Commons Sitting of 27 November 1974

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  FOREIGN AND COMMONWEALTH AFFAIRS

    Cyprus
    Mr. Laneasked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on the latest situation in Cyprus.
    Mr. Brittanasked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement about the progress of negotiations relating to settlement of the future of Cyprus.
    The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): We are continuing to keep in touch with the parties involved and my right hon. Friend had talks with Archbishop Makarios and Mr. Clerides last week. Her Majesty's Government support the talks between Mr. Clerides and Mr. Denktash and stand ready to assist in any way possible to achieve a satisfactory and lasting settlement in Cyprus.
    Mr. Lane: Is it not the case that the mass of the people in both communities in Cyprus want peaceful coexistence and believe that they can make a success of it in the absence of outside interference? In view of our special and impartial relationship with Cyprus, will the Government not merely be ready to help but to look for any occasion when a new British initiative may help towards a workable constitutional settlement?
    Mr. Hattersley: Certainly the people of Cyprus want a peaceful settlement in terms that are honourable and permanent,
    412
    and certainly the British Government are available to help in whatever way is possible. What I think would not help is for the British Government to press for new negotiations of the sort that took place in Geneva during the summer. The British Government are certainly available to assist in the process, but for the process to succeed the other parties to the talks must come together freely and voluntarily.
    Sir D. Walker-Smith: In addition to the responsibility that Her Majesty's Government have as one of the treaty Powers, do they not have a direct responsibility in regard to the well-being of British residents in Kyrenia? Is the hon. Gentleman able to say anything further about that? What is the position with regard to the protection of property and possible claims for compensation?
    Mr. Hattersley: I understand very well the anxiety that is implied in the right hon. and learned Gentleman's question. I hope that he will accept my renewed assurance that we are doing all we can to safeguard the lives and health of British residents, and their property. A senior Foreign Office official is on the island at this moment investigating what additional steps we can take. The High Commissioner and his staff are also working long and hard properly to represent and preserve British interests. The right hon. and learned Gentleman will understand, however, that in the situation as it exists in Cyprus this is a very difficult task.
    Mr. Amery: The hon. Gentleman may have seen Press reports this morning that the Soviet Union has asked for a base at Larnica. Has he any information about that?
    Mr. Hattersley: The suggestions that the Soviet Union has asked for a base are completely unfounded. As I understand it, the Government of Cyprus are considering a number of alternative ways of running an air service out of the island. There is some possibility of Soviet help in that regard, but that is not the only possibility and it certainly does not involve a base, as the right hon. Gentleman and I understand that term.

    South Africa (UN Membership)
    Mr. Hooleyasked the Secretary of State for Foreign and Commonwealth

    413
    Affairs if Her Majesty's Government will propose in the Security Council the temporary suspension of South Africa's membership of the United Nations until such time as South Africa withdraws its administration from Namibia, which has been declared illegal by the International Court.
    The Under-Secretary of State for Foreign and Commonwealth Affairs (Miss Joan Lestor): No, Sir.
    Mr. Hooley: Is my hon. Friend aware that I would not myself support the outright expulsion of South Africa from the United Nations in the present situation but that I believe that Her Majesty's Government should take a very firm initiative to indicate that the position by which South Africa is in flagrant defiance of the United Nations, of the International Court, of the Security Council and of the General Assembly on this issue calls for action that would start to bridge the gap between the Western Powers and the African countries?
    Miss Lestor: I am glad that my hon. Friend shares our views about South Africa's expulsion from the United Nations. We take the view that the United Nations must be a universal organisation. The views on South Africa in that respect just expressed by my hon. Friend were made clear by our spokesman at the United Nations. We share my hon. Friend's views on that point.
    Sir Frederic Bennett: If the Minister should at any time change her mind and decide that there is a case for suspending South Africa's membership, as the Question suggested, would she consider whether that course should apply to other Powers as well, such as the Soviet Union, in the case of Hungary and Czechoslovakia?
    Miss Lestor: I think that the hon. Gentleman is perfectly right. If one accepts the principle of expulsion or suspension, of course individual member nations can apply it and argue for it according to their own ideas and attitudes. That is why we take the view that expulsion is a very dangerous precedent.

    Entry Certificates (Indian Subcontinent)
    Mr. Bidwellasked the Secretary of State for Foreign and Commonwealth
    414
    Affairs what steps he is taking to reduce the delays in arranging for the admission to the United Kingdom of the fiancées and spouses of men and women settled in the United Kingdom.
    Mr. Leeasked the Secretary of State for Foreign and Commonwealth Affairs if he will take steps to reduce the delay experienced by citizens of Pakistan seeking interviews at their British Embassy in Karachi in order to secure entry permits into this country; and if he will make a statement.
    The Minister of State for Foreign and Commonwealth Affairs (Mr. David Ennals): As I indicated in my reply of 14th November to my hon. Friend the Member for Preston, South (Mr. Thorne),—[Vol. 881, c. 238.]—we have almost completed the reinforcement of our staff in the sub-continent which I announced earlier this year and I very much hope that when this takes full effect there will be a significant reduction in the waiting time to interview in Pakistan and Bangladesh.
    Mr. Bidwell: I thank my right hon. Friend for that reply, which indicates that his Department is sensitive to the problem. Does he not agree that it is monstrous to tell a man or woman domiciled in this country that his or her spouse cannot join him or her, or even be considered to be eligible to do so, except by interview two years hence? Does he not agree that it is not just a question of presenting an individual case on the basis of individual hardship, but that we have what is tantamount to widespread hardship?
    Mr. Ennals: I entirely agree with my hon. Friend that the position is extremely unsatisfactory. The delays are due largely to the situation that we inherited from the previous Conservative Government, who allowed a large backlog to build up through understaffing, which was why we had to take measures to increase our staff. It means that there are significant delays in several of the countries. Where there are urgent compassionate grounds, we can bring forward the time of an interview. For newly-married couples, we have in Pakistan a special arrangement whereby priority is granted when six months' notice is given of the intention to marry.
    Sir Anthony Royle: Is the Minister aware that there is widespread concern among High Commission staff both in Pakistan and in India about the numbers of people in both those countries who are now advertising in the United Kingdom for fiancés to enable them to come to this country on a bogus prospectus? What does he propose to do about that?
    Mr. Ennals: That question is a matter for the Home Secretary. I do not believe that the situation is anything like as serious as the hon. Gentleman suggests. I think it was absolutely right that my right hon. Friend the Home Secretary should take the decision that he made both in relation to fiancées and fiancés. I deplore the sort of advertising that has gone on. It creates a problem for our entry certificate officers, who have to satisfy themselves of the bona fides of applicants.
    Mr. Noble: I welcome my right hon. Friend's statement that the number of staff will be increased. Will he ensure that the bureaucratic procedures adopted in these countries when people come for interview are carefully examined? In particular, will he ensure that those who are seeking interview are fully informed about the documents they require, so that when they have journeyed perhaps more than 100 miles, they are not turned away and made to wait again?
    Mr. Ennals: The procedures for interview, too, are a matter for my right hon. Friend the Home Secretary, but I cannot accept that there are the bureaucratic objections suggested by my hon. Friend. Identification is extremely difficult in India and Pakistan, where often there are not the appropriate marriage and birth certificates and other proofs of identity. It is necessary for our entry certificate officers to be satisfied if they are to do their job. I agree that it is important that those who come forward should know what information is required of them.

    International Women's Year
    Mrs. Renée Shortasked the Secretary of State for Foreign and Commonwealth Affairs what allocation of funds has been made by his Department and by the United Nations, respectively, for International Women's Year.
    Mr. Ennals: As I informed the House on 20th November—[Vol. 880, c. 421.]—we have agreed to make a grant of £10,000 available to the Women's-National Commission to assist in the effective celebration of International Women's Year in the United Kingdom.
    The amount to be allocated for International Women's Year by the United Nations from its regular budget is not yet known.
    Mrs. Short: Will my right hon. Friend undertake to make representations to the United Nations to be as generous as possible? Will he also make representations to his right hon. Friend the Chancellor to do better than the niggardly amount of £10,000, which will nowhere meet the programme planned by the Women's National Commission, either for the publicity required next year or the hospitality it hopes to offer?
    Mr. Ennals: It is not just a matter of making representations to my right hon. Friend the Chancellor about the sum of money. We should have liked to see a larger contribution, but I think that everyone is aware that we are facing extreme financial stringency. This is a sum that is reasonable for the organisation of events in this country. Many voluntary organisations will want to contribute.
    One of the greatest contributions that the Government are making lies in the fact that 1975 will be a landmark year for women's rights because of the full implementation of the Equal Pay Act, the new legislation on sex discrimination, and the introduction of equality of rights in pensions and social security.
    Mr. Wood: Will the Minister tell me, in case I missed anything, whether there are any plans for an international year for men?
    Mr. Ennals: I think that roughly half the world's population has thought that every other year has been an international year for men.
    Mr. William Hamilton: Has my right hon. Friend any idea how the money is to be used? Will he tell the House when we are to appoint our first British ambassadress?
    Mr. Ennals: We already have a woman high commissioner in Botswana. We also have a number of very senior female diplomatic representatives overseas. The detailed programme of the Women's National Commission is being worked out now and the commission will be having discussions with me about it.
    Mr. Kirk: Will the Minister confirm that the European Parliament has written into the European Community budget quite a substantial sum for this purpose? Will the Council of Ministers support the use of that sum for that purpose?
    Mr. Ennals: I should need to see a separate Question on the subject to answer that.

    Uganda
    Mr. Farrasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the situation in Uganda and how it affects the interests of British subjects.
    Miss Joan Lestor: Reports reaching us indicate that the situation is calm. We have no reason at present to believe that the interests of British citizens are at risk.
    Mr. Farr: Is it not about time that Her Majesty's Government took a more robust attitude when dealing with General Amin, who is universally regarded as a tyrant? Would it not be a very good thing if we were to recommend to those 1,000 or so British subjects in Uganda that they should be prepared to leave at any time at short notice, and that at the next excess by General Amin we should give a clear indication that we shall close down our embassy in that country?
    Miss Lestor: The British Government have taken a very robust attitude to many of the utterances and actions of General Amin, particularly when it was announced that the United Kingdom-based staff at the high commission had to be reduced to five and we replied in exactly the same terms by instructing the Uganda High Commission here to be reduced to five.
    As for the point about the 1,000 United Kingdom citizens in Uganda, we are watching the situation there closely. We have no reason to believe that they are in any immediate physical danger. There
    418
    have been two recent cases of deportation, which we are having investigated. In conjunction with our high commissioner there, we are watching the position very carefully and, naturally, will take whatever action we think suitable if an unfortunate situation arises in which we have to advise our citizens to leave.

    USSR (Ethnic Minorities)
    Sir D. Walker-Smithasked the Secretary of State for Foreign and Commonwealth Affairs what recent representations have been made by Her Majesty's Government to the Union of Soviet Socialist Republics stressing the importance in the context of good British-Soviet relations of better treatment of ethnic minorities such as Jews and Ukrainians in the Soviet Union; and what further representations are contemplated.
    Mr. Hattersley: As my right hon. Friend told the House on 30th October—[Vol. 880, c. 235–6]—in these matters we will speak and act wherever and whenever we feel it to be right. But these cases can sometimes better be dealt with in private discussions rather than in public declaration.
    Sir D. Walker-Smith: I accept that Her Majesty's Government cannot assume the role of lecturing other nations on these matters. However, may I ask that they lose no opportunity of bringing to the attention of the Soviets the concern of this country with the principles of the Universal Declaration of Human Rights, to which Russia is also a party, and the good that would be done to improve Russian-British relations by removing the causes for complaint, which cause considerable concern here?
    Mr. Hattersley: I hope and believe that our views on these matters are well known. They have been made very clear in the past on many occasions, both publicly and in private. I promise the right hon. and learned Gentleman that we shall not hesitate to make them known in a similar fashion in the future.
    Mr. Faulds: Since this Question deals with the treatment of ethnic minorities, may I ask what representations Her Majesty's Government have made to their mates in the Israeli Government about the treatment of the ethnic minorities—the Palestinian Arabs—both in Israel

    419
    proper and in the militarily occupied territories, where they are under extreme repressive measures?
    Mr. HattersleyThat is not merely another question; it is another question about which Questions have been put down for answer this afternoon.
    Mr. Blaker: Does the Minister agree that it is a question not simply of ethnic minorities, who are indeed very important, but of the treatment that the Soviet Union accords to Russian citizens, such as academics, writers and artists? Will he consider making representations to the Soviet Union to the effect that while its treatment of such people continues it must have an adverse effect on the process of detente, if only for the reason that neighbours of the Soviet Union will feel anxiety about the way in which a régime capable of such action might behave in other respects?
    Mr. Hattersley: The hon. Gentleman's analysis of public opinion in the West is very accurate, but he will understand that the Government's locus in this matter is extremely limited. We have to take a view and make a judgment on the question whether the process of detente and good international relations are best enhanced by public statements of that sort, by private statements of that sort, or in any other way.
    Mr. Russell Johnston: Does the Minister nevertheless recognise that there is considerable concern in many parts of the House about the principles upon which the Government determine whether they have locus to protest about the treatment of ethnic minorities or for that matter, political prisoners? For example, what distinction is to be drawn between the Soviet Union and Iraq and Indonesia? I should like the Minister to say something more about the basis upon which the Government make these decisions.
    Mr. Hattersley: The basis on which we make these decisions is that of applying a policy that is even-handed and consistent from one country to another. But that even-handedness and consistency have to be matched by a judgment about the countries and areas in which direct action, direct intervention, public statement or private pursuit is most likely to achieve the same result. I hope the hon. Gentleman accepts that in the treatment
    420
    of minorities and civil liberties the Government's attitude is the same, irrespective of the country concerned.

    Law of the Sea Conference
    Mr. Hendersonasked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on the progress made at the Law of the Sea Conference.
    Mr. Luardasked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on the progress of the negotiations at the Law of the Sea Conference in Caracas and on his proposals for the next session of the conference at Geneva.
    Mr. Wallasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement regarding British proposals at the forthcoming resumption of the Law of the Sea Conference in Vienna.
    Mr. Ennals: No decisions were made at Caracas, but a considerable amount of essential preparation was accomplished for the future negotiations and there was encouraging momentum towards agreement on a new convention. We are now undertaking wide international consultations with a view to the next session, which will begin in Geneva in March 1975. We intend to hold a further seminar at Church House on 30th January 1975 to give all interested parties in this country an opportunity to express their views.
    Mr. Henderson: Will the Minister accept that his proposal to have a proper exchange of information will be warmly welcomed by all who are interested in the progress of this conference? Will he also accept, however, that the restrictions on, for example, herring quotas are causing considerable concern about the future of the fishing industry in Scotland, and that there is an urgent need for an immediate increase in our limits to 50 miles in order to protect and conserve stocks? Will he be prepared to take unilateral action in the event of this conference failing to achieve what we all hope it will achieve?
    Mr. Ennals: I am afraid I cannot give the hon. Gentleman that assurance. At the conference we took a favourable

    421
    attitude towards the extension of limits—in fact, up to 200 miles from base lines. That attitude was generally accepted throughout the conference. We take a very strong view against unilateral action by countries. In the last two days I have had discussions with the Minister of Fisheries from Norway, who has proposals for trawler-free zones around Northern Norway. One of our main arguments is that such actions should not be taken unilaterally, but only by agreement.
    Mr. Luard: Does my hon. Friend agree that what, basically, happened at Caracas was a very ambitious extension of jurisdiction over marine resources by the coastal States largely at the expense of the non-coastal States and other States? If there is ever to be agreement on a new law of the sea, must it not win the good will, consent and co-operation of the non-coastal States, the shelf-locked States and the States with very short coastlines? Will my right hon. Friend accept that the best way that we and other coastal States could bring this about would be to agree to some measure of revenue sharing within our own 200-mile zone, which would to some extent make good to those other States the resources that have been taken away from them by the coastal States?
    Mr. Ennals: There are two halves to my hon. Friend's question. I agree that we shall get a satisfactory convention only if it is internationally agreed, and that must entail the acceptance of developing countries and those that are disadvantaged either through being landlocked or geographically disadvantaged.
    But taking international law as it exists, it is our view that the new convention should reaffirm what we consider to be the present position under existing international law—that a coastal State has sovereign rights for the exploitation of sea bed resources to the edge of the continental margin
    I cannot reveal any negotiating positions. It is clear that if there is to be agreement there may be issues on which we have to give if other countries are prepared to give. Basically, one of our main concerns is that the international authority which will be responsible for areas beyond national jurisdiction should be able to provide resources which can help developing countries.
    Mr. Kilfedder: Is the right hon. Gentleman aware of the deep alarm felt by our fishermen at the over-fishing by foreign vessels of the seas around Britain and Northern Ireland? Does he agree that if a decision is not made soon this Government will have to act unilaterally in defence of our fishing rights?
    Mr. Ennals: I am conscious that there is a great deal of concern, which I share, about over-fishing. There will be discussions in Bergen in the North-East Atlantic Fishery Commission to seek new catch agreements which will help to limit over-fishing by certain countries—including some which have newly come into fishing areas—which is causing damage that will eventually have a long-term effect upon the fishing interests of this country, including Scotland.
    Mr. James Johnson: When we discuss these matters at international and United Nations levels, do we not move into a nebulous world of make-believe? May I, therefore, ask my right hon. Friend to come nearer home? Will he bend his best efforts towards getting a common fisheries policy in the EEC, which is much more important to fishermen in Scotland, Wales and elsewhere, including the coast of Yorkshire?
    Mr. Ennals: It is all very well for my hon. Friend to say that we must try to get agreements that affect the European situation. As many of the countries which fish in our waters, or waters close to our shore, are not European, and as we have problems of pollution, and so on, it is essential that our main effort should be to secure a widely accepted international agreement. I accept my hon. Friend's view that if there is a change in fishery limits, as I have little doubt there will be, it will have an effect upon the common fisheries policy of the EEC. But we must consider that matter as soon as we know where international decisions lie.
    Sir John Gilmour: Was any progress made on the special problem of migratory fish which breed in fresh water and can be caught in large quantities at sea?
    Mr. Ennals: That was one of the issues which was taken very seriously at Caracas. In my opening speech at the conference I laid particular stress upon the question of migratory fish. There is

    423
    a general agreement—not yet written into a convention—that the place of breeding gives, in a sense, the nationality and the passport of such migratory fish.

    Nuclear Non-Proliferation Treaty
    Mr. Robin F. Cookasked the Secretary of State for Foreign and Commonwealth Affairs what consultations he has had in preparation for the forthcoming review of the nuclear non-proliferation treaty.
    Mr. Ennals: Her Majesty's Government are directly and actively involved in consultations in preparation for the review conference next May of the Nuclear Non-Proliferation Treaty. We are members of the special 26-nation committee which, since April this year, has been working on the arrangements for this important conference.
    Mr. Cook: I am grateful for that reply. May I remind my right hon. Friend that Clause 6 of the non-proliferation treaty laid an obligation on the then nuclear Powers to take effective measures towards nuclear disarmament before the review conference? Given that the missile ceilings recently agreed by the American and Soviet Governments apparently exceed the existing numbers of missiles, and given that Britain herself has exploded a nuclear device to improve our nuclear deterrent, what effective measures towards nuclear disarmament does my right hon. Friend hope to report to the review conference in fulfilment of our obligations under Clause 6?
    Mr. Ennals: That is a very big question. To take the first point, I welcome the agreement that has been reached in Vladivostock between the Soviet Union and the United States. It is most important that there should be a limitation not only on existing numbers but on the growth of missile systems. At the United Nations First Committee there are, in effect, a large number of resolutions, in which we have played an active part, which affect non-proliferation and are of great importance. My hon. Friend mentioned the British test. That was an underground test and was not in any way in conflict with the limited test ban treaty.
    Mr. Alan Lee Williams: Because of the importance of this subject, might it not
    424
    be helpful to the House if the Foreign Secretary stated the Government's policy in respect of the non-proliferation treaty, either as a statement or in a debate on foreign affairs, particularly in view of the dangers not only of proliferation between States but the possibility—remote, but still there—of terrorist organisations and similar bodies achieving nuclear capability?
    Mr. Ennals: I made not a lengthy but an adequately long statement in the United Nations a fortnight ago on precisely this question. I shall arrange for a copy of that statement of Her Majesty's Government's policy to be put in the Library. We have established an advisory committee on disarmament to advise me, as the responsible Minister, and at its next meeting, which comes well before the conference on non-proliferation, that will be the main item on the agenda.
    Mr. Amery: The right hon. Gentleman referred to the Vladivostok agreement. Can he assure the House that in the Government's opinion there is nothing there that would in any way weaken the security of the West?
    Mr. Ennals: I have no reason to believe that any agreement that was reached by the United States would imperil the security of the West.

    Middle East
    Mr. Luceasked the Secretary of State for Foreign and Commonwealth Affairs whether he has discussed the latest developments in the Middle East with the Foreign Ministers of the EEC.
    Mr. Ennals: My right hon. Friend holds discussions on the Middle East with his EEC colleagues from time to time but the details must, of course, remain confidential. The most recent discussion took place on Monday 18th November.
    Mr. Luce: In welcoming these discussions, will the Minister say, in the regrettable absence of the Secretary of State, whether he agrees that the greatest prospect of bringing any influence to bear in the Arab-Israeli dispute is by means of a common European approach? Will the right hon. Gentleman persuade the Secretary of State to take an initiative to obtain a Common Market agreement,

    425
    first, to persuade the Palestinians that the State of Israel has a right to exist, and, secondly, to persuade the Israelis that the Palestinians have justifiable grievances that can be put right and solved only by direct negotiations with them?
    Mr. Ennals: This has been precisely the purpose both of my right hon. Friend and of his colleagues in the EEC in the discussions that have taken place. There have been a number of discussions, because we felt it important that on these vital issues, especially in the debate in the United Nations on the Palestinian resolution, we should, if possible, secure a common European approach.
    We did, in fact, achieve that. All nine member States of the EEC took a common line in respect of the Palestinian resolution. None of us was prepared to support it, although we acknowledged that the rights of the Palestinian people must be recognised. However, any resolution that did not also recognise the absolute right of the State of Israel to exist within protected and secure frontiers as outlined in Resolution 242 could not be acceptable to us.
    Mr. Leslie Huckfield: What kind of discussions did my right hon. Friend have with the EEC countries on the votes at the United Nations last Friday? Does he not accept that one of the resolutions which were carried gives observer status to a terrorist organisation? Does he not also accept that the other resolution, taken logically, denies the existence of the State of Israel? Does my right hon. Friend think that the best moral lead this country can give is by persuading the rest of Europe not to vote?
    Mr. Ennals: An abstention is not a non-vote. The Opposition know very well that it is a procedure which is fully recognised in the United Nations. Two resolutions were referred to. First, on the Palestine resolution, we made absolutely clear, as did our colleagues in the EEC, that we could not accept such a resolution, for reasons that my hon. Friend has given. That was clearly stated in the explanation of vote. The second resolution, which would have accorded observer status to the PLO, was voted against by us and most of our colleagues in the EEC.
    Mr. Rippon: While we may all agree that in any settlement legitimate
    426
    Palestinian interests should be borne in mind, there is grave anxiety on both sides of the House about the recognition of an organisation engaged in terrorism. Of course, the Opposition are glad that the Government have reaffirmed their adherence to Resolutions 242 and 338, so that there is no doubt about everyone in this House recognising the right of Israel to exist within secure and recognised borders.
    Is the Minister aware of many other things going on at present? We hear of new discussions taking place between Kissinger and others, and the possibility of reconvening the Geneva Conference. I am concerned that the Foreign Secretary is not here to deal with this major international matter. I should point out that he has sent me a most courteous letter in which he explains that he is acting as chairman at the Labour Party conference——
    Mr. Speaker: Order. The right hon. and learned Gentleman is crossing the limit now.
    Mr. Rippon: With respect, Mr. Speaker, this is a matter of major concern to this House——
    Mr. Speaker: Order. This is Question Time.
    Mr. Rippon: May I raise a point of order, then, Mr. Speaker?
    Mr. Speaker: Perhaps the right hon. and learned Gentleman will raise his point of order at the end of Question Time.
    Mr. Ennals: I shall deal with that matter when the right hon. and learned Gentleman raises his point of order.
    With regard to the central issue, my right hon. Friend has been extremely active in his discussions within the EEC, in his constant discussions with Dr. Henry Kissinger, and with representatives of other countries including countries in the Middle East, in order to further what I believe is the common objective of both sides of the House to bring about a peaceful settlement. In this sense, the mission of Dr. Kissinger is one which we all fully support.
    Rear Admiral Morgan-Giles: On a point of order, Mr. Speaker. In view of the unsatisfactory reply to this Question, I shall endeavour to persuade the

    427
    hon. Member for Nuneaton (Mr. Huck-field) to raise the matter on the Adjournment.
    Later—
    Mr. Rippon: On a point of order, Mr. Speaker. I thought it right during Questions, as a number of right hon. and hon. Members had commented on the absence of the Foreign Secretary, to say that I had received a courteous letter from him, as I should expect, saying that he was taking the chair at the Labour Party conference. But I expressed concern also that a matter such as the Middle East should be discussed in the House without his being present. Of course, we on this side will always be very sympathetic to Ministers who are absent on Government business, but I submit that there is a difference here, and the Foreign Secretary is, we know, very close to this House. I raise this matter, Mr. Speaker, because I recall that it has always been customary on these occasions for an explanation to be given. I recall that in 1972, when my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) said that Sir Alec Douglas-Home, who was the Foreign Secretary, was at The Hague, it was the present Foreign Secretary who said that he thought that normally
    "the Foreign Secretary should fulfil his duty to the House and answer Questions here on the day when they are down to him."—[OFFICIAL REPORT, 20th November 1972; Vol. 846, c. 889.]
    I hope that this type of issue will not arise in future.
    Mr. Ennals: Further to that point of order, Mr. Speaker. I regret that the right hon. and learned Gentleman has raised what I think is a petty party point. I think it was also discourteous of him to do so, since he had received, as he generously said, a courteous letter of explanation from my right hon. Friend the Foreign Secretary. I think that both sides of the House will agree that my right hon. Friend has always been very open with the House and has been ready to come here when important questions needed to be answered, whether concerning Cyprus or the EEC renegotiations, for example. I do not recall a Foreign Secretary who has been more
    428
    ready to be present to answer questions when circumstances required. I deeply regret, therefore, that the right hon. and learned Gentleman should raise such a a petty party issue.
    Several Hon. Members——
    Mr. Speaker: Order. The Foreign Secretary may be in the chair at the Labour Party conference, but I am in the Chair here. I allowed the right hon. and learned Member for Hexham (Mr. Rippon) considerable latitude in raising this matter as a point of order. I thought it was right to allow the Minister of State to reply. More than that I cannot put up with.
    Mr. Skinner: Further to that point of order, Mr. Speaker. Are you aware that during the course of the last administration but one I tabled a number of most important Questions to the then Prime Minister, now the Leader of the Opposition? On three occasions he was absent yachting and on the last occasion he was in China negotiating for two pandas.
    Mr. Speaker: The Chair has many responsibilities, but the presence or absence of Ministers is not one of them.
    Later—
    Mr. Farr: On a point of order, Mr. Speaker. I wish to call attention again to the point of order raised earlier about the absence of the Foreign and Commonwealth Secretary——
    Mr. Speaker: Order. That is not strictly a point of order. I allowed the matter to be raised earlier, and I allowed the Minister to reply to it. I cannot permit any more talk about it today. It is a matter for the Chair to rule. The absence of a Minister cannot possibly be a matter for the Chair. It is not a point of order for me, and so I rule.

    Vietnam
    Mr. Cryerasked the Secretary of State for Foreign and Commonwealth Affairs if he will recognise the Provisional Revolutionary Government of South Vietnam.
    Mr. Newensasked the Secretary of State for Foreign and Commonwealth Affairs if he will recognise the Provisional Revolutionary Government in Vietnam.
    Mr. Teddy Taylorasked the Secretary of State for Foreign and Commonwealth Affairs what is the policy of Her Majesty's Government towards recognition of the so-called Provisional Revolutionary Government of South Vietnam; and if he will make a statement.
    Mr. Ennals: No. The PRG do not meet our long-standing criteria for recognition.
    Mr. Cryer: In view of that answer, will the Minister convey to his right hon. Friend the possibility of reviewing the situation, since the PRG signed four out of the eight sections of the Paris Peace Agreement—an agreement that has been supported by successive British Governments? Will he also take into account the possibility that recognition may bring peace and, further, the means of peace in South Vietnam, which is a particularly unhappy country? Will he seek every possible means of achieving peace there?
    Mr. Ennals: I assure my hon. Friend that I share his concern that there should be peace in both North and South Vietnam. This can best be achieved by fully carrying out the Paris Agreement. I cannot for a moment accept that peace could be brought about by recognising two Governments in the south. There are already two Governments in Vietnam, and three, I think, would not add anything to it.
    Mr. Taylor: Following the normal criteria of recognition, does the Minister accept that the so-called Provisional Government of South Vietnam have broken every single peace agreement with which they have been associated?
    Mr. Ennals: I am not going to make any comment on that question, any more than I would comment on some of the other signatories to the agreement, who also, I believe, have not fulfilled their obligations.

  EUROPEAN ECONOMIC COMMUNITY

    Regulations (Control)
    Mr. Gouldasked the Secretary of State for Foreign and Commonwealth Affairs whether, before the question of Common Market membership is put to
    430
    the British people, he will seek to amend the European Communities Act 1972 in order to ensure greater parliamentary control over regulations made in Brussels.
    Mr. Hattersley: The Scrutiny Committees have been set up to ensure that the views of Parliament on Community legislative proposals can be made known to the Government before decisions are taken.
    Mr. Gould: Does my hon. Friend recognise that in voting on Common Market membership the British people will need to know whether they are voting for a Parliament which remains subservient to Brussels or for a Parliament which has reclaimed its sovereignty? Does he further recognise that since the instrument by which we chose to yield that sovereignty is an Act of Parliament—which, like all others, is open to repeal or amendment—the resolution of that issue lies in our own hands?
    Mr. Hattersley: My hon. Friend's question involves, as I am sure he intended—I congratulate him upon it—a number of value judgments about the treaty and the Scrutiny Committee. He will understand if I do not endorse and share those judgments. I believe that the scrutiny procedure which the House has examined and put into operation is an adequate method, at the moment, for ensuring that the propert rights of Parliament are observed.
    Mr. Ronald Bell: Does the hon. Gentleman agree that the scrutiny procedure, although it may be the best that we can devise at the moment, is not only hopelessly overloaded but is frequently outpaced by the movement of these documents, and that the only way of preserving the sovereignty of this Parliament is, therefore, to have restored to us the power to come along after things have been done in Brussels and refuse to implement them, or alter them by our own legislation?
    Mr. Hattersley: I do not share that view. I believe that the Scrutiny Committee, by a number of adjustments which, no doubt, it will make to its procedure as a result of other examinations taking place at the moment, can adequately ensure that the proper rights of Parliament are preserved. The implication of the hon. and learned Gentleman's

    431
    question, namely, that membership of the EEC is automatically exclusive of proper parliamentary rights, is a view that I do not share.
    Mrs. Winifred Ewing: Does the Minister accept that among Scottish Members there is growing support, across party boundaries, for the proposition that when the issue is put to the British people, the result of the referendum should be given constituency by constituency? Many of us have a natural curiosity to know the statistics for Scotland.
    Mr. Hattersley: I know that the hon. Lady always sees these great issues in rather narrow terms. I am sure that that will be taken into account when we consider the question of a referendum.
    Mr. Spearing: Does my hon. Friend agree that it is a question of greater parliamentary control, and not parliamentary control that may or may not exist at the moment? Does he agree also that if the objectives of renegotiation, in respect of parliamentary sovereignty, are to be achieved, an amendment to the European Communities Act will be needed, possibly involving a codification of the so-called Luxembourg Agreement? Is not that logical, even if the hon. Gentleman does not agree with the premise?
    Mr. Hattersley: No. I am afraid that I agree with neither the proposition nor the logic. I think that it is possible, through the scrutiny procedure and through many other devices recommended to the House by the Foster Committee—one of which I hope to observe this afternoon—to ensure that Parliament's views and wishes are fully represented. So far as the Luxembourg Agreement is concerned—this is crucial to the questions asked by my hon. Friend—we believe that the outcome of that Luxembourg meeting should be preserved. That is in one sense, essentially the way in which the will of the British Parliament and British Government is preserved within the EEC.
    Mr. Kirk: Does the Minister agree that if Government Members are so anxious for greater parliamentary control, the simplest way to get it is for them to take their seats in the European Parliament?
    Mr. Hattersley: I answer this question almost every Wednesday, most often when the hon. Gentleman is in Strasbourg, but let me answer it again today. I have never denied that on two occasions at a private meeting I voted for participation in that Parliament by my party. But I now strongly take the view that, involved as we are in a serious renegotiation, were we to change the position we took up a year ago people would put question marks against the seriousness of our renegotiation and our intention to go ahead with that on a real and proper basis. The decision whether the Government side of the House is represented in that Parliament must inevitably and properly await the outcome of renegotiation.

