest by placing orders in British shipyards. The great difficulty about the present situation is that, while grants to shipbuilding are being given to the industry, there is a dearth of orders. It is a well-known fact that many British shipping companies are holding back on orders which are so necessary for our yards because there has been no Government statement on what proposals they may have to help the industry by placing orders in British yards.

It is desperately important that we get such a statement, and I hope that we shall get it today. If we do not, I hope that we shall have a statement tomorrow. Certainly we must get it before the House rises for the Recess because the uncertainty is damaging to British shipyards.

My preliminary comment on North Sea oil is that it is scandalous that we have not had a full-scale debate on the matter in the House. We have had Adjournment debates through the initiative of my hon. Friend the Member for Fife, West (Mr. William Hamilton) and we have had little bits of debates introduced into other wide debates, but no full-scale debate in the House on North Sea oil. What is more, we have had no statement of Government policy on North Sea oil. Nor have we had a White Paper, although we have asked for one on a number of occasions. We have been promised information, but we have been given no substantial information either about the actual situation or about the Government's policy in the present situation.

Our criticisms fall under a number of heads. First, we do not believe that the Government have yet sufficiently appreciated the change in the situation which has arisen because of the now acknowledged discoveries of large quantities of North Sea oil. They have not appreciated that those discoveries change the whole situation and that they should change considerably Government policy. The Government still adopt a rather deferential approach to the oil companies, as if the oil companies are doing us all a great favour by investing their money in the North Sea. That is not the situation. We are doing the oil companies a favour in that they are being allowed to exploit far too much of a considerable national asset. It is about time that the Government became less deferential and adopted a much tougher approach towards licensing, exploitation and other matters.

The point is put neatly in an editorial in the Glasgow Herald of Monday, 24th July, which says: So gentlemanly is the British approach compared with that of the main established petroleum producing countries that there seem far greater dangers of missing out on the benefits than of a few reasonable demands frightening the companies off. I agree with that view. The first change which I should like to see in Government policy is a much harder and tougher attitude towards the oil companies. That change of attitude should apply in a number of ways. It should relate to how the licences are granted and the terms on which the licences are given. One criticism, which applies to some extent to the previous Government as well as to the present Government, is that the licences have been granted to the oil companies on terms which are not sufficiently attractive to the national Exchequer, and that the companies have obtained the licences too cheaply. They know they have done so. They know that they have done extremely well out of a lackadaisical Government who are unaware of the real potential of the situation in the North Sea.

I am not impressed by the argument put forward by the Government spokesmen that we either get the maximum amount for giving out licences or something less than that with the imposition of conditions on the oil companies. That is not the choice which has to be made. I see no reason why we should not get higher licence figures than we have got so far and at the same time impose stronger conditions.

The Secretary of State for Scotland (Mr. Gordon Campbell)

Will the hon. Member say whether some of the oil companies operating now under licences issued in 1969 when the Labour Government were in office received those licences from a lackadaisical Government?

Mr. Millan

I said that some of the criticism I was making applied to the last Government as well as to the present Government. I also said at the beginning that the present Government have not sufficiently realised the change which has occurred in the whole situation since 1971. It is not possible to compare the situation today with what happened in 1969 and 1965 because we now know that there are substantial reserves under the North Sea, and therefore the potential profits to the oil companies are very much higher than anyone could have known in 1965 and 1969.

The mere fact that the Secretary of State made that intervention demonstrates that either he has not sufficiently appreciated, or that he has not appreciated at all, the change in the situation over the last year.

Mr. Patrick Wolrige-Gordon (Aberdeenshire, East)

Would the hon. Member advocate the setting up of the State-controlled holding company that he is speaking about to take over the exploration and exploitation of North Sea oil?

Mr. Millan

I would like to see it involved and if the hon. Member will read the new Clause which was put down for the Industry Bill he will see that that point was included. There is insufficient participation by public enterprise in the exploitation of North Sea oil resources and the conditions laid down in this regard by the Labour Government have been abandoned by the present Government. It is an example of handing over a considerable national asset to private enterprise. The same criticism also applies to the conditions of the licences. There is no condition stipulating that oil must be refined in the United Kingdom, much less in Scotland, and it seems likely that in a few years' time when the oil begins to flow a good deal of it will flow out of Scotland to be refined overseas. That is an utterly appalling situation.

There has been no substantial effort to write into the licensing agreements provisions to ensure the maximum use of United Kingdom supplies of equipment, pipelines and the rest. Some of the figures which were given by Lord Balogh in the debate in the House of Lords on 7th June about this aspect make absolutely horrifying reading. The Government seem to be saying that the rate of exploitation of resources should be for the oil companies to decide. I take an entirely different view. The rate of exploitation is principally and fundamentally a matter for the Government and the oil companies should fit in with Government decisions. I do not believe that the maximum rate of exploitation will necessarily provide the maximum benefit to the United Kingdom or Scottish economies.

We want to see the maximum exploitation consistent with the maximum benefit to the national interest, and the two concepts are not necessarily the same. There is a considerable danger that if it is left to the oil companies without stringent conditions being laid upon them by the Government, exploitation will be at a rate which is of the maximum advantage to them but not necessarily to the United Kingdom.

A good deal has been done to interest Scottish industry in the opportunities open to it and I have no doubt that the Minister will read out some of the things that have already happened in Scotland, and we are grateful for them. But there was bound to be some Scottish involvement in the situation even in the worst circumstances and with the least amount of effort by the Government. Participation is a good deal less than it should be and it is a good deal less than it would have been if there had been considerably greater emphasis by the Government over the last year or 18 months on the maximum amount of Scottish and United Kingdom participation. More than anything else we need a White Paper explaining Government policy and we need to debate it in full in a way which is not possible in today's debate.

The statement by the British Steel Corporation a week or two ago that there was to be a loss of 7,500 jobs without any compensating development to provide alternative employment came as a considerable shock in Scotland. We accept that modernisation must come in the steel industry. We accept that modernisation by itself means a diminution in a number of jobs. But we are not willing to accept, particularly in view of present Scottish unemployment, 7,500 redundancies or, for that matter, any redundancies, without providing compensating alternative employment in the industry. All this ultimately depends upon the total capacity of the industry. The Government's attitude has been to limit production within the range of 28 million tons to 36 million tons. Quite simply that means that the BSC, as confirmed in this morning's newspapers, wants 36 million tons and the Government want it to plan for 28 million tons.

The Government's proposals have considerable implications for the Hunterston scheme. This was made explicit almost for the first time in Lord Melchett's statement yesterday as reported in this morning's Glasgow Herald. He said that the absolute minimum level of production which would permit a major expansion like Hunterston—and there is no guarantee that development will take place, and if it does that it will take place at Hunterston—is 33 million tons. That means that if the Government keep the BSC down to 28 million tons there will be no green field development. In that event the Secretary of State for Scotland's great concern and preoccupation with Hunterston, and his statement that he would stake his reputation on what happens there, will be a hollow sham.

If I am wrong I hope the Secretary of State will contradict me. I am quoting what Lord Melchett said at his Press conference yesterday in introducing the latest annual report of the British Steel Corporation. The real danger in Scotland is that we shall have neither a green field site at Hunterston nor developments which will maintain anything like the present level of employment in the industry. We shall have what will ultimately be a declining industry with Scotland's share of the United Kingdom steel industry falling and with a considerable drop in the number of job opportunities in Scotland. If that is not to happen the British Steel Corporation at the very least must be allowed to increase its capacity by 1980 to 36 million tons and the green field site development, when it comes, must be at Hunterston and not at one of the other sites that have been mentioned. There is no doubt that if there is to be a green field site, the advantages of Hunterston are overwhelming compared with those of other possible sites.

