OFFSHORE OIL

HC Deb 08 December 1975 vol 902 cc37-168

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

3.48 p.m.

Mr. Patrick Jenkin (Wanstead and Woodford)

Before I come to the subject of the debate, there is one matter that I want to put to the Secretary of State and perhaps he will pass on my representations to his right hon. Friends. It is now a month since the Royal Assent was given to the Petroleum and Submarine Pipelines Act. It is impossible for anyone in the industry or in this House to obtain a copy of that Act. It is outrageous that we cannot even obtain a copy of an Act about which the right hon. Gentleman decided to make a broadcast which, for some reason which we all understood, he withdrew. I hope that he can do something about this, because it is intolerable that the industry and the House should be expected to consider these matters without the legislation before them.

We have chosen to debate the Government's oil policies today for two reasons. First, we want to expose the dangerous fallacy inherent in the Government's euphoric and unrealistic attitude towards the impact which United Kingdom oil will have on our economic prospects. The Government believe, judging by their actions and their words, that United Kingdom oil will be some kind of magic potion which will miraculously transform the whole of our future and enable us to become one of the richest and most powerful nations in the world.

I believe that that was the attitude that underlay the Foreign Secretary's ill-starred swagger and bluster at Luxembourg last month, ending, as we now know, at Rome in humiliation not only for himself and the Prime Minister but for the whole nation. I think that somehow was behind his actions.

The Prime Minister's repeated references to Britain joining OPEC, which is calculated to cause the maximum offence to our friends in both the consuming and producing countries, and indeed worldwide, is born of the same sad illusion.

The Secretary of State himself seems to be approaching his responsibilities in a way which shows that he totally fails to understand the harsh realities of our situation. To talk, as he has, of summoning a world conference of State oil companies at a time when the BNOC's entire staff consists of Lord Kearton and a secretary displays delusions of grandeur approaching paranoia.

But perhaps the most revealing glimpse of ministerial euphoria came in the Prime Minister's Guildhall speech on 10th November when he spoke of our economic strength being revolutionised, when the flow of North Sea oil into the refineries which started in Aberdeen last week, becomes a torrent. Later he said: So let there be no doubt about the economic strength we shall be asserting by the end of this decade, nor any doubt about what this twentieth century industrial revolution will mean". To talk like that in the light of the real problems besetting the economy is fatuous.

The Chequers strategy paper spelled out the causes of our economic weakness with admirable frankness. It talked of low investment, poor returns on investment, shortages of skilled labour, poor productivity, poor management, inadequate consultation, restrictive practices, overmanning, industrial disruption, unhelpful attitudes to pay and mobility, unstable economic management, excessive public spending, price controls, and so on.

Neither oil nor oil revenues will by themselves cure any of these things. Yet Ministers somehow go round trying to convey the impression that all we need to do is to tighten our belts for a couple of years and thereafter effortless prosperity is somewhere just around the corner. It is not. It is we ourselves, the whole British nation, not our oil, who must resolve to cure the deep-seated ills from which we suffer. Of course the oil will help. It will help particularly on the balance of payments, but it is not the key to Nirvana.

Our second purpose in debating this subject today is to expose the sadly deteriorating oil scene in Britain and to pin the blame fairly and squarely where it belongs—on Her Majesty's Government—and, in particular, on their misbegotten and doctrinaire obsession with nationalising 51 per cent. of the offshore licences. The uncertainty which has been created—uncertainty is the great killer of confidence—is strangling the offshore industry. Here, too, Ministers continue to display a bland complacency which is breathtaking when compared with the facts on the ground.

Here I come to the Minister of State. We warmly congratulate him on his promotion, although our congratulations must be tinged with some sympathy that he is succeeding the noble Lord, Lord Balogh, just at the time when the policies perhaps identified with the noble Lord more closely than with anybody else are crumbling round the ears of the Government.

The Minister of State presented a paper in Aberdeen on 21st November to the Standing Conference on North Sea Oil. It purported to be a progress report, but the whole document is redolent with an odious aura of self-congratulation which I find strange. One sentence which at the present juncture deserves to be recorded for posterity is: The level of activity in all stages of the process of exploration for and development of our offshore petroleum resources is healthy and vigorous.

The Minister of State, Department of Energy (Mr. John Smith)

That is correct.

Mr. Jenkin

Tell that to the marines. The hon. Gentleman knows that it is rubbish, and certainly the Northern group of Labour Members who took a deputation to see the Secretary of State a month ago about the threatened unemployment at Graythorpe know it is rubbish. There are no prospects of an order for the Graythorpe yard until 1977. I hope that hon. Gentlemen opposite, when they read rubbish like that, will rise up in anger against the Minister of State for his complacency.

The Government are complacent even against their own forecasts. The Chancellor of the Duchy of Lancaster, answering Questions a few minutes ago, was at pains to point out to his hon. Friends that they could not expect immediate results from the participation negotiations, that they are immensely complicated, that progress is being made, but that there are many companies and that the issues are complex.

That was not what his predecessor said when he introduced the Bill last April. He said, by the end of this year you will find that most of the companies have agreed to participation on terms which are fair to Britain and fair to the companies. There is no agreement yet in sight. Only eight companies have agreed in principle—seven of them under duress and one under orders.

The participation negotiations are becoming a shambles. Yet, until certainty returns, there is little chance of the momentum on oil development returning. Until it does, oil workers and workers in oil-related industries will continue to go on the dole. I hope that is what hon. Gentlemen opposite want, because that is what will happen. The Government's policies are putting at risk even those benefits which it is realistic to expect to flow from United Kingdom oil.

These are matters of extreme gravity. If the Government continue to bungle the development of the United Kingdom's oil resources, while at the same time pinning exaggerated hopes on the benefits which will flow from our oil, they will forfeit, and deserve to forfeit, any shred of confidence which they still manage to retain. With oil we might just about get by. Without it, our prospects would be bleak indeed.

I should now like to turn to a brief analysis of the likely impact of oil on the United Kingdom's economy. I ask the House to bear with me in going through come of the figures.

Looking at the development of United Kingdom oilfields in isolation, the picture is by no means unattractive. Some figures recently published by the Scottish brokers, Wood, Mackenzie, are probably as good a guess as anyone's of the likely outcome. They show that the overall contribution to the balance of payments—that is, the net inflow of capital plus the impact of the oil on our current account—rises from an inflow of under £400 million in 1975 to over £3,500 million in 1980. Figures for the probable Exchequer revenues from oil are also given. These are estimated to rise from £10 million in 1975 to £1,860 million in 1980.

It is true that these estimates are based on what some people might think is a rather optimistic assumption about the development of the oilfields. For instance, they assume that the Hutton field will be developed, but there is still a big question mark hanging over that. However, the figures are probably of the right order of magnitude.

But, of course, they look at United Kingdom oil in isolation, something we cannot do. We must take account of the overall prospects.

Take first the balance of payments. We cannot look only at the net benefit of United Kingdom oil there. We must look at the whole oil sector balance. The Government have published no estimate of this, so we must rely on independent studies. A recent study was prepared by the group at the European Institute of Business Administration—INSEAD—and I believe it is authoritative. If the Government challenge its figures they must give their reasons. The study shows, taking account of the cost of oil imports together with the accumulating debt they represent, that, even with a substantial net export of United Kingdom oil after 1980 and with a significant premium on our oil, a net credit balance is achieved for only two years between now and 1984. Up to 1980 oil will continue to be drain on our balance of payments. Unless oil production rises to well above 150 million tons a year it will still be a drain from 1983 onwards. There will be small surpluses on the balance of payments in just two years—1981 and 1982.

Of course, the situation would be catastrophically worse if we did not have the oil. That, however, is not the point. The conclusion of the INSEAD study is quite clear. Perhaps I may quote from a review of the study in the Financial Times on 3rd October. It says: North Sea oil will represent a fortuitous opportunity to cancel out the adverse effect of the quadrupling of the price of oil but … the country will have to go for substantial net exports of oil or other goods in the 1980s if it is to service the oil sector debt accumulated in the meantime. And there's the rub.