    Renegotiation
    Mr. Blakerasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the progress of Her Majesty's Government's negotiations regarding the terms of membership of the EEC.
    Mr. Hurdasked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a further statement on the progress of his discussions on future British membership of the EEC.
    Mr. Hattersley: We are covering the ground required by our renegotiation objectives and the House has been, and will be, kept fully informed about all relevant developments.
    Mr. Blaker: Is the Minister of State aware that his right hon. Friend the Secretary of State for Prices and Consumer Protection told the House, in an answer to me on 23rd November, that food prices in the United Kingdom are now lower than they would be if we were outside the EEC? In the course of the continued negotiations, will the hon. Gentleman ask his right hon. Friend to give maximum publicity to that fact?
    Mr. Hattersley: I am certainly aware of that answer, because I gave it a week earlier than my right hon. Friend.
    Mr. David Steel: Will the Minister use his influence within the Government to make sure that when the negotiations are complete and they are put to the House

    433
    there will be a free vote and that hon. Members will not be dictated to by irrelevant meetings across the road or anywhere else?
    Mr. Hattersley: I genuinely do not subscribe to the view that the meeting going on across the road at this moment is irrelevant. It is essentially the representation of the party which I have tried to serve for almost a quarter of a century. The question of a free vote in the House, as the hon. Gentleman will understand, is a matter not for me but for others on my side of the House.
    Mr. Churchill: Will the Minister confirm that the total amount over which the British Government are quibbling in regard to the United Kingdom's proportion of budgetary contribution by 1980 is no more than £250 million, and that it represents no more than two and a half weeks of our current Budget deficit at its present rate?
    Mr. Hattersley: It may be because of a difference in our backgrounds that I am unable to dismiss £250 million in the lighthearted way that the hon. Gentleman can. I think our renegotiation aims represent something more than that. They represent the principle that what I must describe as the poorest members of the Community ought not, through the budget, to subsidise the richest members of the Community. I do not see how anyone in the House, or in Europe, can argue with that principle.
    Mr. Hurd: Does the Minister of State recall that in Luxembourg on 4th June the Foreign Secretary gave a specific pledge to his partners that once negotiations were completed the Cabinet here would form a collective judgment on the result? Will he draw that pledge to the attention of the Prime Minister, because the Prime Minister, on every possible occasion, draws a thick smokescreen over this aspect of what is to come?
    Mr. Hattersley: I am very well aware of what my right hon. Friend said in Luxembourg on 4th June. I urge the hon. Gentleman to try to rise above these small party points and concentrate on the really important matters concerning European unity to which I at least try to direct my attention on Wednesday afternoons.
    Mr. Rippon: May I, on the question of the Community budget, express agreement with the hon. Gentleman that it is quite right that we should seek to negotiate on the basis of the treaty and in accordance with the provisions of the treaty if our circumstances deteriorate? However, the Opposition do not accept as readily as he does the assumption that we must, under a Labour Government, be among the poorest nations in Western Europe.
    Mr. Hattersley: The right hon. and learned Gentleman has continued to make that point in a bellicose way, no doubt to justify the inadequacies of his own negotiation of EEC terms.
    Two points have to be borne in mind. The first is a submission by my Government to the EEC. The second is the analysis made by the Commission of the EEC on that submission. The Commission confirms, not the right hon. and learned Gentleman's view but the view of Her Majesty's Government that there will be a problem in this area by 1980. If the right hon. and learned Gentleman denies that, I think he is flying in the face of two sets of facts which we have to recognise.
    Dr. Edmund Marshallasked the Secretary of State for Foreign and Commonwealth Affairs whether the renegotiation of the terms of United Kingdom membership of the European Economic Community include consideration of the position of Gibraltar.
    Mr. Hattersley: No, Sir.
    Dr. Marshall: Is my hon. Friend aware that during the past year the Gibraltarians have been hard hit by large increases in the prices of flour and sugar—much larger than in this country—and that the Chief Minister of Gibraltar attributes this situation to the arrangements governing our membership of the EEC? How do the Government intend to help Gibraltar in these difficulties?
    Mr. Hattersley: In two ways. First, aid talks have gone on in the past concerning our relationship with Gibraltar. The second way is concerned with those relationships between Gibraltar and the EEC which have been circumscribed in a precise fashion, but which, I think, have not resulted in the price increases directly

    435
    flowing from the EEC membership of Great Britain, as the Chief Minister of Gibraltar suggests.
    Sir Frederic Bennett: Does the Minister accept that on the question of the standard of living of the people of Gibraltar there is complete unanimity on both sides of the House that, irrespective of the Common Market or otherwise, we have to ensure that they do not suffer unduly due to international situations over which they have no control and over which, constitutionally, they are not allowed to have control?
    Mr. Hattersley: I think that there is complete unanimity on two issues concerning the people of Gibraltar and that country's future. The first is the one to which the hon. Gentleman draws attention, namely, their standard of living. The second is their free choice to remain in association with the United Kingdom as long as they choose to do so.
    Mr. Norman Lamontasked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on the progress of Great Britain's renegotiation of membership of the EEC.
    Mr. Adleyasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the EEC negotiations.
    Mr. Hattersley: I would refer the hon. Members to the reply I gave a little earlier this afternoon to questions from the hon. Members for Blackpool, South and (Mr. Blaker) and Mid-Oxon (Mr. Hurd).
    Mr. Lamont: Will the Minister explain how he can reconcile the statement of the Foreign Secretary, made on several occasions, that Britain is now playing a full part in the development of the Community, with the statement contained in the Labour Party manifesto in February, that until the renegotiations were complete all impetus to further integration would stop? If the Foreign Secretary will not come to the House, will he arrange for the question to be answered at the Labour Party conference?
    Mr. Hattersley: I hope that the hon. Gentleman has been here to ask that question on the many previous occasions when the Foreign Secretary has been
    436
    available to answer such questions. The answer is perfectly simple. The Government have made it absolutely clear throughout their renegotiations that there are a number of objectives that we need to achieve. We promised the British people those objectives and we cannot go back on them if we are to fulfil the promises in our manifesto.
    On the other hand, we have made it absolutely clear that although we pursue those objectives we shall neither inhibit nor prevent the progress of the Community. Those two policies are not incompatible, and the Government have run them side by side very successfully.
    Mr. George Rodgers: Does my hon. Friend accept that there is considerable concern about the lack of pace in the negotiations and that many of us feel that the longer negotiations are prolonged, the deeper we get into the quagmire and the more difficult it will be to extract ourselves, no matter how the referendum or ballot is conducted?
    Mr. Hattersley: With respect to my hon. Friend, that is another question I have the privilege of answering almost every Wednesday. Let me make the situation clear to him again. The Government are anxious that the renegotiations should be completed as quickly as possible, as are our partners in the EEC, the country at large and the House. These are serious and detailed negotiations, and our obligation is to get them as right as possible rather than to hurry them. But I assure my hon. Friend that we shall not delay or prevent progress in these negotiations. Our hope and intention is to complete them as soon as possible.
    Mr. Powell: Is it the view of the Minister that the renegotiation aims set out by the Labour Party in February and reaffirmed in October can be achieved without amendment of Section 2 of the 1972 Act or alteration of the Treaty of Brussels? Second, since he is desirous, as he says, of preserving the sense of the Luxembourg agreement, may I ask whether Her Majesty's Government will ensure that that agreement is given the force of a treaty?
    Mr. Hattersley: On the right hon. Gentleman's first point, the Foreign Secretary made clear to his colleagues in Luxembourg on both 1st April and 4th June

    437
    that it was our hope and belief that we could achieve our renegotiation aims without amendments to the treaties. As regards the Luxembourg compromise, if it can be so called, I believe that that is working well. It is working in fact rather than in theory, and as long as it can continue to work in fact it will represent and preserve the sovereignty of this Parliament and the British people.
    Mr. Walters: The Minister has tended to dismiss the questions from some of my hon. Friends about the position of the Prime Minister and the Cabinet as being party-political points, but is it not reasonable to ask at this stage whether, if the renegotiations continue satisfactorily, one is to expect the Prime Minister on this crucial decision for the country to come out with the Cabinet and state that he is in favour of the terms which he is negotiating?
    Mr. Hattersley: The hon. Gentleman is right to say that I can dismiss that type of question as the most trivial kind of party point.
    Mr. English: When my right hon. Friend is next in Europe, will he try to explain to the Commission and its employees that civil servants in this country do not normally engage in matters of party controversy in the way that a commissioner and other members of the Commission did last week on this very issue of whether we should stay in the Common Market or not, with which, frankly, they have nothing to do?
    Mr. Hattersley: I do not know to whom my hon. Friend refers. It is very difficult to describe the commissioners in the European Community as civil servants in the accepted sense. They are deeply distinguished representatives of this country who are serving this country abroad. Mr. George Thomson, at one time one of my right hon. Friends in this House, is a commissioner, who said on television on Friday that he believed that, as a citizen of Great Britain and, indeed, as a member of the Labour Party, he had a right and a duty to express an opinion on these matters. That is a judgment which I share.
    Mr. Alison: Does the Minister agree, in the context of the renegotiations, that leaving the Market would be nothing less
    438
    that traumatic for Britain, and that coming out of the Market would be very different from not going in to the Market?
    Mr. Hattersley: I think that the hon. Gentleman is trying to cause me difficulties by quoting what the Foreign Secretary said on television on Thursday. Since I recognise the reference, he will hardly expect me to disagree with it.

    European Movement
    Mr. Jayasked the Secretary of State for Foreign and Commonwealth Affairs what grant the Government propose to make to the European Movement during the financial year 1974–75; and for what purpose.
    Mr. Skinnerasked the Secretary of State for Foreign and Commonwealth Affairs how much money has been allocated to the European Movement in the current year.
    Mr. Raphael Tuckasked the Secretary of State for Foreign and Commonwealth Affairs what has been the size of the United Kingdom contribution to the European Movement in the current financial year.
    Mr. Hattersley: The grant in aid to the British Council of the European Movement for the 1974–75 financial year has been reduced to £20,000. The grant is made on the strict understanding that its use is limited to a programme of exchanges and visits with countries in Western Europe as a whole.
    Mr. Jay: Is my hon. Friend aware that some of us are not impressed by the doctrine that all this public money is spent only on educational visits? We believe that organisations engaged in political propaganda in the internal affairs of this country ought to finance themselves and not rely on the taxpayer.
    Mr. Hattersley: I am well aware of my right hon. Friend's views, and I assure him absolutely that when this reduced grant was made to the European Movement, I, on the Foreign Secretary's instructions, saw the president and secretary of that movement and made clear to them that the money available from the Foreign Office could be used only for what I must describe as non-propaganda purposes, and that we should

    439
    want to keep an extremely close watch on how that money was spent to ensure that our requirement was met.
    Mr. Rost: Is the Prime Minister, together with the Leader of the Opposition, still officially a patron of the European Movement?
    Mr. Hattersley: Yes, Sir.
    Mr. Skinner: Will the Minister look at the more sinister question of the source of the European Movement's massive finances? Does be know that over the past several years the European Movement has been financed in part by the CIA, as disclosed in an article commissioned for The Sunday Times, which was then suppressed and stopped by the editor, and will he give a guarantee that in the forthcoming referendum campaign there will be no use of CIA money?
    Mr. Hattersley: I have no information that the European Movement is financed by the CIA, nor do I invariably rely on the accuracy of The Sunday Times, and, I suspect nor does my hon. Friend. To deal with the serious point of the question—and, if I may say so, I think there was one—there is, I feel, an obligation on all of us to make sure that, when the British people's will is determined, no matter how we choose to determine it through the ballot box, there are a number of alternatives and it is determined in a way which ensures that both sides of the argument are fairly presented and neither side of the argument can produce so much funds that it has an unfair advantage over the other. I do not disagree with my hon. Friend about that.
    Mr. Russell Johnston: Does that answer mean that the Government are seriously considering offering some financial assistance to both sides of the argument, accepting that the financing of political objectives is a major problem? Speaking as a long-standing supporter of the Community, I accept that it would be wrong that the balance should be unfairly tilted.
    Mr. Hattersley: It means two things. First, the Government are considering how the people's will should best be tested. That means a number of alternatives, one of which may not be a referendum. But it also means that the Government are determined to ensure that,
    440
    whether it is determined by a General Election or a referendum, our commitment is to the ballot box. However the ballot box is used to decide the direct view of the British electorate, there is an obligation on us to make sure that both sides of the argument are presented fairly and equally. The Government entirely accept that view.
    Mr. Raphael Tuck: Further to what the hon. Member for Inverness (Mr. Johnston) said, if my hon. Friend is so keen on giving money to an organisation that is avowedly in favour of Britain's being in the Common Market, will he be even-handed and redress the balance and give a similar amount to an organisation, the address of which I can supply—the Common Market Safeguards Committee?
    Mr. Hattersley: I am enthusiastic about giving what Government money is available to organisations that promote exchanges between various countries. The British Council of the European Movement has traditionally promoted exchanges between Britain and Western Europe, and I am enthusiastic about giving it money to make that possible.
    I am not remotely enthusiastic, at this point, about giving Government money to promoting propaganda on either side of the EEC argument. Therefore, our grants must be restricted very firmly to the purpose for which they were intended.

TEACHERS (SCOTLAND)
Mr. Rifkind: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration; namely,
"the decision of Scottish teachers to sabotage school examinations and instigate widespread strike action in furtherance of their pay dispute."
This particular form of action has continued for some weeks. The situation has now reached a state of unprecedented seriousness. I am conscious of the gravity that is required for a request of this type to be accepted, but I respectfully submit to you, Mr. Speaker, that all the criteria are fully met in this case.
As to the specific nature of the issue, the dispute is taking place in the Scottish part of the United Kingdom. No one

441
could seriously doubt the importance of the dispute. There has been industrial action in Scotland for some weeks. Only yesterday half a million Scottish schoolchildren were denied their education as a result of this industrial action.
On the urgency of the matter, a new dimension is worthy of immediate debate. The Scottish teaching profession has decided to sabotage examinations. Already the schools have had to defer consideration of these examinations for many months. There has been a decision by the Further Education Association that examinations cannot be held at the present time.
It is in these circumstances that I submit, Mr. Speaker, that the matter is of sufficient importance to justify an immediate debate.
Mr. Speaker: The hon. Member for Edinburgh, Pentlands (Mr. Rifkind) gave me notice of his intention to make an application for a debate under Standing Order No. 9 on
"the decision of Scottish teachers to sabotage school examinations and instigate widespread strike action in furtherance of their pay dispute."
My decision is a procedural one. I must consider whether it is right to disrupt the business already before the House in order to have a debate on this matter. I am afraid that the answer must be "No". The hon. Member must find other ways of raising this matter.

EUROPEAN ECONOMIC COMMUNITY (BUSINESS)
The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): With your permission, Mr. Speaker, I will make a statement about business to be taken in the Council of Ministers of the European Community during December. The monthly forecast for December was deposited yesterday.
At present seven meetings of the Councils of Ministers are proposed for December. Foreign Ministers will meet on the 2nd and 3rd December, Agriculture Ministers on the 9th and 10th, Transport Ministers on the 11th, Energy Ministers on the 17th, Finance Ministers on the
442
19th, and Social Affairs and Development Ministers on dates yet to be set. There may also be a ministerial meeting on the 19th to consider preparations for the multilateral trade negotiations.
At the Foreign Ministers' Council we expect discussion of the British case on the budget to be resumed on the basis of the Commission's stocktaking report. Foreign Ministers may also discuss preparations for the summit meeting which is expected to take place on 9th and 10th December, though much of the preparatory work is taking place outside the Council. They will also consider relations with Greece, the Protocol 22 negotiations and, possibly, relations with Portugal, as well as Commission proposals for the use of the first tranche of the Community contribution to the United Nations emergency measures. They may also review the progress of negotiations with certain Mediterranean countries.
Agriculture Ministers will give preliminary consideration to Community farm prices for 1975–76, and are also expected to consider the new beef régime. It will also be necessary to complete the detailed arrangements for sugar, following the general agreement reached on this subject at the November Council.
Finance Ministers, in addition to their usual monthly discussions on the economic situation in the Community and the convergence of national economic policies, will have a preliminary exchange of views on the draft sixth directive on value added tax and draft directives on the harmonisation of excise duties, and also a report on the French Presidency's September proposals for new monetary measures.
The Energy Council will review progress towards a Community energy policy and consider draft directives on the maintenance of minimum fuel stocks at power stations, limiting the use of natural gas and petroleum products in power stations and a draft Council decision adopting a Euratom research and training programme on plutonium recycling in light water reactors.
Transport Ministers are expected to discuss a draft Council decision on government/railway relations and two draft regulations to extend respectively the

443
system of bracket tariffs and the Community quota affecting the carriage of goods by road between member States.
Development Ministers will discuss two Commission papers on food aid policy and a new aid framework for the Community. Social Ministers are likely to discuss the draft directives on equal pay and mass dismissals and draft regulations concerned with the establishment of a European vocational training centre and a European foundation for the improvement of working and living conditions.
Mr. Rippon: I thank the Minister for his statement. I have one question for him. Will he say a little more about the preparations for the summit? There have been Press reports in which it is indicated that he has made certain observations. In particular, will he confirm that among the subjects to be discussed will be the regional aid fund?
Mr. Hattersley: Let me assure the right hon. and learned Gentleman that it is the wish of Her Majesty's Government and my right hon. Friend the Prime Minister that the summit should be held on the proposed dates and should be a success, and all that Her Majesty's Government did and said on Monday was intended to contribute to that end. It was our view then, as it is my view now, that the success of that summit would be best achieved not by Prime Ministers going paragraph by paragraph over a long document but by them concentrating their minds on a number of issues of importance from which decisions ought to flow but on which they should take general decisions, leaving detailed decisions to other Ministers.
Our certain hope is that the summit will take place and that it will consider five, six or seven major issues. I think that regional policy and the regional development fund must be one of those issues.
Mr. Spearing: In replying to Questions my hon. Friend the Minister suggested that the de jure sovereignty of this House would be sustained by continuing the de facto situation under the Luxembourg agreement. Will he say whether this agreement and the requests which may have been made for the writing in of that
444
agreement in a de jure sense will be discussed at this summit, and if not, when will they be discussed?
Mr. Hattersley: I must tell my hon. Friend frankly that at this summit there will be proposals—on what I describe as minor matters, issues which do not affect the direct interests and major issues of sovereign States—that the Luxembourg compromise should be abandoned. But it is not the belief of Her Majesty's Government that that is the correct policy, and we shall resist and, if possible, prevent the abandonment of the Luxembourg compromise.
Mr. John Davies: The Minister mentioned that the new beef régime would be discussed by the Agriculture Ministers. Will a proposal to that effect be before the House before that discussion takes place, and will the House have the opportunity of looking at the explanatory memorandum on that subject before the Ministers meet? Secondly, will the Minister say whether the Commission paper on the present economic situation in the Community will be a matter for discussion both by the Foreign Ministers and by the Finance Ministers during December?
Mr. Hattersley: It is unlikely that the economic condition of the Community will be discussed by the Foreign Ministers, unless there is some oblique discussion of it in preparation for the summit, as the Heads of Government will want to consider a number of general economic matters.
As to the beef régime, the intention of the Agriculture Ministers is to consider, as they are obliged to do by resolution, a new régime to operate at the beginning of the next marketing year. As I think the right hon. Gentleman knows, our intention is to press for an end to intervention as the principal measure of support and for its replacement by what we regard as a more realistic and more acceptable means of ensuring a successful beef market.
I give the right hon. Gentleman the absolute promise that if the Council is provided with the sort of public papers which we are obliged to send to the Scrutiny Committee, those papers will be sent to him. On the other hand, he will recall that agricultural business sometimes moves very quickly and that in the

445
national interest my right hon. Friend has to respond to that movement with the utmost speed. I know that my right hon. Friend sympathises with the concern expressed about that difficulty.
Mr. Skinner: Will my hon. Friend ask the Council of Ministers or some other body—not the Assembly, which has no powers—to look at the way in which the European Movement has been financed by United States secret funds, some of which have come from the CIA, as was disclosed in the article that the Sunday Times commissioned and then suppressed. Will my hon. Friend see to it that this expensive form of brainwashing does not play any part in the referendum campaign in 1975?
Mr. Hattersley: I do not think that I am prepared to ask the Council of Ministers that question. If I did, they would regard me as ridiculous.
Mr. Russell Johnston: May I follow up the remarks made by the right hon. and learned Member for Hexham (Mr. Rippon)? Is not the fact that the hon. Gentleman's statement contains no reference to regional development more than regrettable? Is the Minister aware that it is being nationally alleged that the British Government are dragging their feet over regional development in the renegotiations on the argument that Britain will gain from a regional development fund and that that will detract from the force of renegotiation? Will the Minister take this opportunity to deny that allegation?
Mr. Hattersley: I am happy to tell the hon. Gentleman that I took the opportunity on Monday to deny exactly that suggestion. It is absolutely untrue to say that the British Government are dragging their feet over the regional fund. What the Government have said, and must continue to say, is that an increased regional fund will not meet the budgetary aspects of renegotiation. It would not enable us to say that our budgetary contribution, although excessive, was no longer a problem. A large regional development fund would not meet that need. I made it as clear as I could to my colleagues in the Council of Ministers last Monday that I believe that the Council and the Community cannot succeed unless the more prosperous areas within the Community
446
help the least prosperous areas, and that is certainly the Government's policy.
Mr. Gordon Wilson: Will the hon. Gentleman note that there will be concern on both sides of the House about progress which may be made towards a common energy policy within the EEC? Will he give an undertaking that in the reviews that are taking place there will be no concession or surrender of Scotland's natural gas or oil resources either to such a policy or in furtherance of any other purpose within the Common Market?
Mr. Hattersley: We are very conscious, as were the previous Conservative Government, of the obligation and necessity to preserve the rights over British oil and the energy resources within Britain which are rightly ours. I promise the hon. Gentleman and the House that we shall not deviate from that policy.
Mr. Kirk: Will the Minister accept that, while the Opposition would like to see the summit take place, it would be better not to have the summit if it is not properly prepared?
Secondly, may I ask the hon. Gentleman about the United Nations Emergency Fund? Is it the Government's view that the first tranche should not be released until other States have contributed to the fund, and that the second tranche should not be voted until we have heard from the other States about the first tranche?
Mr. Hattersley: I need notice of the second part of the hon. Gentleman's second question. We have put pressure on other Governments to give a release at the same time as we do. We understand the obligation, which is to provide help where help is most needed, and the Government will not hesitate in bringing that forward at the right time.
I accept and share the hon. Gentleman's view about the importance of making the summit a success. I do not remotely criticise other parties in other days, but previous summits have not been a success. It is not in the interests either of this country or of the Community as a whole to hold another summit that is adjudged a failure. It was with the intention of making the summit a success that I made the recommendations I did to my colleagues on Monday.
Mr. Hordern: Is the hon. Gentleman aware that British beef farmers have no form of guarantee support after the end of January? Whatever may happen in discussions among Agriculture Ministers about the form of support, is there likely to be an early conclusion to the discussions, and is the Minister able to give us an idea when to expect the results of the negotiations to be announced?
Mr. Hattersley: My right hon. Friend the Minister of Agriculture is very conscious of the problems which in previous years resulted from the time taken to get a general structure for agriculture confirmed in the Community. In a previous statement the Minister of Agriculture explained that it was the Community's intention to get a general pricing system agreed this year at an earlier date than in previous years to avoid over a wide range of subjects the difficulty to which the hon. Gentleman refers, and that remains our intention.
Mr. Powell: Apart from the matter on which the Minister replied to the right hon. Member for Knutsford (Mr. Davies), will the Council of Ministers have before it for decision any proposals which have either been recommended for debate in this House by the Scrutiny Committee or have not yet been processed by the Scrutiny Committee? If it is inconvenient for the hon. Gentleman to answer that question viva voce, will he put the reply in the OFFICIAL REPORT?
Mr. Hattersley: I understand on the position today that the answer to the right hon. Gentleman's question is, "No, it will not". He will understand, as I know the right hon. Member for Knutsford (Mr. Davies) does, that business moves quickly within the Community and there is always at the beginning of the month the prospect that we shall have a decision to take in the national interest by the end of the month which it is physically impossible for the Scrutiny Committee to examine. The Scrutiny Committee on previous occasions has expressed understanding of such problems.
Our intention remains, wherever possible, whenever British national interests can be so preserved—and that is almost invariably—that there will be no progress made in the Council until the Scrutiny Committee and, if necessary, the House have made recommendations. I empha-
448
sise that there are occasions when the national interest requires that that rule should not be observed.
Mr. Small: My hon. Friend addresses the House in polysyllables. I do not know whether he used the word "platinum" or "plutonium". I should like to have an interpretation of what they are talking about in Europe in "plutonium" terms.
Mr. Hattersley: So would I. I hope that my hon. Friend will put down a Question about that.
Mr. Fairgrieve: Further to the question asked by the hon. Member for Inverness (Mr. Johnston), does the hon. Gentleman accept that there is genuine worry in countries on the periphery of the EEC, such as Italy and Scotland, that the speedy setting up of a large regional fund could be currently in danger on the altar of the Westminster negotiations?
Mr. Hattersley: I hope that that is not so. I do not regard either Scotland or Italy as being on the periphery of the EEC. I regard them as being central to it and central to its long-term success. I understand that those countries and parts of countries that might receive grants from the regional development fund are naturally enthusiastic for its speedy conclusion and speedy implementation. That is also our view, but implementation has to be matched against other legitimate needs. The wishes of the Federal German Republic, which have been reported in British newspapers, are strong on this issue. The belief of the British Government that over the general area of regional policy our renegotiation aims are important is strong. I share the hon. Gentleman's view that it is in the interests of parts of the United Kingdom, Italy and the Republic of Ireland where there is severe unemployment that the regional development fund should make as much progress as possible.
Mr. Moate: The Minister said that the sixth directive on the harmonisation of VAT would be discussed at the forthcoming meeting of Finance Ministers. May we be informed of the view of Her Majesty's Government on that directive, and will the right hon. Gentleman confirm that no commitment, even in principle, will be entered into until there has been a full debate in this House?
Mr. Hattersley: I can confirm, as I always can, that we shall observe the rules laid down if it is a legislative proposal in a published paper. We have our rules of conduct, and we shall abide by them. As for the directive on VAT, one proposal concerns the incidence and coverage of VAT, and, therefore, it deeply involves the British Government's view on zero rating. I give an absolute assurance that we shall not change that view and will continue to apply it.
Mr. Ronald Bell: On the beef régime, does the right hon. Gentleman agree that the situation to which he referred, in which it is in agriculture more than anything else that the speed of progress in Brussels defeats our scrutiny procedure, is a situation that we cannot allow to continue indefinitely when it touches important matters such as the beef régime? Secondly, will the right hon. Gentleman assure the House that the two drafts relating to plutonium and railways will not be finally agreed to in the December meetings because this House will not have had time to assess the possible implications of those two drafts, which may be considerable?
Mr. Hattersley: On those drafts, I can only repeat my earlier assurances. It is not within my competence or ability to remember on each occasion whether a draft comes in a legislative published form, which is part of the rules governing the performance of the Scrutiny Committee. If it does, we will apply those rules. As for the beef régime, this House must face realities. My right hon. Friend the Minister of Agriculture has had spectacular success in a number of areas in improving agricultural régimes and meeting obligations which this House wished him to meet, the most successful of which was the 1·4 million tons of sugar coming in from the Commonwealth Sugar Agreement. To enable him to do that there must be occasions when in the Council of Agricultural Ministers, which meets very often and whose meetings go on very late dealing with issues which arise from day to day, my right hon. Friend must be given the opportunity to use his judgment on behalf of British agricultural interests. I can see no way of avoiding that.
Mrs. Winifred Ewing: Will the right hon. Gentleman comment on the omission from his statement of any reference to fishing? Are we to take it that it is not a subject which will be on the agenda for these discussions? Does he accept the concern of the inshore fishing fleet about waters being over-fished and about the uncertainty of the EEC policy which is due to start in 1984?
Mr. Hattersley: I am glad that the hon. Lady now understands that there is a derogation until the mid-1980s for the Community fishing policy. Her conclusion from my written statement and from what I have said orally is correct. There is no intention to discuss fishing policy in the next month, and, therefore, it would be out of order for me to comment on it.
Mr. John Davies: I apologise for rising a second time. I am sure that the right hon. Gentleman realises that the question of the beef régime is one of quite singular importance to British farming. It is a matter to which the right hon. Gentleman has referred previously, as have his right hon. and hon. Friends, as a topic discussed in Brussels. In this really vital matter, is it not possible to give the House an opportunity to discuss it before the Minister takes what may be irrevocable decisions in Brussels about matters of a critical nature for our farmers?
Mr. Hattersley: That question is essentially one for tomorrow and for my right hon. Friend the Leader of the House. What the right hon. Gentleman understands, and what I must ask other right hon. and hon. Members to understand, is that the Scrutiny Committee is not an organ by means of which there is a general monitoring of what goes on in the EEC. It enables this House—a similar committee exists in the other place—to be sure and confident that those matters proper for legislative concern and interest are not bypassed in some way. To ask for an important matter to be discussed simply because it is important is a legitimate request. But it is for my right hon. Friend the Leader of the House and not me. It is not a matter for the Scrutiny Committee. It is one for a general House of Commons decision.

QUESTIONS TO MINISTERS
Mr. Madel: On a point of order, Mr. Speaker. By ten minutes past three today we had reached only Question No. 11. One reason was that the Minister of State gave a very long Answer to Question No. 7, which was followed by an equally lengthy supplementary question by the hon. Member for Oxford (Mr. Luard). I wonder whether you could ask Ministers who intend to give Answers of considerable length to provide them in the form of statements at the end of Question Time, otherwise Question Time becomes a seminar.
Mr. Speaker: I am sure that that will be noted. My only hope is that both Questions and Answers will be brief. Many of them are much too long.

BALLOT FOR NOTICES OF MOTIONS

  FOR FRIDAY 13TH DECEMBER
  Members successful in the Ballot were:

  Dr. Alan Glyn.

  Mr. Airey Neave.

  Mr. Anthony Fell.

BILLS PRESENTED

  PREVENTION OF TERRORISM (TEMPORARY PROVISIONS)
  Mr. Secretary Jenkins, supported by The Prime Minister, Mr. Secretary Callaghan, Mr. Secretary Ross, Mr. Secretary Rees, Mr. Alexander Lyon, Mr. Attorney General, and The Lord Advocate, presented a Bill to proscribe organisations concerned in terrorism, and to give power to exclude certain persons from Great Britain or the United Kingdom in order to prevent acts of terrorism, and for connected purposes. And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed [Bill 16].
  Mr. English: On a point of order, Mr. Speaker. I have inquired unsuccessfully at the Vote Office. May we be told when the Bill will be published?
  The Secretary of State for the Home Department (Mr. Roy Jenkins): I understand that the Bill will be available at the Vote Office at 4 o'clock.

  WILD CREATURES AND WILD PLANTS PROTECTION
  Mr. Peter Hardy, supported by Mr. Arthur Blenkinsop, Mr. Tarn Dalyell, Mr. John Farr, Mr. Peter Fry, Mr. Mark Hughes, Mr. David James, Mr. Jasper More, Mr. John Parker, Mr. David Price, Mr. Caerwyn Roderick, and Mr. David Stoddart, presented a Bill to provide for the protection and conservation of wild creatures and plants growing wild: And the same was read the First time; and ordered to be read a Second time upon Friday 24th January and to be printed. [Bill 17.]
  LOCAL LOTTERIES
  Mr. Tony Durant, on behalf of Mr. R. Graham Page, supported by Mr. Peter Blaker, Mr. John MacGregor, Mr. Hugh Fraser, Mr. Michael English, Mr. John Spence, Mr. Stephen Ross, Mr. Bob Cryer, Mr. Giles Radice, and Sir George Young, presented a Bill to authorise local authorities to promote lotteries: And the same was read the First time; and ordered to be read a Second time upon Friday 31st January and to be printed. [Bill 18.]
  ABORTION (AMENDMENT)
  Mr. James White, supported by Mr. Ian Campbell, Mr. Leo Abse, Mr. Dan Jones, Dr. Jeremy Bray, Mr. Simon Mahon, Mr. Teddy Taylor, Mr. Andrew Bowden, Mr. Nicholas Winterton, Mrs. Jill Knight, Mr. Michael Roberts, and Mr. Donald Stewart, presented a Bill to amend the Abortion Act 1967 and to make further provision with respect to the termination of pregnancy and matters consequential thereto: And the same was read the First time; and ordered to be read a Second time upon Friday 7th February and to be printed. [Bill 19.]

  LITIGANTS IN PERSON (COSTS)
  Mr. Arthur Bottomley, supported by Sir David Renton, Mr. Frederick Willey, Mr. Emlyn Hooson, Mr. Robin Cook, Mr. George Cunningham, Mr. Charles Fletcher-Cooke, Mr. Gerald Fowler, Mr. William Hamilton, Mr. Richard Luce, Mr. Dennis Skinner, and Mr. David

  453
  Weitzmann, presented a Bill to make further provision as to the costs or expenses recoverable by litigants in person in civil proceedings: And the same was read the First time; and ordered to be read a Second time upon Friday 14th February and to be printed. [Bill 20.]

  TELEVISION LICENSING (ELDERLY AND DISABLED PEOPLE)
  Mrs. Joyce Butler, supported by Mr. John Farr, Mr. Frederick Willey, Mrs. Ann Taylor, Mr. Joe Ashton, Mr. James Wellbeloved, Mr. Cyril Smith, Mr. David Stoddart, Mr. Peter Hardy, Mr. Guy Barnet and Mrs. Maureen Colquhoun, presented a Bill to abolish television licence charges for retirement pensioners and disabled people: And the same was read the First time; and ordered to be read a Second time upon Friday 21st February, and to be printed. [Bill 21.]
  MOBILE HOMES
  Mr. Tom King, supported by Mr. Norman Buchan, Mr. Kenneth Clarke, Mr. Patrick Cormack, Mr. Robert Hicks, Mr. Douglas Hurd, Mr. Airey Neave, Mrs. Sally Oppenheim, Mr. Arthur Palmer, Mr. Stephen Ross, Mr. John Stanley, Mr. Phillip Whitehead, presented a Bill to amend the law in respect of mobile homes and residential caravan sites; and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time upon Friday 28th February and to be printed [Bill 22].

  UNSOLICITED GOODS AND SERVICES (AMENDMENT)
  Mr. David Knox, on behalf of Mr. Anthony Grant, supported by Mr. Terry Walker, Mr. Patrick Cormack, Mrs. Helene Hayman, Mr. Teddy Taylor, Mr. John Ovenden, Mrs. Sally Oppenheim, Mr. Robert Bean, Mr. Kenneth Clarke, Mr. Ron Thomas, Mr. Frederick Silvester, and Mr. David Knox, presented a Bill to amend the Unsolicited Goods and Services Act 1971 to enable the Secretary of State to make regulations with respect to the contents and form of notes of agreement, invoices and similar documents and to provide for conviction
  454
  on indictment in relation to an offence under Section 3(2) of the said Act; and for connected matters: And the same was read the First time; and ordered to be read a Second time upon Friday 24th January and to be printed [Bill 23].

  DOGS
  Mr. Peter Doig, supported by Mr. Richard Buchanan, Mr. Adam Hunter, Mr. Teddy Taylor, Mr. Harry Gourlay, and Mr. Alexander Wilson, presented a Bill to require owners of premises to display warning notices regarding dogs kept on those premises; to regulate the keeping and use of guard dogs; and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time upon Friday 14th February and to be printed [Bill 24].
  MENTAL HEALTH (AMENDMENT)
  Mr. William Whitlock, supported by Dr. Alan Glyn, Mr. Kenneth Lomas, Mr. Trevor Skeet and Mr. John Forrester, presented a Bill to strengthen the Mental Health Act 1959 to enable potentially dangerous patients to be detained in institutions: And the same was read the First time; and ordered to be read a Second time upon Friday 24th January and to be printed [Bill 25].
  LOCAL GOVERNMENT (RATE RELIEF FOR SMALL BUSINESSES)
  Mr. John MacGregor, supported by Mr. Hugh Rossi, Mr. Leon Brittan, Mr. John Cope, Mr. Tony Durant, Mr. Reginald Eyre, Mr. Douglas Hurd, Mr. Michael Latham, Mr. David Mitchell, Mr. Tony Newton, Mr. Keith Speed, and Mr. John Stanley, presented a Bill to empower local rating authorities to give special relief in respect of rates to certain small businesses: And the same was read the First time; and ordered to be read a Second time upon Friday 18th April and to be printed [Bill 26].

  EDUCATION (PARENTS' CHARTER)
  Mr. William Shelton, supported by Mr. Norman St. John-Stevas, Sir John Eden, Sir George Sinclair, Miss Janet Fookes,

  455
  Dr. Keith Hampson, and Dr Rhodes Boyson, presented a Bill to amend section 76 of the Education Act 1944 in order to impose clearer obligations on local education authorities to take account of parental wishes in regard to the education of their children; to provide by order for the establishment of independent appeal bodies for parents aggrieved by the decision of local education authorities in connection with the choice of school for their children; to give parents and teachers additional rights to be represented on school boards of governors and managers; to enable an obligation to be placed on all maintained schools to form parent-teachers' associations; and to make other provisions for the strengthening of parental rights and influence in education: And the same was read the First time; and ordered to be read a Second time upon Friday, 25th April and to be printed [Bill 27].

  FARRIERS REGISTRATION
  Mr. Michael Mates, supported by Mr. Eldon Griffiths, Mr. Marcus Kimball, Mr. Jerry Wiggin, Mr. Michael Brotherton, and Mr. William Molloy, presented a Bill to prevent and avoid suffering by and cruelty to horses arising from the shoeing of horses by unskilled persons; to promote the proper shoeing of horses; to promote the training of farriers and shoeing smiths; to provide for the establishment of a Farriers Registration Council to register persons engaged in farriery and the shoeing of horses; to prohibit the shoeing of horses by unqualified persons; and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time upon Friday, 24th January and to be printed [Bill 28].

  REPRESENTATION OF THE PEOPLE
  Sir Anthony Meyer, supported by Mr. Cranley Onslow, Mr. Nicholas Edwards, and Mr. Wyn Roberts, presented a Bill to enable electors who are away on holiday at the time of a Parliamentary election to vote by post or by proxy; to amend the law about the registration of members of the forces and about the correction of the register of electors; and
  456
  for related purposes: And the same was read the First time; and ordered to be read a Second time upon Friday, 2nd May and to be printed [Bill 29].

  CANCER SCREENING (EDUCATION)
  Mr. Simon Mahon, supported by Mr. Michael O'Halloran, Mr. Richard Kelley, Mr. Edwin Wainwright, Mr. Ray Mawby, Mr. Fred Evans, Mr. Richard Buchanan, Mr. Stanley Cohen, Mr. Hugh Delargy, Mrs. Joyce Butler, Mrs. Lynda Chalker, and Mr. Hugh McCartney, presented a Bill to require local authorities to provide information in educational institutions under their control relating to the dangers of cancer and the need for early screening: And the same was read the First time; and ordered to be read a Second lime upon Friday, 9th May and to be printed. [Bill 30].
  TOWN AND COUNTRY PLANNING (AMENDMENT)
  Sir Derek Walker-Smith, supported by Mr. Patrick Cormack, Mr. Arthur Blenkinsop, Mr. Arthur Jones, Mr. John Parker, Mr. Hugh Rossi, and Mr. Robert Cooke, presented a Bill to amend the Town and Country Planning Act 1971 and to extend the rights of the citizen under that Act: And the same was read the First time; and ordered to be read a Second time upon Friday, 14th February and to be printed. [Bill 31].
  EVIDENCE (PROCEEDINGS IN OTHER JURISDICTIONS)
  Mr. Paul Channon, supported by Mr. Mark Carlisle, and Mr. Marcus Lipton, presented a Bill to make new provision for enabling the High Court, the Court of Session and the High Court of Justice in Northern Ireland to assist in obtaining evidence required for the purposes of proceedings in other jurisdictions; to extend the powers of those Courts to issue process effective throughout the United Kingdom for securing the attendance of witnesses; and for purposes connected with those matters; and the same was read the First time; and ordered to be read a Second time upon Friday 24th January and to be printed [Bill 32].
  BALANCE OF SEXES
  Mrs. Maureen Colquhoun, supported by Mrs. Audrey Wise, Mrs. Millie Miller, Mrs. Gwyneth Dunwoody, Mr. John Garrett, Mr. Brian Sedgemore, Mr. Terry Walker, and Mr. Martin Flannery, presented a Bill to ensure that appointments to the boards of public bodies and corporations, to certain committees, panels and tribunals, and to juries and the House of Lords, shall consist of women and men in equal numbers: And the same was read the First time; and ordered to be read a Second time upon Friday 16th May and to be printed [Bill 33].

