HC Deb 03 December 1975 vol 901 cc1686-90
The Secretary of State for Energy (Mr. Anthony Wedgwood Benn)

With permission, Mr. Speaker, I should like to make a statement.

About a year ago, Burmah Oil Company approached the Government and the Bank of England about its difficulties in meeting the technical requirements of certain loan agreements, notably those covering its large borrowings in dollars from a group of North American banks. As the House will know, it was agreed that the Bank should guarantee the North American borrowings for a period of 12 months and should also provide a further measure of support by way of a standby facility. However, Burmah has not been able to proceed as rapidly as expected with the sale of its United States assets.

The Government have therefore reviewed the situation with the company, including its cash needs, in consultation with the Bank of England and Peat, Marwick and Mitchell. It has been decided that the dollar borrowing guarantees should be renewed for a further nine months so as to give further time for the company to realise its United States' assets at a satisfactory price.

In addition, the Government have offered to purchase the whole or a substantial part of Burmah's North Sea oil assets at a fair price to be negotiated on an arm's-length basis. The board of Burmah is ready to enter into immediate discussions with the Government to explore all possibilities subject to its being satisfied that the interests of the company are fully safeguarded. These discussions will necessarily take some time and both parties are hopeful that they will be successfully concluded. Both parties are determined that the negotiations shall not hinder the continuing development of the North Sea.

Mr. Patrick Jenkin

Are the Government aware that they have already pocketed a profit of over 150 per cent., no less than £260 million, in less than a year at the expense of the pension funds and the small shareholders in this company arising out of their take-over of the BP shares? Why have the Government now chosen the path of outright nationalisation of the company's North Sea interests? Why are not the Government prepared to continue the guarantee without forcing the company to surrender not 51 per cent. but the whole of its North Sea interests?

I have two questions of detail to put to the right hon. Gentleman. How much new money will the Government have to add to their borrowing requirement in order to be able to finance this purchase? Is this not just an example of highway robbery under duress? Have not the Government now become the biggest asset stripper of the lot?

Mr. Benn

I do not accept what the right hon. Gentleman said in respect of the support arrangements made at the beginning of the year. I think that when perhaps, on reflection, he rereads my statement, he will recognise that an offer by the Government to buy at a fair price on an arm's-length basis does not qualify for any of the kind of phrases that he used.

Mr. Grimond

As the Minister is aware, I have made clear my view about Burmah and my interest in it. May I ask, first, whether the right hon. Gentleman will bear in mind that this company—though personally I have doubts about its claim for some share in the profit in the sale of shares—has been hit both ways, because its assets in Burma were destroyed and it was unable to profit from war damage compensation?

On this particular matter, will the Minister make clear whether the guarantee is dependent upon the company surrendering its North Sea assets? Will he also make clear that both these arrangements—the guarantee and the negotiations for the sale of the North Sea assets—are being entered into by the directors of Burmah perfectly freely without any Government pressure?

Mr. Benn

I do not propose to go into the other matter raised by the right hon. Gentleman, although I know his concern with it. However, I am making a separate statement today about another matter and I think that it is clear from the wording of the statement that the Government have offered to purchase and that the negotiations and discussions will now be taking place. But the position is set out very fully in the statement, and I think that it meets the right hon. Gentleman's question.

Mr. English

When my right hon. Friend heard the Opposition spokesman, was he tempted to withdraw his guarantee on the spot and allow the company to go bankrupt? Is he aware that there are two aspects of the fair price? At present the Government are propping up the company with this guarantee. If they did not do so, it is conceivable that they might be able to acquire some of the North Sea assets at a quite reasonable price. Is my right hon. Friend aware that some of us on the Government side of the House wonder what exactly is meant by "a fair price" in this context?

Mr. Benn

I think my hon. Friend will appreciate that when the Government announced the support operation at the beginning of the year, it followed from that that discussions with the company would be proceeding over the year; and what I have announced today is the extension of the guarantee and the offer to acquire some assets. On balance, I think that is the right response for us to make in the situation.