Dr. Colin Phipps (Dudly, West)

Did I understand the right hon. Gentleman to say that by 1983 we should be using 150 million tons of oil a year? That appeared to me to be the theme of the study, yet best current estimates put the figure at not more than 110 million tons.

Mr. Jenkin

I said that the figure related to production. The study estimates United Kingdom consumption rising by 1984 to no more than 119 million tons, which is probably not an unrealistic figure.

Do the Government challenge the conclusion that we shall need a surplus of the order I have described simply to pay the interest on the debts incurred in the meantime? We deserve an answer to that question because the conclusion very much contradicts what the Prime Minister and others have been saying. If these figures are anything like correct, there will be no balance of payments bonanza. The oil will do little more than avert for a few years the catastrophe which would otherwise have overwhelmed the United Kingdom economy, and for Ministers to try to pretend otherwise is for them to delude themselves and to deceive the nation.

Then there is the question of the oil revenues to the Exchequer. It is said that these will surely be a substantial benefit. However, we cannot look at the oil revenues in isolation. We face a series of dreadful Budget deficits in spite of almost whatever the Chancellor of the Exchequer may do. The April Budget this year had a public sector borrowing requirement estimate of £9 billion. A month ago the Chancellor told the Parliamentary Labour Party that the public sector borrowing requirement was now running at about 20p in the pound —and that means that it may be between £11 billion and £12 billion this year. The interest payment at, say, a 12 per cent. rate on that figure are almost £1½ billion a year, on just one year's addition to the National Debt. My hon. Friend the Member for St. Ives (Mr. Nott) was told in a Written Answer on 3rd December at cc. 658–9 that the total public sector interest charge on debt had risen from £1,379 million in 1964–65 to an estimated £5,074 million in 1975–76. That latter estimate was based on the assumption of a £9 billion borrowing requirement. If that rises to nearly £12 billion, the total interest payment in the current year could not be less than about £5.4 billion.

That is bad enough, but we must look to 1980 and here we must make some assumptions. I have assumed, generously, that the Chancellor of the Exchequer will manage to reduce the public sector borrowing requirement by £2 billion every year between now and 1980–81. That means that a £12 billion deficit in 1975–76 will be down to a £2 billion deficit in 1980–81. In those five years some £30 billion will have been added to the National Debt, and the extra interest payments-12 per cent. on 30 billion—will be an additional £3.6 billion charge on the Exchequer. That is just double the anticipated Exchequer revenues from North Sea oil in 1980. Let me repeat that. The extra interest payments on the National Debt by 1980/8 will be just double the estimated oil revenues in that year. I must ask the Government whether they dispute these estimates.

We should be much worse off without the oil revenues, but it would be ludicrous to argue, as the Prime Minister did at the Guildhall, that the oil will be the foundation of a 20th century industrial revolution. The only revolution the Prime Minister faces will be in his own party when his hon. Friends realise how they have been fooled by language of that sort. Whatever the benefits of United Kingdom oil may be, they are being spent now in the deficit the Government are running up. If we spend it now we cannot spend it again later. That truth should be shouted from the rooftops.

However, even these benefits depend on our oil development going according to plan, but what is happening? The story is starkly but, I believe, accurately told in a series of newspaper headlines which began back in June and bring us up to date. They read as follows: British platform yards facing orders crisis". Then, Benn brings pressure for oil platform orders".

Hon. Members

Are there any cuttings from the Morning Star?

Mr. Jenkin

No, I have none from the Morning Star. Those I have are from the Financial Times, The Times, the Daily Telegraph, the Scotsman and The Guardian. They go on: Campbeltown's hope of oil boom jobs recedes". Then No-order blow to Portavadie yard". Then we come up to October and the headline, Rig lay-ups sign of depression followed by, Rig makers warn of lay-offs and then, No more platform orders this year". Then, Threat to Britain's oil as yards run out of orders for new platforms followed by, Gloom over future of oil jobs". Then, Orders for oil platforms disappointing, Benn says and, Fresh attempt is likely soon to gain oil platform orders followed by, Benn admits oil rig defeat and, finally, No work in sight for £14m oilrig yard". What a distastrous commentary on the Secretary of State's conduct of our affairs. Labour Members know that all this is true because they have been leading deputations to the Secretary of State to express their anxieties.

The workers at the Graythorpe yard are desperately worried because they have been told that there is no prospect of any orders before 1977. I cannot help feeling that the union deputation that waited on the Secretary of State on 30th October must have been disillusioned when he told them that there was nothing specific that he could offer other than pointing out the existence of the £10 per head temporary employment subsidy. My hon. Friend the Member for Ross and Cromarty (Mr. Gray) faces the same problems at Nigg Bay and Kishorn.

There is no comfort from the Members of the Scottish National Party who voted for the Second Reading of the Petroleum Bill and who have made it abundantly clear that they too believe in a State oil company.

I turn to the rundown of exploration rigs. It was expected that by this year there would be 40 rigs at work. Last month there were 27 and this month only 26. All the forecasts indicate that next year there will be still fewer rigs. At present those rigs are engaged solely on drilling to fulfil their commitments, or on appraising existing finds. There is no genuine wildcat drilling being carried out at all.

Mr. John Smith

The right hon. Gentleman has once again said that the Government forecast that 40 rigs would be working this year. As he studies the statistics carefully he will know that the prediction was 30. The outturn is likely to be 28, which is not bad for projects taking place in this difficult area. To say that we said there would be 40 working is just not true.

Mr. Jenkin

The hon. Gentleman will no doubt be able to make his case, but all the assumptions upon which the Government were basing their forecast were that there would be a steady build-up of the number of rigs, and 40 was certainly mentioned.

Why is there a rundown in the platform yards? Why are the rigs leaving United Kingdom waters? I accept that costs have risen. Inflation has hit the oil industry as hard as it has hit anywhere else. Also the risks are great. To talk about risk-free investment is rubbish. We have been reminded only this weekend of the severe technological risks which are involved in developing oilfields in the hostile waters of the North Sea.

However, there is not the slightest doubt that the central reason for the loss of confidence in this industry is the foolish and irrelevant policy of 51 per cent. participation. The Treasury knows that it is a nonsense. The Chancellor of the Duchy of Lancaster knows that it is a nonsense. Otherwise why is the right hon. Gentleman constantly pressed by his hon. Friends from below the Gangway? I suspect that half the Government know that it is a nonsense, yet the right hon. Gentleman told us a few weeks ago that he was "implacably resolved" to secure 51 per cent. participation. Primarily it is participation, leading to loss of confidence which is causing such havoc to the pace of development.

Until companies know the details of the cash flows of their operations they cannot spend their money. They cannot calculate their cash flows until they know what the participation terms will be. This is the kernel of the case. The Government have killed the equity market for major development schemes in the United Kingdom Continental Shelf. They know that if the equity market is killed and if companies cannot increase their equity base they cannot go to the market for loan capital. It is only the very large companies which can hope to finance without recourse to the banks. Without bank money, development has become impossible.

The country is entitled to ask—what on earth is going on and what is the purpose of the whole exercise? One explanation which is certainly going the rounds is that the Government are not now prepared to put up as much new cash to finance participation as the Minister of State indicated they were prepared to put up six months ago. We were told in Committee that the original plan was to spend up to £500 million in 1976–77 and the same again in 1977–78.

However, after months of negotiation I am now given to understand that the Government have recently put forward entirely fresh proposals embodying a far smaller input of cash by them. In some cases the offer amounts to no more than a long-term sale and buy-back arrangement for the 51 per cent. of oil. The BNOC takes 51 per cent. of the oil and sells it back on a long-term contract to the company at a price which will secure to the company the same post-tax return as it would have received without Government participation. That would satisfy the "no better and no worse off" pledge which they had given.