  YOUTH AND COMMUNITY
  Mr. Cyril D. Townsend, supported by Sir Edward Brown, Mr. Robert Cooke, Mr. Philip Holland, Mr. David Knox, Mr. Charles Morrison, Mr. David Mudd, Mr. Anthony Nelson, Mr. Geoffrey Pattie, Mr. Michael Roberts, Mr. Nicholas Winterton, and Sir George Young presented a Bill to make further provision with respect to youth services in the community and participation by youth
  458
  in community development; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 21st February and to be printed [Bill 34].

  INTERNATIONAL ROAD HAULAGE PERMITS
  Mr. William Hamling, supported by Mr. Guy Barnett, Mr. John Cartwright, and Mr. James Wellbeloved, presented a Bill to make further provision with respect to the forgery, carriage and production of licences, permits, authorisations and other documents relating to the international carriage of goods by road; and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time upon Friday 24th January and to be printed [Bill 35].

  STATUTORY INSTRUMENTS
  Ordered,
  That the Home-Grown Cereals Authority Levy Scheme (Approval) Order 1974 be referred to a Standing Committee on Statutory Instruments.—[Mr. Coleman.)

ORDERS OF THE DAY

  OIL TAXATION BILL
  Order for Second Reading read.
  4.7 p.m.
  The Paymaster-General (Mr. Edmund Dell): I beg to move, That the Bill be now read a Second time.
  Within the United Kingdom Continental Shelf there is currently progressing an investment programme so large that it is probably unprecedented in this country in a single industry within such a time scale. The railway boom of the nineteenth century may have constituted a comparable concentration of activity. For this the resources and the money have to be found. A great part of the investment is currently private risk capital of multinational provenance and, even on the assumption that the negotiations on participation are successful there will remain a vast private investment in what remains an undertaking with a high level of technical risk. It would have been so much more convenient, so much less costly in resources and money, had a beneficent deity located these resources of oil and gas on shore rather than under some of the world's less hospitable seas. But, lest I be misunderstood, may I make it clear that I have no complaint.
  In my speech in the Budget debate I tried to place in a cautious perspective the contribution of North Sea oil to our economic outlook. I said that it was a valuable bonus giving us security of supply and relief to our balance of payments. It will add to available resources and thus will ease some constraints on economic policy. It is certainly not an increment to be lightly dismissed. It has not been a frequent occurrence in our history that any one industry could make within such a time scale such an important contribution to the economic well-being of the country. But North Sea oil is not a solution to our economic problems. It is not, in particular, the solution to our problems of industrial competitiveness. The question is what happens to this increment to productive potential.
  The first point is that not all of it will benefit this country unless the measures in the present Bill are enacted. Many of
  460
  the original licensees are subsidiaries of foreign-owned companies, and there could be a large balance of payments loss through remittance overseas of their share of excess profits unless corrective action was taken. So one of the Government's first priorities is to ensure that the new tax arrangements will protect the balance of payments by ensuring that the Government retain a significant part of the earnings of North Sea oil operations in this country. In fact, the only way of doing this is by increasing the Government's share of the profits.
  This Bill achieves that through the introduction of a new tax, the petroleum revenue tax, and the tightening up of the corporation tax régime which accompanies it. In this way, the Government's command over the use of these additional resources is reinforced and their freedom of manoeuvre is increased. It is as though the "tax" which the people of this country are currently paying to the oil-producing countries through the medium of the present high price of oil was diverted to the Government of the United Kingdom.
  The second priority, of course, is to increase the nation's revenues and to secure for the community a reasonable share of the profits of North Sea oil. We would patently not do so under the arrangements hitherto in force. We have a clear duty to provide for the public as a whole to receive a fair share of the benefit from the arrival of North Sea oil, and this is reinforced by the balance of payments considerations to which I have referred.
  I have mentioned foreign-owned companies. There is one point which I must make absolutely clear. The petroleum revenue tax is completely non-discriminatory as between licensees controlled in the United Kingdom and those controlled in other countries. All will pay the tax on exactly the same basis.
  In arriving at the total proportion of North Sea revenues which should accrue to the public—what has come to be called the "Government take"—there is a delicate balance to be struck. Besides securing for the community a reasonable share of the profits, we need to ensure a fair rate of return to the oil companies whose risk capital and skill and experience are crucial to the development of these resources.

  461
  It has been suggested in some quarters that there is something inherently contradictory about the concept of fairness both to the oil companies and to the citizens of the United Kingdom and that, as the prime necessity in this situation is to leave the oil companies with an adequate incentive to do their essential job, the Government must lean towards favouring them rather than their own people.
  There is no doubt at all that until this country has considerably increased its own technical capacity in oil exploration and production—and probably even beyond that point—we shall be greatly dependent on the oil companies. Therefore, we have to make sure that they are not deprived by taxation of the level of profit necessary to make this investment attractive to them. Equally we have to make sure that the level of profit retained by them after tax is not excessive for that purpose.
  The people of this country also have their legitimate claims on the benefits from the exploitation of their raw material resources. This is admittedly a difficult balance to strike and is one reason for deferring for a little the decision as to the rate of petroleum revenue tax.
  This Bill attempts to achieve the right structure of taxation. The rate of tax will come later in the 1975 Finance Bill.
  The structure as it will exist following this Bill is not, I think, excessively complicated. Perhaps I might remind the House that under the proposals now before it, the Government take would in future have three components. First, there will be the royalties, provided for in the Continental Shelf Act 1964, which are a condition of the licences issued to the oil companies. The second component is the new petroleum revenue tax. The third component will be corporation tax at the standard rate, but with the system of assessment strengthened by the changes in Parts II and III of the present Bill.
  In due course there will also be the profits of direct Government participation in North Sea licences. I do not propose today to discuss participation in any detail. The negotiations led by my right hon. Friend the Chancellor of the Duchy of Lancaster will begin tomorrow. There is only one point that I need make at this
  462
  stage. Those negotiations are self-contained and will take account of the fact that it is our intention that the Oil Taxation Bill should have been enacted before the Petroleum Bill, providing for participation, has passed through Parliament.
  However, I want to emphasise that the Government are very conscious of the combined impact of their various measures, fiscal and non-fiscal, including such matters as depletion controls and other oilfield regulations. Some of these can, of course, have an effect on the profitability of the companies.
  My right hon. Friend the Secretary of State for Energy will be announcing shortly what use he intends to make of the new powers he proposes to seek. This will, I hope, remove some of the more exaggerated fears. But I can say now that before the final decision on the rate of PRT is taken we shall consider very carefully the impact of such non-fiscal measures along with all the other factors like costs and price which go to determine profitability.
  But for our present purposes this afternoon, it is enough to regard the new PRT and the strengthened corporation tax provisions as standing on their own, and viable in their own right. Their combined effect will be to produce a fiscal régime which would be appropriate, whether or not there was State participation, and on whatever scale that were negotiated.
  I believe that the principle of taxing the profits of North Sea oil in some special way has never been controversial between the political parties in this House, and the need to do so has certainly not been diminished by the fivefold increase in world oil prices which has transformed the expected profitability of North Sea operations, although, of course, it was never in question that over a period there were likely to be increases in the price of oil as it was at the beginning of 1973.
  The question is how can this most appropriately be done bearing in mind, on the one hand, the expected high profitability of this venture taken as a whole and, on the other, the considerable and continuing uncertainties relating to the costs of development in particular fields, and future movements in the price of oil.

  463
  I therefore now proceed to discuss the reasoning underlying the Government's decisions on some of the distinctive features of the petroleum revenue tax. I do not deny that many of these decisions are controversial and I have already said that the Government will listen carefully to representations about them, just as we did to certain earlier representations made by the oil industry which led to a number of changes in the original proposals.
  But I commence this discussion with two features of petroleum revenue tax which I have already described as fundamental to its conception—that is the priority of PRT over corporation tax and the field-by-field basis.
  First, PRT is to be a prior charge on North Sea oil profits, and will be deductible in computing income for corporation tax. It would have been possible to introduce a new tax on North Sea Oil profits which was entirely independent of corporation tax, and it might have been administratively simpler to charge the tax on that basis. The reason we decided to make petroleum revenue tax the prior charge was that the tax has been specifically designed to bring the money in faster than would corporation tax, which under our system is paid later than in many European countries. The average delay in this country in corporation tax payments is about 18 months. PRT will be paid four months after the end of any chargeable period, and a chargeable period is six months.
  Moreover, there are provisions restricting the possibility of delays in payment arising out of disagreements about an assessment. Given the importance of securing not only a fair but a prompt take for the nation from North Sea oil profits, it is therefore right to make petroleum revenue tax the prior charge and to have a correspondingly reduced corporation tax liability. It is also appropriate as a concept that a tax tailored, as is this tax, to the special situation of the oil industry should take precedence in the taxation of that industry.
  Moreover, one effect of the decision to make PRT a prior charge is to make revenue from the North Sea oil more independent of the level of corporation tax. Many factors having little or no
  464
  relationship to North Sea profitability might determine or influence changes in corporation tax.
  The CBI has recently been advocating a cut in corporation tax to 35 per cent. for reasons of industrial confidence. The Chancellor did not accept their arguments, but there could well be domestic circumstances in which a Chancellor of the Exchequer might wish to make a significant change in corporation tax and might feel inhibited if that change implied at the same time a very substantial change in North Sea revenues. Making PRT a prior charge reduces this problem considerably, though it does not, of course, eliminate it. For all these reasons we decided that it was reasonable to make PRT the prior charge.
  The field-by-field basis also has the effect of accelerating the take as compared with a company-by-company basis. A company basis would defer payment because a company would be able to set expenditure on developing a later field against profits from a field already in production. Though companies will still be able to do so for corporation tax purposes, provided the second field is within the ring fence, there is no acceptable reason why Parliament should agree that the yield from the new PRT should be thus deferred and the deferment could be substantial.
  The companies will obtain relief for capital and operating expenditure on the field as it is incurred, and—as one important exception to the field-by-field basis—there will be relief for abortive exploration and development expenditure incurred outside the field.
  Mr. Peter Rost Mr. Peter Rost (Derbyshire, South-East) rose—
  Mr. Dell: It might be easier if I finish this section of my speech relating to the field-by-field basis, after which I will readily give way.
  These allowances in themselves already involve considerable deferment of the Government take. They will assist the companies with their cash flow and, where necessary, in raising finance from the banks and other institutions. To accept even longer deferment by agreeing to a company-by-company basis would be unreasonable. It is a matter, as I have said, of striking the right balance.

  465
  Perhaps I should point out that there was one way recommended to us in which the Government could have speeded up their take even further than they have done under the provisions of this Bill. The Public Accounts Committee recommended that the Government of the day should consider a system of quantity taxation among other methods of substantially improving the effective tax yield from operations on the Continental Shelf. What the Committee specifically had in mind was a barrelage tax.
  As the PAC recommended that this proposal should be considered, naturally I considered it. From the point of view of the Government, a barrelage tax would have the considerable advantage of greatly advancing Exchequer receipts. Instead of waiting for calculations of profits, the tax would be charged on quantities landed. However, the Government came to the conclusion that this would be to over-load the front end, that it would be unreasonable and might prove to be too great a disincentive to the companies.
  We therefore adopted the structure proposed in the Bill, which represents a reasonable compromise between the delays of a corporation tax-type tax, charged on a company basis, on the one hand, and the front-end loading of a barrelage tax on the other.
  Some companies have nevertheless suggested that the field-by-field basis will deter future development. I do not believe that it will, provided that the overall tax régime is reasonable, and of course an important element in that will be the rate of tax and the consequent return on investment net of tax. In considering this structure, the companies should remember they will not pay a penny of tax on any field until their allowances for capital expenditure on that field are exhausted.
  Mr. Rost: With regard to the question of setting off wild-cat drilling and other developments involving abortive expenditure against the proposed PRT, does not the right hon. Gentleman agree that there is an anomaly for those development companies that have no proven fields and cannot offset tax?
  Mr. Dell: I do not know what the hon. Gentleman would suggest to meet this point, unless the Government were
  466
  to make a grant for the purpose. The hon. Gentleman knows that the ring fence in respect of corporation tax operates only one way, which might be helpful to certain companies in that position. But it is not unusual in this country's tax history that a company that makes a tax loss without profits to set it against loses its tax loss.
  The early relief for capital expenditure is a very advantageous feature of the tax from the companies' point of view. They will be able to set against their profits 100 per cent. of abortive exploration expenditure and 150 per cent. of capital expenditure on development, production and transportation, together with 150 per cent. of abortive development expenditure—one of the provisions introduced into the Bill following representations from the industry. A feature of this kind is, of course, particularly valuable in an industry in which large gross profits make it possible to absorb large allowances of capital expenditure in a short time.
  The industry will, no doubt, at this moment be making its own calculations of the return on capital at different rates of tax, after taking account of these allowances. In making these calculations, they will no doubt also bear in mind that, under existing corporation tax provisions, they are allowed 100 per cent. of their capital expenditure in the first year and that under the Bill they will also be allowed proportionately allocated interest as a deduction against corporation tax as well.
  Taking PRT——
  Mr. Patrick Jenkin: The right hon. Gentleman just used a very interesting phrase—"proportionately allocated". It has been assumed that the provision under Part II about interest requires that the loan shall have been specifically raised for the purposes of this development and that it cannot be apportioned between this development and some other activity of the company.
  Mr. Dell: The right hon. Gentleman will find, I think, if he examines the Bill, that what I have said is correct.
  Taking PRT and corporation tax together, it is clear, even without knowing the rate of PRT, that the Government will be allowing as a deduction from the oil

  467
  companies' tax liability a very high proportion of their capital expenditure.
  It has often been said that large capital allowances have little effect as investment incentives because business men typically are innocent of the accountants' arts and therefore do not appreciate the real extent of the advantage that these allowances provide. Although I had some momentary doubts when I heard some of the off-the-cuff comments last week, when the Bill was first published, I cannot believe that such a charge can be brought against any of the companies operating on the Continental Shelf.
  The 150 per cent. allowance against PRT of which I spoke includes an uplift or supplementary allowance of 50 per cent., but no allowance will be made for interest. There are various reasons for the disallowance of interest. One is the Government's wish to keep the new tax as simple and as clear-cut as possible, and to avoid the complexities that are inevitably introduced if interest is allowable for tax purposes. A further reason is the protection which this technique offers against erosion of the tax base by the making of inappropriate or excessive payments of interest.
  This matters more for PRT than for corporation tax, because for corporation tax purposes an overpayment of interest may simply mean a correspondingly larger payment of tax by the recipient of the interest; but because PRT is confined to the profits from oil production there could be no question of a corresponding receipt to set against an overpayment which reduced the PRT base. This is a problem which, in theory, it would be possible to tackle by specific legislation, but it would undoubtedly be a great complication for the companies as well as for the Revenue, and this is something which we are anxious to avoid.
  The question has been raised whether 50 per cent. of capital expenditure is an adequate substitute for relief for interest actually paid. I believe that in most cases it will be, but I understand that some companies feel that it will be less than their financing costs. This question is not one which can usefully be discussed in generalities, and if the industry generally, or some companies in particular, would like further consideration to be given to the amount of the uplift, we
  468
  would have to ask for figures as a basis for consideration.
  Mr. John Nott: The right hon. Gentleman knows my interest in this subject. Since the major proportion of the borrowing for the North Sea will be in foreign currency, will he tell the House now the answer to one question? If, for instance, there were to be a shift in the sterling-dollar parity, and therefore the interest charges in sterling terms were to be much greater than is now expected, would the uplift be changed to meet the currency realignments?
  Mr. Dell: We should consider that situation. The hon. Gentleman must bear in mind that, at any rate in my judgment, subject to anything that the companies wish to present to us by way of their calculations, the capital allowances under the Bill are very generous. Therefore, before I enter into any commitment of that kind I should wish to see the calculations of the oil companies themselves as to the actual value to them of these capital allowances, which I believe are considerable, and against that background it is not appropriate at this point to enter into further commitments.
  Mr. T. H. H. Skeet: Could I follow that point? The right hon. Gentleman has said that the uplift of 50 per cent. could be lowered in a subsequent Finance Bill. Although it is in lieu of interest, how can this possibly assist the small company in raising finance in the market?
  Mr. Dell: We have said that the uplift will be 50 per cent. In a moment I shall discuss our view of the stability of these arrangements, but I have made this offer to companies which feel themselves disadvantaged by these arrangements—that, if they come with their evidence, we shall look at it.
  We have been asked why we had to have special rules for PRT instead of applying the familiar corporation tax principles to the new tax. The reason is that the new tax is tailored to the special circumstances and needs of one homogeneous industry. In a tax concerned only with one homogeneous industry it is possible to have specific provision about the inclusion of receipts and the allowance of expenditure. Corporation tax on the other hand covers all trades

  469
  from a sweet shop to a steelworks and it would be totally impracticable to draw up a specific list of allowable expenditure covering such a wide variety of trades.
  What the new PRT rules produce is, of course, a computation of profits on generally conventional lines, and there are distinct advantages, when, as in this case, it is practicable, in having rules so that taxpayers know where they stand. There is also merit, since we are having a new tax on Continental Shelf oil profits, in making it clear that it is a tax in its own right and not, in substance, an additional slice of corporation tax.
  During the Budget debate, I indicated in reply to the hon. Member for the City of London and Westminster (Mr. Tugendhat) that the Government intended there to be a single flat rate of PRT. It would, of course, follow that there might have to be special provisions for so-called marginal fields which could not hope to pay tax at the single flat-rate level. Some commentators and, I think, some companies criticise the concept of a single rate and would prefer a graduated or variable tax. I do not believe that anyone attracted to this solution should underestimate the problems.
  There would, for example, be problems in devising satisfactory criteria, and we might still have to make special provisions for marginal fields. Should the permitted rate of return go up or down as capital expenditure increases relative to profits? One could, of course, decide on a fixed rate of return on capital and then, by means of a variable tax, take from the companies all profits above that level.
  One could devise a progressive tax on the profitability of an enterprise. This is a proposal that was in fact made some years ago in relation to Middle Eastern oil production. The argument was that capital expenditure was determined far more by geological factors than by management efficiency, though it was admitted that there had been notable reductions in costs over previous years which would not have taken place if a firm maximum rate of return on investment had been set for the industry.
  There is advantage in leaving some incentive to efficiency in the industry, particularly perhaps in the North Sea, where costs per barrel of oil are so much greater than in the Middle East; and
  470
  there is danger in a system which could have many of the characteristics of a cost-plus system, eliminating or at least reducing incentive to economy. Would it not simply turn the companies into agents of the Government for the purposes of oil production and tax collection with a commission related to the size of their capital expenditure as their reward at the end of the day?
  Nevertheless, this is not a question on which the Government have finally made up their minds. We shall certainly listen to what is said during these debates and to representations made to us by the industry. The consultations which we are now having with the industry may reveal insuperable difficulties in a single rate, but I must make it clear that the Government have a strong preference for a single rate of PRT. It will be simpler to operate and it may be another advantage of the levels of capital allowance which we are permitting, that it will make it possible to operate a single rate with results satisfactory to both Government and companies. But I am not dogmatic about this. I look to the debate and to the consultations to determine whether we are right in what I have described as our strong preference.
  This leaves us with the problem of the marginal field. In terms of profitability there is likely to be a whole spectrum of fields in the North Sea. Some, even after taxation, will produce very substantial profits. That is the justification for this tax. Other fields will be less profitable. There are possibly some even now that are wholly uncommercial, that is to say, they are not worth private investment whatever the tax position. There may be some fields where PRT at a standard rate would make the difference between a field justifying private investment and not justifying it. Indeed, there may be fields in which even corporation tax alone at its present level might make that difference. These are the marginal fields.
  It is no part of the Government's intention to allow their tax proposals to deter development. We need to get as much oil as possible from the North Sea in the next few years, provided it can be justified against the costs of extraction. This is one reason why we have opened up detailed consultations with the oil companies. We have invited the oil companies to

  471
  let us know the facts about any marginal fields there may be, that is to say, the fields that, in the opinion of the oil companies, would be rendered uncommercial by the application of the provisions of the Bill. We need to know which fields they are, how much production is involved and just how unprofitable they might be. When we have this information we shall be in a better position to see whether any changes are desirable to ensure production from marginal fields, and what forms any concessions might take.
  Mr. Rost: Would the right hon. Gentleman accept that in addition to there being marginal fields, there are also marginal companies, in the sense that many of the smaller exploration companies, particularly those with outside non-oil interests, raise their finance more on short-term loans, whereas the majors are inclined to raise their finance on long-term loans? Is he taking that into account?
  Mr. Dell: Yes. I am aware that there are marginal companies, and I am interested to hear the hon. Gentleman inform me that there are marginal companies engaged in the North Sea. But I have made an open offer to the oil industry. If the companies wish to provide information that they think should influence the final form or rate of this tax, I am open to receive it. I think that has been made sufficiently clear.
  I now return to the subject of marginal fields rather than marginal companies. Before the House is asked to approve the rate of PRT next spring, the Government will complete their review of the position in the light of their discussions with the oil companies. If the need for special treatment for marginal fields is established, proposals for the necessary legislation will be brought forward at the appropriate time either at the Report stage of the present Bill, if we can, or in subsequent legislation.
  In giving this assurance the Government genuinely have an open mind on the question, recognising that there may be a problem here. But it is a problem that can be assessed only when we have further facts from the oil companies. We will not be forced prematurely to a conclusion either as to the need or to the method of meeting it. We must proceed step by step, assessing first the effects of
  472
  the tax in the light of the information for which we have asked, and then proceeding to select the most appropriate solution.
  There are, of course, many techniques available for dealing with this problem. About them I will say simply this: some people may be tempted to blame PRT for preventing the development of fields which are in any case uncommercial and others to use the marginal field problems as a way of securing changes in PRT which would be contrary to wider national interests. We must be very wary of solutions to the marginal field problem which would have the effect either of eroding the overall tax base, even of profitable fields, or of deferring the payment of tax by profitable fields.
  There has been some criticism of the fact that the rate of PRT is not included in the Bill but is left for determination in a later Finance Bill. Some criticism has been to the effect that we are rushing ahead too fast in imposing a new tax even before the oil is flowing ashore. Other criticism has been to the effect that we have been too slow in that we have not decided the rate as well as the structure of the tax.
  As for the alleged rush, it is clearly desirable that we reduce as rapidly as we can the uncertainty under which the industry has been labouring for some time, in particular, since the previous administration made clear that they accepted the PAC recommendation that they should take action substantially to improve the effective tax yield from operations on the Continental Shelf, and even more since the dramatic increase in oil prices a year ago.
  With regard to the delay in announcing the rate of petroleum revenue tax, I believe that no apology is required. In the first place, there would have been some difficulty in announcing a rate of tax before the House had finally agreed the appropriate structure. But the decision as to the rate of PRT will be one of the most important tax decisions made by any Government since the war. The sums of money involved are very large and a modicum of caution is not out of place. It was for this reason that, as I announced during the Budget debate, the Government intended to enter into what is, I believe, a unique consultation where tax matters are concerned.

  473
  I said that I intended to have further early and detailed discussions with the oil companies about their present and future level of costs, and about the effect of the tax proposals on the future profitability of North Sea operations. As I put it to the companies, the consultation is about the data underlying the decision as to the rate of tax.
  This process of consultation has now begun. The success of the consultations, of course, depends on the willingness of the companies to co-operate. But after the meeting I had with them on 19th November I have little doubt that they will do so. I can assure them that the information they supply will be treated as strictly confidential. Only when the process of consultation is completed will the Government decide the rate of tax. So we are not rushing to judgment. I hope, moreover, that it will be possible to make an announcement of our intentions to the House well before the introduction of the 1975 Finance Bill.
  While I cannot at this stage say anything about the likely rate of petroleum revenue tax, I can indicate our views on one associated question which is of vital importance to the companies, that is, the duration of a rate once fixed. This is, of course, a matter for Parliament, and no Government can enter into any binding commitments in relation to a matter which is subject to Parliamentary determination. Our policy would, however, be to avoid frequent changes of the rate but to be prepared to review the rate of tax if substantial changes in the situation were to occur. One such change would be a significant shift in oil prices. We should certainly be prepared to look at the impact of the tax if that were to happen. Indeed, I can speak more generally and I assure the House, as I have assured the industry, that if there is a substantial change in the circumstances relating to the extraction of oil on the Continental Shelf, the Government will be ready to review the rate of tax.
  I have said nothing about the changes which the Bill makes in the corporation tax treatment of North Sea oil profits. I think that I discussed these in sufficient detail in the Budget debate and there is no need to repeat what I said there. I should, however, before concluding, refer briefly to an article in today's Daily Telegraph by the right hon. Member for
  474
  Wanstead and Woodford (Mr. Jenkin), which I read with great interest. It was a long attack on the policies of this administration in respect of North Sea oil, ending with the sentence:
  "The Socialists are indeed gambling with our life-blood."
  That, I remind the House, comes from the spokesman of the party whose Government in August 1971, in the fourth round of licensing, the most damaging episode in our post-war industrial history, did not gamble with the life-blood of our country but gave it away for a pittance. It comes from the spokesman of a party which, two-and-a-half years thereafter, could not make up its mind on how to rectify its own errors, which had made no statement at all before going out of office except to reject the idea of a ring fence, thus permitting more of our life-blood to drain away.
  Mr. Patrick Jenkin: No, no, no.
  Mr. Dell: I know that the right hon. Gentleman says "No, no, no." Unfortunately, the words of the then Financial Secretary to the Treasury are clearly on the record. He was also the spokesman for a Government who at the time they went out of office had not ruled out participation—though we do not hear much about that now—participation for which, no doubt, they would have been prepared to pay, though listening to what the right hon. Gentleman says on that topic, we are fortunate that the financing of the payment is not in his hands.
  If the whole idea of participation is, as the right hon. Gentleman now says, so absurd and so costly, why had they not ruled it out when they went out of office? The difference, apparently, is only the difference between a minority and a majority interest.
  I shall not ask the right hon. Gentleman for a little uncharacteristic humility on this topic. At any rate, he will understand if we do not regard his criticisms as the best informed we are likely to receive.
  Finally, may I invite the House not to underestimate the problems of enacting a structure of taxation appropriate to the exploitation of North Sea oil? The Bill that the Government have presented to the House encapsulates our view as to the right structure but we will listen to

  475
  criticism. At any rate, we can take one comfort. The decisions, though difficult, about this tax are taken in the comfort of offices, on the green benches of the Chamber, and in the more moderate ease of a Committee room upstairs.
  May I end by paying tribute to those who will not be taking part in our deliberations but will be actively engaged in the dangerous business of bringing the oil ashore for us to consume and to tax? Their way of life appears no less risky than visiting the moon, but I suggest that it will bring rather more benefit to mankind, and, more specifically in this case, to the people of Britain. I think that today these men, of different nationalities, should not be forgotten.
  4.46 p.m.
  Mr. Patrick Jenkin: The House will have listened to the Paymaster-General's speech with great interest because much of what he said will have been refreshingly new to the House and to the country outside. He has displayed this afternoon a remarkable flexibility, compared with his attitude only a week ago when he introduced the Bill and gave a Press conference, and with the attitudes prevailing on the benches opposite during the last two or three years. What we heard today was in remarkable contrast to all the heady accusations made by Lord Balogh, and even by the Prime Minister, who apparently spent much of the election period making fun at the expense of the international oil companies.
  The right hon. Gentleman was at one point, I thought, donning the mantle of Pooh-Bah when he said that he, as Paymaster-General, had seriously considered a proposal for barrelage tax put forward by a Select Committee under the chairmanship of the right hon. Member for Birkenhead! I am glad that he rejected it, as we rejected it, as I think it would be unduly harsh and difficult to operate.
  However, a view persists on the benches opposite—and we had it at Question Time on Monday—that the history of North Sea oil is one of almighty scandal, unrivalled since the South Sea Bubble. It would perhaps be right—particularly as the right hon. Gentleman allowed himself for a few moments to don horns and a tail and appear in his earlier self—to say a word about the matter. The truth
  476
  is entirely the contrary. This has been one of the most outstanding success stories in the post-war period.
  A brief 10 years ago there had not been one cubic foot of gas discovered in the Continental Shelf; there was not one barrel of oil whose existence was even suspected. Today, Britain is virtually self-sufficient in natural gas, and we confidently look forward to self-sufficiency in oil by 1980. From nothing, the oil industry—both the United Kingdom firms and the international industry—has reached the point where it is now investing over £500 million a year or more in United Kingdom waters. If I may say so, I liked the parallel with the railway boom of the 19th century. It has many features in common with that boom.
  Moreover, this investment is being carried out in the face of physical conditions—wind speeds, wave heights, ocean depths, distances from the shore—which have absolutely no parallel in the whole history of oil exploration. The industry has had to pioneer new techniques in deep water diving, sub-sea completions, pipe jointing, and so on. The industry has risked huge sums. "Risked" is the right word, for when it started no one knew that anything was there. It costs up to £2 million to drill a dry hole. It costs £30,000 a day to hire a pipe-lay barge.
  British Petroleum recently installed—we all marvelled when we saw it on television—two of these vast steel jackets which, in themselves, are miracles of engineering. Their subsequent operations of the piling, fixing the modules on top and the setting up of the equipment to drill the production wells are costing that company £110,000 a day merely to keep the men and equipment there. Allowing for bad weather, the actual operational days have been costing them £400,000 a day.
  The North Sea has attracted oil companies and, more important, their scarce equipment and their skills from all over the world. Even now, things may go wrong. We saw in the papers how the French accidentally dropped one of their jackets, destined for the Frigg field, some miles short of its destination. They face the most formidable problems in refloating it and locating it in its intended position. This may put into perspective the achievements of the oil companies based in this country.

  477
  In the face of this swift development and this astonishing technical expertise, it is simply an insult to the firms and to the Departments under whose aegis they have operated to characterise the whole exercise, as some have done, as a giant swindle or, as did the Minister of State, Lord Balogh, as "the Great Oil Bungle". I recognise that the attacks refer, not to the technical achievements of the companies, but to fears that the industry would be allowed to get away with vast profits—I shall come to that in a moment—and that the people of Britain would have no return from all this activity.
  Dr. Colin Phipps: There is one aspect to which the remarks of Lord Balogh apply. I think the right hon. Gentleman would accept that the previous Conservative administration had to stop transfers in licences taking place at the end of last year because of the bargaining, bartering and outright selling of licences which was taking place by companies which had no pretensions of being bona fide explorers in the North Sea but were merely small outfits, generally foreign, which were given these licences by the Conservative Government and were then selling them on, pocketing the money and going back to Houston.
  Mr. Jenkin: I have no doubt that when one is dealing with an entirely new industry advancing at an enormous pace, anybody who has the ability to see nits as they come over the horizon can pick out individual points where things may have gone wrong. But to characterise the whole enterprise as a giant oil swindle is to insult all concerned.
  Let me put it on the record: no vast profits have been earned; there have been no profits at all yet from oil, because the oil has not begun to flow; only fair and reasonable profits have been earned from gas. No foreign companies have salted away the nation's heritage. On the contrary, they have invested huge sums of their own capital; they have provided vast quantities of sophisticated equipment; they have brought skills and know-how that it would have taken us years and years to develop ourselves.
  Nor is it true that foreigners are preponderant. In July the Secretary of State for Energy—no doubt, he, too, with the Foreign Secretary, is attending another place—said in reply to a parliamentary
  478
  Question that the British share of the proven oil reserves in the North Sea amounted to 50 per cent. of the total. That share will have risen since then as a result of the discovery by BP of the Magnus and Andrew fields.
  Mr. Dell: It has never been my view—as was made absolutely clear in the Public Accounts Committee Report—that the oil companies were to be criticised for these episodes. What was to be criticised was the incompetence of the previous Government.
  Mr. Jenkin: I am coming to the position of the previous Government. The right hon. Gentleman seems to have gone on perpetuating the myths which he absorbed while Chairman of the Public Accounts Committee and to have taken absolutely no note of anything that has happened since.
  Of course, it is true that with the rise in the price of oil since 1970–71 the potential profitability is greatly enhanced. With the benefit of hindsight, one must say that it is just as well that it has risen, because if oil were still available at the 1970–71 price it would be doubtful whether any of the North Sea fields would now be economic. As it is, the United Kingdom is one of the few nations in the world which can confidently look forward to self-sufficiency in oil within a few years.
  I hope that the House will feel it right that I have spent a moment or two in reminding ourselves of what an immense amount has been, is being and, pray God, will continue to be achieved—almost the whole of it by private enterprise. Britain's position today, bleak as it undoubtedly is, would be utterly catastrophic if none of this activity had taken place.
  I agree with the Paymaster-General that this oil gives no permanent salvation for the British economy. We must still correct the deep and long-standing deficiencies in our performance. Indeed, I see the rôle of oil rather like the place of manna in the book of Exodus. In no sense did it relieve the wandering tribes of Israel from the need to find the promised land and work out their own salvation. What it did was to keep them alive at a critical juncture in their history so that they could continue the search. So, too, with our oil. When it flows in quantity, it will be a vast relief to the

  479
  balance of payments and a significant boost to the economy. But it is no automatic passport to eternal and effortless prosperity.
  However, given that it will relieve our balance of payments and provide opportunities to get our economy right, two things are essential. First, further delays must be kept to the absolute minimum. As I said in the debate on the Queen's Speech, every day's delay in reaching self-sufficiency costs this country £10 million across the balance of payments. Second, there must be no avoidable discouragement put in the way of further exploration and investment. The life of an oilfield may be as little as six or seven years for a small one, perhaps up to 20 years for a large one, and even then with only four or five years at peak production.
  If the United Kingdom is to enjoy a period of self-sufficiency lasting more than a mere decade or so, we need a sustained effort in drilling for new discoveries, exploiting the smaller and more marginal fields, and engaging in secondary and tertiary recovery, with the higher operating costs that that implies.
  Neither is it true, as Lord Balogh has said, that North Sea investment is investment virtually without risk. There are still huge areas unexplored. Nobody knows the extent of the hydrocarbon deposits, if any exist at all. I note with interest that the Under-Secretary, the hon. Member for Lanarkshire, North (Mr. Smith)—I am glad to see him here today—said at the conference on the environment on Monday that further discoveries would undoubtedly be made and it was hoped that some of these discoveries would
  "eventually prove to be of the same order as those finds we have made so far."
  I hope he is right. But he cannot be certain, as I am sure he will be the first to admit. Adrian Hamilton, who was reporting on that conference, detected some element of whistling in the dark, and in his report he commented that
  "Mr. Smith's remarks came at a time when the Government is known to be becoming increasingly concerned at any possible slow down in the rate of development or exploration off shore."
  I think that the whole House will have recognised echoes of that concern in the Paymaster-General's speech today. We
  480
  welcome it. If the Government are at last beginning to realise the risks which their policies may be running, it is not a moment too soon. If Ministers are now aware of the deepening anxieties in the oil industry and in the financial institutions which lie behind them, perhaps that is the beginning of wisdom. But it remains to be seen whether this newfound concern is reflected in the changed attitudes and policies.
  I have laid stress on this aspect because it is the background to the Bill. The Bill is only part of the Government's total approach which I do not intend to discuss, or seek again convincing arguments for participation which we have never yet had from any Minister. Neither do I intend to explore the question of non-fiscal controls, even though I am tempted by the astonishing proposition made on Monday by the Secretary of State for Energy, who said:
  "… we can have an effective depletion policy only on the basis of public participation."—[OFFICIAL REPORT, 25th November 1974; Vol. 882, c. 5.]
  That statement is sheer nonsense. Participation is wholly irrelevant to the proper control of depletion. But those arguments must await the further Bill to be introduced next year. Examination of the Bill shows, as the Paymaster-General said, that all the policies are interdependent, and we must remain constantly aware of the rest of the Government's package.
  I turn to the Bill. The Paymaster-General will no doubt recognise where the Opposition have stood and where we stand today, but I want to make the Conservative Party's position crystal clear.
  First, we accepted, more than two years ago, well before the Select Committee's report, the need for additional and effective taxation of profits from the Continental Shelf. I say that advisedly. I was a Minister at the Treasury at the time, and I have since taken the trouble to remind myself of what we were engaged on then.
  In his Budget Statement on 6th March 1973, Anthony Barber made that position abundantly clear when he said that
  "profits from North Sea Oil will probably not arise until 1975, but I can assure the House that the Government already had under consideration the other important questions affecting licensing terms and the Government's

  481
  'take' from operations on the United Kingdom Continental Shelf to which the PAC has drawn attention"—[OFFICIAL REPORT, 6th March 1973; Vol. 852, c. 264–5.]
  The argument that the previous Government were heedless of the need for a higher "take" until the quadrupling of oil prices forced it to their attention is without foundation. I hope that we shall hear no more of it.
  The Minister of State, Treasury (Mr. Robert Sheldon): The right hon. Gentleman will.
  Mr. Jenkin: If the hon. Gentleman is determined to conduct this debate on the basis of myths, we shall not arrive at the kind of truth that the Paymaster-General was seeking, nor will the hon. Gentleman get the kind of response that he seeks from the oil companies. I advise him to pay attention to what has been said and not go on wallowing in the propaganda of Transport House.
  Mr. Sheldon: Does the right hon. Gentleman consider that the conclusions reached by the Public Accounts Committee, an all-party Committee attended by many Members of his own side, belong to the realms of propaganda, too?
  Mr. Jenkin: That Public Accounts Committee made two recommendations. Surely the hon. Gentleman knows what they are. One recommendation was substantially to improve the yield. That aspect was under study, and was reinforced by what my right hon. Friend the then Chancellor said in March 1973. The second recommendation was to look at the question of the artificial losses, a suggestion that we had under consideration. My right hon. Friend Mr. Anthony Barber accepted it within days of the issue of the Public Accounts Committee report.
  Those were the only recommendations made by that Committee. Both dealt with matters that the Conservative Government had firmly under review. I say that advisedly. I was Chief Secretary to the Treasury at the time. To go on pretending that nothing was happening until the right hon. Gentleman produced what, I agree, is a good and well-constructed report is to wallow in myth. I hope that the Minister of State will not do that.
  Mr. Dell: There is no need to pretend that the Conservative Government did not have these matters under consideration. If I may speak from memory, and without authority, if the PAC had found out that the Tory Government did not have those matters under consideration, that would have been a further subject of criticism. The main burden of the Public Accounts Committee's report was the utter incompetence shown by the Conservative administration during the fourth round of licensing.
  Mr. Jenkin: With respect to the right hon. Gentleman, the whole of the superstructure of myth that has been built round that statement rested on the proposition that the oil companies were going to get away with murder, until the right hon. Gentleman came into office. That is wholly untrue, and I hope that both sides of the House will accept that.
  Thirdly, we had certainly not ruled out the concept of the ring fence for corporation tax purposes. Whatever may have been said by my hon. Friend the Member for Worthing (Mr. Higgins) during the Public Accounts Committee debate—and here again I speak from personal knowledge—as recently as February, this year during the last weeks of the Conservative administration, Mr. Tom Boardman, my successor as Chief Secretary to the Treasury, and Mr. Barber, the then Chancellor, were discussing exactly how a ring fence might properly be set up.
  My hon. Friend the Member for Worthing (Mr. Higgins) said this in a debate on a report from the Public Accounts Committee:
  "it will be difficult to deny to the oil companies normal reliefs which are available to groups of companies".—[OFFICIAL REPORT, 3rd December 1973; Vol. 856, c. 1029.]
  But no decision had been reached.
  If the Paymaster-General persists in taking that—the tail end of a long Public Accounts Committee debate—as an important statement of policy on tax, he is deluding himself. It is certainly not the Opposition's intention to challenge the main concept of the ring fence during debates on this Bill, although we shall wish to examine the details with great care.
  Fourthly, we do not challenge the need to deal with artificial transfer prices.