To sum up, we have had a lack of information about the steel industry, a lack of decision by the Government, a lack of openness with the House and the country, just as we have had about North Sea oil and so many other aspects of Government economic policy. Over the past two years, because of the misguided and mischievous regional policies adopted in October, 1970, a disastrous situation has been created in Scotland, with hardship for the unemployed and hardship for Scotland generally.

Of course the Government have learned some of the lessons of the past two years, but they have neither learned enough of them nor learned them quickly enough. It may have been a painful experience for them to learn those lessons, but it was nothing like so painful as the experience that the Scottish people have had over the past two years because of the failures of Government policy. It is because of the failures of that policy and because we do not believe that they have the capacity or the will to produce alternative policies which would go anywhere solving Scotland's economic problems that we are censuring them to-day.

5.1 p.m.

The Secretary of State for Scotland (Mr. Gordon Campbell)

I beg to move to leave out from "House" to the end of the Question and to add instead thereof: 'welcomes the huge public works programme authorised by Her Majesty's Government to stimulate employment in Scotland; endorses the decision to increase investment incentives to encourage new industry and to expand existing industry, the commitment to the British Steel Corporation scheme for a £26 million ore terminal at Hunterston, the British Steel Corporation's intention to maintain a strong and viable steel industry in Scotland and the provision of £35 million to launch Govan Shipbuilders Limited; and recognises Her Majesty's Government's determination to set Scotland on course for a new period of industrial expansion including additional expenditure on harbours, roads and other infrastructure related to the opportunities opened up by the North Sea oil discoveries'. The whole House will be concerned about this month's increase in the absolute numbers of unemployed. The total registered as unemployed in Scotland increased by 9,000 between mid-June and mid-July. This increase, however, is less than the rise in the number of unemployed school leavers and adult students seeking vacation employment, more than 8,000 school leavers and more than 4,000 students. Seasonally adjusted, the July unemployment rate is lower than that for June, and this is the third consecutive month in which the seasonally adjusted rate has fallen.

Earlier this year the House debated the nature of the unemployment which we have had in recent months and which the Government deplore. In those debates I pointed out the shedding of labour which had taken place on such a scale and the rise in productivity. The Government are very concerned about the situation and have taken early action to alleviate it.

I should like first to deal with the part being played by the additional public works programme, for which hon. Members opposite pressed and which in Scotland has amounted to £70 million. The purpose of the programme is to provide extra employment, mainly in the construction industry, in the period to March, 1973. Our aim has been to increase the demand of the public sector for resources which would otherwise have remained idle by sanctioning extra capital spending for a period in the immediate future on an unprecedented scale. The programme, which was put together last autumn with the ready co-operation of the local authorities, which are rightly pleased with their efforts, spans a whole range of services. It is worth remembering that this special programme has been added to the normal capital programmes, including spending by the nationalised industries.

The hon. Member for Glasgow, Craigton (Mr. Millan) mentioned the new measures for regional development announced by the Government in March, and some of them are now before the House in the Industry Bill. The boost which the extension of free depreciation to all industries throughout the country, with the Government's other measures to assist industry, will give industrial growth and modernisation should be of considerable benefit, not least to the capital goods sector in Scotland, which is an important part of our industry.

The regional development grants at the rate of 22 per cent. in the special development areas and 20 per cent. in the development areas for investment in new plant, machinery and buildings will provide the basic incentive to growth in Scotland. These grants make no discrimination, as there was before, between existing and incoming industry. This is welcome in Scotland because it remains a source of grievance. The hon. Gentleman criticised the differential between the 22 per cent. and the 20 per cent., but previously there was no differential in the rate of grant paid except in relation to incoming industry. Although the incoming industry did not use it very much, it was none the less a source of grievance, and I think that all hon. Members realise that.

Mr. Tam Dalyell (West Lothian)

The right hon. Gentleman referred to the capital goods sector. When shall we have a decision on Stake Ness which will affect many parts of Scotland, even the right hon. Gentleman's own, particularly remembering that the sub-contractors want some kind of decision on the future of the nuclear industry? Indeed, this is a decision affecting the whole of the nuclear industry.

Mr. Campbell

The hon. Gentleman has already asked that question today of the Leader of the House; I was here at the time. He was told that a statement about the nuclear industry would be made soon. He was told that my right hon. Friend the Secretary of State for Trade and Industry hoped and expected to make a statement soon. The hon. Gentleman will have to wait, but I hope that it will not be long.

Mr. William Ross (Kilmarnock)

The right hon. Gentleman knows quite well that Stake Ness is the responsibility of the Secretary of State for Scotland.

Mr. Campbell

Certainly; I know that very well. But the hon. Member for West Lothian (Mr. Dalyell) asked when there would be a statement on the nuclear industry as a whole. I know that the nuclear plant industry is concerned to know the results of the Vinter Committee's work. He has had an answer to his question, and I give it again for the benefit of those hon. Members who were not present at Question Time.

These grants will apply equally to modernisation projects and expansions and new projects. Another radical departure is that the grants will not be taken into account in the calculation of entitlement to tax allowances on capital investment, and that is a considerable improvement on the previous system of investment grants.

In addition to the regional development grants, the Industry Bill will provide selective financial assistance towards industrial investment. Like the grants, this will not be restricted to projects which create additional employment, which is an important feature for Scotland. Although the hon. Member for Craigton criticised this, it will greatly simplify the system.

In addition, a large measure of industrial devolution is taking place. In Glasgow there is now an industrial development office with an industrial director who will work in close collaboration with the DTI regional director for Scotland. This industrial development office has a positive and active rôle in promoting industrial growth and modernisation. It will provide advice and assistance to industry across the board. As it has full access to the expertise within the National Industrial Development Executive, it will be associated with national initiatives taken by that executive in securing expansion and growth in British industry.

The regional development grants will in future be administered in Scotland, so that there will exist in Scotland a centre with considerable financial resources at its disposal.

Mr. James Sillars (South Ayrshire)

The right hon. Gentleman has mentioned the director. I wonder whether he is aware that Mr. Dennis Kirby has declared that Scotland's unemployment will fall during this coming winter? Does he agree with that view?

Mr. Campbell

I know that the hon. Gentleman has not been in the House for long, but he has a Question on the Order Paper and he ought to know that it would be wrong for me to anticipate it.

The subject of North Sea oil is important, and the hon. Member for Craigton dealt with it at some length.

Mr. William Baxter (West Stirlingshire)

rose—

Mr. Campbell

I must get on or other hon. Members will not have the opportunity to speak.

Mr. Baxter

Before the right hon. Gentleman deals with North Sea oil—

Mr. Campbell

I do not have time to give way.

Mr. Baxter rose—

Mr. Campbell

I know the hon. Gentleman's constituency is land-locked, but North Sea oil could have an important impact for the good of his constituency, like others.

The discovery of oil deep below the bed of the North Sea is probably the most important economic development for Scotland this century. I do not underestimate it in any way, as the hon. Member for Clackmannan and East Stirlingshire (Mr. Douglas) knows very well. Last year he accused me of speaking about oil all the time, of drawing too much attention to it. I am glad to see that his Front Bench now realises the importance of this new industry.