I put that proposal as a possibility to the Minister of State in Committee, and received the firm answer: It would be untrue".—[Official Report, Standing Committee D, 15th May, 1975; c. 69]. The Sunday Times put that proposal to the right hon. Gentleman during an interview and the author of the article wrote: The idea that participation should be reduced to a paper transaction in which BNOC acquires half the oil and immediately sells it back (widely favoured in the Treasury) —I bet it is— he rejects as a mere 'charade'. Of course, he is quite right; it is a mere charade. But I am given to understand that it is precisely such a charade which the right hon. Gentleman's officials at the Department are now putting to some of the companies as one way in which they propose to achieve participation.

I ask the Secretary of State—is this true? This debate gives him an excellent opportunity to answer that question. The Secretary of State may, for the purposes of his hon. Friends below the Gangway, condemn it as a"charade", but is it true that his Department is negotiating with some of the companies on precisely those terms? If it is, Labour Members must realise that it is in order to support such an empy charade that all the difficulties and tribulations which I referred to a moment ago are now being suffered; it is for that reason that enormous damage is being done to the industry's confidence and to the momentum of development.

When unemployment comes to the platform yards, whether it be at Graythorpe, Nigg Bay, Kishorn, Ardyne or wherever, the direct cause will be the Government's damaging obsession with participation and their determination to go on with it even if it is to be only an empty charade. It is time that Labour Members who carry their complaints to the Secretary of State faced up to the situation.

The long-term cost of delay is even more serious. If we lose just six months, the cost to the balance of payments will be an extra £2 billion across the exchanges with an annual cost in interest getting on for about a quarter of a billion. As a result of the Government's policies we are likely to have lost a great deal more than six months. It is nearly a year since any major plaform order was placed. It is over a year since any major financing scheme was announced. When the Secretary of State, as he no doubt will, boasts of the new discoveries made in recent months, let him ask why no oilfield which has been declared commercial since the October General Election has yet had a development plan announced for it, let alone any orders given. There has not been one. The delays caused by participation are already costing Britain dearly.

However, all we get from Ministers is the complacent euphoria of the Prime Minister in the City, the strutting braggadocio of the Foreign Secretary at Luxembourg and the folie des grandeurs of the Secretary of State as he sits with his blackboard in Thames House South concocting absurd proposals for an international conference of State oil companies to be hosted by the BNOC. The country deserves better than this. If the Government are not prepared to face the realities of our oil situation it is time they made way for a Government who are.

4.19 p.m.

The Secretary of State for Energy (Mr. Anthony Wedgwood Benn)

I greatly welcome this debate. There is one matter I should like to mention straight away. The right hon. Member for Wanstead and Woodford (Mr. Jenkin), who used such highly coloured language last week about our offer to acquire assets from the Burmah Oil Company, having chosen this debate made no reference whatever to that matter. If something which brought him to his feet with near-hysteria last Wednesday should have passed from his mind by Monday, how much attention are we to give to the fresh anxieties which he has thought to put before the House today? His speech today indicates that in dealing with oil policy he follows the headlines. If it is not in the headlines he drops it, and if it is in the headlines he tries to give some credibility to Fleet Street's search for daily circulation.

I want to come first to the subject of this debate. The Government's oil policy is central to their economic and industrial strategy. I know of no Minister who has ever said—certainly I have not—that offshore oil solves the nation's problems. Ministers who have said that are entirely creatures of the right hon. Gentleman's imagination. But I also know few people who do not believe, as we do, that, properly used and sensibly controlled and with the benefits fairly distributed, offshore oil can help to transform our prospects.

There is a sharp difference between Government policy and that of the Opposition and an even sharper one between the record of the last Government—on which I propose to say a few words—and the intentions and approach of the present Administration. But before I come to such points in the right hon. Gentleman's speech as merit comment, let me restate, for the benefit of the House, the Government's objectives in their offshore oil policy.

The first objective is to ensure that the benefits of offshore oil accrue to the British people as a whole—in marked contrast to the record of our predecessors. The second is to develop these resources at the optimum speed, taking account of economic, environmental and energy considerations, in partnership with the operators, whose investment and technology are needed for that purpose. The third is to build up that partnership by participation in existing and future licences on the basis of good faith and good will.

The fourth objective is to establish a really effective BNOC as a national oil company to act as a partner in the participation arrangements and to develop it into a strong organisation with a capability, here and ultimately abroad, for comprehensive operations in the oil business in exploration, refining, marketing and downstream activities. The fifth is to use the offshore oil discoveries to build up a powerful industrial capability over the whole range of the oil business to meet needs here and in world-wide export markets. The sixth is to retain control over these resources for our own people, working with the companies, as I have said, with good will and good faith, discussing energy policy in the International Energy Agency and the EEC, constructively but with the ultimate control of these resources remaining with the British people throughout the United Kingdom Parliament and a Minister answerable to them through the House of Commons. Those are the objectives by which we seek to be judged. I want to make a progress report on the achievements and on the problems which confront us in implementing the objectives.

However, I cannot allow the retirement of Lord Balogh as Minister of State to pass without a personal reference to him. At a time when he was highly critical—properly so—of the handling of these matters by the Government of which the right hon. Member for Wanstead and Woodford was a member, he was very much alone initially in drawing public attention to the scandalous mishandling of these resources by that Government.

I am very proud, both politically and personally, to have served in the Department of Energy with him—a distinguished economist and public servant of more than 40 years' experience in this country and a man who, as a Minister, devoted his entire time and effort to the implementation of the policy that he did so much to fashion. In his new freedom, when he will no longer be a Minister, I certainly intend to retain him as a special oil adviser. Although I am not able, or do not intend, to announce the board of BNOC today, when it is announced Lord Balogh's name will be among those who serve on it.

When history comes to be written, I believe that the right hon. Member for Wanstead and Woodford will be not criticised so much as forgotten and that Lord Balogh's contribution in alerting the British people to what happened under that Government will long be remembered as notable. I shall come in greater detail later to the failures of the previous Government.

I come now to a progress report upon the Government's policy. First, I turn to the Petroleum and Submarine Pipelines Act. I share with the right hon. Gentleman an anxiety about the problems of printing the Act. I have raised this matter and I think that he was right to refer to it. We intend to bring the Act into force on 1st January. Those hon. Members who sat on the Committee will know that my hon. Friend the Member for Lanarkshire, North (Mr. Smith), now properly rewarded by his promotion to Minister of State, discussed the Bill in detail with the operators as it went through Parliament.

The picture that the right hon. Gentleman always seeks to paint—of oil companies in disarray because of Government policy—does not conform to reality. His trouble is that he reads their Press releases day by day to fight their current battles for them, when in fact they are engaged—I make no complaint about it—in a negotiating position from time to time with the Government of the day. The right hon. Gentleman's account of their total confusion and uncertainty bears no relation to reality—

Mr. Patrick Jenkin

rose—

Mr. Benn

Even a cutting from the Wanstead, Woodford and Redbridge Observer about what they think of the Government's policy will not convince me, even if he can find it among his cuttings.

Mr. Patrick Jenkin

It is in fact a cutting from The Times. It is a direct quotation from the retiring chairman of BP, for whom I hope the right hon. Gentleman has some respect: BP had still not finally agreed terms of the Government's proposed 51 per cent. participation in its North Sea fields, Sir Eric said. He added: 'We have been having a continual but rather desultory exchange with the Government. BP is not dragging its feet. We are trying to finalise the matter. It rests entirely with the Government.'

Mr. Benn

If I dare say it, the right hon. Gentleman is too good to be true. BP has been owned to the extent of 51 per cent. by the British Government since 1914 until 1967, and is currently, if one includes the Bank of England holding of the Burmah shares, owned to a greater extent. So if Government participation in an oil company is such a disaster, can he explain the success of BP since 1914, when it was brought into public ownership by Winston Churchill? The right hon. Gentleman cannot tell the oil from the rigs or the wood from the trees or the statistics from the reality. It was a very poor effort to try to make much of that in his speech.

Mr. John Prescott (Kingston upon Hull, East)

Will my right hon. Friend use the powers in the Petroleum and Submarine Pipe-lines Act to improve the safety of the workers on the rigs, particularly to put right their dangerous working conditions, and extend the rights of trade union recognition and the trade union charter on those rigs?

Mr. Benn

My hon. Friend may not be surprised to learn that I have a special passage on this matter to which I shall come in a moment, if he will allow me to develop the argument in the order in which I had prepared it.