  483
  Originally, we thought that the concept of an administered price might be one way of dealing with it, but the Opposition are certainly prepared to consider the extension of Section 485 of the Income and Corporation Taxes Act.
  I repeat that if debates on the Bill are to proceed sensibly and rationally all parties should start by recognising the extent of the common approach which exists now and which has existed on this important matter for a number of years.
  For this reason, it is not my intention to advise my right hon. and hon. Friends to divide the House tonight. This is the Second Reading. We accept the principle of additional taxation and, if properly levied and accompanied by proper regulatory controls, it renders nationalisation, the BNOC and all the other Socialist nonsense totally unnecessary.
  However, there the kissing has to stop. I entertain the gravest doubts if, in the PRT, the Government have chosen the right instrument to achieve their purpose. The central features of the PRT are, first, the flat-rate tax somewhat qualified by what the Paymaster-General said this afternoon, and we welcome his more open mind. I think that a flat-rate tax would be wholly unsuited to the infinitely variable circumstances of the Continental Shelf, but I shall return to that point in a moment. It draws no distinction between the high-cost, low-profit marginal field, and the low-cost, high-profit prolific field. If it leaves a reasonable profit from the high profit field it simply makes the marginal field uneconomic, and vice versa.
  The second feature is that the PRT is to be a prior charge—that is to say, before corporation tax. So it could be paid by a concern even if it had no profit on its offshore operations—that is, profit as normally computed for corporation tax purposes.
  Thirdly, the PRT would be levied field by field and so paid by a company with revenue from field "A" with no regard for the need for a cash flow to finance investments in field "B" and to explore for oil in fields "C", "D" and "E". There may well be a case for separate computation, field by field, but it is far from clear that it is right to treat each field as a separate taxable entity.
  484
  Fourthly, by departing from the normal corporation tax expense rule, the Government will levy tax on profits without allowing for the costs necessarily incurred in earning those profits. The proposal to disallow interest on finance raised for investment, as it stands at present, spells ruin for many of the smaller companies which depend heavily on outside finance.
  Again, the Paymaster-General indicated that he has a less than closed mind on this, which we welcome, but it is not a question of increasing the uplift. That will be no solution to companies which have incurred interest over a long period—possibly seven or eight years—before they earn a profit. There is no alternative to allowing at least an option for interest payments to be allowed in place of the 50 per cent. uplift. As provisions stand in the Bill, they operate entirely capriciously between different companies with different financial arrangements.
  Then there is the question of the rate. The right hon. Gentleman went to great lengths to explain why he will not tell us now—we are grateful for the consultation—but, in an article in The Guardian this was described as
  "even less than Hamlet without the Prince. It is Hamlet without Gertrude as well. …"
  People simply cannot do their sums until the rate is known and the uncertainty caused by the absence of the rate is one of the major reasons for the hesitation and anxieties now so apparent. However, it appears that the Government do have some idea about the rate.
  What did the Sunday Times mean by saying:
  "The Treasury is coyly circulating worked examples based on rates of 45 per cent. and 65 per cent. This produces a Government take of 75 per cent. to 80 per cent. of oil revenue, but based on highly favourable assumptions."
  We are entitled to know a little more about those figures. Perhaps the Paymaster-General will not be altogether surprised that one or two of my hon. Friends and I have been able to get hold of the figures that the Treasury has prepared. The assumptions are highly questionable; for instance, the figures assume that the oilfield has a 20-year life, but that is to say it is a major and very exceptional field.
  The figures do not take into account the fact that the Bill disallows interest

  485
  but simply takes costs as they stand. They include all the onshore expenditure, much of it expressly disallowed in the Bill. The figures assume the 50 per cent. uplift on all expenditure. As the right hon. Gentleman knows, the Bill specifically restricts the uplift to only certain expenditure.
  The most questionable of all the figures assumes that the price of oil and the cost of development will move in parallel with the rate of inflation. Offshore costs have doubled in the past two years and oil prices might well fall.
  All I would say about the right hon. Gentleman's figures at this stage is that if he is going to base his ideas of PRT rate on those figures, he is quite right to be coy about them. But they show a disastrous failure to understand the complexities of the oil industry, which is perhaps more serious.
  Regarding the basic flaws in the Bill as drafted—the flat-rate, field-by-field prior charge—this is, quite shortly, the wrong structure. It is a structure which forces one to conclude that the Government place a higher priority on securing revenue for the Exchequer than on securing oil for the country. But it is not as simple as that, as there is more than a risk that if the Exchequer is too greedy for cash, it will end up by getting neither the oil nor the money.
  I was glad to hear what the right hon. Gentleman said about the question of balance. This is vital, but the Bill as it stands does not have the right balance. If it is unamended, it will put dangerously at risk the future of our oil supplies. I repeat, the central reason is that the flat-rate prior charge tax will make the marginal fields uneconomic.
  This is no empty threat. I beg the Government to believe what work is already slowing down on fields hitherto regarded as commercial. If I am asked which fields, I will tell the Government, "Go and talk to the companies that are involved in the Hutton and Heather fields and see what they have to say". Companies cannot be expected to invest if they do not see an adequate return at the end of the day. For pity's sake do not let us have a repetition of what the Chancellor of the Exchequer did with the whole company sector in the earlier part of this year—swingeing tax increases
  486
  in March that only had to be cancelled out by tax reductions in November as liquidity crashed.
  For oil, the consequences would be infinitely more serious. The delays would be enormously costly to the balance of payments, and the withdrawal of rigs and other equipment would be virtually irreversible. Exploration, appraisal, delineation, production platforms, pipelines—there is a rhythym and momentum in the development of these oilfields that is vital if it is to be carried through successfully. The huge variations in the size of reserves of different fields, in the nature of the geological structures, the distance of the fields from land and the distances from other fields—all these lead to huge differences in costs and, therefore, of profitability.
  For instance, the range of capital costs necessary to bring ashore a barrel a day ranges from about £750 at the low end to getting near to £3,000 for every barrel-a-day production. That is a factor of between four and five times in differences in the capital cost and, of course, with even larger differences in profitability.
  A flat-rate prior charge tax is the wrong weapon. Instead a variable excess profits tax should have been introduced. Such a tax would be levied on excess profits above a given standard. It could be levied at progressive rates as profits exceed the standard. One standard by which to set thresholds, obviously a difficulty referred to by the right hon. Gentleman, might well be a given return on the firm's investment in the field. Profits in excess of that would trigger off the next slice and so on up the scale. Or it could be triggered off by the return on investiment by all the firms engaged in a particular field.
  Mr. Russell Kerr: Allowing that many of the companies engaged in the exploration and development of these fields are multinational corporations, is not the hon. Gentleman being a little optimistic in suggesting that the tax-gatherer will be able to get his hands on the profits which they are making?
  Mr. Jenkin: There is absolutely no reason why the Government cannot set up the machinery with this tax, and nothing we would seek to do would

  487
  weaken that machinery because if taxation is to be the principal weapon it must be effective. But there is no reason why it should kill off the oilfields, and that is what I am afraid of.
  As the Economist said in an article last week:
  "A variable rate would allow the Government to cream off the fat profits from the low-cost prolific fields without penalising the development of the marginal fields. A flat rate usually accomplishes neither of these aims. Fat profits are made on the prolific fields and the poorer fields go undeveloped."
  A variable tax, if properly devised, would be a far more flexible weapon. It would be a much more equitable tax and might well in the end raise more revenue. There are two grounds for believing that. It would ensure a proper take from the high-profit low-cost fields, higher than could be achieved with a flat-rate tax. It would ensure that the more marginal fields, as they were discovered, would be brought into production and the Government would get some revenue from them.
  The Government have shown themselves today not to have a completely closed mind on these matters. That is a welcome change. I urge Ministers, whatever their preferences, not to be stiff-necked about this. It is only eight or nine weeks since the consultation on the details of the tax started in earnest with the letter from the Inland Revenue, and only 15 days since the Bill was published, giving the industry the details of the tax. The structure of the tax is one of the three or four key components in a policy which will determine not only the success or failure of the oilfields but the success or failure of the Government's entire economic strategy.
  There are many features of the Bill which we shall want to discuss in Committee, in addition to questions of basic structure. We shall press for loan interest to be deductible. We shall press for disposals and purchase of oil interests to be included. We shall seek to preserve the hallowed principle of the confidentiality of the affairs of the individual taxpayer. We shall seek to ensure that the smaller British independent companies, such as Berry Wiggins (Sea Search) Ltd., Cluff Oil Ltd., Phipps Oil Ltd.—I am glad to see the hon. Member for Dudley, West (Dr. Phipps) is in his place—Tricentrol
  488
  North Sea Ltd., will not be driven to the wall, but can make a proper contribution, indeed, thrive and prosper, as part of the nation's energy industries.
  We shall not be a factious or destructive Opposition but I warn the Government that I do not see how we can possibly complete the Committee stage before Christmas. It is not that we cannot sit long enough, but that the industry does not have long enough to consider the whole affair and consult with the Government so that the Government may bring forward the necessary amendments. It is far too important a matter to rush through in a matter of weeks.
  If the Government, despite representations, remain stiff-necked and adamant in the face of convincing evidence that a tax in this form and with these features, at any likely rate that could be imposed, would cause severe damage to the national interest, then we shall have no alternative but to press our opposition to the limit. I hope it will not come to that, for there is much common ground. But if it does, that is where our duty will lie.
  5.19 p.m.
  Mr. David Steel: The right hon. Member for Wanstead and Woodford (Mr. Jenkins) will forgive me if I say that he wasted an unconscionable part of his speech in trying to go back over the history of the previous Government, what they did or did not do, and what various people said they had or had not done. If we are to concentrate our minds on the maximum benefit which may be derived for this country, from now on we ought to get on to discussing the future and forget about the past.
  My colleagues and myself have consistently, from the beginning, taken the view that successive Governments have not been as alert as they should have been in their forward planning, both in the general development of oil and in the public benefits that could be obtained from a financial point of view. Indeed, the Paymaster-General will accept that the Public Accounts Committee went back not only over the period of the Conservative Government but over the period of the previous Labour Government as well. Therefore, I think it best that we let all that go to one side and set about now in Parliament to try to get the policy

  489
  which will put right the neglect of the past. My colleagues and 1 welcome this measure and we shall support it, although, naturally, we have questions to raise.
  In bringing forward an Oil Taxation Bill it is extremely important that we reaffirm in Parliament, and, perhaps more important, reaffirm outside Parliament, that revenue from the North Sea and, indeed, the development of the resource itself, will not, as the two Front Bench speakers have said, be the salvation of this country. I wish that we could maintain that stance in all political walks of life outside the House as well. I believe that the Chancellor of the Exchequer, in the heady days of February, was guilty of giving the impression that if only somehow we could muddle through until about 1980, everything in the garden would be lovely. Of course it is not true, and the fact is that, through our overseas borrowing, we have mortgaged our future and mortgaged the benefits which we shall derive from North Sea oil to such an extent that I do not think anyone can argue the case that oil will be the solution to all our ills.
  What I say in a United Kingdom context I say in a Scottish context as well, and I think that hon. Gentlemen in the Scottish National Party are guilty of the projection to the public of the view that somehow there is a magic solution lying under the North Sea. I think that all we can do is to accept that this find and its development will give this country a breathing space and thereby enable us to get out of our industrial and economic problems. If we make use of it, well and good. But if we do not, we shall be no better off at the end than we were at the beginning.
  I believe it right that we should take account of the obvious difficulties outside the control of the Government in the international pricing of oil. Just as a year ago the price of oil went up artificially for political reasons, so, equally, the price of oil could come down artificially for political reasons, or, if not come down, at least remain stable, which in the nature of inflation comes to the same thing. Therefore, with the rising cost of development, I think we need to be acutely aware of the danger of working out sums on paper about the possible
  490
  benefits to this country in the present situation when we do not know what the situation may be in a year's time.
  Mr. Russell Kerr: I agree with the general tenor of the hon. Gentleman's remarks that we ought not to regard this as an Eldorado just around the corner. But, equally, is he aware that it has recently been estimated that the present level of manufacturing profits in this country over the past couple of years will probably be more than matched by the net profits of North Sea oil beyond 1980?
  Mr. Steel: Yes. The hon. Gentleman is adding to the line of argument that I am adducing.
  I agree, however, with the case made from the Opposition Front Bench against the inflexibility of the Bill and, indeed, I thought it rather extraordinary that the Paymaster-General appeared, even before the Bill has had its Second Reading, to concede that point. If the Bill were as flexible as his speech, we might be a good deal happier, but the proposal in the Bill for a flat rate of tax is not realistic. I think that the geographical, geological, financial and technical conditions facing operators in, say, the Forties Field or the Argyll Field make a nonsense of the fiat-rate tax.
  In his speech this afternoon the Paymaster-General said more or less, "Never mind what it says in the Bill. We shall introduce a whole series of exceptions and a marginal tax". In other words, before we have even got the Bill on the statute book the Government are considering ways of minimising the basic damage done here. I suggest that it would be far more constructive to consider whether the approach is right in the first place. I am advised that one small operator sold out in the Argyll Field to a larger operator because of the restrictive financial policies being pursued by the Government. We would far rather see in the Bill a sliding scale—admittedly it would be difficult to work out—with rates which could range as widely as from 20 per cent. to 80 per cent. I believe that both Norway and Canada have had experience of scales of that kind.
  In giving a general welcome to the Bill, may I say that the policies adopted

  491
  over the past few years which were scrutinised by the Public Accounts Committee of which the Paymaster-General was Chairman when it reported, have served to illustrate the appalling ignorance that has existed in Government circles about all the matters relating to the oil industry. It has become obvious that the Government have been far too dependent on the oil companies for information in the past few years and they have been unable to take in all the data that have been provided.
  We have all argued all along that the Government would have been in a better position to influence events in the North Sea—the rate of development; the scale of development; the places of development on shore, and so on—if they had recruited a small team of world-class oil experts modelled on, say, the Alberta experience and the conservation division there.
  In our view, it would be much more sensible to spend, say, £1 million on recruiting a couple of dozen top quality international experts and giving them all the facilities they need than to proceed with the proposal for setting up a cumbersome international oil corporation at unknown expense.
  The Liberal Party has never been doctrinaire on the question of public ownership. We have always accepted that in the matter of oil there could well be a case for participation. The case has to be made out on pragmatic grounds, and I do not think that it has been. We believe that the combination of a properly qualified staff, imaginative development legislation and a flexible tax policy, properly combined, is the right way to harvest the benefits from the North Sea for our people.
  Dr. Phipps: I endorse the hon. Gentleman's remarks about the nature of the staff available to the Government. Will he accept that there is a distinct difference between the duties of such staff advising the Ministry and those advising a company with a direct working participation in oilfields? They are in a position to know more about the actual workings and are not there to give the kind of advice to Governments that a specific Government Department requires. There is a place for both, and the Government have tried to develop their oil policies in that
  492
  direction. Will the hon. Gentleman accept my endorsement?
  Mr. Steel: I accept that reservation, except to say that if, right at the beginning, the Government had set out to recruit unashamedly from the oil companies and others in this field, they would have been better advised. But I am going back over history again, which I said we should not do.
  The present Government's approach will not strike the correct balance between the commercial interests of the oil companies and the national interest. We have to remember, when looking at the rigorous taxation that might be imposed on multinational companies, that we also have our own British multinational companies exploring in Alaska and elsewhere, and other people will be looking at the sort of taxation we levy on their companies. One of the companies in which the Government have a direct interest is British Petroleum.
  I regard this part of the Government's policy as basically correct. I hope that it will be improved during the Bill's passage through the House, but we still have doubts about the wisdom and effectiveness of the total package of Government policies, of which this is an important part.
  5.29 p.m.
  Dr. Colin Phipps: I am grateful, Mr. Deputy Speaker, for having caught your eye. The competition on this side of the Chamber has not been particularly strong today.
  I should begin by announcing interests of my own. They have already been referred to by the right hon. Member for Wanstead and Woodford (Mr. Jenkin). I do not know whether he was correct in referring to Phipps Oil or the hon. Member for Dudley, West's Oil. I am a director of two companies involved directly in the North Sea, and a director of a third, a consultant company, advising companies involved in the North Sea.
  I wish to refer to the effect of the Bill as drafted not only upon the international companies but upon some of the smaller, indepedent companies that have been developed in Britain during the past few years.

  493
  I welcome the principle of the Bill, but I should like to examine it in the light of certain objectives which I believe the Government have, and in the light of the effect that the Bill is likely to have upon these objectives.
  I would name these objectives as, first, encouraging the most rapid development and exploitation of our resources; secondly, assuring a proper United Kingdom participation, both in terms of national participation and fiscal participation; thirdly, encouraging the continued presence of the international oil industry; and fourthly, further to encourage the development of an independent British—not merely Scottish—oil industry within the United Kingdom. To some extent, these four objectives are incompatible with certain elements of the Bill, and it is to that that I should like to address myself.
  I had thought that I fully understood the principle objectives of the Bill when I listened to my right hon. Friend during the Budget debate. I then made the gross error of getting a copy of the document, and I confess that beyond about page 5, when I got to the fifth schedule five times removed from Clause 1, understanding left me. Therefore, I have referred to an excellent document put out by the Inland Revenue on the Bill, but I may thus be misinterpreting some of my right hon. Friend's points because I have not understood the complexities of the Bill as thoroughly as I might have done if I had studied it in its full form.
  First, I should like to deal with the question of one field, taking the taxation on a field-by-field basis, because I believe that this has a direct relevance to one particularly contentious point, which is the disallowance of interest. If one considers the taxation in terms of one field, one realises that it is difficult not to make the assumption that the capital invested in that field is in its nature loan capital. It does not matter whether it is a wholly-owned field of a larger corporation. It is the fact that one is considering one field that is part of a much larger complex. It means that, in terms of the company that owns that field, one is looking at what is, in essence, a loan situation.
  There are a number of difficulties inherent in the disallowance of loan interest.
  494
  The companies that are seeking to develop a field must, by and large, borrow virtually 100 per cent. of the moneys that they require for field development. Therefore, they have to approach various financial institutions—in particular, the banks—to obtain sufficient capital to finance the development of their fields. The financial institutions, very properly, will want to have some form of security if they are to make such a loan.
  I accept that the fact that we do not know the rate of the tax complicates this matter, but, even if the rate were known, we are in a situation in which a bank or financial institution lending money does not know for certain that a company will have enough cash left over after paying the PRT to have an adequate profit to finance its on-going purposes.
  It is a high-risk development. Banks are aware of the fact that if they put their money into developments of this kind it is at high risk. They are, therefore, likely to ask more than standard rates of interest, but even if it were 12½ per cent—and let us assume that that is the rate of interest levied—a company that was benefiting from a 50 per cent. uplift could, in effect, be saying that it was in the position of being able to offset that interest for a period of four years, for four years at 12½ per cent. would add up to 50 per cent.
  The point which will concern the companies and the lending institutions is what happens to the interest after the fourth year. As I understand my right hon. Friend's statement—and I hope he will correct me now if I am wrong—this interest will be allowable against corporation tax. I gather that my right hon. Friend agrees and that we shall have the situation where the interest will be allowable against corporation tax. After the fourth year companies will effectively not be able to allow interest against the PRT. I think the banks will view such a situation with considerable nervousness because they will be in the position of not knowing what final cash flow will be available to cover their interest payments. There is a strong case for considering putting interest as an allowable item prior to PRT.
  I think I understand my right hon. Friend's reluctance to do this, particularly

  495
  when it may be concerned with an inter-company transaction where the rate might be at 17 per cent. or some such high level. Nevertheless, I would have thought that that was controllable, and my personal preference would be to see the interest allowable and controlled prior to the tax being levied.
  I turn now to consider the offsetting of allowable exploration expenses. It is not clear either in the Bill or in the Inland Revenue document what these would comprise. Do they comprise expenses incurred within the whole of the ring fence of the United Kingdom, or merely exploration expenses incurred in the discovery of a specific field?
  I can assure my right hon. Friend that it will be extremely difficult to distinguish between exploration expenses incurred in discovering a particular field and those incurred within the whole of the United Kingdom. It might be possible to distinguish as between the Celtic Sea and the North Sea. But within the North Sea that is not possible because all the information gathered there from exploration activities, whether geophysical or drilling information, is part and parcel of the data available in determining where oil accumulations are likely to lie and in selecting drilling points.
  It will be unreasonable to restrict offsetting abortive exploration expenses within the ring fence so that they are allowable only if they are directly related to the accumulation which is being exploited and developed. This will involve considerable problems of definition. Perhaps I have misunderstood this aspect of the Bill, but it is not clear whether all abortive exploration expenses within the ring fence will be allowable. I believe they should be.
  Mr. Dell: Abortive exploration expenditure is an exception to the field-by-field basis and can be offset against the first field.
  Dr. Phipps: I am grateful to my right hon. Friend for that explanation. It was a point I had not fully understood in the Bill.
  The question of the ring fence has different implications for multi-national companies than it has for the small British
  496
  independent companies attempting to establish themselves in the industry. I read the report of the Public Accounts Committee with great interest and I thought that the conclusions that my right hon. Friend and his colleagues came to were fully justified in terms of multi-national oil companies operating internationally. But I would suggest that this kind of special transfer pricing and other such expedients which have been used by the multi-national oil companies are no different from expedients used by any multi-national companies.
  This is not specifically an oil problem, although it has specific oil applications particularly because of such things as offset prices. It applies to multinational companies in general. By tackling the problems of oil companies specifically we shall be inhibiting the small independent British oil companies, the kind of companies with which I am involved.
  Perhaps I may develop a little the philosophy of oil exploration, and in so doing illustrate what I mean. Oil exploration, in spite of the extremely highly developed technological methods now available, still has a quite definite success ratio. That ratio varies internationally from about 1 in 6 to about 1 in 10, and it is the aim of all multinational oil companies to try to cover this difference as much they they can.
  There is something of an assumption on both sides of the House that all the oil companies in the North Sea have to do is drill a hole and find an oilfield. It is felt that the difficulty then arises in finding money to develop it. The problem, in fact, is finding an oilfield to start with. Many companies drilling in the North Sea will never find oil. The international industry is well aware of this and so it tries to cover the difference, and if the odds are 6 to 1 against or 10 to 1 against they need six, 10 or preferably more opportunities, not only in different geological environments but in different political and tax environments.
  It is not enough for the small British independent company which enters the oil business to have an interest in just a couple of blocks in the North Sea. That would be putting all its eggs in one basket. If there is to be a genuine British oil industry it has to try to operate

  497
  as closely as possible the way the international industry operates. This means that small British companies must obtain a spread of interest, preferably international. Admittedly, they cannot do it on the scale on which the major companies can do it, but they can do it on a smaller scale with, say, a 5 or 10 per cent. interest in an exploration.
  Many of the smaller British independent oil companies have recognised this fact, generally by taking a small partnership in an exploration acreage. They are trying to get the kind of spread which they hope will produce for them the same success ratio as that enjoyed by the international oil industry in general. If there is a ring fence around the North Sea it becomes extremely difficult for a small British oil company to spend exploration moneys overseas if those moneys cannot be offset against income which is produced in this country.
  One can see the case for the multinationals having to comply, but the multinationals by and large are vertically integrated companies. They have other operations in this country such as refining, petro-chemicals and marketing against which they can offset losses. By and large they have the same opportunities in other countries. But the small British oil companies, which are largely involved in exploration, do not have these opportunities.
  I am not trying to suggest to my right hon. Friend ways and means of dealing with this problem, although I have some ideas. However, he said that he had offered to meet all sections of the industry. There is now an association representing the smaller British oil companies. To my knowledge, my right hon. Friend has not met them, and I should be grateful to him if he would do so, because a ring fence operating in this way would severely affect the development of the independent British oil industry.
  During his speech on the Budget debate my right hon. Friend said that he would be prepared to let us know what the amount of tax would be prior to the date of the Budget in April 1975. If companies are to proceed with development and get loan capital it is vitally important at the earliest possible stage for them to know the amount of the tax. They need to know it to enable them to work
  498
  out cash flow requirements, borrowing requirements and interest rates. I appreciate my right hon. Friend's difficulty and I would not have urged him to announce the rate prior to today's debate, but I ask him to do so as soon as possible after it. The amount of the tax is more important than the principle of the tax. The amount of tax is the factor which will determine the willingness of the international oil companies to remain operating in Great Britain.
  In looking at different tax situations in different countries one tends to look at the amount of tax levied rather than at the final risk/reward ratio and the final return on capital to the companies. That is made difficult by the system of posted prices and other complexities. Fundamentally, a company decides in which country it will or will not make its exploration investment on the basis of the marginal return after tax, expressed generally in dollars per barrel, that it will receive. The basis on which most companies decide is the amount expressed in dollars per barrel that will accrue to them after they have done their development, and the amount of tax payable in this country will determine that. That is why most companies are now going back to the United States.
  Mr. Dell: My hon. Friend has considerable experience of these matters and I intervene merely to ask a question. He said that what will determine whether oil companies remain in this country is the return in dollars per barrel. Presumably, companies will not ignore the cost of producing the barrel, which is a very variable factor between the North Sea and the Middle East. What weight would companies give to dollars per barrel compared with return on capital?
  Dr. Phipps: The cost of producing the oil would be included in any calculation. I was speaking in terms of the net post-tax total cost figures. I do not suggest that that simple yardstick will always be used, but we have to accept that, for most international oil companies, finding oil is a bind. Their principal business is refining it, turning it into petro-chemical products and selling it. That is the principal distinction between the independent British companies I have been discussing and the international majors.

  499
  International majors are more concerned to get a source of oil. If they have that source of oil, it is the marginal profit at the top which will determine where they go to explore. I am well aware that it is cheaper to do so in the Middle East, but Middle East tax rates and other aspects are such that it is the margin of profit at the top that will determine where they go.
  Perhaps I should not have spoken in simple terms of dollars per barrel. Let us put it as a percentage return on the capital invested. That is what determines where they go. That is why in the United States there is an oil exploration boom. There is no PRT in the United States, but I should not like to guess how long it will be before there is. I do not believe that the United States Government will allow the kind of profits that are currently being earned to continue.
  I conclude by reiterating the importance to the British economy and the Government of a healthy independent British oil industry. I believe that that can be achieved alongside a British national oil company. For many years I have been a proponent of a British national oil company. I want to see both a Government and an independent participation industry developed here. I suggest to my right hon. Friend that at an early opportunity he should meet the companies which are attempting to build such an industry so that those aspects of the Bill which currently mitigate against its development can be ironed out.
  5.52 p.m.
  Mr. John Hannam: The hon. Member for Dudley, West (Dr. Phipps), in an excellent speech, displayed his knowledge and understanding of the oil industry. He was the second speaker to express confusion at the complexity of the Bill. Perhaps that is why the benches around him are empty.
  The debate is proving to be a searching examination of a potentially damaging piece of legislation, not in the sense of the principle of extending oil revenue taxation, but in the method chosen and the complexities of the proposed petroleum revenue tax and the field by field basis. However, I welcome the conciliatory approach of the Paymaster-
  500
  General. He says that he has kept an open mind on the tax and I hope that in Committee he will accept the need for substantial changes in it.
  We are all extremely concerned at the economic crisis facing the country and the whole of the Western world. There is grave danger of a world-wide recession in trade which would mean a difficult period ahead for our exports. Our home industry has been clobbered so hard by the Government that confidence and profits have dropped to an all-time low. Even the Chancellor of the Exchequer recognised that and made the biggest "U" turn ever. He has not done enough to save us from slumpflation over the coming year and possibly for a longer period. Therefore, we look to the productive capacity of our economy to produce as competitively as possible those products and goods which can be sold here and abroad to reduce our balance of payments deficit. Gas, coal and oil are obviously three such products.
  Coal is in world-wide demand, yet despite massive pay increases since 1972, production is not reaching basic targets and we face grave shortages at home, let alone having coal available to export. Even the Central Electricity Generating Board is having to generate electricity uneconomically by oil-fired stations because of the shortage of coal.
  However, we have oil—at least, we hope to have oil and should have it—in increasing quantities. It is represented as our nation's lifebelt, although whether by the time the lifebelt is thrown to the drowning Britannia it will prove to have been rotted away by over-taxation and State interference is part and parcel of what we are discussing today. The priority for Britain must be to attain maximum exploration now and to have controlled exploitation of the oil reserves in future.
  Since 1964, when the first wells were drilled in the North Sea, a remarkable success story is evident. The physical conditions in the North Sea and the scale and cost of the equipment required make exploration and production operations very expensive. Nearly 700 appraisal and production wells have been drilled in the North Sea since 1964, each exploration well costing about £500,000 in the southern sector and over £1 million in the deeper water in the north. Winter

  501
  drilling in the northern North Sea can cost between £2 million and £3 million a well.
  The next phase will take the search into exposed waters of still greater depth and turbulence, for which a new generation of equipment is taking shape. Exploration expenditures will be dwarfed by the huge investment that will be required for fields found in these northern waters. These fields must be large enough to justify investment in pipelines at nearly £1 million a mile and costly offshore production facilities to bring the oil ashore. This kind of work has never previously been carried out at such depths anywhere in the world. The cost of developing under-sea fields in the North Sea will thus be measured in hundreds of millions of pounds for each field.
  One of the many significant factors influencing the prospective return on such huge investments, is the very considerable "lead-in" time. The large production platforms may take up to three years from the decision to build to actual completion, and the development of a reasonable-size field could take between four and six years from drilling the first discovery well to bringing the oil ashore. For these reasons, the investment in productive capacity could be 10 times as much as would be required to produce the same amount in the Middle East. Operating costs will also be proportionately higher.
  The financial implications are formidable. Even for the successful companies it will take several years to generate a cash flow sufficient to recover the very substantial initial high risk investments on exploration and production. To find the necessary capital, not only for the North Sea but for many other similar ventures around the world, the oil industry must maintain its profitability and will look for taxation policies by Governments that provide real incentives for the search to be pressed forward and investment levels to be maintained.
  Of course, British involvement in these high-risk, deep-water technologies has been that of gradual progress in learning the skills of underwater drilling and assembly, oil-rig manufacture and servicing. We are now getting somewhere, although there are still many problems to overcome—rig construction sites, shortages of materials, labour difficulties and
  502
  shortages of labour. Nevertheless, a massive investment by the international oil industry has resulted in this lifeline being thrown to the hard-pressed British economy. We can now look forward to self-sufficiency by 1980, or even surplus and substantial benefits to our balance of payments, but only if the full potential of the North Sea and other areas of our shelf can be developed.
  The oil crisis last October has meant a major reappraisal of taxation policies, licensing and conservation measures. As far as conservation of energy goes, I regret very much the total inactivity of the present Government during the crucial summer period when many steps could have been taken to conserve fuel in this country.
  However, the election is over, the pregnancy is nearly at an end and the Government's conservation baby is about to be born. I hope it is a more prepossessing child than the one we have before us today. We all wanted to see some kind of oil taxation change, but the PRT looks less attractive the closer we get to it.
  No one really disputes the need for extra oil taxation. The oil companies themselves acknowledged that a year ago when the Conservative Government were drawing up plans to place ring fence around the North Sea and to tax excess profits which would accrue when the oil begins to flow next year. It was considered essential to raise taxation only to a level which would still leave a reasonable discounted cash flow for the oil companies of around, say, 25 per cent.
  So I do not oppose the principle of extra oil taxation. Yet what a complicated nonsense the Government made of it. Instead of a graduated-rate excess corporation tax on the windfall profits fitting neatly on to our existing corporation tax structure, we have this complicated tax, with no rate established yet, strict and penal restrictions on secondary field "sideways" costs, and limitations on deductibility of interest.
  The effect upon our smaller marginal companies, which are those with just the oil wells we shall want to see developed if we are to attain the production levels we need, will be to drive them out of business. The effect on the larger companies will be to make them reconsider their future plans for secondary explora-

  503
  tion and development. American operators have already begun to reverse original exploration plans. They believe that there has been fundamental dishonesty on the part of the British Government in changing the rules so drastically halfway through the contract. They have had 12 months waiting for details of the Government's intention to be made clear. Now, very great concern is being expressed, not at increased taxation, but at participation threats, uncertainty over the rate of tax and the disallowance in the Bill of the real costs and interest incurred in genuine oil developments in our North Sea.
  The Govenment's only reply to these charges is that other countries in the Middle East and Norway are doing it. Norway, with its 4½ million inhabitants and its need for conservation rather than exploitation, is a special case. The Middle East is an area of ridiculously low-cost established oil production. In any event, it is not the answer to beat your own child just because the bully down the road has been beating his. I suggest that the answer is to go and stop the other chap from beating the lad.
  I should like to turn to some of the detailed provisions of the Bill which I hope the Government will revise before making it law. First of all, we have the concept of the petroleum revenue tax—a new tax on proceeds rather than profits requiring our oil companies to pay a rate of tax, as yet not defined, on their income after certain expenses have been allowed and the initial capital investment paid off.
  It seems to me that the Government have opted for this complicated new tax system because they fear delays in payment of Government income if a simpler form of extended corporation tax were to be used. I think this is a fundamental error on their part, although I accept that it would be difficult initially to agree the levels of excess profits at which a sliding scale corporation tax would apply. But the flexibility inherent in the corporation tax system would allow early adjustment to the rates applicable to the smaller more marginal fields.
  The more productive fields would be adjusted to a higher scale to cover the windfall profits of a prolific field. The problem of early payments of tax income to the Revenue could be overcome by use
  504
  of an advance excess profits tax payment—a kind of oil PAYE system. In any case, under PRT the Revenue will not get its return until after the capital costs have been recovered.
  The complications and restrictions on allowable costs in the Bill are unnecessary and will certainly have a serious detrimental effect on the North Sea oil developments. Surely the first priority must be to get the oil flowing as quickly as possible and then to increase and sustain further exploration. But this involves vast capital costs and, in this inflationary era, rapidly rising servicing and development costs.
  It must be becoming obvious to the Government that the so-called profits bonanza which the much-maligned oil industry was about to experience at the nation's expense is fast disappearing out of the window. In the last year, development costs of winning the oil from the unfriendly depths of the North Sea have just about doubled. On top of that there is always the fear of a sudden drop in world trade followed by a sharp fall in oil prices. I fear a future OPEC weapon when we are all hooked on expensive oil production.
  For months, the Opposition have tried to warn Ministers of the danger of a mass walk-out from what is becoming a high-risk financial gamble. Now, at last, it seems that warning signals are being received by the Energy Ministers as the major oil companies cut back on future exploration plans and the smaller companies withdraw altogether from their North Sea ventures. If that is so—and it seems borne out by the article in last night's Evening Standard headed
  "North Sea oil—a change of heart in Whitehall"
  —we welcome the realism creeping into the attitude of Ministers.
  We have had the Chancellor of the Exchequer, the Employment Secretary and now the aggressive Energy Ministers, especially the noble Lord, Lord Balogh, changing tack and becoming more subdued in their accusations against the wicked oil companies. If that is the new situation the Bill should and ought to be radically redrafted to include a graduated excess profits extension of corporation tax and the fundamental inclusion of real costs in recoverable allowances.