We have a completely new industry in Scotland already, although it will be two years before the first oil can start to flow. It was about 10 years ago that gas was found below the North Sea off the coast of the Netherlands. Since then it has been the policy of British Governments, Labour and Conservative, to proceed as quickly as possible with exploration for hydro-carbons in the Continental Shelf within Britain's jurisdiction. The last two Governments worked out and operated a system of licensing which enabled exploration to be carried out in blocks. Massive investment was needed, and this to some extent governed the pace at which the exploration was extended northwards.

Natural gas was found in the North Sea off the shores of England, and has been successfully piped ashore and distributed. The resources of the international oil industry, both for finance and for equipment, were needed. The National Coal Board and the British gas industry also took part.

When blocks opposite Scotland were reached, oil was discovered in significant quantities. These finds have been made in the past two or three years. Last October BP made the first public announcement of plans to produce oil from the North Sea. This was confirmation that oil had been found in conditions and quantities which made the field a commercial proposition. Both BP and Shell-Esso have announced that they intend to work the Forties and Auk fields.

In the early days, before gas or oil were being discovered in significant quantities, it was a high-risk and costly operation. Both the Labour Government and the present Government avoided any action which would unnecessarily slow up the progress of exploration northwards. Special restrictions might have done that. For example, if the process had been carried out at half the speed we still would not even be aware of the oilfields off the shores of Scotland. These areas would not yet have been reached by the rigs. The start of the new industry would have been delayed by some years. I believe that the speed of the exploration has been very helpful for Scotland. We need this new industry now to help redress the contraction of older industries and to relieve the consequent high unemployment. To have held up the rate of exploration would have been a disservice to us in Scotland.

Let there be no misunderstanding, however, about the way in which our licensing policy can help British firms. In considering applications for petroleum production licences on the United Kingdom Continental Shelf, the Department of Trade and Industry takes into account the extent of the contribution which the applicant has made, or is planning to make, to the economy of the United Kingdom, including the growth of industry and employment. As part of this, the Government are watching carefully to see that oil companies give full and fair opportunities to British firms. We shall take this into account when any further applications for discretionary licences are considered.

Mr. Dick Douglas (Clackmannan and East Stirlingshire)

Will the right hon. Gentleman tell the House the means at his disposal to ensure that the companies give fair treatment to British companies?

Mr. Campbell

The Government see what the companies are doing, and that is taken into account before licences are issued.

Mr. Baxter rose—

Mr. Campbell

I will give way to the hon. Gentleman.

Mr. Baxter

On a point of order, Mr. Deputy Speaker. I understood that the Secretary of State was not prepared to give way, but he gave way to my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. Douglas).

Mr. Campbell

Further to that point of order—

Mr. Deputy Speaker (Miss Harvie Anderson)

Order. It is not a point of order. I think the right hon. Gentleman was on the point of giving way to the hon. Member for West Stirlingshire (Mr. Baxter).

Mr. Campbell

The point was that I felt I should move on to North Sea oil. That was why I felt I could not go on giving way on the previous subject.

The rate of exploration is controlled by the Government, because the licences cause applicants to enter into commitments that they will carry out the work within a certain time.

The exploration and development of the North Sea deposits require massive capital investment. So far, companies have invested well over £300 million in British waters to explore and produce both oil and gas. I am told that each hole drilled costs over £1 million, and on average only one in 20 of the holes finds oil in commercial quantities. At the Aviemore conference in February which I attended, it was estimated that the oil industry might have to invest as much as £1,500 million—£150 million a year over the next 10 years—in exploration and production in British waters.

We are still in the early stages of exploring the North Sea and the Continental Shelf all round our coasts. At any given time we can only make assessments arising from the strikes of oil made up to that time. My own guess is that there is still a lot of oil to be discovered, and that estimates based upon our present knowledge will be overtaken as more discoveries are made in British areas of the Continental Shelf.

We should remember that the oil is about two miles below the seabed; that the depth of the water in the North Sea is considerably more than in other waters where similar drilling has been carried out; and that the stormy conditions which must be expected in the North Sea produce additional problems. The situation calls for a technology as advanced as anything needed almost anywhere else in the world. The Americans are the present world experts, but we in Scotland should be able to join in perfecting the new technology and equipment required and make it our business in the future. It is a formidable operation of exploration, and, later, pumping, requiring expertise and resources on an international scale. It is not surprising that man reached the moon before he was able to locate and pump oil from two miles beneath the North Sea.

Dr. J. Dickson Mabon (Greenock)

I know that the right hon. Gentleman follows the proceedings of Committees, and particularly that considering the Industry Bill. Does he recall the powerful speech of his hon. Friend the Member for Bolton, East (Mr. Laurance Reed) on this point of technology and the failure of Scottish and British firms to supply any reasonable fraction of the amount of material going into the development and exploration of oil? Should we not receive from the right hon. Gentleman today a report from the independent observer appointed by the Shell companies to try to encourage our own people to take advantage of this great exercise and participate in it?

Mr. Campbell

I do not need to do that, because I and others in Scotland have spent many months doing everything we could to encourage Scottish firms to take part in the exercise. I have heard in recent weeks from those closest to industry that some firms in Scotland have taken great initiatives in this matter, and many more are investigating and finding opportunities in the new industry.—[Interruption.] I agree with the hon. Gentleman that no one is satisfied. There is still a great deal to be done. No one will be satisfied until we get the maximum possible in the way of work and business from this new industry.

Although it will be two years before the first oil comes ashore from below the North Sea, the actions and decisions already taken are likely to produce about 7,500 new jobs in Scotland in work connected with this new oil industry. Over a hundred new companies have established themselves in service and supply in and near the city of Aberdeen, involving about 1,300 new jobs. At suitable places along the whole east coast of Scotland facilities are being prepared. Of particular importance are the projects for building production platforms, the installations to be placed over the wells from which the oil will be pumped. The furthest ahead is at Nigg Bay, where Brown and Root has already started building this month what will be the largest production platform in the world.

A similar operation is starting in the Moray Firth at Ardersier. In both cases the planning procedures were made to operate as quickly as possible, and I was able to give article 8 directions. Within four months of the grant of planning permission Brown and Root had almost completed a mammoth graving dock. At the same time it was also training 50 men in the skill of welding at a special school.

These two projects are expected to produce nearly 2,000 jobs for men, and they will be using large quantities of steel. Because we in Scotland were able to act quickly, and provide help and advice, this important work of building production platforms will take place at these two new installations in the North-East. They might well have gone abroad but for our action.

The new industry should be of immense benefit to Scotland since it requires skills in which Scots excel; for example, engineering, shipbuilding—which can now be applied to platforms and rigs—and seamanship.

Another way in which the Government have been able to step in with speedy help has been by promoting the Harbours (Scotland) Bill. This will ensure that valuable jobs in servicing oil rigs are created and that this work does not go abroad. We had to bring it in quickly. The large bay at Peterhead, hitherto used only as a harbour of refuge, now proves to be ideal for uses connected with the oil industry. In addition, the Government are ready to spend about £3 million there, and we hope that the servicing work can start early next year.