We now have, under that Act, a framework of regulations for the development of these resources which was entirely lacking when the previous Government were in power. We also have the petroleum revenue tax, also negotiated with the companies. With the royalty and corporation tax provisions, this will bring £3 billion to £4 billion cumulative to the Exchequer by 1980 and £2 billion to £3 billion a year thereafter.

The right hon. Gentleman has a double responsibility because he was a Treasury Minister and then briefly an Energy Minister in an administration which entirely failed to introduce—

Mr. Patrick Jenkin

No.

Mr. Benn

—entirely failed to introduce a proper PRT system. It has fallen to this Government to provide the arrangements, with the special provisions for the smaller fields, the ring fence provisions and the provisions for amortisation and fair return. We have remedied the scandalous neglect of the Government of which he was a member in the two relevant Departments. Had we ignored this problem there would have been an explosion of anger directed at the poor stewardship that the right hon. Gentleman himself, in a special sense, exercised when he had responsibility for these matters.

Mr. Patrick Jenkin

The right hon. Gentleman was not present during most of our Committee sittings. Therefore, he may perhaps be excused for not recognising how far the Labour Party came to acknowledge the commitment of the previous Government, in the light of the Public Accounts Committee Report, both to taxation and to controls, The one thing with which we will have nothing whatever to do is 51 per cent. participation.

Mr. Benn

All I can say is that if the right hon. Member were in favour of it all along, why did not the previous Government do it? The answer is that they never had an oil policy, which leads them to redouble their attacks on us in order to cover up the failures for which they were responsible.

I do not know whether the right hon. Member believes in participation, or whether he advocated it in the corridors of power when he was in office, but in our view taxation is not enough in itself. If we are to benefit long term by this, there must be a partnership arrangement through participation. We have set 51 per cent. as an objective for future and existing licences. For existing licences, given the tax provision, we have said that our objective is not to acquire more money for the Government through it, and that is how the "no better, no worse" provision in existing licences came in to being. It is not an agency for increasing revenue, and we have chosen the voluntary route. We have made proposals to the oil companies and some have agreed in principle, including BP, some have made counter-proposals and it is correct to say that some have not responded at all. Negotiations are in progress and they are of course centring around some of the matters to which the right hon. Member referred—such as buy-back provisions, progressive development, financing and future development. Of course this is a part of the process of negotiation and discussion. In negotiations of this kind the outcome will depend on the circumstances in individual cases but we shall press and argue and I hope persuade the oil companies that participation, which has been accepted world-wide, represents a sensible and proper way of dealing with the host Government in this country. I am confident that we shall succeed although I can see that in trying to remedy the disadvantageous way in which the previous Government gave the licences, we have a long way to catch up.

Mr. Peter Rost (Derbyshire, South-East)

May I ask the right hon. Gentleman about the cancellation of his proposed visit to the United States to discuss participation with American companies? The suggestion has been made that the decision to cancel was not made voluntarily by the Secretary of State himself but was an attempt by the Government to continue the stance that not he but the Chancellor of the Duchy of Lancaster is in charge of the negotiations. Will the right hon. Gentleman clear up the confusions and vague rumour about the cancellation?

Mr. Benn

I would have thought it pretty apparent that, during the week I was due in the United States, discussions with the Burmah Oil Company were reaching a climax. The hon. Gentleman might have noticed that Mr. Alastair Down and myself were due in the United States, and we both cancelled our visits to allow us to continue our discussions together. The Press reports were based on the necessity to provide an opportunity for me to continue discussing these matters in this country. I shall be fixing my renewed visit to the United States as soon as I am able to do so—I hope early in the New Year.

The case against participation would not be argued in any other national Parliament in the world except this one, because everyone else has adopted participation. They have accepted, that with a resource as important as oil, control of it is needed, and that technological and economic knowledge of the industry is needed by the Government which is possible only by partnership in the operating committees. Most other oil-producing countries have moved in this way and we believe it to be right. I would be very surprised if the right hon. Member for Wanstead and Woodford were ever charged with those responsibilities, which I doubt, would he in any way attempt to abandon the object of participation which is fully understood by the oil companies and which is the only way in which this country can establish a real position in the oil industry.

Mr. T. H. H. Skeet (Bedford)

Surely the right hon. Gentleman is quite wrong. He has mentioned the position abroad, but Australia, Norway, and many other countries, have refused to accept retrospective action in their licences—and that is not the form of participation that he is recommending.

Mr. Benn

We are engaged in discussions of a voluntary character and that is fully accepted. It is true that the hon. Member's Government gave away so much in such unfavourable circumstances, that we have had to seek to remedy some of the damage which was done then.

The BNOC represents the national capability to which I have referred. Every country, except the United States, has adopted the approach of establishing a national oil company to be, in our case, a key partner in participation talks. It is a public corporation which will be linked to Government through two officials on the board, a device adopted by many other countries over a wider range of the public sector. It will have its executive and commercial tasks, its agency functions and advisory rôle. The first task of the BNOC will be an organising task and will be discussing with Lord Kearton and with the Board, whose names I hope to announce soon, the strategy of the BNOC. It will be borrowing experience in partnership, not only from the NCB (Ex) function but, subject to the negotiations with the Burmah Oil Company it will be acquiring all or part of its North Sea assets. It is in that connection that the BNOC will be operating.

I turn briefly to the industrial capability, which is an integral part of this operation. The Offshore Supplies Office established by the previous Government in a skeleton form, has been developed and moved to Glasgow. We have the new Industry Act, the National Enterprise Board, planning agreements and development agencies as resources at our disposal to give strength to this industrial effort, and there is a big task to perform towards this country. I pay tribute to my hon. Friend the Minister of State, who has negotiated with the offshore operators a memorandum of understanding designed to bring orders to this country on the basis of equal opportunity. This will create jobs and capacity we shall badly need.

I turn now to the question of trade union representation, because it is crucial that, in the development of this new industry, from the beginning there should not only be good labour relations but that the trade union rôle should be accepted as being in line with the objectives of this country and its traditions and, indeed, of the Government of the day. I will turn first to the question of safety in this context because sometimes people think that trade union interest is simply concerned with wages, but everyone in industry knows that the first responsibility of trade union representatives is to see that safety requirements are laid down and met and where defective are remedied.

I do not have to say that this is a new industry with new and special risks which involves special care in safety matters, and I believe that the development of trade union representation, which I shall try to promote and encourage as best I can, is an integral part of that. In difficult questions of certification of rigs, where I have had to provide certain exemptions for risks which will be familiar to the House, I have sought to consult the TUC because I think that the interest and rôle of the trade union movement here is perhaps the strongest of all. There are problems of trade union organisation. It costs £2,000 an hour to run a helicopter, which makes it harder to get trade union representatives on to the rigs, and, in consultation with the Inter-Union Offshore Oil Committee, the STUC and the general secretaries of the relevant unions, I am prepared to do what I can in that respect.

Mr. Tam Dalyell (West Lothian)

I think my right hon. Friend knows of my particular interest in the matter following the fatal accident inquiry report into the death of my constituent, John Clark. Is it part of the policy to study fatal accident inquiry reports—I am sure it is—to see what went wrong and to try to do something about these harrowing circumstances?

Secondly, there is the issue that diving instructors, as I understand it, at Loch Linnhe and elsewhere are being paid rather less than many of those who attend the diving schools because of various financial regulations in Government policy. Could something be done to help the diving instructors, and also to help qualified people to become diving instructors, and to see that they are all adequately rewarded? I acknowledge that this is a tricky problem.

Mr. Benn

My hon. Friend has kept in touch with me on this matter. He has referred to the tragic death of a constituent. The question of remuneration of diving instructors is for the Training Services Agency, and I understand that there are problems which have to be dealt with. On the question of conveying information to the companies as a whole, we immediately inform everyone. I will give an example. There was the recent case of hyperthermia. We immediately informed everyone concerned because this had not been seen as a hazard. We do our best in circumstances of this kind, but I agree that more needs to be done.