  505
  It is wrong to tax the revenue from the oil flow from one field without regard to the fall in profit margins due to rising costs and to the losses incurred and the costs of company operations in other secondary areas and wells. The aggregation of results from marginal and successful fields should be allowed, or without doubt the doubtful fields will not be continued and the smaller man will be driven out. But, perhaps in line with their other industrial policies, that is what the Government want to see.
  The 50 per cent. uplift on capital expenditure set out in Clauses 2 and 3 represents an arbitrary formula which will not help the small company which has financed its oil exploration by outside financing and therefore has substantial servicing and interest costs to bear. Surely these smaller operators must be allowed to deduct such interest payments. I believe that they should be given the chance—I hope that the Bill will be so amended—to give up the uplift allowance and instead to deduct interest paid for outside financing.
  Under Clause 3 the disallowable expenditure items will crucify those companies which have negotiated arm's-length financing. Even good fields will be threatened.
  A company borrowing on a non-recourse basis has to offer a reasonable interest rate plus a return on profits to cover the risk element. The banks providing this non-recourse finance do not gain super profits from the transactions, because the oil companies ensure that such a sacrifice is not made. Therefore, arm's-length financing at normal returns of interest and royalty should be allowable either as uplift allowance or as interest at commercial rate. I hope that the clause will be altered to allow these fundamentally reasonable development costs.
  I turn to the field-by-field requirements of the Bill. The Government have stated that these field limitations are non-negotiable. I hope that the flexibility that has begun to creep into the Paymaster-General's attitude will allow this rule to be relaxed. My objection to the inflexibility of the rule is that, at a time when investment programmes are at risk anyway, this field-by-field basis of assess-
  506
  ment will discourage investment by preventing profits from one field funding investment in another.
  A company with four definable oilfields could have success with field A but suffer nine years abortive drilling on field B. The colossal interest costs over those nine years will not be allowable against field A revenue, so the result may be that the company will have to cancel the high-risk exploration programmes for fields C and D. In any case, the limit of 1,000 long tons laid down for the definition of a taxable field needs to be adjusted to take account of the abortive field which is lost after six months' operations due to one reason or another. By that time over 1,000 long tons of oil will have been extracted anyway, and I understand that the costs of that abortive field will not be allowable against the company's other fields. These losses will then be locked into that abortive field because it had run long enough to exceed the limit of 1,000 long tons of production.
  As we look closer at the Bill it seems that we need to carry out substantial revisions. The nation and the oil companies want oil from the North Sea. We want a profitable oil industry with ever-growing British involvement. We want a businesslike method of taxing the windfall profits accruing to the oil industry. However, we do not want to create an unnecessarily complicated and unfair tax system which puts our exploration plans at risk.
  I hope that the points that have been made in the debate will be taken into account, that by the time the Bill reaches Committee more drastic changes will have taken place and that other changes will be allowed by the Government in Committee.
  6.10 p.m.
  Mr. Iain Sproat: I give a cautious and highly qualified welcome to the Bill. I give it a welcome because I appreciate the more open-minded manner in which the Paymaster-General presented it but more particularly because there is no disagreement on either side of the House that it is right that the potentially vast revenues from offshore oil should, in substantial part, accrue to the nation and not to the oil companies.

  507
  I give the Bill a cautious and highly qualified welcome, first, because I think that, while the Government's end is right, their means are wrong. I shall say why in a moment. Secondly, I qualify any welcome that I give to the main principle of the Bill because it cannot be wholly divorced from the allied legislation that is to be brought before the House later to set up a nationalised body, the British National Oil Corporation. That body's existence will be made largely redundant, and certainly could be made wholly redundant before it is even born, by the provisions of the Bill allied to some straightforward and relatively simple further legislation, since it and such allied provisions could give the British Government all the control they need over revenue, depletion and so on.
  There is nothing by way of control that the BNOC is likely to have that could not be had by such a Bill as we are now considering together with allied legislation of a relatively simple kind to cover depletion and so on. The Bill, if properly amended, will give the Government a rightful element of financial benefit and control. A British National Oil Corporation will merely add interference without added control and, what is more, hugely expensive interference, which is likely in the nature of things to be slow and inefficient in itself and the cause of slowness and inefficiency in others.
  It is wretchedly ironic to think that the huge sums in taxation that are proposed to be raised by means of the Bill and which could be put to such vital use for the country will be wasted in substantial and continuing part in propping up the white elephant of a BNOC the existence of which this very Bill makes largely needless.
  It seems to me, speaking not as a tax expert and without going into the detail that my right hon. and hon. Friends have already well covered, that through the present provisions of the Bill we will get the worst of all worlds by levying taxation at a fixed rate and assessing each field separately.
  By levying a flat rate equally on all fields, whether they are highly profitable or merely marginal, we are in effect turning what could be a marginal field into a totally uneconomic field since the reasonably high rate of tax that would
  508
  assure a fair return for the community and the oil company on a highly profitable field could be totally crippling on a marginal field. Therefore, the oil company would no longer consider it worth its while to exploit the marginal field, and the gross oil potential for the country, for whatever purpose, including that of taxation for the Treasury, would be diminished. That seems crazy in terms both of tax revenue for the Treasury and of the balance of payments.
  Surely it would be sensible to do the exact opposite of what the Government are currently proposing. They should cither vary the tax rate with regard to the size, profitability, exploration and exploitation problems of any individual field or they should lump together all North Sea profits for any one company so that the consequences of the differences in character of the various fields within any one company's control can be spread in that company's tax reckoning on profits from British resources. That is emphasising what many of my right hon. and hon. Friends have said, so I shall not go into it in any greater detail.
  There is another aspect of the effect of an inflexible tax rate on the currently marginal fields which I wish to mention now. One reason—not the only one—why a field may be economically marginal at present is that its exploration and/or exploitation requires a technological mastery of adverse physical conditions that is not yet developed and is highly expensive to develop.
  An inflexible tax rate may now make it not worth the while of an oil company to develop such a field by turning it from one that is merely marginal for physical reasons into one that is utterly uneconomic for tax reasons. The technological advance which could have resulted from mastering the physical conditions will not now result since it will not be called for.
  This is a particularly important point for Scotland since one of our hopes for the future is that Scotland will benefit from oil not only in the immediate and medium future in terms of increased benefit to the United Kingdom Treasury from the revenue accruing from oil and of jobs, which we are already seeing, but, more importantly, in the long term as the home of advanced oil technology which can then be put to use anywhere in the world where oil is found during

  509
  and long after the exploration and exploitation of our British resources have run dry.
  6.15 p.m.
  Mr. Geoffrey Dodsworth: The purpose of the Bill, as I understand it, is to ensure that there is no unfair or unjust profit transferred to the multi-national companies. I can understand that that is a proper and laudable desire in the national interest. But we must bear in mind very carefully that this is a project of an international and not a parochial nature. In these circumstances, it seems to me that perhaps the Treasury has been guilty of the sin of reading too closely the work of the Middle East in declaring that interest should be illegal. Under the terms of the Bill, as I understand it, interest is not allowable and does not exist.
  I understood the Minister to say that the purpose of the Bill was that it was specially tailored to this particular situation, to allow freedom of movement in corporation tax and to ensure that the proper share of profits from the North Sea was directed in the national interest. If it is specially tailored—the Minister said that he wanted to keep it simple—I say that it is tailored but that it does not fit very well.
  In the case of the PRT there is an attempted substitution for the payment of interest of the 50 per cent. uplift. A Labour Member drew an analogy with the 12· per cent. interest rate to try to equate the 50 per cent. uplift. If it were as simple as that, it would be very simple. But I suggest to the Minister that there is an attractive alternative if he wishes to control the profits so that they are not siphoned off for the multinational companies. There is no reason why we should not control the level of interest rates charged.
  Suppose that I were to suggest that we take a percentage over the London inter-bank rate as a perfectly viable, attractive alternative allowing for proper freedom of flexibility of financing but at the same time ensuring that there was not any undue siphoning of profits outside the interests of this country. We are all concerned to see that this country benefits in its exchange and energy situations in particular.
  510
  The Bill fails to recognise that most of the financing must be carried out in foreign currencies. This is unfortunate. I should make clear at this stage that I have a particular and personal interest in that I am a director of a London merchant bank and chairman of the Equipment Leasing Association. There must be some form of mental blockage in the fear that too many funds will be extracted. I understand that there is a desire to eliminate hiring, for example, as being an allowable cost for uplift purposes to prevent there being an undue charge, thereby siphoning away profits unnecessarily and unfairly.
  But we must recognise that in international oil and natural gas financing leasing is a world-wide technique and is already considerably in use in the North Sea. If that is the case, we wish to consider what the position is likely to be in connection with the contracts which have already been incurred, extending over many years in the past and into the future. In these circumstances I would like to be clear in my mind—it may be because of my failure to comprehend the terms of the Bill that I am not yet clear in my mind—what terms will be incurred in respect of contracts already entered into.
  Leasing is a modern technique of financing what has been developed and is likely to continue to develop. It should not be confused with the short-term rental, hiring or contracting of equipment when comparing it with the full financing leasing of major international projects. Many rigs and substantial items of that nature such as gas pipes can be appropriately and properly provided through financial and other institutions, making sure that the funds which are desperately needed are available for a project which we all agree is of paramount national importance.
  In these circumstances I hope that the Minister will receive any representations made to him on this subject. One recognises the difficulty which may be faced in ensuring that there is fairness in treatment so far as the national interest is concerned, but it would be unwise and ill informed if we did not allow modern financing to be operated in one of the most modern developments of our time.
  6.21 p.m.
  Mr. Peter Hordern: I declare my interest as a director of a subsidiary of an international oil company. The Bill should be considered as one part of the Government's proposals to deal with our offshore oil. We cannot consider it on its own. We must think of its total impact combined with the system of royalties, of corporation tax and of nationalisation.
  We must first recognise that there is no prospect of our being able to exploit our North Sea reserves as we should like unless we realise that the North Sea must be made at least as attractive to the oil companies to develop as anywhere else in the world.
  It is, of course, our right to tax the profits of oil production. We must, however, recognise that it is not for us alone to judge what is a fair return to the oil companies from such production but it is for the oil companies themselves, because it is they who can develop oilfields in other parts of the world—or decide not to develop them. Happily for us the cost of oil production in the Middle East is quite unpredictable. Until 1st October it seems that the companies' average cost of a barrel of oil from Saudi Arabia was $9·277, of which the actual cost of production was 16 cents. I understand that from 1st November, although the cost of production remained the same at 16 cents, the average cost to the companies has risen to $10·358 a barrel. Since, however, the price at which the State buys back the oil from the companies has been reduced, it also follows that the oil companies' margins have been severely squeezed.
  It seems to me that two consequences flow from this. The first is that, as there is little or no prospect of the oil companies ever again achieving their former profit margin in the Middle East, they will be anxious to develop oilfields in the North Sea and in the rest of the world as rapidly as possible.
  The second consequence is that the value of North Sea oil will receive an uncovenanted bonus simply by the Middle East producers increasing their price by such a large margin. It is this uncovenanted bonus that, it seems to me, it is right to tax. Yet we have all the time to recognise that the cost of production
  512
  of Middle East crude oil will always remain lower than North Sea crude oil and that the very existence of a bonus depends upon the producer countries' willingness to continue their high tax policy. The bonus depends also upon the actual cost of production in the North Sea, which is increasing at an alarming rate through inflation. I see no end to these inflationary pressures on the cost of building and construction for the North Sea. Therefore, the basic cost of getting oil out of the North Sea is likely to continue to rise rapidly.
  A further problem about North Sea development concerns its financing. I understand that it is likely to cost about £10,000 million to develop the oilfields in the north of the British sector of the North Sea alone. It is not, of course, beyond the ingenuity of the banks to find money for this purpose, but there is considerable competition from the Government and local authorities for the sort of medium-term money that this kind of development requires. There is only one source for these funds—the surplus revenues of the OPEC countries themselves.
  At present those countries show no inclination to deposit their funds on anything but a short-term basis. If they continue to do this, there will be no prospect of the banks being able, with prudence, because of their capital base, to lend these funds for medium-term investment, either directly themselves or through the Eurodollar market.
  There is thus a growing demand for medium-term funds from all sources but a reluctance by the OPEC countries to supply them. If they are to supply these funds, they will do so only if the oil companies are confident of the long-term return that they will get from North Sea development. And that is the trouble with this tax. How can anyone be confident about the long-term return when they do not even know what rate will be charged? For the time being, therefore, borrowing for North Sea development must be difficult, and every day that passes makes the problem more acute as inflation continues to roar ahead.
  This is not the time to make Committee points about the Bill, but there are certain things to which I should like to refer. First, the tax needs to be very flexible. I was interested in what

  513
  the Paymaster-General said about this. When one considers that only two years ago the landed cost of a barrel of oil was $3·20 from the Middle East and that it is now over $10 a barrel, one sees that the oil companies could find themselves losing their profits before the rate was changed.
  Second, the flat-rate tax is bound to affect the fields owned by small companies which need to fund their development by loan and which have not yet got profitable mainland activities against which losses and allowances can be offset. It does not seem to me that the Government are aware of the vital part that loan interest plays with these small companies, and it is important too that loan interest should be deductible for the purpose of this tax. I hope, therefore, that this can be put right.
  What matters is the impact that this tax will have on developing our oilfields quickly and getting the money that we need to do so. Until we know what the rate is likely to be, there is bound to be uncertainty. There are already signs that for one reason or another some oil companies are about to pull out of the North Sea.
  But it is not only the fact that they have no idea what the rate will be that disturbs them; it is the threat of nationalisation. Why should oil companies pursue hazardous and expensive exploration if their profits will be severely limited by tax and more than half their equity removed from them at a price they cannot forecast? All that can be said about nationalisation is that it is a highly expensive, offensive and unnecessary operation which will be carried out for reasons of Socialist dogma and nothing else.
  It is reasonable to ask where the Government think that they will get the money. They already have to raise over £6,000 million on the capital market simply to fill their borrowing requirement for this year. They will probably need at least that sum next year and the year after that. Let us suppose, although there is no reason to do so at present, that the non-oil balance of payments moves into surplus in three years' time. We could easily find ourselves with a total debt over the next five years of some £20,000 million—that is to say, a debt in the next
  514
  five years equal to our present debt which it has taken the whole of our recorded history to amass.
  On top of that the Government are proposing that we should add £4,000 million or £5,000 million—I do not know what it will cost—of debts simply to nationalise North Sea operations. It would be impossible to conceive of a more damaging or wasteful operation.
  Mr. Dell: I intervene merely in the hope that, as the right hon. Member for Wanstead and Woodford (Mr. Jenkin) did not do so, the hon. Gentleman, with his greater information about Conservative Party policy, might explain why, if participation is so costly, unnecessary and absurd, the Government that he supported had not ruled it out by the time that they left office.
  Mr. Hordern: I do not know whether my right hon. Friend ruled it out, but I rule it out. The purpose of my speech is to explain why.
  The Government do not understand the gravity of the situation. The additional interest charge that we shall have to pay in five years could be about £2,500 million a year, and that payment will have to be made abroad. Unlike interest charges paid to lenders in this country, therefore, that interest will amount to a straight annual tax on our own people.
  Quite apart from this impost, it is certain that countries everywhere will take careful note of these proposals. The United States, for example, will do so in the light of BP's operations in Alaska. The OPEC countries, which will be asked to lend money to the Government for nationalisation, may well decide to take an equity interest in the North Sea for themselves in exchange for a direct loan to the oil companies.
  The Government are not aware of the urgency of the situation. Why are we not now taking measures as the French have done, for example, to conserve energy? Why do we not limit the heating of offices, apply strict speed limits or make grants for the insulating of houses? What are the Government doing in this respect?
  There is now, more than at any time since the war, a paramount need for the Western countries to get together and form a common policy. The international

  515
  energy programme is a beginning, and Secretary Simon's suggestion that a target should be set for a lower growth of oil imports is both constructive and helpful. Have we the will to heed it, or will we once again find the Government anxious to disguise from our people the full nature of the change which has occurred, as they did in the Budget? This is a time for high statesmanship and common action for a common purpose among all the oil-consuming countries. It is no time to spend millions in nationalising our most precious resources. So let the Government drop it.
  6.32 p.m.
  Mr T. H. H. Skeet: The Paymaster-General asked just now whether we on this side should accept participation. He is aware that the United States and Canada have ruled it out, as they have ruled out PRT. Consequently, the tendency is for money to flow back to the States for exploration there. If the right hon. Gentleman wishes to continue to use the model not of PRT but of the subsequent legislation which will be introduced in 1975, using the Norwegian method, he might also adopt their practice of not interfering with existing contracts. Statoil will not have the right to abrogate contracts at all; its policy applies only to future licences.
  My hon. Friend the Member for Horsham (Mr. Hordern) made a crucial point about company profit margins. It is assumed by many Labour Members that the profits of the oil companies are enormous. This is not so. The weighted average cost of Saudi Arabian crude oil in November was $10·358 a barrel and the transferred sale price was $10·57, which gives a company margin of only 22 cents. So how can it be said that in dealing with the Middle East the companies are making an extraordinary profit?
  Another pertinent example when we are dealing with a taxation Bill is that the average realisation from a typical refinery yield in the United Kingdom, even accepting Sheikh Yahmani's figures, would be 19·9p per gallon made up of operating costs of 2·7p per gallon, total taxes, including producing countries' taxes and UK duties and taxes of 16·1p per gallon and company profits at only 1·1p.
  516
  Expressed as a percentage, the picture is even more interesting, with operating costs of 13·8 per cent. and taxation from all sources of 806 per cent., giving company profits of only 5·6 per cent. So it cannot be argued that the oil companies are making a bonanza worldwide. If Labour Members want to visit the appropriate opprobrium on the organisations making the big profits, they should do so on Her Majesty's Government in the United Kingdom and the OPEC Governments in the Middle East and elsewhere.
  What I fear is this: the petroleum industry may be quite prepared to concede the lion's share of the profits it is likely to make from the North Sea. It may well be in the vicinity of 80 per cent. I do not know what flat rate of PRT is to be introduced, but if it is a very substantial share most of it will go to the Exchequer. What I am in doubt about is whether the Minister is prepared to concede fairness to the oil companies. They, after all, initiated the proceedings in the North Sea, and but for their success in the early stages the Government's present rapacity to take over what is proving to be a productive asset could not have existed.
  I fear that the petroleum industry will become a veritable Gulliver, tied down by the Lilliputians of Whitehall; in the end they may be unable to operate successfully and instead of extracting the oil from the North Sea it will be left there because of constant slippages in the programme. I therefore suggest that the industry and, I hope, the Government, should examine all the proposals most carefully and consider the various elements involved in profitability.
  One is that the companies must know the rate of tax. I hope that the right hon. Gentleman will be able to disclose this well before Christmas. Secondly, he must recognise that the price of oil oscillates. The price may go extravagantly high, or it may in future years fall very considerably, taking a great deal of the profitability out of the North Sea operations. I hope that he will also bear in mind that industrial costs are escalating. Whereas in Norway the rate of inflation is 9·5 per cent., in the United Kingdom it is well over 20 per cent., so that the two situations are not comparable.

  517
  He may also care to consider, for example, the cost of production platforms. In 1970, for a production platform operating in 100 feet to 120 feet of water—that is, in the southern North Sea—the cost was about £1 million or slightly over. In 1974, to operate in 275 feet of water, it was about £10 million. The figure for concrete platforms now being ordered for operation in depths of 465 to 500 feet is £60 million. There has been a rapid escalation in costs. Is he taking all this into account in his negotiations with the oil companies?
  Perhaps I could make certain recommendations to him, in order to abbreviate what I have to say. I think that a flat rate of PRT must be ruled out. He indicated today—and I was satisfied to hear this—that he intends to avoid frequent changes but that there will be periodic reviews. He must recognise that certain elements must be borne in mind both by the Government and by the companies—the ravages of inflation on the cost of equipment, the impact of interest rates, the risks involved, the problems of working in very deep water, the demands of technology, and, finally, the mercurial nature of oil prices. He must have noted that between October of last year and this year there has been such a movement in oil prices that—and it seems a rather extraordinary thing to say—he cannot now talk about the extraordinary profitability of the oil companies.
  I therefore hope that he will introduce a very flexible PRT. It will be incumbent upon the Government to interpret the prevailing prices intelligently at all times. Moreover, I hope that in dealing with Clause 2—and I apologise for the fact that I shall be in Africa when he comes to discuss it upstairs—he will not consider taking prices at mid-periods in the assessable term but will consider them almost from week to week in order to give the companies the opportunity of actual prices or fair assessments. I also suggest, for reasons which I shall give later, that natural gas should be excluded because there there are no uncovenanted profits. I suggest, too, that the flate rate of PRT could suitably be broken down into multiple rates, somewhat analogous to VAT and the multiple rates which exist on the Continent. I would put
  518
  it into three categories: the highest rates for the prolific fields; a lesser rate for marginal fields; and possibly—I hope that he will earnestly consider this—a lower rate to aid the smaller operators.
  Mr. Dell: The hon. Gentleman does not seem to realise that if we adopt the proposals of his right hon. Friends, which evidently he supports, there would be, say, a 52 per cent. rate of corporation tax. Does he not appreciate that a marginal field could be highly marginal at a 52 per cent. rate of corporation tax, completely leaving aside petroleum revenue tax?
  Mr. Skeet: I appreciate that, but I am afraid that the right hon. Gentleman is so concerned with his tax figures that he is overlooking the necessity to get the oil. The prime concern of the United Kingdom today is to get the oil to secure our balance of payments. He is so concerned with the facts and figures from the tax angle that he will deter North Sea development which is what I am trying to persuade him not to do.
  The right hon. Gentleman has indicated, too, that one of the fundamental factors is the field-to-field basis of assessment. I should like to see the allowances spread right across the North Sea. But, rather than a tax of this nature, covering areas delineated by commercial fields, could not the areas conform to the size of geological basins—that is, the southern North Sea basin, the northern North Sea basin, the Faroes basin, the Celtic Sea basin, the Rockall basin and the Porcupine Sea Bight basin? That would seem to make much more sense than breaking up the North Sea into fragments which simply complicate the whole position with no benefit to the companies involved.
  The right hon. Gentleman has talked about easing the cash flow of the companies in the early years. I admit that by conceding 150 per cent.—that is, 100 per cent. write-off and a 50 per cent. uplift—the cash flow will be eased in the early years. It will be the front-loading of allowances. But what will happen ultimately when all the allowances have been worked off and interest rates continue? Interest is disallowed for the purpose of PRT. Companies will find that they will be extremely heavily taxed indeed and therefore it might be a better

  519
  idea to allow the companies to spread their allowances over the established life of the field in the form of free depreciation at the companies' option. Surely that would be much more reasonable than the one that has been suggested.
  Under Clause 3 I find that the allowable expenditure is totally inadequate. Has he considered that no allowance has been made for essential research and ancillary office services or for seismic surveys conducted beyond the 1,000 metre limit? He has no built-in inflation element and no provision for gas separation plants which are essential to put the oil on the market. He has no provision for the construction of storage facilities to accommodate the off-take of companies engaged in consortium. On those points there is scope for several amendments at the Committee stage.
  May I approach another point which I am certain the Paymaster-General will take into account when he is dealing with the oil companies? I am going to challenge him outright. His whole policy is to drive the small firm out of the North Sea, and let them be taken up by the new organism which he is building up next year in his petroleum Bill—the BNOC. It will be standing in the wings to take up all these small companies. He wants to eliminate the small company and favour the big one.
  Of course, I do not think that the big companies will object to that. How will the small companies state a proposition to the banks to obtain money? How will they raise cash? In the United States they can mortgage the oil in the ground. This they cannot do because Section 1 of the Continental Shelf Act 1964 says that the oil vests in the Crown and thus is no longer available to them. If they were in Norway they could assign their licence to the bankers. Why can they do that in Norway but not in the United Kingdom? Because the right hon. Gentleman and the Secretary of State for Energy have the right to revoke the licence. Anyway, it is not allowable here and it is asset that they cannot convey.
  They are not capable of identifying a commercial proposition. The banks will ask, "Why should we lend money to you? You do not know the rate of tax and have no idea of the actual costs involved."
  520
  What proposition will they put up to their bankers? The right hon. Gentleman has made the situation even more difficult. Under Clause 3(3)(a) he has disallowed interest. Grants of overriding royalty or profit participation with third parties are disallowed under Clause 3(3)(d). Thus, the Thompson's 5 per cent. overriding royalty to a consortium of banks in respect of its interest in the Piper field has been negated. Although it received the prior approval of his Department, it is negated by this Bill. How will the right hon. Gentleman deal with that? Incidentally, further exploration may be discouraged in the Thistle and around the Thistle field due to overriding royalies granted to the Signal Oil and Gas Company or Signal Industries should oil and gas be discovered in adjoining blocks. Therefore, the provision in the Bill could lead a discouragement of exploration in that area.
  The small firm is again impeded because all forms of farms-in and farms-outs have been disallowed under Clause 3(3)(e), although this is the normal practice of the industry. Thus, the Hamilton Bros, sale of 24 per cent. interest to Texaco in respect of the Argyll field to help finance the participant's costs becomes vulnerable.
  I dare say the right hon. Gentleman is bearing many of these points in mind and he may care to consider them. They come under Clause 3(3), paragraphs (a) to (e), on page 7 of the Bill. If the Minister is prepared to give an undertaking tonight that he will modify paragraphs (a), (d) and (e), we shall get somewhere. If he is not prepared to do that, he is signing the death warrant of most of the small companies involved.
  Will the Minister bear in mind one or two other aspects? I am quite prepared to say that interest is an element of cost and to recognise that, from the Treasury's angle, there are difficulties. There will be difficulties, however, if the right hon. Gentleman leaves the provisions unaltered, because malpractices will develop, interest will be added to the price and on the price there will be a 50 per cent. uplift. That is how it will develop. The best analogy I could find was when levy was added to the price under Land Commission legislation and the purchaser paid the lot. I am certain that the Minister wishes to avoid that and

  521
  the best way would be to follow the recommendations I have suggested.
  Neither is it fair on the smaller enterprises to be forced, with little or no security to offer, to pay a premium rate of 5 per cent. over the market price in order to obtain the necessary finance to do what they want in essential exploration and development.
  The other point I raised when I intervened was this: the right hon. Gentleman is prepared to put in the Bill a 50 per cent. uplift, which we could regard as a sweetener, but that would not prevent him at any time in the future from lowering it to 25 per cent., and probably to 10 per cent. The Americans had vast experience of this when the depletion allowance was reduced from 27 per cent. to about 22 per cent.—and it now threatens to go down even further. Is he prepared to give a guarantee tonight that the uplift will be maintained for 10 years at the current rate to give the companies support?
  May I make one or two suggestions on the marginal fields, which I think are important. I agree with the Minister that they should be developed. The trend is towards the discovery of the smaller field. In a number of basins, similar to the North Sea, 10 per cent. are large but 60 per cent. are small, that is, roughly about 50,000 barrels a day or less. Therefore, the long-term development of those fields is essential and the Minister is in a position to encourage their development—not through the BNOC but through the use of the private companies. All Governments have made that initial mistake in the southern North Sea. Gas fields were discovered many years ago which have not been developed because of the uneconomic pricing engaged in during 1966 and afterwards.
  If I may, I recommend that an exemption limit be granted to marginal fields or that they be granted a tax holiday for five years, or that multiple rates of PRT be granted for fields with a barrelage reserve of under 250 million barrels. These would include the Argyll, Auk, the Brent extension, Josephine and Montrose, and probably many others. I know that the Minister has in mind a grant analogous to the REP, which was for a fixed term—I am merely using a general analogy—but that would amount to a subsidy which is one thing I would not recommend.
  522
  Natural gas is included with oil. I fail to understand why, if there are no uncovenanted profits, it should be included in the Bill and be subjected, even with modifications, to PRT.
  The right hon. Gentleman will recollect the history. In the Hewett field the price paid to the oil companies is 1·1958p. That price was negotiated in 1968. In the Viking field it is 1·5p. These are very low figures. There is a big difference between the price paid for the raw material, the natural gas, and what the domestic consumer has to pay in England and Wales, namely, 10·96p, and in Scotland 13·78p. Thus, it is the British Gas Corporation that is making the profit.
  But if the right hon. Gentleman is to take this into account, will he not consider adopting the procedure in Norway? The Viking field price in the United Kingdom is 1·5p, equivalent to 36 United States cents per thousand cubic feet. In Norway the Ekofisk field price is 2·3p, or 52 United States cents per thousand cubic feet. If the Norwegians are prepared to pay a higher price for the gas, why are we not prepared to do so? Or are the Government prepared to continue to cut the companies to the bone and hope that they will produce the gas and still tell them that they will be liable to pay PRT and corporation tax?
  The Paymaster-General will be aware of the Continental Shelf Act, which in Section 9 places an obligation on the Government, in the guise of the British Gas Corporation, to secure a reasonable price, and they are the lone arbiters of their case. I enjoin the Paymaster-General to knock out natural gas altogether from this Bill. If he must keep it in, he should ensure that the tax is kept low. The United Kingdom should have a low price for gas, and it is absolutely essential that there should be a lower price for natural gas for chemical processing, although the legislation he has in mind for next year will put it on a par with others forms of gas.
  Finally, the right hon. Gentleman has heard about what happens in the United States, in offshore Louisiana and Texas. The oil companies' revenue percentage of gross profits is between 25 per cent. and 30 per cent. Is he working it out on that basis?

  523
  In the Netherlands the Government have an option of a 40 per cent. participation rate, and with taxes, they aim at a total Government take of 80 per cent. of profits, after costs. In the UK, if he does not allow realistic costs, he will deprive the companies and he will not have a reasonable result.
  While I am prepared to concede what my right hon. Friend the Member for Wanstead and Woodford said, it is absolutely essential that the companies should be called upon to pay their fair share of taxes. But it is encumbent upon the Government to ensure that they are reasonable to the companies so that there may be a continual flow to the United Kingdom of oil when it is required so that we can improve the balance of payments situation.
  6.54 p.m.
  Mr. John Moore: I shall endeavour to be brief, Mr. Deputy Speaker. This is, I think, one half of two stages of Government legislation. It is the half that I believe to be most crucial. This is the legislation that will bring a return to the British people. It is somewhat distressing that 90 per cent. of the speeches in this debate, pleasant though it may be to listen to my hon. Friends, have had to come from this side of the House, with the more than notable exception of the speech from the hon. Member for Dudley, West (Dr. Phipps), who I believe in this instance should be sitting with us.
  My comments will be on the general theme of the Bill, but I draw the attention of the Paymaster-General with as much emphasis as I can to the comments of the hon. Member for Dudley, West, with few of whose views I found any difficulty in agreeing, much to my pleasure.
  I give a grudging but definite welcome to the Bill. I stress that from the beginning. I find that the measure proposed is in many ways attractive. I stress that because the Paymaster-General made it clear that the variations that could take place and the degree to which he would listen to comments would allow him to make those variations and would still
  524
  not destroy the principle. I do not find difficulty about the principle of the Bill.
  There are two main factors that should be looked at in regard to an Oil Taxation Bill at this stage of our history. I deprecate the need by so many in the House constantly to refer to the past. Looking to the future, our two prime objectives are the need to produce our oil and the need to make sure that the nation benefits.
  First, as to the need to get out the oil, my criticisms are of the margin and not of the centre. In that context I strongly urge the arguments that have been pressed from both sides for variable rates. I say this to illustrate a point that has not so far been made in this debate. I argue for almost positive discrimination in terms of certain fields. I see this as a long-term pattern of price decline in world oil costing. Over the next three to 10 years as we begin to produce our oil we will constantly, as mentioned by my hon. Friends, have low-cost Middle East crude oil available to affect the basic price structure.
  With that on one side, the obvious political factors involved and the price risks involved to us, it would appear sensible, if we are endeavouring to utilise Government policy to encourage certain forms of exploitation, to go for the most expensive produced oil first. We would thus be in a position three to five years from now where our oil which cost less to produce would still be available. In other words, I think it would be possible for the Government to examine those possibilities along with variable rates of positive incentives for the more marginal fields and companies.
  I am unhappy at the absence of any provision for the offsetting of interest payments, and I endorse the comments that have been made in that respect. I cannot stress strongly enough the importance of that aspect. I recognise the Treasury's difficulties, but I believe that this is a controllable factor and it would be depressing if any Government today were not able to introduce this key factor by the use of intelligent mechanisms.
  I emphasise this as one who has observed rather than been in the oil industry. There seems always to be a fundamental difference between the

  525
  exploitation of oil and its discovery. The initial discoverers are a particular kind of breed and company. Those companies are not the same as the vast, multinational company. We must be a little more sophisticated in our handling of the situation, especially with regard to the treatment of interest payments.
  I turn now to consider whether the nation profits. We have had much extraordinary political discussion about the degree to which the oil companies or the nation are likely to gain from the oil exploitation. I should like to submit a few simple figures which I believe to be germane to the argument, because if we are to consider the possibilities not only of variable rates, to which I have referred, but, more important, the actual rate of the petroleum tax, the House and the nation should be made aware of the realities.
  I am aware that it is a difficult assumption to make, but let us take, say, crude oil at $10 a barrel. I submit that in all my assumptions that would be a pattern of price expectation that would decline. Let us take costs of about $4 a barrel. Those are low relative to North Sea production and to inflation in the future. On an 80 per cent. petrol revenue tax, taking an approximation of corporation tax at 50 per cent., we have a return of 15 per cent. to the company. That is not excessive. It is not enough to encourage people to put money into a high-risk operation.
  What is vital in that equation, however, is to draw the nation's attention, even on those figures, to the fact that out of a barrel of oil $5·40 in tax would go to the Government compared with 60 cents to the company. Those are the comparisons we should be talking about in terms of the Bill, and they are valid comparisons. I am not decrying the prime thesis. Taxation should be able to be levied, provided that there is sufficient return to attract capital investment to develop the oil.
  I could give many examples. At $8 a barrel, with PRT at 80 per cent. we are talking about a 10 per cent. return. That is far less than using one's money in a much less risky enterprise. Therefore I submit that the Bill's provisions, taken in isolation, given the variations proposed and the right level of PRT to
  526
  entice capital into oil development, would be adequate. My true worry is that the proposals will not be in isolation but that the participation agreement will come in on top of it. That participation agreement coming on top of it will be enough politically to worry companies and, more important, not give to the nation any particular advantages.
  The question has been asked, why should not the British nation gain the same as the OPEC nations? But we are doing that, as I have illustrated by the figures in the Government's own proposals. If on a barrel of oil, on my assumptions about present prices, we were to gain $540 against a company profit of 60 cents—at no risk and no cost to the nation, with all the risk and costs being incurred by the company—we should not be endeavouring to tie up the nation's capital, which could then surely be used for the development of hospitals, schools and other activities.
  That is the crucial issue. The Bill has enormous merit, given variation, but I ask that we ensure that the support we may give to the Bill will be seen in isolation from the detrimental possibilities associated with participation.
  7.3 p.m.
  Mr. George Thompson: In speaking on the Bill tonight I am aware that I speak as a sort of Daniel in the lions' den of the oil and taxation experts, because I am neither a lawyer nor a taxation expert. But I felt that if there were no Scottish National Party voice tonight the fact might be commented upon by hon. Members.
  Dr. Phipps: The hon. Gentleman can sit down now.
  Mr. Thompson: I thank the hon. Gentleman for his remark, but I shall continue to say a few more words, because in addition to promising to speak I promise to be brief.
  I have noticed that the Prime Minister is very fond of quoting scripture to us when he comes to Scotland to talk about oil. I fear that his attention has never really left the book of Genesis. I should like to commend to him for meditation a verse from the forty-fifth Psalm:
  "You have loved justice and hated iniquity: therefore God, your God, has anointed you with the oil of gladness beyond your companions".