The Opposition seem critical of the Government's rôle in encouraging new North Sea oil developments. Yet their attitude to the Bill when it was before the House was incredible. It being a party which ostensibly appears to recognise that North Sea oil could mean valuable new jobs for Scotland, it was astonishing to see some hon. Members opposite apparently intent upon holding up the pasage of the Bill with every kind of improbable objection. [Interruption.] I must say this because the Motion speaks of maximising the benefits of the oil industry in Scotland. Anyone listening to the debates on the Harbours (Scotland) Bill would presume that the Opposition were maximising their obstructions to the oil developments. Spectators could be forgiven if they presumed that the Opposition still regard oil as a competitor to coal, to be resisted.

Mr. Douglas

Shame.

Mr. Campbell

Let me turn to the latest Labour Party document—

Mr. Ross rose—

Mr. Campbell

I will give way in a moment. I have not finished.

Mr. Deputy Speaker

Order. We cannot have two right hon. Gentlemen on their feet at once.

Mr. Campbell

I will give way in a moment. I want to read from the document "Labour's Programme for Britain" which came out about two or three weeks ago. It says "Labour will reverse without compensation the de-nationalisation process carried out by the present Government. In the case of licences to explore for gas and oil in the North Sea, which Labour would have reserved for the public sector, these permits will be taken back as soon as possible."

What possible help can that be to Scotland? Is that the policy of the Opposition? I hope that the right hon. Member for Kilmarnock (Mr. Ross) will come clean and say whether that is the policy. Labour did not do this when they were in Government before. It is totally wrong. In the second round of licensing in 1965 and in the third round in 1969, licences were issued to companies in the consortia. What is the explanation of that statement? What is the message for the industry, for the men on the rigs, if the permits are to be taken back as soon as possible? These men are likely to lose their jobs. Will there be some new nationalised body which will somehow find £1,500 million from the taxpayer? I give way now to the right hon. Member for Kilmarnock.

Mr. Ross

The right hon. Gentleman knew quite well that I wanted to ask him about his remarks on the Harbours (Scotland) Bill and not this. I will deal with these other points when I make my own speech. As for the Harbours Bill, will he tell the House how long we took on Third Reading?

Mr. Campbell

I am grateful for the fact that last night after a considerably longer Report stage and two days in Committee—a great deal more than was necessary—the right hon. Gentleman did not have a Third Reading. There was practically nothing else to be said about the Bill at that point. I hope that the right hon. Gentleman will do what he said and give us tonight an explanation of what this policy statement means. If the country were to suffer the misfortune of another Labour Government —

Mr. Ronald King Murray (Edinburgh, Leith)

May I correct the right hon. Gentleman? He has repeatedly said that this is a policy statement. It is a discussion document.

Mr. Campbell

I am grateful to the hon. and learned Member, who, with his legal mind, has been prepared to give an answer which his right hon. Friend was not prepared to give.

The Government have always recognised the important help which they can give, besides that which I have already mentioned, to new industries through the infrastructure. The port services are essential in the exploration phase of the oil development. These are being provided on an expanding scale. For example, work costing well over £1 million for the improvement of Aberdeen harbour has been authorised for oil industry purposes, and a Government loan of up to 100 per cent. has been agreed. In addition, a grant of about £600,000 is available for the fishing harbour at Aberdeen.

As for housing, a special programme of 700 houses has been arranged, to be built by the Scottish Special Housing Association, in the North-East for the needs of the oil industry, and the expenditure here is about £4 million.

Dr. Dickson Mabon

Over what period?

Mr. Campbell

Dealing with air transport development, over £200,000 was spent last year on improvements at Inverness Airport, which has assumed special importance in view of the number of oil industry developments being established on the Moray and Cromarty Firths. Such public expenditure being carried out now is a most valuable help to the oil industry and a way in which the Government can assist development as a whole. It also helps Scotland as a whole, particularly with roads, to which I now turn.

We have undertaken, as quickly as technical resources permit, to improve the A9 to Invergordon. This is the main road north to Inverness and beyond, and includes the virtual reconstruction of much of the road between Perth and Inverness, and a new road across the Black Isle and the two Firths. This means spending about £40 million on these improvements to the A9. Earlier this week we announced the building of a new motorway, the M80, between Glasgow and Denny to replace the south-western part of the Glasgow-Stirling trunk road, thus providing a link to motorway standard for the whole length between Glasgow and Stirling. This is a new gateway to the North. The cost will be over £15 million, apart from the section inside Glasgow, which will cost an additional £7 million.

I come now to the steel industry.

Mr. Millan

Before the right hon. Gentleman leaves the subject of North Sea oil, will he answer the question about whether it is the oil companies or the Government which are to determine the rate of extraction of oil, and, if it is the Government, how will it be done?

Mr. Campbell

As the hon. Gentleman knows, the licences already place conditions about the speed of exploration. In future licences, should it be necessary, we can control the extraction of the oil. [Interruption.] In future licences we can decide what we want to do. The position is still open. At the moment we are in the exploration stage.

Mr. Ross

Will you do that in future?

Mr. Campbell

Like the hon. Member for Glasgow, Craigton and, I am sure, the hon. Member for East Stirlingshire, I would very much welcome the chance to have a debate on North Sea oil. If hon. Members opposite had not, for example, bitterly opposed the European Communities Bill we might have had some time to do this. We have not had that much time. There have been very few opportunities. We would have liked to discuss local government on the Floor of the House. I cannot now go into all the possible provisions of future licences. No doubt I can continue in correspondence with the hon. Member.

Mr. Millan

Why cannot we have a White Paper?

Mr. Campbell

When I was asked by the right hon. Member for Kilmarnock about this I said that I would consider it. I pointed out that I have provided in the Library bulletins and information about what is going on from time to time. A White Paper could only say what the situation was at the moment. But the information which we shall continue to place in the Library will keep hon. Members abreast of the main events.

The Scottish steel industry has been mentioned. This is an industry whose future prosperity is of great concern to the Government. The British Steel Corporation has made it clear in its statements that its aim is to preserve the key position of the Scottish steel element in a strong and viable United Kingdom industry. Clearly, this aim could not be achieved if a high percentage of the industry's output were to continue to depend on methods of steel production which could not compete in technical efficiency or economic operation with modern plants.

It is against that background that the corporation plans a further extension of steel-making at Ravenscraig at a total capital expenditure of £60 million to double its output of liquid steel. This means about 1,000 new jobs. When this expansion programme is complete, Ravenscraig will be fed with ore from the £26 million terminal to be built at Hunterston. As the increased capacity at Ravenscraig comes into use, the open-hearth plants can be phased out. If this did not happen, the Scottish steel industry would be doomed to be a steam-age industry. Hon. Members on both sides of the House concerned with the steel industry accept that we cannot keep the open-hearth furnaces going for years ahead.

The corporation plans also to preserve and update Scotland's most modern rolling mills to enable them to meet world competition, including in particular developments to meet the needs of North Sea oil exploitation. These plans, which include modernisation of the Clydesdale tube works, bring total planned investment in Scotland to nearly £100 million over the next three or four years. The plan is to modernise the industry so that it will emerge strong and more efficient.

Modernisation must mean reduction in jobs per unit of output. The British Steel Corporation has made known its estimate that its present programme will mean a reduction, but not starting for some time, of between 6,500 and 7,500 job opportunities. That is not redundancies; it is a reduction of job opportunities. [Hon. Members: "Oh."] Some men will retire for reasons of age and for other reasons. It is important to say that, otherwise hon. Members only cause more alarm than need be caused.