Mr. David Crouch (Canterbury)

Before the right hon. Gentleman leaves the question of safety, perhaps he is going to deal with the other liaisons and consultations that he has had. We are interested to hear that he is consulting the trade unions. Is he also in consultation with the Department of Health and Social Security and the Ministry of Defence? Some of us have had the opportunity to talk to the Royal Navy about diving problems. I had a meeting in Portsmouth some months ago. We appear to have reached the limit of medical knowledge about what happens to men operating at such depths and for such a long time as is possible in the North Sea now. I agree that it is primarily the responsibility of the right hon. Gentleman's Department, but we should like to be assured that he is having interdepartmental consultations in order to penetrate further into such knowledge.

Mr. Benn

The hon. Gentleman is right. This operation is at the frontier of technology and the known limits of human endurance. There is a parallel in aviation medicine, in which the availability of information from space research has to be used to the full. In the same way, the knowledge available through naval research must be made available. If the hon. Gentleman has any indication of defects in consultation, I should be happy to take the matter up, but I understand that at this level a great deal is being done.

I want now to turn to one other point to which the right hon. Member for Wanstead and Woodford made no reference—the next round. During 1976, we aim to be able to license new blocks and we are considering the precise terms, taking account of best performances, and there are certain issues linked with that, such as the arbitration with the French and the negotiations with the Irish Government about dividing lines. All applications will be considered.

I do not know why the right hon. Gentleman made such a mockery of State oil companies. Both the Japanese Minister and the Swedish Minister whom I have seen were representing State companies interested in North Sea development. Why the right hon. Gentleman chose to mock such companies passes my imagination. All countries which are interested in the development of resources use oil companies which represent their interests.

I want to turn now to real problems which need highlighting. One is the hiatus in ordering platforms. I must make clear, since the right hon. Gentle- man lives on promoting rumour, that there is no question of having to wait until 1977 before further orders are made. The right hon. Gentleman should read not just the headlines but make inquiries in some detail. The problem at Graythorp is that there is work until summer 1976, but that, in order to carry the work through without gaps, we would have needed further orders in 1975. Nigg Bay goes on until spring 1977.

Genuine technical uncertainties are involved. Construction techniques are being looked at again; decisions have to be taken between steel and concrete. There are other examples. To attribute evey single hesitation, whatever the cause, to Government policy, or to suggest that the speeches by Lord Balogh determined the precise date on which orders for rigs were made is to do less than justice to the problems we have in trying to develop our capability and to match and marry it into the needs of the oil companies.

I repeat that I have never said, and that no other Minister has said, that Graythorp will have to wait until 1977 for a further order, and I would be grateful if the right hon. Gentleman would withdraw his allegation.

Mr. Patrick Jenkin

Much as I wish I could in the interests of the workers employed there, I cannot. The trade unions wrote to my hon. Friend the Member for Cleveland and Whitby (Mr. Brittan) saying: You can imagine the dismay and shock this same work force felt when told no more orders until 1977. Redundancies at Christmas or mid-summer 1976. Are the unions there telling untruths, or have they misunderstood the position? What comfort can the right hon. Gentleman give them?

Mr. Benn

The right hon. Gentleman had better believe me when I say that, having seen the STUC, the companies, the general secretaries of the relevant unions, the offshore managements and the shop stewards and other groups, at no stage during those meetings did I say that there would be no further orders for Graythorp until 1977. It may be that the letter to which the right hon. Gentleman refers is based on a misunderstanding. What I said was that we needed orders in 1975 in order to guarantee a follow-on when the present rig building at Graythorpe runs out in July 1976. But I am sure that when I correct him the right hon. Gentleman does not want to give fresh life to false rumour. When I am able to say so authoritatively to him, on the basis of my inquiries with the oil companies, that we expect orders in 1976, what motive could there be but sheer destructiveness on the part of the right hon. Gentleman in trying to create disarray among people who have genuine interests that has nothing to do with Government policy?

Mr. Patrick Jenkin

rose—

Mr. Benn

No. The right hon. Gentleman has made his speech. I think that he had better be prepared to listen. Will he withdraw his remark?

Mr. Patrick Jenkin

If the right hon. Gentlemen is right, and if he is now holding out prospects of fresh order for Graythorpe in 1976, no one is better pleased than I, but I shall believe it when I see it.

Mr. Benn

I suppose that I cannot get a less churlish response from the right hon. Gentleman. I have waited half an hour, so I suppose I shall have to accept that one.

The second problem is cost escalation. Large sums of money in capital are involved. There is the problem of inflation, which is not confined to this country. There are technical innovations to be studied, and there is competition for finds. There is no doubt that the North Sea is an intensly valuable oil province. There is undoubted need for its oil, and it will be a highly profitable operation in the best of the fields. Our tax provisions are designed to safeguard fields which are not so immediately profitable. We are confident that we shall sustain the best and be of assistance in the next round.

I had prepared a section on the difficulties experienced by certain oil companies, notably Burmah, but since the right hon. Gentleman did not think it necessary to refer to Burmah at all, perhaps I need do no more than briefly repeat what I said last Wednesday, that in the 1974–75 support operation Burmah approached the Government, the Govern- ment made an offer to acquire the BP shares, the company had to make a decision whether to accept it, and had it decided not to accept, the consequences would have been for the company best to assess. It was a fair price, and we have now extended the guarantee. We have offered to purchase all, or a substantial part of, Ninian and Thistle, and it is for the board of Burmah, which remains entirely in charge of its operations, to decide. Negotiations are in progress.

But at least we have the British National Oil Corporation to discuss matters with Burmah. Indeed, I am not surprised that the right hon. Gentleman did not refer to it in his speech, since the alternative would have been either to refuse the offer of help to Burmah or, as he would no doubt have preferred, to sell the North Sea interest to foreign State oil companies which would have been very happy to buy from Burmah its North Sea asset. The idea that it would have been right to sell it, for example, to some European State oil company but not to seek to acquire it for BNOC only proves to me that the right hon. Gentleman has not thought out his position on this matter.

I come now to a short section of my speech devoted to points made by the right hon. Gentleman. I drafted my speech this morning and I had in mind eight points which he might make. In fact, he made three of them. One was his reference to the energy seat. The right hon. Gentleman did not make clear whether he thought it right that Britain should be represented at the energy conference, at the CIEC. If he thinks that it was not right to try, I take it that he ought to be pleased that the Community declined to let us have the seat. In fact, of course, it was right to try, my right hon. Friends were right to try, and I regret, as they do, that they were unable to succeed.

Next, the right hon, Gentleman introduced an argument about confidence. If the oil companies took much notice of what he says, they would be pulling up their rigs and leaving. The truth is that they do not, because they see in the North Sea an opportunity to develop a rich oil province, the benefit from which will be shared fairly between the British people and themselves, and the delays to which reference has been made do not justify the right hon. Gentleman's criticism.

I have already referred to the right hon. Gentleman's collection of cuttings. He is always there with a yellowing clipping to tell us that all is wrong. I warn him that anyone who reads the Press knows that one day all is bonanza and the next it is fiasco, that one day it is triumph and the next disaster, that one day it is a scandal and the next salvation. The trouble is that the right hon. Gentleman reads the newspapers only every other day. He ought to do better than that. I could produce endless cuttings about how the state of our nation will be transformed—not just from Ministers but from journalists who have to sell newspapers. The right hon. Gentleman must do better. So far, he has not done well enough.

I shall not be as offensive to the right hon. Gentleman as he tried unsuccessfully to be about me, but let us be clear. Under his Government there was no special tax provision for North Sea oil, there was no depletion control, there was no participation, and there was no national capability built up. Because of those omissions, the right hon. Gentleman has to scrabble through his cuttings file to find ways of justifying the omissions.

Perhaps I could properly ask the right hon. Gentleman some questions. Would his Administration, if it ever came to power, abolish the BNOC? Would it sell off BNOC's assets abroad? Would it end participation? Would it repeal the Act? Can he imagine what would be the reaction if he called in the Seven Sisters and said "We are selling off our assets, we are closing down BNOC, and we are stopping participation"? They would think that he was off his head. Of course, that would not be done, and the right hon. Gentleman takes refuge in damaging gossip and the undermining of confidence in order to establish a case.