  527
  I feel that there are certain depths to be meditated on here, and I commend the verse, using, I admit, the old-fashioned symbolic exegesis.
  The great thing that oil has done for us in Scotland is to promote a new self-confidence. For many years we have heard the prophets of doom going on about how we were too poor to run our own affairs—sometimes that we were too stupid to run our own affairs—and in general we in Scotland indulged in a process of self-denigration. The oil in the North Sea has restored self-confidence to such a degree that I noticed during the election campaign this year that arguments that I put forward in 1970 on behalf of our candidate in Galloway and that were then not accepted were accepted in 1974.
  Many people said to me during the recent election campaign that they agreed with what I had to say about North Sea oil but that Scotland could run her own affairs perfectly well without it. So there is a psychological benefit already from the oil in the North Sea.
  I agree with the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) that oil is not the great salvation. That is perfectly clear and we must not delude ourselves into thinking that all our problems, either in Scotland or elsewhere in the United Kingdom, will disappear with a wave of the oil magician's wand. Certainly, too, we must not indulge in the folly of mortgaging our oil, or borrowing on it and then having to use it to repay such loans.
  There is also the need for conservation, the need to draw out the oil at a rate that will allow us in Scotland to benefit from the technological knowledge that will be developed there and allow us to use the revenue in such a way that our industry is developed for the day when there will be no more oil. We must not delude ourselves into thinking that the oil will last for ever, or that oil wells somehow fill up like water wells.
  My colleagues and I support the Bill because it seeks to plug the gaps in our taxation legislation, gaps that were allowing the oil companies to benefit excessively from Scotland's gas and oil. I cannot let pass the opportunity to warn the House that we on these benches do
  528
  not accept that the increased oil revenue, which I am informed will amount to £3,000 million by the early 1980s, should go to the British Treasury.
  We should like the House to remember in passing this legislation that the possibility must be envisaged that it will have to be adapted so that the revenues will be able to go in due course to a Scottish Treasury. The problem of the division of revenue from oil in federal systems has already arisen. I understand that in Canada there is dispute between Alberta and the Federal Government on this subject. We hope that the arrangements that the Inland Revenue makes will be such that the revenue from Scotland's oil and gas can readily be transferred to a Scottish assembly when such an assembly becomes a matter of fact.
  I am not a taxation expert, but I regret the absence of a mechanism for utilising a tax reference price system, because that would make for stability and control, whereas the Bill relies on the fluctuating yardstick of arm's length sales receipts. The Scottish National Party has always believed in participation and we hope that the Government will not envisage taxation merely as an alternative to participation. We hope that they will press companies to participate by having a two-tier tax rate, with lower burdens imposed on companies which accept participation.
  I shall not condescend upon particulars, as I am only a layman in these matters. I therefore leave for another occasion the detail to my colleagues who are learned in the law.
  7.10 p.m.
  Mr. Peter Rees: I had not intended to intervene in the debate until I had applied my mind more closely to the details of the Bill. However, having looked at the Bill, even though briefly, various points have occurred to me, as they have no doubt occurred to other hon. Members, and I hope that the Minister will be able to deal with these points.
  I welcome the moderate contributions of the hon. Member for Galloway (Mr. Thompson). I was a little surprised to hear him say that North Sea oil or, as he may choose to call it, Scottish oil, was needed to boost the self-confidence of the Scottish people. In view of their

  529
  massive contributions to our Imperial past, our shared history and, I hope, our shared future, I would not have thought that the discovery of North Sea oil was needed to regenerate confidence in that important part of the United Kingdom.
  I agree with the hon. Member that we should be rather moderate in our expectations from North Sea oil. The Hudson Institute—not that I have a great regard for either its analysis or its conclusions—has pointed out that there is at least a possibility that we shall find ourselves tied to a source of high-cost oil when prices are declining in the Middle East. We must consider this carefully before launching into any grandiose projects.
  The hon. Member said that he thought that it would be wrong for the revenues from North Sea oil to go to the British Treasury. In all candour, I think that the real danger is, not that the proceeds will go to the British Treasury, but that they will go to service the inordinate borrowing to which we shall be committed in the intervening years.
  I believe—this has been the tenor of all the speeches—that we are all agreed on the objective, which is to ensure for the British people a fair measure, a fair cut of the profits, such as they may turn out to be, from our native resources.
  I do not propose to debate whether it should be some kind of excess profits tax or a special tax, as has been devised. I do not see any great difference in principle, providing that both taxes are drawn in a sensible and fair way. Unless we achieve a measure of fairness, as I am sure the Paymaster-General and his hon. Friend recognise, we shall find a marked reluctance among the oil companies to exploit these resources.
  To judge the fairness of the tax it is necessary to look at the fine print. I hope that I shall not be thought to be raising points which should more properly be canvassed in Committee. But I would like to ask the Minister if he could deal with the following points.
  What criteria are the Government going to apply in the determination of what constitutes a field? This is a question of supreme importance, because the oil companies should know what expenditure they can match, and what revenues. In that regard, I am concerned that I see no par-
  530
  ticular provisions for appeals against a determination of the appropriate authority. Will the Minister give us an assurance that somewhere deeply embedded in the schedules, in a part that has possibly escaped my attention, there is at least an appeal procedure?
  Mr. Skeet: Would it not be more appropriate if fields were determined by the oil companies, on geological considerations, and the Minister reserved the right to object?
  Mr. Rees: I am grateful for my hon. Friend's intervention. I do not particularly mind where the onus should be put, whether, in the first instance, the determination should be left to the oil companies, subject to objection by the Minister, or whether there should be determination by the Minister, subject to appeal by the oil companies. I am perhaps predisposed in favour of the outside experts rather than in favour of the Government and would prefer, perhaps, the determination to be left to the oil companies in the first instance.
  The point I am stressing—and one which I hope the Minister will be able to deal with tonight—is that there should at least be a fair appeal procedure, as this is of crucial importance. I am sure that the House will appreciate that there should be a fair determination of fields, particularly as, apparently, there is to be no offset between losses in one field and profits in another. I would prefer to see such an offset because it seems that the rather narrow, niggardly approach the Government seem wedded to at the moment will discourage the exploitation of the more risky marginal fields. I hope that the Minister will be able to deal with that.
  The second point which I hope that the Minister will deal with is the calculation of profit. There is a great amount of detail which will have to be explored on a later occasion. But there has crept in an entirely novel principle which we have not so far encountered in British tax law—that is, that tax should be exacted before there has been a disposal of the stock-in-trade or the product. The oil companies are bound to bring in
  "the market value, three months before the end of the period"—
  I may be obtuse, but I do not see why the market value should be determined

  531
  three months before the end of the period—
  "of so much of any oil so won as was appropriated by him in the period to refining".
  presumably by the oil company itself, otherwise it would have been disposed of.
  That seems an unattractive breach of a principle that has long been established in British tax law, that one taxes only when a profit has been realised. There are many details in the computation of profits that will have to be explored at a later stage, but this seems a point of fundamental importance with which I hope the Minister will deal.
  I come next to the question of the deductions that will be allowed under Clause 3. Many of my hon. Friends have dealt with the first disallowance, namely, the disallowance of interest. It is quite wrong that the Government should attempt to dictate the way in which these operations should be financed. It seems contrary to much of their philosophy, as expressed in opposition, as this will tell in favour of the large multinational companies against the small domestic operators, which may have to finance their operations with bank loans, or in other ways. Is that the intention of the Government, or is it something they have overlooked? It is a curious approach to the problem.
  As one of my hon. Friends suggested, if one wishes to control the deduction of interest, a limitation should be placed upon it. It should be, say, interest at a commercial rate. I know the pathological worry of Governments that dividends or distributions will be dressed up as some form of sophisticated interest, but that can be got round. It has been got round in our ordinary tax legislation, so why cannot it be got round in regard to this tax. The fundamental objection is that one is dictating the way operations can be financed and one may limit the operations to certain large multi-national companies. I have no criticism of or objection to multi-national companies, but it is a matter of curiosity on which I am entitled to comment. It is not in harmony with the views we have heard from the Labour Party in opposition and even, to a degree, in government.
  532
  There is another deduction which I find curious and which may bear harshly. It is the deduction under Clause 3(3)(e):
  "any payment made for the purpose of obtaining a direct or indirect interest in oil won or to be won from the field".
  As I read that with a perhaps untutored eye, it will prevent companies taking over the unsuccessful, or partially-completed operations of another company and obtaining any deduction for the cost of acquisition.
  That strikes me as a little harsh. There may be operators, crushed with the burdens the Government are putting on them, who will wish to abstract themselves from the North Sea and sell their operations to one of the multi-national companies. Why should not a deduction be allowed for that kind of expenditure?
  Then there is the disallowance under Clause 3(3)(c) of
  "the cost of acquiring or erecting any building or structure on land …"
  It occurs to me that the pipe which is inserted at the field and attached to some installation on shore may be in part a "structure on land". The whole tenor of the legislation—and I am sorry to burden the House and the Minister with the details, but I think that they are important details—shows a rather niggardly approach. Perhaps the Government are drawing on precedents established in the Persian Gulf. I detect the hand of Lord Balogh, and that augurs ill both for the oil industry and for the country.
  I have thrown at the Minister points of detail, but in the aggregate I believe that they are important. Unless the Bill establishes a fair balance between the Government and those who are going to risk their capital and expertise in the North Sea, we shall find that there will be a marked lack of enthusiasm to exploit something which in the long run may prove to be an extremely expensive asset.
  There is common ground, I hope, between all parties on this side that we wish controlled but enthusiastic exploitation of this asset. Therefore, I hope that the Minister will consider the various points made tonight and will give us a generous and clear reply to our anxieties.
  7.21 p.m.
  Mr. David Howell: This debate has been remarkable in three ways. The first has been the almost total absence of Labour Members from the debate from start to finish. We all know where they are, of course. They have gone to a comradely little gathering across the road. But the Paymaster-General told us himself that this debate involved possibly the most important tax decision taken by any Government since the war. It is rather eloquent that 99 per cent. of Labour Members should place more priority upon a little friendly back-stabbing across the road than on joining in this crucial debate.
  The second remarkable feature was the Paymaster-General's speech. Gone were the bloodcurdling noises we heard before the February General Election and even as recently as last week. Instead, the keynote of the Paymaster-General's speech—and how right he is—is now caution and open-mindedness. He intends to proceed step by step. It is almost as though his favourite hymn has now become,
  "Abide with me,
  I do not ask to see the distant scene;
  One step enough for me."
  This is where the Paymaster-General has got to now, and I certainly think it a more prudent posture than the one which he and his right hon. Friends have been adopting in recent months.
  The third remarkable event in this debate was the speech by the hon. Member for Dudley, West (Dr. Phipps), I hope that my hon. Friends will forgive me if I pick out that speech. It was remarkable in being the only one from the Government back benches, but it was remarkable also because it showed a great deal of common sense and a great deal of expertise. Indeed, the hon. Gentleman is an expert in this sphere. More than that, it showed a feel for the problems of the whole offshore oil industry, which frankly is completely lacking on his Front Bench, as I shall show in a moment.
  The hon. Gentleman's speech showed a sensitivity to the problems and structure of the industry which is not demonstrated when the Paymaster-General and other Ministers recite in a somewhat dreary sequence all the consultations they have
  534
  had with the various oil companies. I shall return to this aspect, because I believe it to be one of the most important and dangerous in terms of the damage that these provisions could do, if we get them wrong, to the whole offshore oil effort of the nation.
  All the speeches pointed also to another aspect which is equally worrying. What concerns us is not so much what the Paymaster-General has said and what the Bill says as what has not been said and what the Bill does not say. The hon. Member for Dudley, West made the point that we do not have the rate. The rate is the nub of the whole programme. The rate is the thing upon which decisions, motivations and investment decisions depend day by day in the North Sea. We are not to have the rate until the spring—we hope, the early spring—and I agree with those who say that it cannot come too soon. The rate is the missing element, and without it the offshore oil programme of this country is inevitably on a crutch.
  Next, I refer to the artificial losses accumulated before 31st December 1972, for which, the Paymaster-General told us, provision would be made in the spring Finance Bill. I see the virtue of proceeding on those lines, although for the oil companies it leaves yet another gap in their calculations. But I add a slight warning. I know that the strategy and the intention is to make sure that the oil companies do not somehow, by upstream operations, escape their full tax liability downstream. We must remember, however, that upstream other Governments are saying the same thing in reverse. The net effect, as my hon. Friend the Member for Bedford (Mr. Skeet) reminded us, is that the squeeze is on the oil companies in a big way.
  In its latest brief, Shell has published a note—confirming what my hon. Friend said in a very authoritative speech—making clear that its margin on a barrel of marker crude is now down to 22 cents. We know—this again is a Shell figure—that the company needs a minimum of about 50 cents to finance the heavy investment programme in oil development. Thus, it is running at below half its need to sustain an adequate investment programme of the kind that we in this

  535
  country expect and hope the oil companies to maintain in the North Sea. We must, therefore, beware lest we fail to adjust our minds to the facts of the present situation in putting on the squeeze through the additional provisions that are to come in the Finance Bill in the spring. They are, of course, another prong in the enveloping strategy in dealing with the oil companies.
  The third gap is the one to which many of my hon. Friends have referred—the British National Oil Corporation. The Paymaster-General rather bravely asserted—as though if it were so asserted it would lie down or go away—that it was a self-contained matter, and that because he said it was self-contained it would remain so. It is not self-contained. It spills over into every aspect of the Bill that we are discussing, into every aspect of the oil programme and into every aspect of the decisions taken by North Sea oil operators. The question mark which it provides and which looms over the whole programme is crucial to the whole future of the North Sea oil industry.
  Will it be just another oil company? That is the sort of safe Fabian view, if I may put it like that. I hope I am not being rude to the hon. Member for Dudley, West. I am sure that from the Front Bench he could have put it in a plausible, relaxed way, as just another oil company such as Total, or something like that. Or will it be a sleeping partner or a busybody agency going round with a cudgel marked "51 per cent." and regarding itself as the instrument of Government policy? That, apparently, is the view of the Secretary of State for Energy. If that is the view, what becomes of the officials in the Department of Energy? Do they stand aside? Do they provide back-up for the BNOC or do they, as I suspect will be the outcome if ever this ghastly contraption sees the light of day, get in each other's hair in one glorious bundle of incompetence, bottlenecks and delay?
  As the Paymaster-General is the first to know—indeed, he has written an excellent book proving it all too clearly—it is all a lot of nonsense. Not a penny piece more will accrue to the people of this country as a result of the creation of BNOC. My hon. Friends have put devastatingly the logical and rational case against it. It will be of no use whatso-
  536
  ever. It is a device entirely to deal with sensibilities within the Parliamentary Labour Party.
  You would be right, Mr. Deputy Speaker, to say that it is not in the Bill and not in order, yet clearly it is highly relevant to the outcome of the Bill. One is driven to the point which my hon. Friend the Member for Bedford made, in an outspoken and forthright way, when he asked "Is this the instrument—the body—that will sweep up the smaller holdings, the smaller operators? Is this the device—the dustpan—into which is to be swept the smaller companies after they have been mutilated under the Bill?" That is the question which is being asked in the oil industry today, and it provides a rotten background against which to create the impetus and drive needed in the North Sea oil programme.
  That impetus was there, and in some areas it still is there. Certainly when I was involved with this programme at the beginning of the year there was a tremendous atmosphere of drive and bustle amongst the business community, the financial community, the oil industry and the smaller oil operators. But I think very few would disagree that at this moment this impetus appears to be fading.
  One has to ask why that is so. To understand why, one has to appreciate, as the hon. Member for Dudley, West, who has just walked out, appreciated—but I still question whether the Government Front Bench appreciate it—that there are two North Sea oil worlds, not one. One is dealing with two distinct worlds. The first is the world of the big oil companies, the big operators and the big contractors. They are the ones who tend to form the deputations, provide the views and consult with the great Departments of State in Whitehall and with Ministers, and by the very nature of their size they are better equipped—they may not like it—to absorb the shocks of the ups and downs, the switches and turns, in the policies of the Government. That is their position.
  Then there is the other world, and it is the voice of the other world which has been heard in this debate but which is totally absent from the thinking behind the Bill. The other world is the world of the new men whose energies have been

  537
  mobilised by the prospects and by the sheer size and magnificence of the North Sea oil adventure. This world includes financial groups, component manufacturers, fabricators of equipment, subcontractors, service firms, consultants and entrepreneurs in the literal sense of the word—go-between operators in the very best sense. These are the people who have provided the vitality in the North Sea oil drive hitherto. It is here that one now finds far less enthusiasm and far more readiness to shrug the shoulders at the appalling uncertainty.
  I do not think that any of these people or any of the oil companies ever expected that there would be an unchanged tax environment. Of course they did not. They never expected that the pattern of regulations and taxation or the economics of oil recovery would remain unchanged. There was no expectation of that kind. But where they may have been misled is in failing to foresee the almost self-destructive disarray which is now being caused by political statements and by actions taken largely by Ministers in the present Government. These have created a background of uncertainty which did not exist six months ago. I do not think that visits of Ministers around the world help. I am referring to the visit of the Minister of State, Department of Energy, to America, which I understand did not do anything to reassure anybody.
  The truth is that there is a feeling of nervousness. The hon. Member for Dudley, West referred to this. That is the first and foremost consideration. Everywhere now there is uncertainty. In a sense, the petroleum revenue tax rate is just the final element in a long and growing string of doubts in this increasingly unpredictable situation.
  That is the first issue—the gross uncertainty. Secondly—and this is the item to which my hon. Friends have referred again and again this afternoon—there is the question of rising costs and the continuing lack of appreciation amongst Ministers in the Department of Energy—I do not know so much about the Treasury—about the rapidly rising costs and the risks in the North Sea.
  First there was the famous, incredible remark by Lord Balogh, the Minister of State, Department of Energy—admittedly
  538
  just before he took office—that the North Sea was
  "one of the least risky areas in the world."
  The more one thinks about that remark, the more it is calculated to send a shudder of nerves through those who are operating in conditions of appalling and rising risks in the North Sea, and who will be operating, we hope, in the other areas as well as they are opened up. Therefore there is apprehension, of which we heard strains in the debate today, that the smaller fields and the smaller operators will be in difficulties.
  The Paymaster-General in his new guise of open-mindedness, of action step by step and all the rest, appeared to suggest that in the smaller fields perhaps the principles that were immutable before, things that could not be changed, had turned out to be mutable and changeable after all. But I am not sure that he had any comforting words for the smaller operators. The difficulty is that the attack on the smaller operators which is evident in the Bill wil not hit only them. It could also hold up the big fields in which they are minor partners. If they cannot get their financing, the whole field can be delayed even though the bigger companies are able to get their finance.
  "Attack" is the right word. We cannot mince our words here. The attack is in Clause 3(3) in the form of the disallowance of interest for PRT. Later in the Bill there is also the disallowance, except for specific North Sea oil money, for corporation tax. This is a tightening up of the corporation tax rules. These represent a frontal attack on the smaller operators and the smaller men in the North Sea oil business. Unless it is changed, Clause 3(3) puts many of the smaller participants in the North Sea oil programme in the tumbril and ready to be rolled off to the tricoteuse of the Labour Left wing who are tonight elsewhere with their knitting.
  The fourth thing which has created apprehension is finance. There is evidence of a reluctantce to lend. Apart from the fact that some banks are short of finance for new projects for obvious reasons, and apart from the general economic climate which creates additional difficulties, there is a general feeling that finance is difficult to come by for North Sea operations both for the main operators and even more so down

  539
  the line for the component manufacturers. One would think that in a levelheaded and rational world the North Sea oil programme would be getting every priority for bank finance and that the Government would be doing all they could to back it up. The Government might say that there will be the FFI, but when will that start? It might be January, February or March, but we do not know. Every day that passes increases the biter and heavy cost to this country of the delays before the oil begins to flow.
  That is the not very happy scene which has now emerged in which the Bill takes its place and in which other measures which lie ahead will take their unhappy place as well. I do not think that the loss of impetus—and it is there—will be shown up in an immediate slow-down in the rate at which the oil begins to flow in the next year or so. It will be further down the line. It will show up in exploration and evaluation of the enormous potential which lies outside the North Sea altogether. In talking about North Sea oil, we sometimes forget that it is believed that there is commercial oil and mineral potential west of the Shetlands, in the Western Approaches, in the English Channel and in the Celtic Sea. Heaven knows, we should be getting on and finding out what exists there at deeper levels down to 1,000 feet and more.
  To get the oil out will require technologies which have not yet been invented, but the challenge is there. With a huge push in this direction we could raise our sights above the aim of the limited ambition of self-sufficiency by 1980. That would be admirable, but we could look far beyond. This country, if we maintained momentum, could be one of the world's greatest exporters of oil, oil products and minerals as well as a leader in the technology of offshore equipment. The question that is left hanging in the air by the Bill is whether the incentive is there to move on to this bigger scene, to provide the impetus to those people who were and still are trying to take part in the North Sea oil programme to move on to the still bigger recovery of minerals and hydrocarbon wealth that lies beyond.
  We all recognise that the Paymaster-General is on a tight-rope. Every leader
  540
  writer who is concerned with these matters has written about his dilemma. I warn him, however, that on one side of his tight-rope is political unpopularity if he fails to screw the oil companies for enough. He was the first to recognise that. On the other side is the danger that he could undermine confidence and that if he gets it badly wrong he could snuff out the prospects which are there and on which our whole national recovery depends.
  Practically everyone in the debate has agreed that oil is not a free ride and is not an easy venture. It has to be worked for and won in the hellish conditions of the North Sea by an enormous input of brainpower and manpower and of every other kind of effort in order to break through the physical and technological barriers and the barriers of organisation and management.
  We in this country are right to make that effort, and I think that my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) brought home devastatingly clearly that so far there has been a great deal of success. Some of the best brains and talents in finance, commerce and industry have come together in the United Kingdom to carry forward the British offshore programme. Now, however, if a clumsy Government put a dead hand on this great surge of activity, as I believe is the danger and as has been chillingly emphasised in the debate they may already be doing, if that is the course of action we get dragged into we as a nation will have deserved to fail.
  7.42 p.m.
  The Minister of State, Treasury (Mr. Robert Sheldon): This has obviously been a valuable debate in so far as it has helped along the discussion which my right hon. Friend the Paymaster-General and I and many of our colleagues have been having and will continue to have with the oil companies. Consultation has been the very keynote in the preparation of the Bill, and with a new tax of a radically different kind from those to which we are accustomed there must be this element of consultation.
  It may be that had we had the time, one of the options might have been for a Select Committee to study the tax. As we know, however a Select Committee

  541
  is already being set up to examine the wealth tax, and it is very important, because of the coming on stream of North Sea production next year, that the oil tax is ready in good time.
  The right hon. Member for Wanstead and Woodford (Mr. Jenkin) referred to the calculations sent to him by an oil company. Those calculations were available only to the oil company and whether by a direct method or an indirect one they found their way to him. These figures were given in confidence, although I shall not elaborate that point. But the important aspect was that the Government provided calculations in a way that is rare. Instead of saying, as has so often happened in the past, that Government know best, we put the calculations forward openly and frankly in an endeavour to see whether the oil companies agreed with the method, to see whether they could devise any better method and to hear any other comments they might make. The element of consultation has been central in the preparation of the Bill.
  Mr. Patrick Jenkin: I accept the value of consultation, although consultation on the tax has not been going on for long, but will the Minister of State release the figures for wider consultation and consideration? They are bound to have gone to the companies' financial advisers and the banks, and I see no reason why they should continue to circulate with "Confidential" stamped on them.
  Mr. Sheldon: The right hon. Gentleman, whose knowledge seems to be fairly considerable, may know that there were two types of consultative document. One type is strictly commercially confidential because it depends on information about the activities of individual companies which could be identified, although we tried to make sure that they were not easily identifiable. The same argument to a more limited extent might be put about the hypothetical case. That aspect gave us some anxiety. I will with pleasure look into what the right hon. Gentleman says. Unless there is an overwhelming case for keeping documents of this type confidential, I believe that they should be made available to the Opposition.
  Mr. Jenkin: I am grateful to the Minister of State who, as so often, approaches these problems with an open mind. Will he consider applying the same procedure to what has become known in the industry as the Dalton letter, which was circulated before the Bill was published and of which the Paymaster-General's office was kind enough to send me a copy in strict confidence? I shall of course preserve that confidence.
  Mr. Sheldon: I shall, with great pleasure, consider that matter, too.
  The hon. Member for Guildford (Mr. Howell) spoke of the need to maintain incentive. He posed the question fairly by asking, "Is the incentive there?" The Government's intention is to maintain an adequate and generous incentive to the oil industry to deal with the problems that it will have to face. We want to make sure that there is an incentive. It will at least in part depend on the rate of the petroleum revenue tax, which is still a matter for final decision based upon consultation and upon other factors that we have discussed.
  The Bill has been called the first part of the Government's strategy for dealing with our offshore oil. The second part will be concerned with participation, and that is outside the scope of this Bill. Participation is one of the most valuable methods of ensuring that the Government understand the problems of the industry——
  Mr. Skeet: Oh.
  Mr. Sheldon: I listened to the speech of the hon. Member for Bedford (Mr. Skeet) with interest and some courtesy. Perhaps he will allow me to continue.
  Participation will give the Government the opportunity to discover the precise calculations of profitability and to learn how to regulate and administer the oil industry.
  Mr. Skeet: I am surprised that the Minister puts it in that way. He is aware that the Government have a 48 per cent. interest in British Petroleum and therefore have every opportunity of discovering these things. Oil companies return to him or to the Treasury evidence on their prices.
  Mr. Sheldon: I wish that were so. If that had been so the need for consultation would have been less. It was precisely because the Government did not have the information which the hon. Member for Bedford assumes they have that they had to undertake extensive consultations to secure the information on which the Bill will be based.
  Mr. Rost: Do not the Government have a representative on the board of British Petroleum? If not, why do not they have a representative on the board to represent their 48 per cent. interest and to obtain that information from inside and at first-hand?
  Mr. Sheldon: The hon. Gentleman should know that the Government in their dealings with British Petroleum do not have the information which they will acquire through the consultations. The information available to the Government from oil companies, even from those with which the Government are closely associated, is an inadequate basis for financial legislation which is crucial to the development of these resources.
  Mr. Jenkin: Of all the arguments advanced for the British National Oil Corporation that is the weirdest. The Government will take powers to get information in the Bill to be presented in the new year. It is all set out in the famous Clarence Tuck letter of September. Why do they need to invest £4 million, £5 million or £6 million of the taxpayers' money to achieve the same objective?
  Mr. Sheldon: The right hon. Gentleman must know that, apart from the problems of dealing with a company in which the Government have an interest but which is not owned by the Government, the details of management and the work on the ground are not known. If those details were known they would be about one company and not about the whole industry. If the right hon. Gentleman's argument is that there is no need for consultation because as the result of the Government's having a connection with British Petroleum all the information is available, he is seriously mistaken. The argument for consultation is that we do not possess the kind of information that the right hon. Gentleman for some peculiar reason assumes that we do possess.
  Mr. Skeet: The Minister could get the same information through the British Gas Operation which operates in the North Sea.
  Mr. Sheldon: I find this to be an incredible situation. Opposition Members are saying that legislation can be framed on the basis of one or two examples and that the Government can decide how to get vast sums of money on the basis of grossly inadequate information. I am talking about consultation over the whole of the oil industry, and about participation which will give us further knowledge. The third part of the Government's strategy is the setting up of the British National Oil Corporation as an oil company possessing the power to develop the resources and hold the shares which will arise from participation.
  I am sorry that we have spent time on this subject which will be dealt with in the Bill to be presented by my right hon. Friend the Secretary of State for Energy. Much of what has been said is a curtain raiser to the Second Reading debate of that Bill. I suggest that hon. and right hon. Gentlemen come back to the House after a month or two and make their speeches on a more suitable occasion.
  Mr. David Howell: The Minister made some important statements and lifted the curtain on the BNOC. In doing so he has revealed a scene of some confusion. Is he saying that it is not to be a corporation in the recognised sense of the word—even a nationalised industry is a corporation—but is to be an agency, an instrument for consultation and information gathering. Is that what he said?
  Mr. Sheldon: No. I did not say anything of the kind. If the hon. Gentleman reads what I said, he will see that this is a matter which will be brought in by my right hon. Friend the Secretary of State for Energy. The hon. Gentleman would do better to wait and see the proposals announced in the kind of detail which will be adequate for the purposes that he has in mind.
  Even before the rise in oil prices last year, it was clear to everyone that the revenue arising from the North Sea was quite inadequate. The impetus for this Bill rightly came from the work of my right hon. Friend the Paymaster-General and the publication of the Report of the

  545
  Public Accounts Committee for the Session 1972–73. There are many outside this House who decry the rôle of Parliament in the work of our country. Those who do that should note that here is a case where a Select Committee of Members of Parliament provided vital information to the effect that our people were not getting a fair return from the oil policies of the then Conservative Government. Condemnation of those policies was voiced by the Public Accounts Committee, of which the right hon. Member for Wanstead and Woodford made light——
  Mr. Patrick Jenkin: Not at all.
  Mr. Sheldon: The right hon. Gentleman spoke of "the myths" of the Public Accounts Committee. I thought that that was making very light of its report, which was the foundation for our oil taxation policy. The myths of which the right hon. Gentleman spoke were the product of an all-party committee whose members included a large number of Conservative Members. They made their condemnation about the granting of licences, and most of us were deeply impressed by the way in which their report formed the background to this present legislation.
  It is important that the three main planks of this legislation should be made clear. My right hon. Friend the Paymaster-General pointed out that the Government had adopted a field-by-field approach, that it was essential to have this prior charge, and that it was essential to have the ring fence in operation. There are other matters which we shall be discussing, and consultations will take place. However, it is important that the resources of our country, newly enriched by these finds, should be used in the interests of the country as a whole. I hope that they will be used for the industrial regeneration of the development regions, especially those in Scotland.
  Our concept of the proper exploitation of this new source of energy includes proper care of this new resource in the provisions which will be brought forward by my right hon. Friend the Secretary of State for Energy——
  Mr. Hordern: The hon. Gentleman said that one of the points not open to discussion was the question of interest relief
  546
  against petroleum revenue tax. Will he address himself to the reasons for this exclusion? This is an important matter, and we should be told the reasoning behind it. At the moment there does not appear to be any.
  Mr. Sheldon: I shall be coming to that later in my remarks.
  I want now to deal with one or two of the detailed points which have been raised. First, the hon. Member for Hertfordshire, South-West (Mr. Dodsworth) pointed out, quite rightly, that Clause 6 allows for abortive development expenditure only if a field is abandoned before 1,000 long tons have been brought up from the North Sea. This is a point worth considering, and I am prepared to consider it.
  Another matter which I found somewhat complex arose when the right hon. Member for Wanstead and Woodford said that this Bill had the wrong structure. There is nothing more fundamental about a Bill than the structure upon which it is built. Having decided that this is the wrong structure, the right hon. Gentleman has come to the conclusion that he does not intend to vote against it. I shall be interested to discover how he intends to reshape the Bill if his opposition to it is so muted.
  Mr. Patrick Jenkin: I thought that I had made the position abundantly clear. The Opposition agree in principle with the idea of additional taxation. I spelled out at length the points of common ground between us. But we have said that the first part of the Bill has instituted the wrong structure of tax and that we shall move amendments in Committee to put that right. It is a little odd to invite the Opposition to vote against a Bill when so much of it is agreed.
  Mr. Sheldon: I have been a little uneasy about the right hon. Gentleman's reasoning on these matters over the years. If he intends the structure to be radically different and he succeeds in changing it, it will not be the same Bill.
  My hon. Friend the Member for Dudley, West (Dr. Phipps) pointed to the problems and needs of the small operators. I accept that they are rather different, and I have personally invited my hon. Friend to make representations to me on these important matters.