The corporation decided that it was right for it to make known this estimate some time beforehand, because I understand that it wanted to clarify the situation when there were a lot of rumours flying around, including rumours that the number of job opportunities lost or redundancies would be as many as 10,000. The corporation has not yet taken firm decisions about the timing of the closure of any plants. When such decisions are taken, I understand that they will be the subject of the usual long period of notice by the corporation and to consultation with all the representative bodies concerned.

Mr. Gregor Mackenzie (Rutherglen)

The right hon. Gentleman makes much of the fact that there is a considerable difference between redundancies and the loss of job opportunities. I should like to know what is to happen about jobs for the sons of the people who work in the steel industry in Lanarkshire. Job opportunities will not be open to them unless something very substantial is done by the Government now.

Mr. Campbell

I proposed to make that point. Our aim must be a healthy modern industry with an assured future. The Government's concern is to promote industrial expansion in the meantime with good and lasting jobs, both in the steel industry and in the steel-using industries, which are very important in Scotland, and in other industries so that there will be alternative jobs available for those who are made redundant and for the next generation.

Mr. Baxter

I am interested in the question of the industries using steel. I am seized with the great problem confronting the nail and wire industries of Scotland owing to the decision of the British Steel Corporation to have its basing points in England. Some of us made representations to the Department of Trade and Industry the other day about this matter. Has the right hon. Gentleman any statement to make about it, because if a satisfactory answer is not given to our representations over 2,000 jobs in central Scotland will be affected?

Mr. Campbell

I am well aware of the problem about basing points and that a number of jobs—about the number which the hon. Gentleman has mentioned—are involved. My hon. Friend intends to deal with this subject when he winds up the debate.

I turn to the question of Hunterston. I do not need to tell the House about the advantages offered by the Hunterston peninsula, with its immediate access to deep water for industrial development. It is over—[Interruption.] The right hon. Gentleman says that I discovered it. He means that it is over three years since I opened a debate, in Supply time, on the subject. At the end of 1970 I approved the industrial zoning of 2,000 acres of land, including the land for the ore terminal which the British Steel Corporation intends to build.

The corporation is now discussing the details of the financing and construction of the terminal with the Clyde Port Authority. The authority, for its part, is seeking the necessary parliamentary powers for the construction of the marine part of the terminal. These necessary preliminaries should be completed soon so that work on the terminal can start. Hunterston is also one of the few sites in Great Britain suitable for a major new integrated steel works. This option remains open.

I turn to the question of an important steel-using industry; namely, the ship building industry—

Mr. Millan

Does not the right hon. Gentleman propose to comment on the point made by Lord Melchett yesterday that unless we have a steel industry with a minimum capacity of 33 million tons there will not be a green field site anywhere?

Mr. Campbell

The hon. Gentleman knows that the bracket which was agreed by the Government and the corporation was 28 million to 36 million tons. My hon. Friend will deal with this matter when he winds up, because, as the hon Gentleman knows, the steel industry is in the sponsorship of the Department of Trade and Industry. The option remains open because the bracket is an agreed bracket. For about four years I have seized publicly every opportunity of drawing attention to Hunsterston as a valuable site for industry as a whole, and that is no doubt why the Press has said that my reputation is identified with Hunterston. I am determined that Hunterston shall be used in the best possible way for Scotland's economic welfare.

I turn to the question of the shipbuilding industry because it is an important user of steel. The Government have carried out the pledge which they gave last July that they would support a newcompany—Covan Shipbuilders—to reconstruct shipbuilding on the upper reaches of the Clyde and that they would aim to dispose successfully of any surplus yard. We have carried out that pledge, and we are facing up to the costs. As a result, Govan Shipbuilders Limited has now started trading as a going concern, and it has secured new orders to provide 2½ years work for its 4,300 workers. This is a reduction. There have been redundancies of about 2,000. It was foreseen that this was probably a necessary consequence of the reconstruction. But. fortunately, those shop stewards who had been demanding that there should be no redundancies and that all four yards should remain together dropped their all-or-nothing attitude. I congratulate Lord Strathalmond and those concerned in Govan Shipbuilders on the orders which they have obtained. I am sure that the whole House wishes them well.

There is an important area in Scotland which is experiencing remarkable industrial and commercial activity. I refer to the Highlands and the North of Scotland, whose prospects appear brighter today than ever before in their history. This is very welcome, and the Government are assisting in every way that they can. Besides all the activities in Aberdeenshire related to the oil industry to which I have referred already, Shetland is booming as never before, and industrial expansion is taking place on the Moray and Cromarty Firths at a considerable rate.

In the area one hears much appreciation being expressed of the work being done by the Highlands and Islands Development Board. It has been successful in helping a number of promising projects and is making full and good use of its incentives, grants and loans.

The Opposition have adopted a carping approach to the measures being taken to promote development in Scotland, and they entirely lack anything constructive in their own attitude. That was nowhere better illustrated than in the speech of the hon. Member for Craigton.

The policies which they propose, as outlined in the recently published discussion document entitled "Labour's Programme for Britain", from which I have read only one small extract, illustrate the barrenness of which I speak. The policy put forward in that document for the North Sea oil industry is completely negative, would bring much of the present exploration to an end, and would be thoroughly damaging for Scotland.

The mercy is that it is most unlikely that those policies will ever be carried out.

5.41 p.m.

Mr. J. Grimond (Orkney and Shetland)

Debates on Scottish affairs have a common pattern. The Government claim that everything in Scotland is perfect owing to their beneficent activities, and they express astonishment that the Opposition have not moved a vote of thanks. The Opposition take the opposite view.

My main criticism of the Government is that, whatever one may say about their activities, I do not get the impression that the Scottish Office has clear policies on various important areas of economic affairs in Scotland or that it is dominating the scene. For example, the decision about the Upper Clyde shipyards may have been right, but one cannot believe that it flowed from the carefully thought-out policy of the Government. We are told that the British Steel Corporation is doing exactly the right thing for Scotland. But what influence the Secretary of State has had is not clear. I wonder whether he was intimately concerned with today's statement about the future of Scottish railways—

Mr. Gordon Campbell

I do not know whether the right hon. Gentleman heard the statement today. It concerned railways in England, not Scotland.

Mr. Grimond

I am surprised to hear that since the Minister concerned did not say so and indeed dealt with a question asking for information about Scotland. I hope the Secretary of State will be able to confirm that this does not affect Scotland. The Minister for Transport Industries said that he was unable to say how many Scottish railwaymen would be put out of work but that some would be. Does the Secretary of State mean that the Scottish railways are to go on as now, with no redundancies and the same organisation?

Mr. Gordon Campbell

The reorganisation affects south of the border. Scotland is hardly affected.

Mr. Grimond

I am very glad to hear that. It means that there will be no redundancies in Scotland.

Mr. Gordon Campbell

No.

Mr. Grimond

That is a very important announcement. It is not what the Minister said. But we must take it that the Secretary of State knows.

I do not want to exaggerate about the oil situation. I am sure that the Scottish Office is doing a lot of work and that the oil companies are well aware of their social responsibilities. However, they are in business to make profits. It is not criticising them to say that they wish to maximise their profits. I get the impression sometimes that the Scottish Office regards them as visiting royalty and that roads have to be made and red carpets laid down for them. I think that the Scottish Office should fight its corner a bit harder sometimes.