Let us have the facts clear. From the very early days, oil and politics have been closely intermixed. From the days of John D. Rockefeller and Standard Oil, when Winston Churchill took a majority holding in the Anglo-Persian Oil Company, and when Sheikh Yamani from the very beginning recognised the relationship between the American and the Arab world, with Britain in the middle—all have recognised that oil is the lifeblood of a modern nation, that it is a currency and a source of industrial growth.

The oil companies have never been private enterprise in the sense that Adam Smith visualised it. I sometimes wish that the right hon. Gentleman would have a word with his right hon. Friend who evidently does the think pieces for the Shadow Cabinet and be persuaded to acknowledge that the major oil corporations which span the world have always worked closely together and long ago repealed the laws of supply and demand. They work very closely with Governments, with industry and with the oil-producing countries. They are estates of the realm, if not realms themselves, and they are properly the subject of international negotiation and negotiation with nation States provided that there is good faith and good will between the negotiating Minister and the company concerned. They expect any British Government to conduct an oil policy comparable with the one which we are now conducting, and if there were to be any turning tail on the existing policy such as that which the right hon. Gentleman suggests but never actually advocates, no one would be more surprised than the oil companies whose interests he has been mistakenly, in my opinion, seeking to promote in his speeches.

I do not wish to detain the House much further, so I shall say only a little more. The link between oil and politics applies nationally and internationally. I do not know whether there are any SNP Members still in the Chamber. [An HON. MEMBER: "Yes."] I see that there is one such Member within earshot at least, and I think that that is rather lucky for him, because the people of Scotland would have been interested to learn that the SNP was not represented throughout our debate on oil.

Mr. Gordon Wilson (Dundee, East)

I am here and I am listening.

Mr. Benn

I understand that the hon. Gentleman speaks for all, and all speak for each. I put it to him genuinely and sincerely that it is a limited view which his party takes when it says that the United Kingdom can parcel out its energy resources on a geographical basis. The truth is that good sense in the use of our energy resources, be they oil, coal, gas or nuclear, lies in seeing that they are United Kingdom resources and that we should seek to defend them as such. That is the best possible service which we could perform for the Scottish people as well as the English and the Welsh in Great Britain.

Mr. Gordon Wilson

I am grateful to the right hon. Gentleman for bringing me to my seat within the Chamber. Is it not in the best interests of the Scottish people that the resources which lie off our coasts should be used for the benefit of our people in Scotland? There is no reason why the right hon. Gentleman should gainsay that if he is a democrat. If he maintains that oil which lies off our coasts is not a European asset but is a United Kingdom asset, then, if the Scottish people will it so, why should it not become a Scottish asset?

Mr. Benn

The hon. Gentleman has not thought the matter out. Is it his view that the oil off Aberdeen should be applied only to the Grampian Region and not to Strathclyde and West Central Scotland? Does he draw a pencil line on a map long established and determine which resources should be reserved for which? We have sought to safeguard the interests of the Scots, of the English and of all the people of the United Kingdom in providing an oil policy for the whole United Kingdom. I do not wish to indulge in too long an argument with the hon. Gentleman, but I cannot believe that the course which he advocates is in the interests of the people of Scotland—and I say that with 51 per cent. Scottish blood in my veins.

Mr. Gordon Wilson

I suggest that in that case the right hon. Gentleman ought to take up domicile immediately in Scotland, in view of the current election results. But, seriously, would he not agree that the reason why the pencil line can be drawn is the reason of history, that Scotland is a nation, not a region?

Mr. Benn

But then the hon. Gentleman gets into argument about the Shetlands and other considerations. I am only saying that oil and politics are and always have been closely mixed, and I suggest that the hon. Gentleman would be well advised to recommend his party to see the value of our energy resources in terms of the first charge, that is, to see that the British people as a whole have the benefit of those resources.

That applies internationally, too. The IEA has an important rôle to play in safeguarding the oil resources of Western Europe and the developed world. The EEC needs to adopt a constructive approach towards energy problems. The new economic order, of which much is said now, is a way of saying that oil has shifted the balance of power in favour of oil producers. In that new economic order we see a shift in the balance of power and influence, I hope, towards the British people in the development of their own resources.

But energy policy is not confined to oil. We have not spoken today, as we did last week, of coal, gas or nuclear energy, but we want to use our energy to re-industrialise the United Kingdom in exactly the same way as the oil producers, once they had access to their oil, wished to use their oil resources to industrialise their own countries. There is no point in mocking that aspiration. It is the sensible approach to the use of those resources. In the end, it is a test of will. This Government have the will and the policy, and I invite the House to support them.

5.1 p.m.

Mr. J. Grimond (Orkney and Shetland)

I was much interested to hear that, as I understand it, the Benns are now 51 per cent. and the Wedgwoods only 49 per cent., and that the Secretary of State is about to be nationalised by the Scots.

Along with others, I congratulate the new Minister of State, and I should like to say a friendly farewell to Lord Balogh. When Lord Balogh first came to this country he was an associate of my father-in-law, and I have know him off and on ever since. I cannot remember any political or economic subject on which I ever agreed with him, but he is a highly agreeable man in other ways, and I wish him well.

It is very awkward to have to say anything critical about appointments, because it is inevitably apt to be construed as personal. However, I think that the constant appointment of retired politicians and civil servants to very important and technical boards is a pity. I shall say no more about that.

I made many speeches on the Petroleum and Submarine Pipe-lines Bill during its passage through the House. I have no doubt that hon. Members will be relieved to hear that I do not intend to repeat them all. My attitude remains unchanged, but certain things have happened since the Bill was passed. First, we have had the White Paper on devolution. I do not want to repeat the arguments about Scottish oil, but there is one dangerous feature in the White Paper. It is that the Scottish Parliament will have considerable powers to recommend expenditure—not enough powers, in my view, but considerable—but it will have virtually no powers to raise money, except indirectly in a most unpopular way through the local authorities.

There would be a considerable psychological gain in giving Scotland, particularly the North of Scotland, some control over its own assets. The White Paper strengthens my case on that. I believe that it would do something to right the imbalance between the powers to propose expenditure and the powers to raise money of the Scottish Assembly, as proposed by the Government, if it were given some control over the oil revenues.

The next development to have taken place is the steep increase in the price of fuel oil and paraffin. I do not need to tell the Government that that will hit a number of people very hard. In my part of the world we have always had to pay more for fuel, and we have been told that it is because we are so far from the source of supply. I only hope that when the oil begins to flow we shall not still be told that. I ask the Government to consider such increases carefully in future, because there is a case for saying that putting so much of the increase on fuel oil and paraffin and so little on petrol may hit certain activities and people in an undesirable way.

The third new matter is the development over Burmah. I have always been frank about Burmah, which I believe got into trouble through being badly directed. But it struck a series of unlucky accidents. When it obtained a judgment for large sums of money for the destruction of its assets in Burma, a special Act of Parliament was passed, a measure which was not opposed by the Conservative Party, to overturn that judgment. Because of the accidents the company has suffered, there may be a case for a special look at the whole Burmah situation, though as a shareholder I must be fair and say that the primary trouble with Burmah was that its management was apparently not very successful at the relevant times.

As to the energy conference, I believe that we should have asked that the spokesman for the EEC should be British, as we are the main EEC oil producer. We have done ourselves long-term damage to little purpose by asking for separate representation.

There is one other matter with which the Minister may not feel able to deal directly, but which is certainly important. What is now the likely production of the new Yorkshire coalfield? There have been rumours that owing to subsidence which might be caused, particularly for railway lines, it might be more difficult to develop the coalfield than was thought. It is worth drawing attention in oil debates to the existence of the coalfield, because it is a large source of energy that is frequently forgotten.