  547
  A number of hon. Members referred to the problems arising out of Clause 2, which lays down the rules for computing participators' assessable profits or losses from oil fields in any chargeable period. I regret that this is a complex clause. When dealing with a new tax it is essential to ensure that it is sufficiently clear for the purposes of those who have to decide its interpretation, even at the expense of the clarity which we ourselves might prefer. The tax is designed specifically for a narrow and homogenous sector of industry. As a result, it is only fair to set out in full the appropriate method of computing profits.
  Clause 3 concerns the allowance of expenditure other than expenditure on long-term assets. A number of hon. Members referred to this, and I shall try to deal with some of their points. I shall take up in correspondence those with which I am unable to deal tonight.
  In defining what is to be allowable as an expenditure in broad categories, the clause departs from the normal rules for income tax and corporation tax. Under those rules, tax is charged on the balance of profits and gains supplemented first by a general disallowance of any expenditure not laid out wholly and exclusively for the purpose of the trade, and second by a number of specific disallowances—and also some provisions for specific items to be deductible. The starting point of all corporation tax and income tax trading computation is the commercial profit shown by the accounts. In discussions on the petroleum revenue tax structure the industry has urged that the same rule be followed.
  Unfortunately, there are good reasons why that cannot be done. Income and corporation tax apply to a wide variety of trades and the computation rules are naturally drawn in wide terms. It would be impracticable to draw up a specific list of allowable expenditure covering all trades from, say, a toffee shop to a steelworks. Inevitably, broadly drawn rules have led to frequent litigation over the years.
  By contrast, the petroleum revenue tax applies to a narrow and homogeneous sector of industrial activity. Therefore, it is sensible to draft the expenditure rules in terms appropriate to that activity.
  548
  The categories set out in Clause 3 subsection (1) are quite broadly drafted.
  Mr. Patrick Jenkin: I wonder whether the Minister is slightly misunderstanding the point that has been made. The novel principle is that of setting out matters which are allowed, whereas the practice in the past has always been to allow more normal business expenses computed on ordinary accountancy principles and to disallow certain specified matters. Is it not possible to adopt that procedure here if the Government feel that it is essential to disallow a number of matters rather than to specify that one must bring the expenditure within a number of categorised headings which may not cover desperately important points?
  Mr. Sheldon: It was felt desirable to draw up this matter rather more tightly than the right hon. Gentleman suggests. During the further discussions some widening may be possible. I look forward with interest to hearing what these representations might eventually produce.
  Several hon. Members have referred to interest. Uplift is in lieu of interest. It is not possible to make a precise connection with the value of the uplift in terms of interest rates in the way suggested by my hon. Friend the Member for Dudley, West without making a number of assumptions. These include the length of the loan repayment period, over how many years the interest would be repayable, the timing, the flow of receipts, and other matters. The Bill provides for the uplift—the additional deduction equal to 50 per cent. of cost—to be given for certain items of expenditure as compensation for the disallowance of interest paid on borrowings.
  The decision to disallow interest when computing profits for PRT was a precaution against possible loss of tax. Interest charges could be arranged to erode the tax base of PRT. The production company could borrow from another company in the same group at inflated rates. There could also be the problem of allocating interest where a company carries on activities additional to North Sea oil production. The uplift has been fixed at 50 per cent., but that figure could be reconsidered, in the light of comments that have been made tonight, if the industry could prove that it was inadequate as compensation for

  549
  interest paid on borrowings. If interest rates were to rise dramatically, that factor could be brought into the discussion.
  I turn to the problem of the ring fence to which reference has been made. Under the present rules for corporation tax there are a number of ways in which the profits on United Kingdom oil activities could be eroded. The most important is the set off of losses and capital allowances from extraneous activities carried on by either the same company or an associated company in the same group.
  The purpose of the ring fence is to prevent the corporation tax yield on United Kingdom oil production profits being reduced by these or by other means. The effect is to isolate North Sea income for all corporation tax purposes from losses and allowances arising from any other sources. The ring fence will operate in one direction only. It will not prevent any losses and capital allowances attributable to United Kingdom oil and gas production from being set off against non-North Sea profits of the same group under the normal corporation tax rules. Other matters connected with this problem were fully discussed by my right hon. Friend the Paymaster-General in his opening speech.
  Severe criticisms have been made about the level of optimism, expectation and enthusiasm by a number of the oil compaines.
  Mr. Peter Rees: I put a specific question which I think echoed points made by others of my hon. Friends. What criteria are to be adopted by the appropriate authority in determining what constitutes the area, as the Minister chooses to put it, within the ring fence? How will the area for taxation purposes be defined?
  Mr. Sheldon: These are matters for, further consultation as required. I explained to the House that there are only three bases on which we firmly stand. We believe that we have a workable outline of the tax—a tax which I think will be of enormous value—but we are prepared to discuss these other matters on the basis of figures and representations made to us by the oil companies. The fact that we had a cordial and valuable meeting as recently as a week ago—it was the largest meeting of a number that we
  550
  have had—is evidence that this relationship exists. Indeed, I hope that it will develop.
  I should now like to deal with the gloomy prognostications made by the hon. Member for Guildford. My right hon. Friend the Paymaster-General said that it is no part of the Government's intention to allow these tax proposals to deter any development. The Offshore Supplies Office of the Department of Energy was set up to ensure that there was no slippage in the development programme. I am sure that the oil companies and the financial institutions accept the Government's assurances that they intend to see this programme carried through at its present pace.
  It is a fact that, for example, Texaco recently acquired a major share in the Argyll field and that the International Energy Bank—a consortium of major banks—recently agreed to arrange a credit of about $250 million for two of the licences for the Piper field. That, at any rate, may go some way to offset the gloomy picture painted by the hon. Member for Guildford.
  Mr. Patrick Jenkin: Will the hon. Gentleman answer the question about the Thomson Scottish and Occidental loans, to which he referred, by telling us the nature of the assurance that the Government had to give to the companies in order that the deal could be signed up?
  Mr. Sheldon: I shall be pleased to write to the right hon. Gentleman about that matter. I have no knowledge of those negotiations. The right hon. Gentleman has these problems in mind because he is more concerned with the next Bill on this subject and is using this debate as a curtain raiser. I appreciate and understand his interest, but I suggest that he should leave those matters for the next Bill which is his prime consideration.
  Mr. Jenkin: The Minister chose to refer to that loan by the consortium of banks, under the leadership of the International Energy Bank, for the financing of the Piper oilfield by Occidental and Thomson Scottish as an example of confidence. What undertakings or assurances have the Government had to give to those companies to enable them to sign up that deal?
  Mr. Sheldon: The right hon. Gentleman will understand that a number of these matters are the subject of confidential negotiations. Naturally all these things always are. But I shall be happy to go into the matter if the right hon. Gentleman writes to me.
  The Government have in a short space of time, but acting with determination—which is important in this respect—created a new tax, in an entirely new situation. The new sources of fuel that arise from the North Sea are now being exploited at a time of international concern about the security of energy supplies. What we as a country do with these sources and how we obtain for our country the benefits from the sources are bound to be matters of debate and continuing concern.
  As I have said repeatedly, we shall continually consult with all those interested, and we believe that with the sort of co-operation we have had so far this wealth will be brought from the North Sea, so that we can produce a fair deal both for those who work to produce the oil and for the people of our country.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  NORTHERN IRELAND (JURIES)
  8.16 p.m.
  The Minister of State, Northern Ireland Office (Mr. Roland Moyle): I beg to move
  That the Juries (Northern Ireland) Order 1974, a draft of which was laid before this House on 31st July 1974 in the last Parliament, be approved.
  I am seeking the approval of the House to the Juries (Northern Ireland) Order 1974, a draft of which is before the House. The most important change provided by the order is the removal of the property qualifications for jurors. This step was recommended for England and Wales by the Morris Committee and was put into operation in the Criminal Justice Act 1972, and Article 3 of the order now
  552
  before the House will make a similar provision for Northern Ireland.
  I am sure that hon. Members will agree that juries should be as representative as possible of the entire population and that the effective way of doing this is, first, to remove the property qualification for jurors and, secondly, to equate so far as is practicable the jurors' list with the list of electors. We have not quite succeeded in doing that because there is an upper limit of age 70 for qualification for jury service. To this extent we are also departing from the position in England and Wales where the upper limit is aged 65. People in Northern Ireland between the ages of 65 and 70 will be able to say that they do not wish to serve on a jury, if that is their desire, but we hope that there will be a number of people between 65 and 70 who will want to serve on juries in Northern Ireland.
  The consequence of this reform measure is that the number of people who will be available for jury service will rise from the present figure of about 60,000 to 750,000. A new system will also be introduced for the preparation of jury lists. The old system was largely in the hands of local authorities, working from rating lists. Hon. Members, particularly those from Northern Ireland, will realise that in the wake of the reform of local government that method is no longer as feasible as it was, and that is therefore another argument for introducing the order.
  The revised procedure for preparation of jurors' lists has been designed with two objectives in mind. The first objective is to ensure that the selection of jurors is as fair and impartial as possible and the second objective is to ensure that the liability to serve will be evenly spread among the population.
  It is intended, if the order goes through, that the first such selection of jurors will be in February 1975. Perhaps I can explain to hon. Members how we intend that the system should work. The first step is to decide the proportion of people who will be required to serve on juries and to decide what proportion that figure bears to the number of jurors available overall. Then we intend to use a computer to select from the list of jurors the proportionate number. If, for example,

  553
  1,000 jurors were required, each seven hundred and fiftieth name could be picked off the jury list by the computer. If 100 jurors were required the figure would be different. That is the way the system would work.
  Names selected each year will be listed in random order by the computer and numbered to form area provisional lists. It is important to bear this in mind, and I shall explain why shortly. The number allocated to a juror in this way will determine the order in which a person is summoned for jury service. Every person whose name is selected in the manner I have described will be informed of his possible liability to serve on a jury and will be asked to complete a form of return which will enable the juries officer to remove from the area provisional list the names of those exempt, disqualified or over age, and furnish a revised area list which will include only those who are qualified and liable for jury service.
  After the names have been picked up by the computer, there will therefore be a further sifting process to reduce the list still further by the removal of those who are exempt, disqualified or over age.
  Lists will be prepared for each area served by a clerk of the Crown and Peace. The areas are six in number and correspond fairly closely to the old geographical counties of Northern Ireland. The important thing about the area basis of the lists is that although a person who resides in Northern Ireland and is selected for jury service can be required to serve on a jury in any part of the Province, in so far as it is possible jurors will be restricted to a request to serve on juries only in their own area.
  The provisions of the order relating to excusal are to be found in Article 6, and the powers of a judge to excuse jurors may be exercised by an officer of the court appointed for this purpose by the rules of the court. The powers of excusal will, we hope, be exercised before the sitting of a court so that there will be no question of a poor, unfortunate, potential juror being summoned to attend court only to be told when he gets there that he can be excused. The whole object of the exercise is to try to excuse potential jurors before they leave home.
  Schedule 2 to the order sets out the exemptions from jury service. This is
  554
  mainly a repetition of the existing exemptions from jury service.
  One matter to which I should draw the attention of the House is that the provisions of the order apply to all juries with the exception of a coroner's jury. Because of the nature of a coroner's jury—such a jury is summoned very often at short notice, and the coroner often has to instruct the chief superintendent of police or his deputy to assemble a coroner's jury at short notice—Article 8 applies only to that part of the order which relates to the qualification for exemption from jury service. In view of what I have said, the important provision by which jurors are numbered in sequence for calling forward for service cannot apply to coroners' juries.
  These are the important points about the order. With permission of the House, perhaps I might be allowed to try to answer at the end of the debate any questions that are raised. I commend the order to the House.
  8.24 p.m.
  Mr. John Biggs-Davison: It has been said lately that hon. Members are subject to marital strains because of our peculiar hours of work. I am an illustration of that tonight, because I am making my maiden speech from the Dispatch Box on my wedding anniversary. I refer to it as my maiden speech although I wound up briefly for the Conservative and Unionist Opposition when the appropriation order was passed in the previous Parliament, but that was only because there seemed to be no one else to hand at the time. I shall be equally brief tonight in the interests of thost representing Northern Ireland constituencies who will wish to put their points to the Minister, for whose exposition we are grateful.
  On the other occasion when I spoke from this Box, a vast public expenditure went through in one and a half hours. Tonight's order is, of course, a less weighty one, although it is important. But perhaps I may be allowed to say now, as I did then, that our procedure does not do justice to Northern Ireland legislation. We do not give expenditure and legislation proper scrutiny. I wonder whether the Minister will be able to tell us when the Leader of the House will set out

  555
  his proposals for an Ulster Grand Committee or other appropriate machinery to enable us to handle this legislation properly instead of in limited debates when legislation cannot be amended.
  For Unionists this measure is welcome, since it provides that, where local circumstances do not dictate divergence, Northern Ireland practice should be in line with that obtaining over here. However, if the hon. Member for Northampton, North (Mrs. Colquhoun) were successful with the Private Member's Bill she has presented—to provide that appointments to juries, among other public bodies, should consist of women and men in equal numbers—I am not sure whether Northern Ireland would wish to keep in step with England and Wales.
  Of course we welcome the removal of the property qualification. The new selection for jury service is in conformity with the Criminal Justice Act introduced by the last Conservative Government in 1972. Jurors will be selected from the electoral register, but there will be a difference between the Province and England and Wales, because I understand that it is the electoral register for the Northern Ireland Assembly and not the electoral register for this House which will apply. I am not sure whether the House grasped, or even whether I myself grasped, exactly why the age limit is to remain different in Northern Ireland.
  I have seen no mention of payment for jurors in the order, but I was relieved to find that remuneration is provided for by regulations under Section 1 of the Juries Act (Northern Ireland) 1953. But will remuneration be in line with what happens over here, and is some review going on at present?
  We on this side agree with the order and thank the Minister for commending it to the House.
  8.29 p.m.
  Mr. A. J. Beith: There are a couple of points on which guidance would be welcomed both here and in Northern Ireland. I echo what the hon. Member for Epping Forest (Mr. Biggs-Davison) said about the problems of dealing with measures of this kind, which cannot be amended or adequately dealt with through the normal
  556
  procedure for orders in the United Kingdom context. It is under very great strain when we use it to deal with elaborate material which would otherwise be Northern Ireland legislation. I think that that view is now widely shared, and it is time that we did something about it.
  For the sake of clarity, can the Minister make clear which people are referred to in Schedules 1 and 2? It is clear that those detained during Her Majesty's pleasure or that of the Secretary of State under Schedule 1(1)(b) are not the people we think of in current Northern Ireland terms as detainees, but can the hon. Gentleman make clear who is referred to in paragraph 2(a)? Some people in Northern Ireland have said that this provision would apply to people who have served detention. I believe that it is not intended to cover sentences of detention.
  The other omission which has been the subject of some discussion concerns the list of people to be exempted from jury service. Clearly there are many who would claim inclusion in such a list. However, when one sees included, for example, the mines inspectorate and others who conduct inquiries, it is reasonable to ask why the planning appeals commissioners are not exempted, given the considerable amount of public work to which they are now committed. I think that that would have been a reasonable inclusion. Again, however, given the procedure that we have, all we can ask the Minister to do is to explain why he has not made that provision this time and whether on some future occasion he will be able to make such provision.
  8.31 p.m.
  Mr. James Kilfedder: I welcome this order, as, indeed, I welcome the hon. Member for Epping Forest (Mr. Biggs-Davison), who has spoken for the Opposition from the Front Bench. He has spoken on these matters before, but I was delighted to see him there opening the debate on behalf of the Opposition.
  I welcome the order for two reasons. First, it brings jury service in Ulster into line with England and Wales, with certain minor exceptions to which I shall refer in a moment. Second, as a result of the changes, a greater number of persons will be available for jury service. The Minister has given us the figures,

  557
  which are quite significant. The number of possible jurors will rise from 60,000 to 750,000. That will make a tremendous difference in the Province.
  For six long years now we have suffered crucifixion. The catalogue of murders, torture, maiming and devastation has grown long. It has long since passed, to quote a former Home Secretary, the acceptable level of violence. Of course, what is acceptable seems to depend on whether one is living in the area which is subjected to violence or in the stately corridors of Whitehall.
  The reign of terror in Northern Ireland has bred other criminal offences. But for the splendid work of the police and other members of the security forces, law and order, already perilously weakened, would have broken down. With this widespread criminality in the Province and the good police work, a vast number of persons have been appearing before the courts, and this has put an intolerable burden on those who are and have been liable to be called for jury service.
  Perhaps the Minister could give the number of trials which have taken place in Northern Ireland over the past few years. He may not have the figures, but I am certain that they have increased with the years, and the burden is too much for the old system of jury service. I believe that in Belfast persons have been called for jury service, on average every two years.
  Having practised as a barrister before my election for Down, North, I know the tribulations of people called for jury service. They attend court waiting to be called, and they may be told that their services will not be required and they should come back the following day. They may attend court and find that they must sit for an unconscionable length of time, often wondering, no doubt, what is happening to their business.
  Worse still, in Northern Ireland jurors are always open to threats of intimidation, particularly—I think that the Minister will agree—because they have been taken from a limited category of persons. This order will provide a greater number of jurors, and consequently there will be a reduced likelihood of a person being called more than twice in a lifetime for jury service. Perhaps the Minister will say whether I am correct in that assumption. If I am right, it is a radical change from the
  558
  existing system requiring persons—certainly those living in Belfast—to attend for jury service perhaps once every two years.
  I have often said that Northern Ireland has lagged behind Great Britain in legislation, and I am glad that the property qualification for jurors will now be abolished, just as it has been in England and Wales. I am not sure of the position in Scotland, but certainly under the 1972 legislation it was removed in England and Wales.
  We are coming into a new era. Quite apart from terrorism in Ulster, society is changing. Ideas are changing. If a defendant is to have the right, except for terrorist offences, to be judged by 12 of his fellow citizens, it is a mockery if jurors are selected solely on a property qualification. Under this order the defendant will appear before a jury, selected from the electoral list for the Northern Ireland Assembly, of persons aged between 18 and 70, and that change clearly makes the courts manifestly fair. I agree with the Minister that jurors will be more representative and that, therefore, those who appear before the court ought to be satisfied that they are being tried, to use the old phrase, by their peers.
  However, I agree with what was said by the hon. Member for Epping Forest about the age limit of 70. In England and Wales the age limit is 65. Perhaps the Minister can explain why that limit has not been adopted for Northern Ireland. I know that exemption from service can be claimed after the age of 65 and before the maximum age of 70, but I should like an explanation.
  I agree with the hon. Member for Epping Forest that under the present system we are not in a position to move amendments. I echo his remark—I have said this often before—that we should have a system whereby we can examine Northern Ireland legislation in great detail and move amendments.
  Will the Minister assure us that the computer selecting the jurors will be closely watched? This is a serious matter. I have seen how the computer compiling the electoral register in Northern Ireland can make mistakes, and I can go further afield. The bank computers are not always infallible. In fact,

  559
  I now pay greater attention to bank statements than I did before because I am not certain that they are correct.
  From my experience, the Post Office telephone computer is guilty of making errors. One account that I received added an extra digit to my bill, and the explanation that mistakes can occur from time to time was not very satisfactory. We know, of course, that the Post Office premium bond computer has left people wondering how it sometimes selects the same people for prizes. I do not know whether the hon. Member for Rochdale (Mr. Smith), who has a heavy Adjournment debate later, has had the same experience. I do not have the same faith in computers that many other have. Computers can be guilty of errors. Can the Minister assure us that this matter will be looked at in order to avoid mistakes?
  Reference was made to the qualification that person under the order who will serve on juries will be selected from the electoral register for the Northern Ireland Assembly. The hon. Member for Belfast, West (Mr. Fitt) said that it made no difference, because there is no difference between the registers. However, there is a difference. The electoral register for the Northern Ireland Assembly requires a person to be a British citizen. I do not know what happens in the case of the hon. Member for Belfast, West, because he travels on an Eire passport. He refuses to have a British passport. A person on the electoral register for the Northern Ireland Assembly has to be a British citizen and resident for seven years, if not born in Northern Ireland, and to have resided at his current address for three months prior to the qualifying date.
  I mention this qualification because I fear that a number of persons from the Irish Republic have slipped on to the Northern Ireland Assembly electoral register. Close scrutiny ought to be made of the register before drafting the jury list for Northern Ireland.
  The present system whereby publicity is given to those who are liable to be called for jury service also gives me concern. It is repeated in the order. Article 4(5) states:
  "The Area Provisional Jurors List as revised by the Juries Officer shall",
  560
  and so on, be
  "available for inspection and may be obtained on payment of such fee as may be prescribed."
  Will the Minister reconsider this? I appreciate that where justice is concerned a person should know who is likely to serve on a jury, but, because of the peculiar and tragic situation in Northern Ireland, will he look into the possibility of not making the jurors' list available for public inspection? I fear that evil-minded persons go through jurors' lists for the sole purpose of intimidation.
  I hope that when the Minister considers these points he will also look into the question of the system of what is called the grand jury. It is high time for that obsolete system to be abolished in Northern Ireland in line with Great Britain.
  8.43 p.m.
  Mr. Gerard Fitt: Strange as it may seem, I am in almost total support of what was said by the hon. Member for Down, North (Mr. Kilfedder). May I first say that I find it interesting that the hon. Member for Epping Forest (Mr. Biggs-Davison), speaking for the Front Bench earlier, said that he was doing so on behalf of the Conservative and Unionist Party. It may be that this is a new innovation in this Parliament, or that a new alliance has been sought and agreed upon. It may be of more interest to look at that again.
  I can well remember, when first elected to the House in 1966, that I demanded equal status and British citizenship for all the people of Northern Ireland. I remember the vehement opposition that demand met from the then elected Unionist representatives. They had a different electoral register. There were qualifications for local government votes. They had the issue which we are now debating on which it was only property owners, people who owned shops, who had the vote at that time.
  We were told time and time again, as we tried to appeal for equalisation of citizenship, that Northern Ireland had peculiar circumstances and that these differences were applicable to Northren Ireland and would not be understood in the United Kingdom.
  I am delighted to say that the Unionist representatives from Northern Ireland are now freely agreeing to changes in the

  561
  law that will bring Northern Ireland into line with the practices in Great Britain. I am delighted to welcome the Bill. I hope that this legislation will be a continuing process.
  Concerning the property qualification, I say again—my most vehement opponents will agree with me in this—that the jury list as it was compiled in Northern Ireland was mainly composed of property owners, people who owned a small business, a shop, or had a certain valuation on their houses.
  We remember well the intimidation of juries that took place in Northern Ireland, by one side or the other. I recall vividly a particular case that occurred in Crumlin Road. Loyalists had been charged with terrorism, and when the jury was sent out to deliberate on its verdict, a gelignite bomb was placed in the corridors off the Crumlin Road courthouse with the intention of intimidating that jury. Whether it has been Loyalists or Republicans involved in trials, we know only too well that juries in Northern Ireland were intimidated. One might easily visualise the small shopkeeper, publican or business man in either a Republican or Loyalist area being subjected to intimidation if what was regarded as a wrong verdict were to be given in a particular case.
  I welcome the law in Northern Ireland being brought into line with the law in Great Britain. Tomorrow we shall debate these matters at considerable length. However, there is still a disparity between Northern Ireland citizens, subjects of the United Kingdom, and those citizens who live here in Great Britain. There is still that disparity, which was deplored by the hon. Member for Down, North, though he welcomed the restriction of the jury list to those whose names appear on the electoral roll for the Northern Ireland Assembly.
  There may be differences of opinion on the subject tomorrow, but today Northern Ireland citizens are citizens of the United Kingdom and any citizen of the United Kingdom in Northern Ireland should be eligible for inclusion on the list of electors. They should be. We cannot, on the one hand, say, "We are United Kingdom citizens" and, on the other hand, say that we shall restrict the list for the Northern Ireland
  562
  Assembly. By placing that restriction on the list, we are saying that Englishmen, Welshmen or Scotsmen living in Northern Ireland are not eligible to serve on a jury in Northern Ireland.
  Mr. Kilfedder: The point the hon. Gentleman is making is false, because a British citizen is entitled to serve on a jury and to be on the register for the Northern Ireland Assembly. A period of seven years must elapse before someone not born in Northern Ireland can appear on it, which is not an intolerably long period to wait and is tied up with safeguarding employment.
  Mr. Fitt: In fact, I was about to illustrate the rather strange law we have in Northern Ireland. It was designed originally to prevent people from the Republic from seeking employment and living in Northern Ireland. To sugar the pill, it was also made applicable to people from Great Britain. I agree with the hon. Gentleman in that there will be restrictions and I suggest that we should have the opportunity to amend such an order. I believe that everyone on the electoral list in Northern Ireland for elections to this House should be entitled to jury service.
  On the subject of computers I again find myself somewhat in support of the hon. Member for Down, North. Computers can go wrong. They can make mistakes. An excuse can often be found for them. Perhaps in Northern Ireland computers could be more accurate than human counters. We have already had the example of what happened in Fermanagh and South Tyrone where there was no computer and where a mistake was alleged involving 2,500 votes. Therefore, when the hon. Member for Down, North talks about the counting of votes, he should push his tongue a little further into his cheek.
  My main objection is to the restriction that has been placed on United Kingdom electors in Northern Ireland. Everyone on the register for a United Kingdom election should be entitled to serve on a jury in Northern Ireland.
  Rev. Ian Paisley: Would not the hon. Gentleman agree that it is possible to be on the register for the United Kingdom elections to this House and yet be a citizen of the Republic

  563
  of Ireland? One needs only a three-month residence in Northern Ireland. Does he believe that citizens of the Republic should be eligible to serve as jurymen in courts in Northern Ireland?
  Mr. Fitt: I think that the British Parliament in its wisdom has promulgated a law that entitles a person to be included in the electoral register and so to serve on any jury, whether it be in Birmingham, London or Belfast.
  8.51 p.m.
  Mr. McCusker: I welcome the opening statement of the hon. Member for Belfast, West (Mr. Fitt) in which he reaffirmed his belief in his British citizenship. It is a pity, therefore, that he would not change his passport. Many of us here would like to see most of the legislation applying to Northern Ireland in line with that for the rest of the United Kingdom.
  We welcome the fact that occasionally there are differences. We can often learn from the mistakes that emerge from legislation passed here. I should like to differ from the hon. Members for Belfast, West, and Down, North (Mr. Kilfedder) in that I do not believe that a computer can make a mistake. It can suffer from a mechanical breakdown or mechanical problem, but the mistakes that emerge from a computer are the mistakes of the person operating the computer. While I do not have the legal expertise of my hon. Friend, I think I can accept that.
  With regard to the point made by the hon. Member for Antrim, North, and so vigorously attacked by the hon. Member for Belfast, West, I welcome the clarification that the jurors' list will be restricted to the list for the Northern Ireland Assembly. The electors' list for this House simply requires a person to have resided in Northern Ireland for three months prior to the qualifying date of 15th September. That person, of course, could be either a citizen of Eire or of any other foreign country.
  As one examines the oath which the juror takes, one can understand the difficulty which such a person would be in. A juror takes the following oath:
  "I swear by Almighty God that I will well and truly try and true deliverance make between our Sovereign Lady The Queen and the prisoner at the Bar."
  564
  I would not want to expose any citizen of the Irish Republic to perjury. While one understands that there are occasions when oaths are taken lightly, where it could involve a person's loss of freedom or a person's loss of life one would not want the oath taken lightly.
  I welcome the fact that there is a restriction on the list. But one has to be realistic and take account of the opinion of the hon. Member for Belfast, West that our Assembly may never sit again. The list may, therefore, become defunct. I hope we shall never have in Northern Ireland a situation such as that which exists in the rest of the United Kingdom, where a citizen of a foreign country can be called upon to take an oath and try fellow countrymen.
  As a non-property owner, I obviously welcome the lifting of the restriction relating to property owners. It is commendable that the area from which jurors will be selected will rise from 60,000 to 700,000. That rectifies a bad situation. However, I have reservations about the lower age limit of 18. When I was 18 I was wearing a peaked cap and still carrying a satchel as a sixth-former at a grammar school. I would be interested to hear what the experience is in Great Britain, but I do not believe that an 18-year-old has the experience or maturity to make these decisions.
  Mr. Kilfedder: Surely if a person is mature enough at 18 to decide what candidate to vote for, and if he is mature enough to fight for his country, he should be fit and able to sit on a jury which may be deciding the innocence or guilt of a defendant of 18.
  Mr. McCusker: An 18-year-old soldier is normally told what to do and does not have to use much discretion in the matter.
  With regard to elections, an 18-year-old in my constituency is one of 90,000. On a jury he would be one of 12, and when majority decisions are the order of the day to some extent that casts a further degree of responsibility upon him. Therefore, the case made by my hon. Friend the Member for Down, North does not apply.
  However, I cannot understand the restriction on the upper age limit. If 65 or 70 is to be the age for exclusion from jury service, application of the same

  565
  rule would restrict a substantial number of people, I assume, from sitting in this House and, perhaps, from being members of the Government. Therefore, while I look questioningly at the lower age limit, I look questioningly also at the upper age limit. As there are slight variations in this legislation in respect of Northern Ireland, there is no reason why we should not consider other minor alterations as well.
  I come now to the list of exclusions and exemptions I find it difficult to understand why civil servants over a certain salary level are excluded from jury service. I shall be interested to know why that differentiation is made. I am interested to know also why an officer of the Post Office is not eligible for jury service. There is then the list of people in the medical profession who are exempt—medical practitioners, dentists, nurses, midwives, veterinary surgeons and practitioners and pharmaceutical chemists. Considering the various medical centres, rota systems and so on now in operation, I do not understand why all those people should be exempt as well. In the Northern Ireland context, when we need as many intelligent and reasonable people as possible to undertake jury service, this should have been looked at more closely.
  Exemptions from jury service also cover members of the Ulster Defence Regiment and the Royal Ulster Constabulary Reserve. One would commend and agree with that. But a person could join the Ulster Defence Regiment or the police reserve between the times of compilation of the jurors' list. My understanding or the order is that that person could be called to the court and would have to stand up and say, "I am now a member of the Ulster Defence Regiment and seek to be excluded from jury service on that basis". Would the right hon. Gentleman consider that a note from the commanding officer of the UDR man, or perhaps the chief inspector in the station where the reserve constable is employed, would be sufficient to gain him exemption without his necessarily having to attend court?
  As I said earlier, this is largely a tidying-up operation. It is a consolidation of existing statutes, amendments and so on, and because it widens the scope of people capable of doing their duty in the community, I welcome it. I look forward to the day when we can return to
  566
  the full standards of British justice which prevail in other parts of the United Kingdom.
  9.1 p.m.
  Mr. William Craig: The order has been given a pretty good airing and there is not much more that I can add, particularly as we have no power to amend the order.
  The order is to be welcomed generally. I only regret that, in the process of consolidating much of the law that relates to juries, the Government have not taken the opportunity to consolidate at the same time the law as to the operation of juries. It would have been useful to consolidate the right of the Crown to stand by, and the right of an accused to object to, a juror.
  I should like to underline the remarks concerning the upper age limit in the order. I cannot think of any justification for having an upper age limit of 70 when this part of the United Kingdom has settled for an upper age limit of 65.
  Can the Minister assure me that as long as this discrepancy exists steps will be taken to inform those between the ages of 65 and 70 that they have the right to be excused? I do not believe that many would be aware of that right. I suggest that the notice summoning people to jury service should say in bold type that there is a right of exemption.
  Jury service is an onerous duty and many old people would go into a considerable flap and suffer anxiety on receiving such a notice. Until such time as the law can be brought into line with that in this part of the United Kingdom, I ask the Minister for that assurance.
  9.3 p.m.
  Mr. Moyle: Perhaps I should say first that I am very grateful for the acceptance by the House of the order. Having said that, I should like to extend to the hon. Member for Epping Forest (Mr. Biggs-Davison) my warmest congratulations on this his first official appearance at the Dispatch Box on behalf of his party. In view of the conciseness with which he presented his case, I cannot think why he did not have that honour many years ago. Anyway, he is there now, and we are very grateful for that.

  567
  It is particularly pleasant to be able to agree with the hon. Gentleman on this occasion. No doubt in future he will be arguing on behalf of his party on more contentious matters, and I look forward to crossing swords with him on those occasions.
  The hon. Gentleman asked me what the procedures were to be for considering Northern Ireland business in the House. I do not wish to be ruled out of order, Mr. Deputy Speaker, so all that I can advise the hon. Gentleman to do is to raise the matter on Business Questions, perhaps tomorrow. That will present an early opportunity to deal with the question.
  There has been discussion about why the upper age limit is 65 in Great Britain and 70 in Northern Ireland, although there is some provision there for people between 65 and 70 to opt out of jury service if they so wish. I have been asked to explain the situation. With all due respect to the doctrine of ministerial responsibility, I feel, on contemplating the problem, that perhaps the explanation should be offered to people in Great Britain why we have not adopted the Northern Ireland procedure, because it seems to be much more logical.
  The procedure in Great Britain is that if someone is 64 years and 364 days old he can serve on a jury, but if he is 65 years and one day he cannot. That seems to be a far less satisfactory method than to have a period of time in which people are free to decide whether or not to serve on juries. Though the right hon. Member for Belfast East (Mr. Craig) spoke about the onerous obligation of jury service, it is worth remembering that it is one of the privileges of citizenship as well. Perhaps some of those citizens between 65 and 70 might be looking at the problem from that point of view, rather than from the point of view expressed by the right hon Member for Belfast, East.
  However, the suggestion that there should be special steps to ensure that those between 65 and 70 know their rights in this matter is very sensible. We shall endeavour to ensure that they are fully aware of their position when those steps have been taken.
  The hon. Member for Epping Forest also asked whether there was remunera-
  568
  tion for jurors. There is no remuneration as such, but they are entitled to claim for loss of earnings and other expenses on the same basis as obtains for the rest of Great Britain. The hon. Gentleman will not be surprised to learn in these inflationary days that a review of those expenses is now being made.
  The hon. Member for Berwick-upon-Tweed (Mr. Beith) asked me to give an example of those who were detained during Her Majesty's pleasure. He was right when he said that this did not refer to people detained under the Emergency Powers Act (Northern Ireland). It particularly applies, for example, to someone who committed an offence while under the age of 18 and was detained during Her Majesty's pleasure whereas if he had been over 18 and was found guilty he might have been given a sentence of life imprisonment. That is the class of person we are referring to here.
  Mr. Beith: Will the Minister say who is referred to in Schedule 2, which refers to a person serving a sentence of detention? Will he make this completely clear?
  Mr. Moyle: I shall have to look into that and write to the hon. Member.
  The planning appeals commissioners have been excluded mainly because we do not want to be unduly restrictive in determining who can serve on juries. Obviously, they will not be summoned very frequently.
  The hon. Member for Down, North (Mr. Kilfedder) asked about the numbers of trials in Northern Ireland. The following are the numbers of trials for indictable offences at assizes or county courts in recent years. In 1968 there were 696 cases; in 1969, 669 cases; in 1970, 800; in 1971, 833; in 1972, 1,348 cases; and in 1973, 1,569 cases, of which 1,423 were tried before juries.
  The hon. Member also asked when the liability for jury service was likely to arise. I think he said that in Belfast in recent years people had been summoned for jury service about once every two years. I am being pessimistic when I say that under the new arrangement people may have to serve on a jury once every 10 years.
  The hon. Member's comments about computers were most amusing. We shall

  569
  obviously watch our random jury-selecting computer with great keenness to make sure that it does not make any mistakes. As I understand it, however, the argument for using a computer is not that it does not make mistakes but that it lacks human bias in selecting people from the jury list. That is why we have decided to use this instrument.
  The hon. Member seemed to think that perhaps the jurors' list should not be open to public inspection in case it lent itself to intimidation. I cannot help feeling that if someone was thinking along those lines he would be taking a pretty long shot, because he would have to contend at one stage with perhaps the main electoral register or a document nearly the equivalent of it. There is no point in intimidating potential jurors generally. The important thing for an intimidator is to intimidate a particular jury in a particular trial. In those circumstances I do not think that a jurors' list would be of much benefit. I cannot, therefore, refrain from publishing the jurors' list.
  Several hon. Members were eager to assimilate the law in Northern Ireland to the law in the rest of the United Kingdom. I was interested to hear the debate across the Floor on that subject, and I have taken note of it.
  The hon. Member for Armagh (Mr. McCusker) asked why civil servants earning above a certain salary were excluded. The only quick answer I can give is that they always have been excluded in Northern Ireland, at least since 1926. To that extent we are continuing an exemption that has always existed. We exempt medical people because, by virtue of their occupation, they are likely to be involved in sudden emergencies. We do not wish them to be taken way from their normal occupation to serve on a jury with possibly serious consequences to the people who man accident wards and the victims of accidents. The police are usually exempt from service for obvious reasons.
  I think I have answered all the questions which have been asked in this short but interesting debate. I hope that the House will approve the order.
  Mr. John Carson: Will the Minister give the assurance asked for by my hon. Friend the Member for Armagh (Mr. McCusker) that the reserve
  570
  police and the UDR will be told before they appear in court that they are not required for jury service? If they are required to appear in court, they may be in danger of intimidation or perhaps assassination.
  Mr. Moyle: I am sorry I overlooked that question. The whole object is to ensure that the excusal procedure operates in such a way that a person who is summoned for jury service will learn about the excusal before he arrives at the court door. He will be informed at home, and an officer is charged specifically with that duty. I hope this satisfies the hon. Gentleman that people will not be needlessly summoned and be caused needless worry.
  Question put and agreed to.
  Resolved,
  That the Juries (Northern Ireland) Order 1974, a draft of which was laid before this House on 31st July 1974 in the last Parliament, be approved.

  PREVENTION OF TERRORISM (TEMPORARY PROVISIONS) BILL
  Motion made, and Question proposed,
  That in respect of the Prevention of Terrorism (Temporary Provisions) Bill, notices of Amendments, new Clauses or new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a second time.—[Mr. Pavitt].
  9.13 p.m.
  Rev. Ian Paisley: If amendments are not tabled before the Second Reading debate will it be possible for them to be tabled immediately after? Certain assurances will be asked of the Minister who is presenting the Bill. If we get those assurances, why should we go to the trouble of tabling needless amendments? We went to facilitate the Government on matters on which we are agreed, but I should like to know from a Government spokesman tonight whether it will be possible to table amendments after the Second Reading debate, as is usual, so that if the assurances which we seek are given, there will be no need to table them.
  9.14 p.m.
  Mr. Gerard Fitt: May I reinforce the request put forward by the hon. Member for Antrim, North (Rev.

  571
  Ian Paisley)? It may be that on the crucial legislation which we are to debate tomorrow, and possible into the early hours of the next day, certain assurances will be asked of my right hon. Friend the Home Secretary the giving of which would make it unnecessary to move certain amendments.
  The House may take the view that to safeguard ourselves against the Home Secretary's refusal to give the assurances the amendments should be tabled now and later withdrawn. I ask that every facility be given to hon. Members, especially to those who represent Northern Ireland constituencies, and that the longest possible time be allowed for the acceptance of amendments.
  9.16 p.m.
  The Minister of State, Home Office (Mr. Alexander W. Lyon): The House is governed by the rules of the House, and those are administered by Mr. Speaker. But, to the extent that it is the responsibility of the Government, I can assure hon. Members that we wish to give the maximum opportunity for the consideration of this Bill and of amendments which hon. Members wish to move.
  There is a practical difficult always in manuscript amendments in terms of the preparedness of Government spokesmen to answer the points raised in them. If hon. Members are thinking of raising matters which will constitute amendments, it will help the Government if they do so tonight so that we may consider them as calmly as possible in the interval between now and the Committee stage. However, I undertake that we shall be willing to consider manuscript amendments tabled after the Second Reading if those are allowed by Mr. Speaker. Clearly there are practical difficulties in the way of considering them.
  The best way of meeting the point made by my hon. Friend the Member for Belfast, West (Mr. Fitt) is for me to say that if there are issues that he wishes to raise upon which he wants assurances, and if, given those assurances, he does not need to move amendments, it will be more helpful if he tables the amendments tonight and then, if he is given the assurances that he seeks on Second Reading, he will be able to withdraw them.
  9.18 p.m.
  Mr. J. Enoch Powell: The House is obliged to the Minister of State for the attitude which he has indicated on behalf of the Government. I thought that it might perhaps be useful and might facilitate business if I indicated that the amendments being tabled by hon. Members representing Northern Ireland constituencies have also been notified to the hon. Gentleman's Department already.
  Rev. Ian Paisley: On a point of order, Mr. Deputy Speaker. I seek your guidance. If we agree to this proposal, are we limited to tabling all our amendments tonight, or can we follow the usual procedure of tabling amendments immediately after the Second Reading?
  Mr. Deputy Speaker: This is an enabling motion, and it will make the matter easier for hon. Members.
  Mr. John Biggs-Davison: Further to that point of order, Mr. Deputy Speaker. Since the discretion will be with the Chairman about the acceptance of manuscript amendments, may we take it that there will be no disposition on his part to be more restrictive than usual on manuscript amendments?
  Mr. Deputy Speaker: That is a matter for the Chairman when he makes his selection.
  Question put and agreed to.