There are many confusing features about the Scottish scene at the moment. We have high unemployment at a time of high inflation. There is insufficient investment at a time when the demands of the oil companies are very large and when inflation should be encouraging investment in Scotland. To my mind, there is insufficient planning for our entry into Europe, and it is only lately that we have woken up to the potentiality of the oil discoveries.

The first area to which the Scottish Office should give a great deal of attention is the change in the general working of the economy. No longer can we push up employment simply by inflating the economy. The old Keynesian argument has proved to be suspect. We have to look very carefully at the structure of unemployment in Scotland. I heard the Secretary of State say that the present figures were inflated by unemployed school leavers and university graduates. If that is so, it is serious. These people will leave Scotland. They will not appear in the unemployment statisticsagain. Scotland is constantly losing school leavers and university graduates, and they are the very people for whom we should make a special effort to find jobs.

Secondly, we have to look at the need for a shorter working life and a shorter working day. I urge the Scottish Office to have consultation with both sides of industry as to how this can be achieved while at the same time not increasing costs too much. We are reaching the situation where machines are taking over from men.We have to find a way of sharing the benefits that machines give to us and not throw half the work force on the street and allow the remainder to benefit.

I turn to regional policies. They are too narrow and, here again, the Scottish Office appears not to know enough about their effect. The latest report from the Expenditure Committee points out that every new job created costs £750. Is that the figure for Scotland, and is this very satisfactory in terms of its results upon the Scottish economy? I share the view that more should be done by direct Government intervention. It is necessary to find more employment at the top of the scale. We have only recently got the Forestry Commission to move out of London. There is a great deal to be said for the major part of the British Steel Corporation and those who deal with oil and coal taking most of their offices out of London and putting them into areas like Scotland which are closer to the raw material and which require that sort of employment. Again, I think that the Government can use their purchasing capacity, which is very great, deliberately to put contracts into development areas to a greater extent than they do at present.

I stress the need for integration in development policy. It is a matter not only of giving jobs but of housing, amenities, education and raising the standard of communities. Let us look at what has been going to Clydebank. Brown's yard has been taken over to make oil rigs. That gives us a breathing space. But presumably when the oil ceases to flow that shipyard may become redundant again. What steps are being taken to think out now a policy for the development of Clydebank over the next 25 years, and what is to happen at the end of that time?

We constantly criticise the Victorians for not caring about the future, for leaving great coal dumps and spoil of all sorts over the country, for disrupting human relations and casting men aside when they had done with them. Clyde-bank is a very good test of whether we can do better, and we should be planning now for the future.

I turn to infrastructure. In the report of the Expenditure Committee emphasis is placed on the improvement of the infrastructure if we are to raise the standard of development areas and get more employment to them. In my constituency there is still a grave housing shortage, and this at a time when there are unused resources throughout Scotland.

Turning next to transport, obviously freight is of prime importance. Freight charges are possibly the greatest handicap under which my constituency suffers. But it is interesing to read what Lord Stokes has said about the situation of British Leyland at its Scottish factory. It costs the company £18 to transport the component parts of each five-ton truck from England and £40 to send the assembled vehicle back again. He reckons that that is one of the biggest drawbacks to getting industry to Scotland, and he stresses the need for better transport facilities. The Government should put far more effort into bringing down transport costs. They cando few things to benefit the Scottish economy more than to give a subsidy in that direction.

Mr. Dalyell

Will the right hon. Gentleman, on the other side of the coin, concede that Bathgate has many advantages over Leyland's other factories, both in relation to the facilities offered by local authorities and, indeed, by the environment which the work-people and executives can enjoy?

Mr. Grimond

Yes, there are compensating advantages. There is a work force available in Scotland. Nevertheless, in today's world transport and freight are important for Scotland and will be more important when we go into the EEC.

There is a strong case for having a central airport in Scotland. What is the present policy regarding the air services in Scotland both internally and internationally? What is to happen to the feeder services in the north which are of the greatest importance because of the oil discovery and, indeed, for the general development of the area?

There is the question of local services in rural areas. Many local railway lines have been closed. We have been told that that has led to substantial economies. Is it not time that some of the advantages of these economies were put back into the areas by way of assistance to local bus services? At the moment this is left to the local authorities, many of them very small and without large incomes, which are unwilling to undertake the obligations.

I am not convinced that the Scottish Office has got round to the paramount importance of the oil discovery. If my figures are wrong, I trust the Secretary of State or somebody else will correct me. On the face of it, Britain has a pretty bad bargain. I understand that British Petroleum paid £39 million for 24 square miles of Alaska. I understand that the United States has had £16,000 million from its gas-oil offshore. The American Government take 16⅔ per cent. as a royalty on well-head profits. Britain takes 12½ per cent. Adding the profits tax, in the USA it amounts to 71 per cent., in Holland 66 per cent. and in the United Kingdom only 52½ per cent. I have no desire to cripple the oil companies, but if they can afford to pay that much elsewhere I suspect they could pay it here and it could be put back into generally stimulating the economy of Scotland. I fail to see why, when we have this enormous asset which every- body agrees lies off our shores, we should not get more benefit from it.

We have been told for many years that fuel is more expensive in Scotland because of the transport costs. Now that it is available there it does not seem to have come down in price. I do not think the benefits to our economy are at all commensurate with what we might expect.

Mr. Wolrige-Gordon

Would the right hon. Gentleman care to add to the interesting figures he has given the enormous amount the American Government spend on the protection of their oil companies in other parts of the world?

Mr. Grimond

I will if it is relevant. I am grateful to the hon. Gentleman for that bit of information.

Norway has a 17½ per cent. participation, not in the dangerous business of exploration but after the oil has been discovered. It is all very well for the Secretary of State to say that the oil companies have borne all the risks, but they have borne all the risks in the Norwegian field. The Norwegian Government are right to put in 17½ per cent. of the capital for the production and to take the profit on it. So, without going as far as this interesting discussion document from the Labour Party, there is a case to be answered by the Government—I do not particularly blame the Scottish Office—for saying that the oilfields have been sold on easy terms and it is not clear at present that Scotland will benefit from these discoveries as much as she ought.

The Secretary of State spoke about the importance of the new technology and how Scotland may play a leading part. Will whoever winds up tell us what is happening? Have the universities or the technical colleges been given large sums to develop oil technology? I know that something is going on. I should like to know what the Government are doing to encourage it and raise our effort in technology to the standard about which they speak. I understand that ultimately this oil discovery may supply all the oil necessary for Britain and that the consequent investment might be about £2,000 million. Yet the Secretary of State talks about only 5,000 new jobs. This seems a very small number for a major discovery of this kind.

Mr. Gordon Campbell

I think the right hon. Gentleman misheard what I said. I have been pressed at various times to give an estimate. In fact, I answered a Question in the House asking about the number of jobs which there are at this moment—if I may use the expression, in the pipeline—which are appropriate to the industry. The jobs which are known to have occurred or are definite from the proposals about which we know already amount to 7,500, but there will be many more as more projects come about.

Mr. Grimond

I am grateful to the Secretary of State. However, a great deal more information should be given to the House and more planning should go on. We should know more clearly who will benefit from this enormous expansion. I believe that the local authorities should get something from the oil profits. Recently we debated the financing of local authorities. Here is a great asset near parts of Scotland which are in need of new assets from which public finance can be drawn. I should like to think that local authorities should be entitled to take some royalty on the oil discovered off their shores.