I come to some of the figures which have been bandied about during the debate. The right hon. Member for Wan-stead and Woodford (Mr. Jenkin) has the enormous advantage of being an accountant and of having been at the Treasury as well as knowing about oil, and he no doubt understands the figures that he talks about. I have grown very suspicious of them. I attended the opening of the new power station in Orkney, which I need hardly say is not one of the largest in the world. The person who opened it was unwise enough to give us the figures for the production that would emanate from it. I was sitting next to the chief engineer of the Hydro-Electric Board, who pointed out that if the power station produced the electricity that the opener said it would produce its production would be slightly in excess of the whole production of the United States.

I also went to the opening of the oil pipeline, and heard the Prime Minister tell us the value of the oil in the North Sea. He got tremendous applause. I was sitting next to the directors of some important companies at lunch afterwards, one of them a financial director, and I asked "Is that really all that it is worth? It is hardly worth getting. Whisky is far more valuable." They said that it was a very difficult calculation, but implied that the Prime Minister's figures were right. We now know that he was £198,000 million out.

I do not want to be given complicated figures, but it would be useful, at any rate to me, if we could be told the price per barrel on which the figures given by the Secretary of State on the revenue side are based. I think that $7 per barrel was mentioned in the recent conversations. That is less than the price on which most of the calculations have been made up till now.

How much will there be in surplus over the amount we already owe in interest on the public sector borrowing requirement? On the figures of the right hon. Member for Wanstead and Woodford, the borrowing requirement would nearly eat up in interest all the expected revenue to the Treasury. That is a very important point, for a variety of reasons. I should like to know those figures.

I should also like to have confirmed the figures in relation to the balance of payments. Am I right in thinking that the right hon. Member for Wanstead and Woodford said that the improvement to the balance of payments was expected to be about £1,800 million by 1980? If so, huge as that sum is, we should put it in perspective by bearing in mind that the balance of payments goes on, not for 20 or 50 years, but for ever. The contribution of whisky to the balance of payments over the generations is much larger. The Scottish people would be well advised to keep up their interest in that nourishing beverage.

Mr. Patrick Jenkin

Is it not even more important that the English should keep up their interest in that desirable beverage?

Mr. Benn

I hope the right hon. Gentleman is not suggesting that we now launch a series of whisky-powered power stations?

Mr. Grimond

If the Secretary of State for Energy is thinking about setting up a national whisky corporation, I would remind him that I am coming up to the age of 70 and would make an admirable chairman.

I have one or two questions to put to the Government on oil-related subjects. We are glad to hear from the Scottish Office that extra assistance is to be given to local authorities. For example, we desperately need help over housing, which has become a matter for serious concern. Although the Scottish Office maintains that it is not holding back on housing, it has cut the loans for private house building. However, it is not holding back non-productive building; and this is a serious matter when there is no labour to spare in the building industry.

There is another matter to which I have drawn attention on many occasions—namely, the effect of oil on the economy. This problem is beginning to be felt to a serious extent, because the traditional industries are losing employment and all prices are being greatly increased. This matter will work through the economy and we are in danger of making inflation in my constituency very much worse. I hope that, when the oil revenues begin to flow, particular attention will be given to the need to support local industry, agriculture and fishing in the areas affected and that efforts will be made to improve housing, roads and services in general. For example, we are not allowed to make a geriatric centre out of an old folk's home because it falls within the responsibility of a different body from the health board for example, Island Authority. It is a great handicap that money allocated for one purpose, even if it is only a small sum, cannot be transferred to other work. Therefore, local authorities suffer in many respects.

Mr. Joseph Dean (Leeds, West)

Is the right hon. Gentleman suggesting that in terms of the increased revenues being made available from oil discoveries he is prepared to forgo that portion of preferential treatment for those for whom he speaks in deference to their counterparts in the English provinces?

Mr. Grimond

There are special problems, as well as advantages, flowing from this large oil find, and Ministers have admitted it. Those problems require to be dealt with sometimes in a different way. I am not asking for more money. I am trying to get the Scottish Office to permit transfer of funds from one purpose to another. I do not believe enough attention is given to this issue.

I should also like an assurance that no change is intended in the Zetland County Council Act 1974, in the passing of which I had some share. Or in the Orkney counterpart. Although the matter is not mentioned in the White Paper on devolution, I understand that there is no question but that this power will still remain with the local authorities. They would like assurance on the subject so that they may be free of uncertainty.

I should also like to know whether there are any proposals to bring to our shores oil from the Norwegian sector of the North Sea. There is a large rift between the Norwegian oil field and Norway. It has been suggested that the Norwegians may wish to bring that oil to Scotland. Is anything known about this? If it is, we should like to be given information about it because it is an important matter.

May we be given more information than we now possess about the disturbing accident in which pipelines came adrift? I do not know how a pipeline, heavily coated with concrete in the constituency of the hon. Member for Ross and Cromarty (Mr. Gray), managed to lift itself off the sea bottom and begin to float away. It is an alarming situation.

The question of that accident brings me to my next point. One of the results of the pipeline coming adrift was that a fishing boat in avoiding the scene went aground. Its owners are having the greatest difficulty in obtaining compensation. This is a continuing complaint over many other incidents. Although the oil companies have agreed to pay compensation for damage and the results of the fouling, it is often difficult, if not impossible, to trace back the matter and to ascertain who is responsible. It is surely unthinkable that fishermen should have to take the BNOC or any other nationalised industry to court. Cannot the Government devise an insurance scheme by which claims are dealt with more quickly than they are at present?

It is disturbing that so little platform building is taking place in the United Kingdom. I am told that in Norway platforms are built much more expeditiously and that delivery dates are better. I do not know whether that is so, but that is certainly the claim made by Norway. On the subject of supply bases, which is an important consideration in my constituency, I have been told that in the Norwegian bases similar jobs are carried out with many fewer men. We must be able to compete in this international industry, and I hope that restrictive practices in the industry will go. I hope that we shall be given some further information on these matters.

The Secretary of State for Energy did not say very much about the progress in regard to BNOC. I hope that the time is coming when we shall be told a great deal more about the corporation, who is to run it, where it will be situated and so forth. I believe that the corporation is unnecessary because we already have British Petroleum, a body that could be 51 per cent. Government-owned. Therefore, I hope the Minister in replying to the debate will say more about the progress, if any, of the corporation.

I should like to emphasise the incredible difficulty of all oil operations in the North Sea. I listened to one programme on the BBC last night in which the commentator expressed some surprise that the wind had reached the speed of 125 miles an hour in some foreign city where all the roofs had been blown off. The trouble with the BBC is that it seems to know all about what is going on in Bangkok or Paris, but it knows nothing about events north of Watford. In my constituency the wind, alas, often blows at 125 miles an hour. After the weekend's weather, if our roofs had not been good ones we would not have had any remaining at all. To keep a roof on a house is difficult enough in such conditions, but to manage to conduct operations in the North Sea in such weather is appallingly hazardous.

I have been in touch with the Government on the question of danger to divers, and I hope that my pleas are being followed up. The hazards involved in these operations are extensive and uncertain. I hope that the British Government will not make matters more uncertain than they are in any event.

5.17 p.m.

Dr. Colin Phipps (Dudley, West)

I begin as usual by declaring my interests. I shall not enumerate them because they can now be found in a useful publication that can be conveniently consulted. I intend to refer to those interests at a later stage.

I wish first to draw attention to the sparseness of attendance at this debate. This is becoming characteristic of oil debates. It was true of many debates on PRT as well as discussions during the consideration of the Petroleum and Submarine Pipe-lines Bill. It seems incredible that in discussing North Sea oil, whether it will be our eventual saviour or otherwise, the subject now creates so little interest, in terms of attendance, on the Floor of the House.

Last week I held a small seminar in the House for some students. They said "It must be marvellous for you being one of the very few oil experts in the House. Obviously when you speak, Ministers take notice." However, if there are not enough people present, a Minister can ignore what one says and it makes no difference.

Mr. John Smith

I am listening.

Dr. Phipps

I am grateful to my hon. Friend, and I congratulate him on his promotion. I repeat that it is a pity that we do not have a better attendance at these debates.