  PREVENTION OF TERRORISM (TEMPORARY PROVISIONS) [MONEY]
  Queen's Recommendation having been signified—
  Motion made, and Question proposed,
  That, for the purposes of any Act of the present Session to proscribe organisations concerned in terrorism, and to give power to exclude certain persons from Great Britain or the United Kingdom in order to prevent acts of terrorism, and for connected purposes, it is expedient to authorise the payment out of moneys provided by Parliament of any expenses incurred by the Secretary of State in connection with—

  (a) the control of travel into and out of any part of the United Kingdom, including the provision of facilities for examining officers, and

  (b) the removal from any part of the United Kingdom, of persons subject to exclusion orders.—[Mr. Michael Cocks.]

  9.20 p.m.
  Mr. J. Enoch Powell: It is sometimes a fault of Money Resolutions that they are too narrowly drawn. It is only courteous to express satisfaction that this motion has been quite widely drawn and drawn in terms of the United Kingdom and all parts of the United Kingdom, which will make it possible for matters of great constitutional importance to be properly debated and examined during the course of our sitting tomorrow.
  Question put and agreed to.

  STATUTORY INSTRUMENTS (JOINT COMMITTEE)
  Ordered,
  That Mr. Peter Snape be discharged from the Select Committee appointed to join with a Committee of the House of Lords on Statutory Instruments; and that Mr. Andrew Bennett be added to the Committee.—[Mr. Michael Cocks.]
  Message to the Lords to acquaint them therewith.

  ADJOURNMENT
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pavitt.]

  TEXTILE INDUSTRY (LANCASHIRE)
  9.21 p.m.
  Mr. Cyril Smith: I am delighted to have the opportunity to raise on the Floor of the House the problems of the textile industry. In passing I must say that it is a great pity—indeed disgraceful—that the only way I find it possible to raise the problems of the textile industry is by way of an Adjournment debate.
  We have days in this House devoted to Ireland, to Scotland, to Wales and even to London, but in my two years as a Member I have yet to find a day devoted to Lancashire or any other province of this country. There ought to be some facility for hon. Members to raise regional problems of the Floor of the House other than merely in an Adjournment debate. We are fortunate tonight in having a little more time than usual, because normally this debate would have to be disposed of within 30 minutes.
  574
  The history of the textile industry is well documented. It is my view and that of the industry that one problem is that it has suffered from an abundance of reports and studies. Unfortunately those reports have been largely academic and they have done nothing to provide stability for the industry as a whole—an industry which desperately needs long-term planning opportunities.
  I want to stress that I am speaking of a major industry. The textile and clothing industry employs approximately 900,000 people, many of them in the North of England and Scotland. In Rochdale, textiles provide 30 per cent. of the total employment. The industry is a major exporter, exceeded only by machinery, motor vehicles and chemicals. It is the fourth in line in terms of its exporting potential and ability.
  In addition to its exports, the industry provides a technological proving ground for textile machinery makers—another large exporting industry. The products of the textile industry, particularly from Lancashire, Scotland and even, we must concede, parts of Yorkshire, find their way to virtually every market in the world.
  Despite that background, for many years the picture within the textile industry has been one of contraction. I believe that the time has now come for the Government—I speak in no political sense; I would be making this plea whatever the political complexion of the Government—to adopt a realistic approach and to decide upon a minimum size for each section of the industry, which would then be protected against attacks from any source.
  For example, the contraction of the industry has meant that in 15 years the labour force in cotton and allied textiles has been reduced from 240,000 to 88,000 and the spinning section has been reduced from 17½ million to 2·7 million spindles. That is why I take the view that the industry has now reached what must be its minimum size, particularly if we are to have any concern for the industrial balance of our economy. We now need from the Government action to stabilise the industry at its present level.
  The present position in the industry is well known to the Minister. I am not always given to flattery, but I say that the position is well known to the Minister

  575
  because I know that he is held in high esteem by all in the industry, and certainly by industrialists in other parts of the country who are also concerned with the textile industry. I suspect that the Minister will agree with me that the present situation is serious, but the threatened future situation is even more serious. I am also sure that the Minister is not unaware of Early Day Motion No. 67 which demonstrates concern about the textile industry by a number of hon. Members, not merely myself.
  In my constituency approximately 700 people are working on short time. Most of them have been on a four-day week. The present Government, I remind the Minister, have been particularly proud to announce more than once from the Dispatch Box that they have done a great job in bringing the four-day week to an end. Ministers have accused the Conservatives of being responsible for the four-day week.
  In my constituency, however, and in many parts of Lancashire, the four-day week has not been eradicated. Indeed, the number of workers on a four-day week is increasing constantly. Even worse, some mills in my constituency—I visited one of them on Monday—have been closed all week, for five days. This is particularly worrying because we are now close to Christmas. Because of the local nature of the industry there are many instances when a man and wife work in the same mill. Therefore, when people are "played off" for one day a week or for an entire week the tragedy within the family is extremely serious.
  I am sure that it is not necessary for me to remind the Minister that figures supplied by the Department of Employment relating to the number of people on short-time working are not a true reflection of the situation. This is because married women, who pay the lower contribution for the stamp, do not register for unemployment benefit. Therefore, the figures produced by the Department relate to people who are in receipt of unemployment benefit or who have registered for it, whereas there are in addition hundreds of married women who are not included in the statistics provided by the Department. The figure in Rochdale at the moment is 700 and it has been as high as 1,400. The Department's
  576
  figures, while correct in terms of fact, present a false picture. I consider that this is a disgraceful situation.
  I raise the matter on the Adjournment in order to pose a straight question to the Government through the Minister. I want to know what the Government propose to do about the matter. I hope the Minister will not say that the industry should put its own house in order. I have heard all that before.
  In 1966, when I had the honour of being Mayor of Rochdale, I led a deputation of Lancashire mayors to the then President of the Board of Trade, the right hon. Member for Battersea, North (Mr. Jay). Our object was to protest about short-time working. The answer we received was that the industry should put its own house in order and invest in machinery and so on—an old hat argument. The industry has invested in new machinery and it has contracted. If any further substantial contraction takes place, it will be not because of the industry's shortcomings but because of Government inaction and a failure to control cheap imports, often produced by sweated labour and sometimes directly subsidised by foreign Governments.
  Of course it is not difficult to see the reasons for the present short-time working. The first is the high level of imports from so-called developing countries, supplemented by increasing imports from the EEC Mediterranean associates. I am well aware that my politics invite the accusation that the Liberal Party has at least helped to take us into the EEC, and we do not apologise for that. The textile industry has always favoured Britain's entry and has been able to increase its markets considerably as a consequence. But if in the end I have to choose between membership of the EEC and the best interests of my constituents, I will choose the latter.
  Imports of cotton and man-made fibre cloth and made-up goods in 1973 totalled 1,200 million square metres, or 57 per cent. of our home consumption. The figure for the first six months of this year shows imports accounting for up to 60 per cent. of home consumption.
  The textile trade cycle has turned down rapidly throughout the world. That slump began to hit some Far Eastern countries before it hit Great Britain and

  577
  consequently those countries aimed to take a greater percentage of our market in order to shift their goods. We do not object to that, but we do object to those goods being brought here at ridiculous prices.
  I understand that the Department has been kept well aware of the growing number of quotations at prices barely even covering the cost of raw materials. No industry can compete against those prices, no matter how efficient it might be. We have details of subsidies and assistance given by the Turkish Government to its growing textile industry, and the Department knows of financial assisttance to new textile developments in Greece and of subsidies to textile exports from Brazil. The Department was advised 12 months ago of impending increases in imports from Turkey.
  We are sick and tired of civil servants in successive Governments ignoring such advice. We are fed up with their demanding proof of dumping from the industry when we all know that it is increasing. I have six letters here which have been circulated to Rochdale textile mills this week by various Turkish concerns offering yarn at less than the cost of raw materials in this country. If the mills concerned went to the Department, the civil servants would say, "Give us proof of dumping."
  The industry wants to see and feel and believe that just for once the civil servants are on the side of our textile manufacturers instead of constantly appearing to be on the side of the textile importers. That is not something peculiar to the present Government; it has gone on for the last eight or 10 years, and we are fed up with it. Turkish imports have increased from 30 metric tons in 1972 to 2,680 in the first eight months of this year. That is what the industry is up against.
  I should be interested to know why the Department chose to ignore the warning given to it by the Textile Industry Support Group about what was happening with regard to Turkish imports. That warning was given to the Department 12 months ago. So far it has been ignored completely, and I should like to know why. I have said that Turkey has been circulating letters, but we know more. It has had agents in this country,
  578
  men touring Lancashire in the past three weeks and men plying from factory to factory for business for Turkish yarns. The Department must be well aware that this is going on.
  A great deal has been made in the Press of the recent formula agreed within the EEC under the GATT multi-fibre arrangement for sharing the burden of cotton and allied imports. That picture has been over-simplified. All that the formula does is to spread more fairly between the members of the EEC any future increases in textile imports from the developing countries. It does not share out the existing burden. For example France and Italy, which at present allow only a fraction of their home consumption of cotton-type textiles to be imported, will be expected to take a larger percentage annual increase from India and Pakistan. We, however, are expected to take increased imports from places like Yugoslavia, Turkey and Greece.
  Substantial as the imports from Turkey are, they represent only a small part of our total imports. But let me remind the House of what happened in the case of Portuguese imports. I warn the House and the Government that unless action is taken the same can happen in relation to Turkish imports. The United Kingdom industry warned the Government of the day about the long-term build-up of imports from Portugal under EFTA arrangements. Those warnings were ignored, and Portugal today is the biggest source of yarn imports.
  I appeal to the Minister and, if I may do so without appearing rude, insist that the Government do not allow history to repeat itself in relation to Turkey and Greece. I hope that even at this late hour it will be possitble to take some action concerning Portugal. I am pleading for action, and I hope that the Government will act now.
  I should like to make two or three suggestions. The first is that existing quota controls should continue without relaxation. The second is that quotas should be reintroduced wherever they have been discontinued for the Mediterranean associates—and we should certainly not drop cloth quotas, as I understand may be suggested in 1975. Thirdly, quick action should be taken on textiles coming in at low price levels, which can be explained only in terms of dumping or subsidies.

  579
  Warnings should be issued immediately to importers that such low-priced imports will be stopped. Indeed, price monitoring of the type used in Belgium ought to be considered so that those whose prices fall below established norms have to justify them rather than that the home industry has to prove dumping.
  Finally, probably most important is the need for a regulator to cope with the textile trade cycle. I understand that the industry has already submitted ideas to the Minister about this. That must not, of course, be an excuse for doing nothing. Existing statistics prove the need for action now, and when such statistics in a regulator-type of system give early warning of a downturn in the trade cycle controls should be introduced, just as I agree that when they show an upturn we can have some relaxation.
  I should like to think that, as a consequence of this debate, a truly effective plan for the textile industry will be devised. We do not want any more costly reports. They are of value only to people who think in terms of the inventions of Arkwright and Crompton and whose idea of the textile industry has not progressed since that day What I am pleading for is a vital industry, a well-equipped, modern industry, for wonderful working people who earn their living within the industry. I believe that we should fight as strongly in the EEC for textiles and for our right to exist within the textile conurbations of Lancashire as the present Government have fought for agriculture during the past two or three weeks. As regards dumping, for example, we should let it be seen that we are on our own soil instead of giving the impression that we do not want to do anything.
  To summarise, we have had enough. The time has come for action. I appeal to the Government to prove that they are as serious about full employment as they plead. Under-employment is as big an evil as unemployment. To put it shortly and in my own Lancashire tongue, I plead with the Government to get their finger out and let it be seen that actions speak louder than words.
  9.42 p.m.
  Mr. Frank R. White: A popular television western series is appearing currently, called "Alias
  580
  Smith and Jones". Hon. Members now have the Lancashire equivalent of Smith and White. Just like our cowboy counterparts, the hon. Member for Rochdale (Mr. Smith) and I intend to get our man.
  The hon. Member clearly and concisely placed before the House the overwhelming case for some measure of protection to be given to the textile industry to prevent the present incidence of cheap import dumping on the British market. I am grateful for the opportunity that the hon. Gentleman gave me to join him in his Adjournment debate.
  I should like to make one or two points that he has covered already. As a Member of only four weeks' standing, I have the strong impression that when one raises the question of textiles a feeling develops—"Oh, them again". It seems to me that some hon. Members are rather fed up with textiles and, therefore, do not treat the industry with the respect or concern that it deserves.
  The hon. Member has stated that manpower levels over the past 15 years have dropped from 240,000 to 85,000—a 66 per cent. reduction. Which other major British industry has faced such a labour contraction? Which other major British industry has faced the challenge not of cuts in home consumption or of great changes in new technology but of the pressure faced by any industrialised nation from the growing industries of the developing countries of the world? Furthermore, the industry in this country faces these problems without adequate protection, or with delayed, ineffectual action to help it.
  The industry, and myself, accept that there is a need to help the emerging nations. But at what price? Is the price to be the complete collapse of the home-based Lancashire textile industry? I wish some people would clarify that. If that is so, the person responsible for taking that decision will have to explain it to the management, to the unions and to the operatives of the industry. I will not take that responsibility on my shoulders. I will not accept it or the thesis behind it.
  There is a balance to be achieved—a balance of support for developing countries and a balance to protect our home-based industries. The spinning side of the textile industry informs me that even on full production it could not fully meet

  581
  home demand and, hence, the remainder would, of necessity, have to be imported. But, as my hon. Friend stated, that should be a controlled situation, not the present free-for-all that merely makes a bingo lottery out of people's livelihoods.
  On the question of textiles, I submit that some hon. Members are a little two-faced. I asked hon. Members to sign Motion No. 67 in respect of the textile industry. Some of them said that they had no textile industry in their constituency and believed in supporting the underdeveloped nations, and therefore, we in Lancashire should have to put up with the situation.
  If what is happening in Lancashire were to happen in their constituencies, without doubt they would ask me to support protection for their industries. Their zeal for assisting developing countries would develop a strong correlation to the length of the dole queue. My hon. Friend and I, together with other hon. Members who wish to take part in the debate, base our support on the practical balance that has already been indicated.
  I emphasise the need for action. As my hon. Friend said, the industry itself has been warning the Government for months about the impending situation in textiles. It has given warning about the impending import dumping that is now a reality. Sales and business contacts have fed information through the normal Government channels giving ample warning of the impending influx, particularly from the Mediterranean associate countries of the EEC. Action could, and should, have been taken at least six months ago.
  The only reply to the warnings has been a request for facts and statistics, and justification upon justification. It is my belief that the only relevant fact concerning the effects of cheap import dumping is the number of textile operatives on short time or laid off completely from work, the number of mills working below capacity, or the number of mills that have been closed down.
  I do not want to hear about "concern". I do not want platitudes from the seat of the pants of Ministers and officials. I want action—action as outlined by my hon. Friend, or some practical alternative that will give continuity of employment to the textile operative and a production floor to the industry. This
  582
  is a basic requirement, and it is not beyond the wit of this Government to meet that basic requirement. Textiles need it just as much as agriculture, just as much as the aircraft industry.
  Above all, the art of government is meeting people's needs. Our need in Lancashire at present in the textile industry is continuity of work and security of work. From that work family standards are built, and on that work community life depends. Lancashire has never let this country down. Is the country now prepared to let Lancashire down?
  9.49 p.m.
  Mr. Charles Fletcher-Cooke: The only point on which I disagreed with the hon. Member for Rochdale (Mr. Smith), who initiated this valuable debate, was his statement that this problem had been going on for 10 years. To my certain knowledge it has been going on for 23 years. It has been going up and down, and the same arguments have been adduced in this Chamber all the time.
  I think that this crisis started about July. It started on imports mostly from two countries—Turkey and Taiwan. The subsidising of Turkish imports is obvious, and it is monstrous that Turkish imports should come in under the umbrella of the European Economic Community, which is dedicated and devoted to the principle that there should be no subsidies and that competition should be free, fair and without subsidies. As the hon. Member for Rochdale said, unless the European Economic Community can police its ideology, which is that of no subsidies, one has to think again about the effectiveness of the European Economic Community in producing the situation of fair competition to which it is devoted.
  The second country, which is particularly threatening my constituents, is Taiwan. We have no Commonwealth obligation there, nor any European obligation. I do not understand, and nor do my constituents, why there should be such a sudden increase—threatening the livelihood of those employed in the large India Mill in my constituency—of imports from that country of very cheap labour and without any claim on the market of this country.
  I have given the Minister no notice of this question, but I should like him to explain why there should be a sudden

  583
  upsurge of Taiwanese imports, not only of cloth, but of made-up garments, at a time when the other ends of the trade are threatened from other countries. We have to take a firm line, and all the hon. Member for Rochdale said about the attitude of his Department is only too well attested by the experience of 23 years. Over and over again his Department says to the industry, "Prove it up to the hilt."
  The truth of the matter is that it is only his Department that has the machinery for proving it. The trade has to make out a prima facie case. The trade can say, "We believe from the figures that these imports must be subsidised," but the 99 per cent. proof can come only from Departmental officers in the field in these countries. They alone can get the evidence.
  Now, after 23 years, the Department turns upon the trade and says, "We will not move. We will remain neutral until you prove it before us as if we were an impartial judge." Instead of that it should be the champion and advocate of the Lancashire textile industry.
  9.53 p.m.
  Mr. James Lamond: All that has been said in the debate so far seems to make very good sense. First, I echo the point made by the hon. Member for Rochdale (Mr. Smith) that there are seldom opportunities in the House to discuss the affairs of the North-West, which is an extremely large region which returns almost 80 Members of Parliament to the House, more than, for example, Scotland, although it receives much less attention than Scotland.
  On many occasions there have been requests for a debate on the Strategic Plan for the North-West which we have not so far been able to debate. I should not say that I accept all that is contained in that plan, but certainly we deserve the opportunity to debate it. However, we are concerned tonight with the textile industry which plays a big part in the life and work of the North-West. I have many constituents who are engaged in that industry.
  I cannot say that there is widespread unemployment in my constituency—the figures disprove that. In fact, the latest figures show that, relatively speaking, the
  584
  position is quite good. What is causing great concern, however, among employers, trade unionists and employees throughout the area is short-time working. Combined with that there are difficulties about unemployment pay. Because of the shifts that have been worked, including weekend working, people have found great difficulty in obtaining their just unemployment payments.
  A fortunate coincidence is that the Minister who is to reply to the debate not only comes from the North-West but shares the honour with myself of representing one of the most important metropolitan county boroughs in that area, and I am sure that we shall have a much more sympathetic ear tonight than possibly we have had for many years. About three years ago I had an Adjournment debate on this subject. We made some headway on that occasion because I and others were pleading for the quota system to be retained.
  I want to make this clear about the textile industry. No fault of any kind can be laid at the feet of management or the employees in the industry for the state it is in at present. The trade unions have co-operated to the utmost with the employers in the modernisation of the industry. It is now the second most capital-intensive industry in Britain, second only to chemicals. Shift working has been accepted in an attempt to make the industry viable, but it is facing competition all the time from developing countries whose wage rates are far below those paid in Oldham and the North-West—and wages are not all that high in this country.
  I visited Hong Kong this summer and looked at a textile factory there. It was not modern. It was not capitalised in the same way as our factories are. But the wage rates were running at about only one-quarter of the rates paid in the North-West. We cannot face that kind of competition.
  I appreciate, as do my constituents, that we must do our utmost to help developing countries. We feel, as my hon. Friend the Member for Bury and Radcliffe (Mr. White) said, that the trade is being asked to carry an unfair burden. I know that there are those of my hon. Friends who feel that perhaps we should not protest so much, but I say to them that if every

  585
  industry had been asked to carry the burden that the textile industry has carried their outcry would be as loud as ours.
  I shall be brief, because the chance of fate has enabled us to have at least a little time tonight. I hope that the Minister will take careful note of the remarks of the hon. Member for Rochdale and others. There is good sense in what they said.
  I am not so bitterly critical of civil servants as some hon. Members were, but I know that it has been very difficult for employers to supply proof of dumping in this country. A constituent of mine, Mr. Frank Johnson, a shirt manufacturer, whose case I have mentioned before, has told me that he knew that a subsidy was being paid to Pakistan shirt manufacturers, because their shirts were coming into this country at prices lower than the material alone from which he made shirts was costing him. Mr. Johnson had to go to Pakistan at his own expense to collect the evidence, which he brought back and showed to the civil servants here. They then accepted it and cleared the position.
  That evidence demonstrated that vouchers were being given to shirt manufacturers who were exporting to this country. These vouchers were being sold on the Pakistan stock exchange and quoted there. They enabled Pakistani importers to import from other countries. Written evidence of this was not acceptable in this country until Mr. Johnson went to Pakistan and proved it to the hilt.
  We should expect a little more co-operation from our civil servants. I am not as bitingly critical of them as some hon. Members are but there is something in what has been said. I hope that the Minister, my hon. Friend the Member for Oldham, West (Mr. Meacher), will listen with a very sympathetic ear.
  It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dunn.]
  Mr. Mike Noble: I am grateful for the extended number of contributions which have been permitted in this debate and I congratulate the hon.
  586
  Member for Rochdale (Mr. Smith) on selecting a subject which is so close to the hearts of Members from the North-West.
  The industry is modern and in contrast to the image that people living in the South have of textiles. I worked in the industry for some time and I know that its problems are not restricted to the North-West. It is spread throughout the nation, with a firm like Coates in Glasgow, substantial textile activity in London and a great deal of cotton textiles in East Anglia, but it is in the concentration in the North-West that the biggest problems are being felt.
  Mention has been made of the efforts by the people in the North-West, joint efforts of both management and unions, to deal with these problems. I do not think there is another industry which could boast of such joint co-operation between management and employees to ensure survival.
  We have a very modern industry. It is the second most capital intensive industry in the country, operating the most advanced technology and with the most advanced management attitudes. I helped to train management at one time and I know that it is aware of and concerned to utilise the most up-to-date techniques. It has an open mind on new developments, yet it feels helpless in the face of the crisis created by imports, and it feels bitter, quite rightly, at being let down.
  There is also a crisis of confidence in recruitment. Very few parents feel able today to advise their children when they leave school that they can be confident of a long and successful career in the textile industry. One of the most difficult tasks at the moment is to ensure that it gets the right quality of recruits. Of course, the unemployment statistics in no way indicate the extent of short-time working and the loss of income in families where in many cases both husband and wife depend on the textile industry and both are put on short time.
  The industry has never asked for privilege. It has accepted sacrifices, going back to the days of the American Civil War. In recent years in many ways the Lancashire textile industry has provided many of the funds for development in the under-developed countries. But while

  587
  we do not ask for privilege, we do ask for fair treatment of imports. It might be appropriate if marks of origin were restored to imported goods.
  The hon. Member for Rochdale indicated the decline in the number of jobs in the industry over the years. The industry is concentrated in an intermediate area into which the Government are pouring funds, but that money will go straight down the drain unless they do something about the import problem.
  It was said at the end of the war that Britain's bread hung on Lancashire thread. Lancashire responded to that situation. I suggest that, now, Lancashire's thread hangs over the Government's head, and I hope that the Minister will respond. I know that he is concerned, and I am sure that he will take urgent action on imports.
  10.5 p.m.
  The Under-Secretary of State for Industry (Mr. Michael Meacher): This has been an important and valuable debate, for which the whole House is grateful to the hon. Member for Rochdale (Mr. Smith). It is an important subject, not least to my constituents in Oldham, West, whose ability and skills in the textile industry are second to none—not even to the hon. Member for Rochdale. His speech was spirited and forceful and for the most part a balanced one.
  There is one matter on which I wish initially to take issue with the hon. Member. He seemed to imply that Governments and civil servants have done little for Lancashire in the past. I deplore the unnecessary and derogatory manner in which he spoke of civil servants. The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) suggested that the problem had been going on for 23 years and not only for 10 years.
  I begin by setting the hon. Member for Rochdale's demands for instant action by the Government in their proper context, which is the record of the present Government and other Governments in assistance that they have given to the Lancashire textile industry.
  With our encouragement, the Textile Council produced a thorough-going study on the Lancashire spinning and weaving industry in 1969. This productivity and
  588
  efficiency study recommended that a tariff be imposed on cotton yarn, cotton cloth and made-ups from the Commonwealth. The study foresaw that after a transitional period the quotas which had been in operation for many years could be abandoned and reliance on tariffs alone accepted. But in the light of changed circumstances, in particular our imminent accession to the EEC, it was decided in 1971 to retain the previous quota system as well.
  Thus, on 1st January 1972 the Lancashire industry had protection against all lower priced cotton textiles by a tariff and against their unlimited access to our market by continuing quantitative restrictions.
  I would also recall that the previous Conservative administration accepted in 1972 the industry's case for protection on woven polyester-cotton fabric and made-ups, and introduced that autumn quantitative restrictions on these textiles. This introduced for the first time the principle that in certain circumstances quota protection might be given to non-cotton as well as cotton textiles. This principle was last year embodied in the so-called Multi Fibre Arrangement on International Trade in textiles in the GATT under which safeguards can be introduced against disruptive imports of any textiles.
  Mr. James Lamond: Will my hon. Friend concede, however, that those measures were taken as the result of action in which he and I engaged, which literally forced the Conservative Government to take action? I hope that tonight's debate will have the same effect on the present Government.
  Mr. Meacher: My hon. Friend is entirely right to draw attention to the effect of lobbying pressure. The pressure which is being mounted now is similarly being taken fully into account.
  When we returned to government last February our objectives were to ensure that the British textile industry was able to compete on equal terms with its European competitors and that developing countries were given greater access to the Community market for their textile exports. Therefore, we pursued vigorously a Community textile policy which would equalise the incidence of textile imports into each member country from the

  589
  developing countries and at the same time give those developing countries greater overall access to the Community market.
  I am pleased to say—the hon. Member for Rochdale alluded to this—that the Council of Ministers approved on 15th October that Community textile policy of burden sharing. I believe that we are now on the road where, over the years ahead, we can expect the other Community member countries to catch up with us in the access that we have ourselves given in the past to developing countries and, equally important, where developing countries now have a greater total market to go for than the United Kingdom market alone. Therefore, it is in their interests as well as in ours.
  I draw attention to the fact that I confirmed again only last Monday in answer to my hon. Friend the Member for Wigan (Mr. Fitch) that the Government are committed to seeking a further derogation from the EEC's Common Liberalisation List allowing them to maintain quantitative restrictions on imports of cotton yarn throughout 1975 and 1976, though it is liberalised by all the original members of the Community. That is a record of considerable concern to the textile industry, and I do not think that that record should be gainsaid.
  I turn now to the immediate problem facing the industry, which is imports of cotton yarn, especially the significant rise in imports of cotton yarn from Greece and Turkey. Again, the Government have been freely accessible to the industry on this issue. My noble Friend Lord Beswick and I met representatives of the industry about it in July. We invited the industry to keep in constant touch with us. This it has done, and on 12th November my Department received a case from the British Textile Confederation proposing specific action on imports of cotton yarn.
  We are considering that case, and I emphasise that that is not some handy bureaucratic catch-phrase designed merely to bury the issue. We are considering it with great urgency, and, in the spirit of open Government I should like to share our thoughts on the matter with the House.
  In reaching their decision, the Government have a number of courses of action open to them. The hon. Member for Rochdale accused Turkey of dumping cotton yarn in the United Kingdom
  590
  market. Should the Government therefore impose an anti-dumping duty? We have received both from hon. Members and direct from the industry evidence of the low prices of Turkish yarn. This evidence is valuable. But it does not of itself set out a simple and straightforward case for anti-dumping action.
  United Kingdom legislation, which is based on the principles of the GATT, requires us to go into the detail in order to establish fair market prices in Turkey and Greece and to satisfy ourselves that the dumping is causing or threatening material injury to the United Kingdom industry. We can establish a fair market price by reference to the domestic prices in those markets, to the costs of production or to the export prices to third countries. Here again, I regret that the hon. Member for Rochdale saw fit to attack civil servants who are obliged to interpret the international rules and, in my belief, have done so in a proper spirit. Cheap textiles are not the same as dumped textiles, and the hon. Member for Rochdale is being too cavalier in merely quoting low-cost textiles and assuming that there is an anti-dumping case.
  As hon. Members and the industry know, it is not easy to establish a case for anti-dumping action. But this is being pursued with vigour, and I know that we shall receive as much information as is available. Once we have this information, we shall decide whether it is sufficient to warrant immediate antidumping action.
  An alternative is the imposition of quotas on imports of Greek and Turkish yarn. This alternative has to be considered against the background of the Mediterranean Associate Agreements to which we are a party through membership of the EEC. The fact that safeguard clauses under these agreements have not been used before creates its own problems. Nevertheless, I assure the House that the imposition of quotas on imports of Greek and Turkish yarn remains a valid alternative course of action open to the Government.
  As the House knows, we are committed to seeking a derogation—I have already mentioned this matter—from the Common Liberalisation List for imports of cotton yarn from presently controlled sources for 1975. As the industry knows,

  591
  the original intention was to set quota levels for 1975 at 150 per cent. of the 1973 levels. I stress 1973 levels, because some have mistakenly thought that the basis was for 1974. In this instance, too, we must consider the possibilities for lower growth than the original 150 per cent. proposal envisaged. But I must emphasise that the GATT multi-fibre arrangement that governs international trade in textiles requires some measure of growth for all parties.
  We are urgently reviewing the courses of action open to us. The question whether we restrict imports may seem simple, but its simplicity hides a number of underlying conflicts that the Government have to try to reconcile in reaching their conclusion.
  I shoud like to spell out some of them. In the spinning sector of the industry we are talking about a total employment of 34,000 persons—that is what the debate is wholly about—who, by the of September, had produced 124,000 tonnes of yarn. Of that, almost half—60,000 tonnes—was cotton yarn. In crude terms, therefore, we are talking about 17,000 jobs. Not all of these are at risk because a major proportion are in the vertical groups in the industry.
  Leaving United Kingdom exports out of consideration, at the end of September the industry's share of domestic consumption was 70 per cent. That is on the spinning side. It is against that background that we should note that imports from Greece and Turkey at 4,700 tonnes amounted to only 6 per cent. of domestic consumption. However, having put that into some perspective, I should equally insist that I am not complacent about what is at stake.
  Of the numbers employed I know that 2,500 are taking a significant cut in their wages through short-time working and lost overtime. Several of my hon. Friends have forcibly remarked on that fact. I am aware of the concern in the industry that short-time working will lead to further mill closures, some of which will be permanent. I am also aware of the lost production in the industry resulting from these lay offs and of the damaging effect of the atmosphere of confidence which is needed for new investment.
  In assessing the rôle of imports, it is difficult for the Government to isolate it
  592
  from other factors affecting production, employment and investment, particularly the downturn in the textile cycle in the United Kingdom and Europe, which is getting under way, lost export markets and the specific difficulties of our economic position. Firms cannot now afford to produce for stock on the levels that they have done during past downturns of the textile cycle. In addition, other production methods and the continuing impact of synthetic and artificial fibres have reduced the total market for cotton yarn. I believe that we must take account of this competition between fibres and between different methods of production as a proper stimulus to the creation of a prosperous and internationally competitive textile industry.
  The Government must also take account of the interests of consumers, particularly at a time of high inflation. Consumers wish to buy good quality textiles as cheaply as possible. I think that it is undeniable that British consumers are better dressed at cheaper prices than consumers in any other industrialised country. This must be due partly to allowing the world's textile manufacturers access to our market.
  It is also a fact of life—I lay considerable emphasis on this—that developing countries will continue to turn as the first step in their industrialisation programme to the production of textiles, and as the first stage in textiles to the spinning of cotton yarn. That is why this particular sector of the industry is so vulnerable. We must also remember that in Lancashire today there is healthy competition between the textile industry and other industries for the skills of the working man and woman. The unemployment rate in the Lancashire textile belt at 2·2 per cent. is below the national average of 2·7 per cent.
  Mr. Noble: Would my hon. Friend please note that the unemployment statistics do not indicate the true position? We have a large number of women who may be entirely laid off, but because they are paying the industrial injuries stamp they are not reflected in the unemployment statistics.
  Mr. Meacher: That is a perfectly fair point, and clearly the comparisons need to be adjusted to take account of it. I hope that my hon. Friend will accept my

  593
  promise on this. We cannot argue that in the Lancashire textile belt there is an over-high rate of unemployment, as there is in other parts of the country, but I do not take that as a reason for complacency.
  I turn now to our longer-term policy for textiles. In the longer term the industry's route to success must surely be through investment—high investment, high productivity and high real wages. It is here that the Government are entitled to ask the industry: "What have you done in the past years to take advantage of the protection you have had?"
  In this respect I am impressed by the role of the textile trades unions. The Lancashire industry has a record of labour relations which is by any standard excellent. The unions' attitude to modern machinery and shift working has been entirely co-operative—they are all for it. Indeed, they have been criticised by their union colleagues in Europe for their willingness to agree to night-shift working. But most importantly, they will agree to shift working only where the machinery in the mill in question is sufficiently modern. I applaud this because we must have more investment in new machinery.
  There are many mills, both in the big groups and amongst the independents, who have followed a policy of high investment. But at the same time there seems to me at present to be too many spindles—more than half a million out of a total of 2½ million—working on a single shift. Even a few old-fashioned inefficient firms are too many in an industry where weak sellers have disproportionate effects on the price in the market place to the detriment of efficient firms in the industry.
  Competition within the United Kingdom market has resulted in a slimmer, more modern, more competitive industry and imports have played a major rôle in driving out the inefficient firms, the weak sellers. Imports have proved a constant spur to the search for efficiency. But I accept that there is a limit to this role where they become disruptive, even to efficient producers.
  I repeat the Government want to see a prosperous internationally competitive textile industry. They do not see per-
  594
  manent quota protection as the way of achieving this objective. The industry should see protection as a means of present security to enable necessary investment to be made for the future.
  I do not need to catalogue the facilities available under existing Government policies to assist investment by industry In my Department's constant and continuing discussions with the industry we will discuss how we can ensure that sufficient investment is made. If these discussions identify inadequacies in present Government policies, then I will certainly consider what further policies we might need to promote the necessary investment that we must have in the textile industry.
  I would inform the hon. Member for Rochdale that I intend to continue the liberalisation for woven cotton fabric set out in the Mediterranean Associate Agreements with the EEC. There is no threat of disruption of these products on the horizon. In the period January to September 1974 we imported 223 tonnes from all the Mediterranean associates. This is considerably below the quota provision made for them and it compares with total imports of woven cotton fabric from all sources of 58,235 tonnes in the same period. However, if this situation changes and there is disruption or a threat of disruption, we shall certainly take the necessary safeguarding action.
  In answer to the hon. and learned Member for Darwen, I understand that the position with regard to our imports from Taiwan is that we imported only 4.5 tonnes of cotton yarn in 1973 and 9 metric tonnes up to 31st August this year. All cotton polyester-cotton yarns, woven cotton and woven polyester-cotton cloth from Taiwan, are under the control of quotas.
  Mr. Fletcher-Cooke: I follow the hon. Gentleman's statistic about the cotton yarn, but contrary to what he said the debate is about the Lancashire textile industry generally. I know that I have given him no notice of my intention to raise this matter, but could he not say something about the quota of cloth and of made-up garments from Taiwan? That is what is worrying my constituents.
  Mr. Meacher: As the hon. and learned Gentleman says, he has given me no notice of this, and I would not wish to

  595
  give an incorrect answer. But I will certainly write to him on the point.
  I have listened to a valuable debate with great care. Hon. Members will understand that I cannot anticipate the Government's decision, but I hope that anyone who may be importing yarn in
  596
  excessive quantities at low prices will recognise that there is no assurance that the present terms of entry to this market will continue.
  Question put and agreed to.
  Adjourned accordingly at twenty-seven minutes past Ten o'clock.