I am also worried about the social consequences of the oil discovery. They could be very good. However, the social consequences of big developments in the Victorian era were not always very good. There is a danger in my constituency of small communities being totally fragmented, disrupted and altered and after 25 years just being dropped and forgotten. The oil will be finished and we shall be left with the wreckage. The whole fabric of our communities and many of our small industries which are doing well might pack up. I suggest that the Scottish Office should appoint a small commission to watch this matter. It should look at the situation before the oil comes and consider what the effect of these mammoth discoveries is as they go along. My constituency is an extreme case. But in the north-west of Scotland and elsewhere there is anxiety about what will happen 25 to 30 years hence if by that time the oilfields should be exhausted.

The Secretary of State said that the Highlands and Islands were to some extent a success story. I touched wood when he spoke of a boom in Shetland. A boom in Shetland depends on close work with the French market in wool and getting fish. We have not always got all the fish we want. There is a potential success story in Scotland. To paraphrase a famous remark, Scotland is now the paymaster. Time was when a sort of Scottish actuary went cap in hand to London because we were the poor end of the country, but not now.

It is the Victoria Line, the line to London Airport, and things like Concorde which need subsidising. Where are those subsidies to come from? From Scottish oil. We must change our attitude. We are now the rich end of Britain. Are we to make a success of it or not? We must get away from the "poor end "mentality that we have had for so long.

We are also well placed in regard to the modern feelings which have been developing all over the world; the revolt against size for the sake of size and the revolt against conurbations the size of Los Angeles. There is a revolt against the inhumanity of treating human beings as hands to work machines in enormous factories turning out mass-designed products. Most of the towns in Scotland are communities and feel as communities. We have a marvellous landscape and open space which is extremely valuable. The time has come to make sure that we know where we are going and decide what use we shall make of the benefits put at our disposal. There is a stronger case than ever for saying that there should be more power in Scotland over Scottish affairs. There should be more high level jobs in Scotland.

I regret the appointment of a retired admiral to the HIDB, whatever his qualifications. It gives the impression that there are no people in the Highlands capable of doing the job; but there are. Unless we promote people in the Highlands who have been doing the job and give them a chance when they are young, they will go. A feeling is growing up that the Highlands and Islands Development Board is a suitable place for retired public servants to end their lives. This, is fatal to the morale of the Highlands, and such a policy is totally unnecessary. There are coming out of the universities and technical colleges young men who are qualified and willing to work in Scotland, and they must be given the chance to do so.

Mr. Gordon Campbell

I live in the area and I know that many of the people employed by the board are young men in their twenties. They are not, of course, full members of the board itself, but they may be in the future. This is a full-time job. I have a Question on this, so I shall not pursue it now, but there are the kind of people who the right hon. Gentleman has been describing working for the board.

Mr. Grimond

I know that 160 people are working for the board, but who is at the top of it? There is one ex-diplomat and one ex-admiral. It is the top in which I am interested. I bet there are several dozen people in Scotland who know more about social development in Scotland than does this ex-admiral on the board. The board has to get round to the integration of economic and social development, and I am not sure that the appointment of a retired admiral and an ex-ambassador, however admirable they may be in themselves, is a good thing. The board is more important than running a small embassy. I have constantly asked whether appointments at embassies are open to ex-members of the Highlands and Islands Development Board. When I see people from the board appointed to be rear-admirals in the Navy I shall know that we have an egalitarian society.

I notice a great improvement in the morale of some places in the far North. I have had three sons. I sent the first two to Eton and the third one to Stromness Academy, not for any anti-snobbish reasons but because it is a better place at which to be educated than Eton. Whether the teaching is as good, I do not know—I am not qualified to judge—but it is a good community and a good school. There is success in the Highlands, and the Scottish Office ought to examine why this is so and repeat it elsewhere. If it can enforce a Scottish policy in Scotland the future will be ours, especially if we use our oil assets correctly.

6.2 p.m.

Sir John Gilmour (Fife, East)

I wish that I could be as certain as the right hon. Member for Orkney and Shetland (Mr. Grimond) that the fact that we have found oil off Scotland means that we are the rich end of the United Kingdom. I regard that as doubtful, and I shall come back to it in a moment.

I should like, first, to take up one or two of the points made by the hon. Member for Glasgow, Craigton (Mr. Millan). He started by talking about the statement made today about the railways. One of the points that came to my mind when I heard it was that over the last few years we have evolved a system in which we have the Government subsidise uneconomic passenger railway services and at the same time we have encouraged local authorities to subsidise the bus services. There seems to be no way in which the two have been brought together to make certain that public funds are used to the best possible advantage.

The situation is well displayed by the fact that the railway from Edinburgh to Kinross and Perth has been replaced by a motorway, and yet no proper estimation has been made of whether the money that is being spent in subsidising other railways would not be better spent on putting the whole lot either on to the railways or on to the buses. It seems that we play about with spending too much money on too many things.

The other point made by the hon. Gentleman came down to the designation of special development areas, and that brought to my mind the new town of Glenrothes, the development of which as a special development area is tied to being linked to Glasgow. Because of what the Secretary of State has been telling us about North Sea oil development, surely the great thing that we should have is a place in the east of Scotland to which to attract people to provide the goods and services which can serve the developing oil industry? Surely it is not necessary to tie development of a place like Glenrothes to taking people from Glasgow? It should be tied to what it can do for the development of the whole of Scotland, irrespective of where the people come from.

The Opposition Motion ill behoves them, because I think back to the 1964 General Election when it was a plank of the Labour Party that we should not look for oil or gas in the North Sea unless we could help it.

Mr. Ross

That is not so.

Sir J. Gilmour

We can now welcome the fact that hon. Gentlemen opposite have changed their minds, but one of the criticisms of many people arises from the method by which the oil will come ashore. The criticism is that it will come ashore in pipes made in Japan because we were not quick enough to anticipate events and get on with producing the necessary type of steel. I think that the right hon. Member for Kilmarnock (Mr. Ross) and his hon. Friends were keener to nationalise the steel industry than to think ahead for the kind of markets which it ought to have.

It is no good saying that there were not other parts of the world in which such pipes could have been used, because we know that there has been undersea exploration for oil in many parts of the world and had we been up and coming about what we should do for our steel industry we could have made the kind of steel necessary for the pipes needed to bring the oil ashore.

Mr. James Hamilton (Bothwell)

Is the hon. Gentleman aware that I have constantly raised this matter with the Government? I know that the British Steel Corporation is responsible for producing these pipes and I have asked that they should be produced in the Clydesdale Works in my constituency. Unfortunately, because the steel industry was not nationalised the necessary research was not done, and we are therefore in our present situation.

Sir J. Gilmour

This is something over which we need to agree to differ. I am certain that to supply pipes, say, this year, it would have been necessary to do the research work four or five years ago in order to produce the type of steel that is needed. It is no good the Opposition moving a censure Motion on my right hon. Friend for a lack of forethought because the fact is that we were not in a position to do anything about the present situation.

One good thing is that the oil refining companies have shown forethought. Not long ago I went to the Grangemouth refinery. It was developed way back in 1924, with a production of 360,000 tons a year. This went on until1939. With the outbreak of war supplies of oil for refining were cut off, and the Grangemouth refinery had to close down. It reopened in 1946 with a production capacity of 2¼ million tons. By 1969 investment of about £70 million had been made, and a petro-chemical plant is also in operation.