Mr. John Davies

I am sure the right hon. Gentleman realises that uncertainty about the ultimate disposal of the shares in BP held by the Bank of England as collateral for the guarantee given casts a shadow of uncertainty over the operation of that great contributor to our national fortunes. Can he give any enlightenment about the Government's intentions on this subject? In particular, can he assure us that it is not the Government's intention to nationalise these shares as well?

Mr. Benn

If I may say so to the right hon. Gentleman—I do not blame him for putting the question—that is an entirely separate question. [HON. MEMBERS: "No."] It is entirely unconnected with the statement I have made today. As I think the right hon. Gentleman knows, the Government have made it clear that when they are ready to make a statement about that, they will do so.

Mr. Jay

In view of what the right hon. Member for Wanstead and Wood-ford (Mr. Jenkin) said, is my right hon. Friend aware that responsibility for the present situation rests with the management of the company and the previous directors, and that if the Government and the Bank of England had not rescued the company the shares would be worth even less than they are now?

Mr. Benn

I think my right hon. Friend is giving an account of the position as it was last December when the company approached the Government and we announced our original support operation.

Mr. Gordon Wilson

Will the right hon. Gentleman elaborate on the terms of compensation in relation to the offer and bear in mind that a large number of small investors are involved in the company? Is he aware that a number of them have invested for retirement purposes and that they have already been hit very hard by the unfortunate developments affecting this company?

Mr. Benn

In my statement I said that the Government have offered to purchase the whole or a substantial part of the company's North Sea assets at a fair price to be negotiated at arm's length and that the board of Burmah was ready to enter into immediate discussions subject to its being satisfied that the interests of the company were fully safeguarded. In the discussions which my right hon. Friends and I have had with the company, these considerations have been in our minds.

Mr. Hordern

Will the right hon. Gentleman confirm that the scheme will eventually be subject to the consent of the Burmah shareholders? Will they not find a pistol being put to their heads if they are forced to enter into negotiations now for the sale of the North Sea assets? What sort of effect does the right hon. Gentleman think that it will have on the assets of other British companies overseas when the compensation terms are forcibly negotiated in this way?

Mr. Benn

I do not accept that the situation is as the hon. Member puts it. The way in which Burmah conducts the negotiations is entirely a matter for the company. We have extended the guarantee and offered to purchase all or a substantial part of its North Sea assets at a fair price on an arm's-length basis. That position is set out quite clearly in the statement, and I cannot accept what the hon. Member has said.

Mr. Skinner

Is my right hon. Friend aware that at the time of the collapse of Burmah Oil the company was in no different a position than is Mr. Riccardo with Chrysler? It had no collateral at all. May I suggest that my right hon. Friend watches this matter very carefully? Is he aware that, when he talks about negotiating at arm's length, that is not good enough for some of us on this side who think he should ensure that we get the 21 per cent. of shares which were there at the time of the collapse not on the basis of paying cash, for which there was no collateral, but for nothing at all? Is not my right hon. Friend aware that these shares were worth nothing then and that nothing should be paid for them?

Mr. Benn

My hon. Friend is referring to the acquisition of the BP shares at the beginning of the year. Whatever the position of the Burmah Company may or may not have been at that time—and I am making no comment on it—there is no doubt that the Government paid a fair price for the shares. That is a quite distinct matter from the offer I am in a position to announce today.

Mr. Monro

Is the right hon. Gentleman aware that he cannot lightly brush aside the forced sale of the BP shareholdings last January? Does he accept that the severe drop in income faced by individual pensioners and pension funds is greatly resented, particularly in Scotland?

Mr. Benn

This has been the subject of a number of ministerial statements and letters. It was for the Burmah Company itself to decide last year whether to accept the offer made for the BP assets. This is entirely separate from the matter I am dealing with at the moment. I do not accept what the hon. Gentleman has said.