What worries me about what the right hon. Member for Orkney and Shetland said about finding North Sea oil and the wealth that might come from it is that the first fuel from the Forties Field will be piped ashore to the Peterhead area and come down by pipeline to Grangemouth. The amount coming in will be equivalent to all the oil that can be used in Scotland. It will come to one company which cannot corner the whole market for Scotland, and a great deal of the oil will need to go elsewhere.

Is there any chance of oil in Scotland being any cheaper? The answer is "No". This is why I quarrel with the right hon. Member for Orkney and Shetland. How did we get our wealth in the past in Scotland? We achieved it because we had cheap coal and steel, and because we built ships and supplied goods. We have to aim at ensuring that these national resources mean cheaper supplies for our industry.

This is not entirely a question of how much money is extracted from the oil companies in royalties. It is largely a question of the fiscal policy that is adopted, and what duty is levied on the oil. This applies particularly to the oil surcharge. This is something that could be got rid of straight away, particularly as no decision to transfer a coal-fired power station from coal to oil can be made without the Secretary of State's permission. In other words, the surcharge does not stop it. It is the Secretary of State who stops it happening.

One of the extraordinary things is that at Grangemouth, the only oil refinery in Scotland, one can look across the river and find the largest coal-fired generating station in the country, and probably in Europe. It is just across the water, next door to the oil. We have the continuing rising price of coal in the report of the South of Scotland Electricity Board, and the first thing that is asked is whether something can be done to cut the price of coal. What seems to be entirely wrong is that we are quite prepared to say that we should spend public money in keeping an unremunerative and uneconomic railway service but we are making coal dearer than oil in order to keep miners in employment. Would it not be better to use that money in Scotland in generating electricity at the cheapest possible price?

Dr. M. S. Miller (Glasgow, Kelvingrove)

I was interested in the hon. Member's previous point about whether oil will be cheaper. Does not he realise that Scottish oil can be cheaper because, first, it is of very high quality, second, transport costs are lower, and third, the markets for the oil are very much nearer as they are all in Western Europe?

Sir J. Gilmour

I wish that I could feel that this was so. But having studied with some interest the Scottish Council's Aviemore report "Oil and Scotland's Future", one finds that the oil experts have said that a great deal of the oil would have to be blended and exported. Again, we do not see our way to getting all these advantages.

As I understand it—again from the report—from the next oil field to be exploited, the Shell-Esso field, the oil will be brought ashore by barge and will go to Teesport. It will not go to Scotland, although the source is off the Firth of Forth. No doubt the situation is slightly different with the Forties field. I forget the code number and all the millions of pounds involved off Orkney and Shetland, but that field is at least twice the distance off Orkney that the Forties field is offshore.

I have been a Member of the House for 10 or 11 years and have taken part in many debates in which Governments of each colour, with the best intention in the world, have said, "We will use public money in order to try to attract industry to Scotland and to redress the balance of unemployment from which we have been suffering for all this time". But no industry is ever particularly persuaded by the idea that at a particular moment it may receive something to persuade it to go there. Industrialists think of the continued effect of establishing an industry there. This comes down to transport costs and so on. If one can reduce transport costs, that does more than anything else to attract industry to come to a place 300 or 400 miles from the main centre of population.

Regarding entry to the EEC and the arguments about what we shall gain by having a population of over 200 million in Europe, one is still faced with the fact that manufacturing industry in Scotland will be further from the centres of population in Europe than it is from those in England. So the advantages will be more difficult for Scotland to obtain unless we can do something to cut transport costs.

Similarly, unless we can reduce manufacturing costs by cutting the price of fuel and making certain that electricity and gas, for instance, are cheaper in Scotland—theprices at present do not compare with those in England, although we have these natural resources—it will not be easy in the long term to get people to come to Scotland.

A businessman setting up an investment of millions of pounds thinks of what is likely to happen over the next 25 to 30 years, and not just in the period between this year's Budget and next year's Budget. He thinks about the long term future for setting up an industry in Scotland.

One of the things to be considered is what sort of manufacturing industry can be set up. There is no doubt that as long as one can manufacture goods in Scotland of a high capital value when produced, so that the content of transport cost is low, one has a much better chance of selling them. But what does one do next about this problem? There is bound to be development in the motorcar industry in the foreseeable future. What is the raw material for a motorcar? The raw material is steel. Therefore, unless we have the most efficient steel industry obtainable we are not likely to attract any more motorcar industries to Scotland.

In these debates we often think very much about the coming industries and developments. Sometimes we tend to forget those things which are the bread and butter of our country. In my part of the world, in the East of Scotland particularly, paper making is an industry of the greatest importance. That industry has been going through an extremely difficult time in past years. It is essential that the Government should make certain that in the transition arrangements of leaving EFTA and entering the EEC, the paper making industry is given all the encouragement and help it can get. If it succumbs at present, it will never be able to start again. It would be subject to overwhelming competition from elsewhere.

The whisky distilling industry is another industry to be considered. It is a continuing factor in Scotland's economy and has an enormous impact on the agriculture industry which produces the raw materials. It employs between 20,000 and 25,000 people. It has the ability to spend capital on plant. Fortunately there is a big development in my constituency now, with millions of pounds being spent on plant. That is exactly the sort of thing my right hon. Friends want to see. They want to see capital expenditure on plant and equipment. I hope that they will look after the whisky distilling industry and make certain that by entering the EEC it does not suffer unfair competition, for instance, in the rate of duty on whisky compared with that on imported wines. The rate of duty should be reduced to a more reasonable level. That would do a great deal to stimulate not only country but town employment in Scotland. It is interesting in that connection that one-third of the traffic out of the Clyde Port Authority is in the export of whisky.

Another industry of the greatest importance to Scotland is the fishing industry. At present we are going through a very difficult period in our negotiations with Iceland. I hope that my right hon. Friends will make certain that they stand firm in this matter. But I am doubtful whether, for instance, if there is trouble, we have sufficient naval strength to look after our fishing interests in Icelandic waters. We need a little more propaganda showing that, while Iceland may have a good case for looking after her fishing industry, she is ruining fishing in the North Sea by allowing commercial fishing, which has ruined herring fishing around Iceland through Iceland's fault.

We had a White Paper recently on the forestry industry. This has caused a great deal of concern to many people, particularly in the Highlands, because we must look forward to a forestry industry which not only employs people in the countryside—and we have had difficulties about whether those people should be itinerant labour travelling around the country or resident labour, and that matter needs careful examination—but also an industry which produces processing industries, paper making, chipboard and so on.

What we need to do is to make certain that we try from time to time to look at Scotland from the outside and see ourselves as others see us. Most people would think that we have very good opportunities but that we tend to think that the whole thing will be saved by Government grants or incentives. We have to set up an economic climate in which it pays people to manufacture in Scotland. That is why fuel policy is so important to Scotland. We are at the end of the road. We are furthest of all away from the markets. This sort of climate can do more good than almost anything else.

I have applauded my right hon. Friend the Chancellor of the Exchequer for reducing taxation. It is fine to say that so many £s have come off income tax More people would be interested in a reduction in the petrol tax than in a reduction in income tax. All of us must by other means drive and travel longer distances than do the people in the rest of the United Kingdom, and fuel costs concern us greatly. A reduction in fuel costs would reduce the cost of transport, electricity and power and encourage more industries to come to Scotland.