I wish to correct one or two statements made by the right hon. Member for Wanstead and Woodford (Mr. Jenkin). There has been a misunderstanding about the decrease in the number of wildcat drillings. The Government's statement about the number of rigs now operating as predicted is correct. What is happening is that over a period of time amongst the same blocks and the same licences—we have not had any new licences for a number of years—the number of wildcats is reducing and the number of appraisal wells is increasing. The right hon. Gentleman, however, was incorrect in saying that no wildcats are currently being drilled. I know, having had to abandon one because of mechanical difficulties, that wildcats are being drilled. Indeed, there are still wildcats to be drilled in the North Sea. The fact that there are not so many is merely a result of the amount of drilling which is taking place. There is bound to come a time when all the potential exploration sites have been drilled, and at that stage one would naturally expect to see a fall-off in the number of wildcats drilled. But certainly the test of the international oil industry's interest in the North Sea will be provided by another round of licences, and I shall be extremely surprised if we do not see the international oil industry competing strongly for licences in that round.

A further point worth making was touched on by my right hon. Friend the Secretary of State, and that is the question of the negotiating position of the companies with regard to participation. It would be most unusual if companies currently negotiating participation were to make Press statements stating that everything was going to be beautiful and that they were winning hands down. In fact, it is only in the final stages when they do agree to participation that they are most likely to make any kind of bullish statement at all.

I should like to bring to the attention of the House something which is possibly not known, and it is an illustration of the way in which the present Government negotiations with the oil companies have proved fruitful. I refer to petroleum revenue tax. Looking at the debate on the RPT, one would have thought that it was the worst thing which had been visited on the international oil industry in the history of that industry. In fact, the international oil industry is trying to persuade the Australian Government to adopt the PRT legislation because they believe that that is as fine a piece of tax legislation as is possessed by any country. This is not generally known, but I know it to be the case. PRT legislation in toto has been presented to the Australian Government as a model of what such tax legislation ought to be, and I feel that we ought to congratulate our negotiators on arriving at such a sensible solution.

The final point worth noting in the coments of the right hon. Member for Wanstead and Woodford concerns platform building. I do not want to be too gloomy, but in terms of the future for platform building we must recognise that technically these may be dinosaurs. Indeed, the industry hopes very much that they will prove to be dinosaurs. An enormous amount of work is going on into research on sub-sea completions. I, will not bore the House with the technical difficulties involved, but if a suitable method of sub-sea completion for major oilfields can be found, platforms will become redundant. I think it must be our hope that this will happen, because it will certainly make the exploitation particularly of the northernmost part of the North Sea very much easier.

The deeper the water, the bigger the platform. It is not just that every extra foot of water adds a proportionate amount to the cost. It adds almost twice as much as the previous foot cost. The increasing cost is exponential with the increase in depth. With water depths greater than 600 feet it will be extremely important that sub-sea completions are brought in. Platform building for any extended length of time—by which I mean a period of time beyond the early 1980s—cannot be expected with confidence, and it is not something to which we ought to look forward.

I referred earlier to my interests, and I should make it clear that I have had two particular interests in the North Sea for a number of years. Quite apart from my own specific involvement, those interests have been to see the formation of a viable British National Oil Corporation in the North Sea operating internationally, a much greater participation of British industry, and the formation and evolution of independent British oil companies. I have always believed that the industry in the North Sea and, indeed, in this country should be a partnership between three partners. Those partners are the Government, in the form of the British National Oil Corporation, the international oil industry and British industry.

I am afraid that there is at the moment some fear that the successful launching of the BNOC may mean that the Government will give less encouragement to the smaller British companies. I admit my self-interest in this matter, a self-interest of which I am proud. I have worked very hard to get small British companies involved in the North Sea. It may be said that I am putting my mouth where my money is, but I can assure hon. Members that I put my money where my mouth was a long time before the possibility of British participation by minor companies was fully developed. There is an idea that because the smaller British companies are finding difficulty in raising finance, there will be a temptation for the Department to say "We now have BNOC. We have the international oil industry. Surely that is enough so far as British participation is concerned and we can, therefore, neglect the somewhat difficult nascent independent British oil companies". That is merely a feeling which is current in the industry. I hope the Minister of State will be able to allay my fears in this direction.

It is, however, probably worth saying something about the way in which the independent oil industry exists in North America. Outside North America an independent industry is not common. Hon. Members are, no doubt, familiar with the way in which States and Governments operate. They are familiar with the way in which international companies operate. But there never have been small independent British oil companies for which a particular expertise or degree of knowledge could be developed here.

In the United States and in Canada these companies operate very much as exploration companies. It is common for them to put their money into exploration, often in difficult circumstances and in areas at which larger companies have not looked, to make a discovery particularly in the case of natural gas, and for that to be financed by the company which owns the pipeline and by the markets. The companies which are exploring are concerned principally with using their exploration expertise to make discoveries. They then turn to existing capital in the form of the transmission and marketing companies for the finance with which to develop their discovery. Often that finance is forthcoming at low or nil interest rates.

That structure apparently does not exist in the United Kingdom. I believe that the BNOC and the Gas Corporation could play a vital rôle in helping to develop the independent British oil industry, and the independent British oil exploration industry in particular. Many of the small independent British companies view the BNOC very hopefully in this respect. This is a point which I press on the Minister of State to consider. In the next round it is most important that the third part of this partnership consisting of the international oil industry, the British National Oil Corporation and British industry itself is not neglected but is given a more important part to play.

I turn to the question of 51 per cent. participation in terms both of the current discoveries and of the next round. The Minister is aware from previous speeches that I have made that I am not in favour of a blanket 51 per cent. participation in future licences. I have always believed that the best way for companies to make a bid for licences in any round is to do what is done in many other countries—to make the bid in terms of the percentage they are prepared to give the Government. In that way the Government could get a good percentage in respect of good blocks and a lower percentage for not such good blocks. That would be a satisfactory arrangement. How ever, I accept that if we are seeking 51 per cent. participation in the current discoveries, it is difficult to depart from that figure in future licensing rounds.

There is an important factor in the current negotiations for a 51 per cent. participation. There is a degree of uncertainty over the question of participation which is affecting development. It is not nearly as severe as has been suggested by the Opposition Front Bench, but it is real and the sooner that it is dispelled the better. The way in which the 51 per cent. participation operates in existing finds must be seen to be fair and to be equal. If the BNOC gains its 51 per cent. by purchasing 51 per cent. of the holdings of existing companies and leaves 49 per cent. untouched—in other words, if there were two companies involved, one with a 51 per cent. holding and the other with a 49 per cent. holding and the Corporation merely purchased the company with the 51 per cent. holding—it would be a very unfair way of tackling the problem.

I would much rather see an across-the-board 51 per cent. obtained from every participant in every consortium in the discoveries where agreement is reached. If that does not happen, certain companies will be put in a very privileged position. They will hold out and will say "No" and the Government will then pick up bits—possibly in the market, possibly by negotiation—to obtain their 51 per cent., letting some companies get away scot-free over the question of Government participation.

It is important that the 51 per cent. participation should be across the board, and I hope that attention will be paid to this matter in the negotiations. If not, we shall give all sorts of ammunition to companies which do not want to participate in any form. They will be able to point to another consortium and say, "They got away scot-free they did not have to give up 51 per cent. of their holding. Why should we have to give up 51 per cent. of ours?"

The final point on which I want to touch—not at length, although it is important—concerns European involvement in the North Sea. The nature of North Sea oil is such that even if we produced a great deal more than we needed it would not be satisfactory to use it to refine the product mix which we use in this country. Our product mix is heavily weighted in the direction of fuel oil and other heavy oils. It will always be to our advantage to import medium or heavy crudes from the Middle East and elsewhere and to use our own premium crude for refining or petrochemical purposes here, or to export. If we are to export, the logical place to export to is Europe.

It is time that we began to involve the countries in the EEC much more closely than we do in the development of North Sea oil. We would not give up our sovereignty by doing that. We might even need to look to Europe, particularly as prices increase and inflation continues, in order to develop many of the marginal fields. It is not too early to begin discussions with Europe about a joint development of many of the fields in the North Sea and to establish marketing arrangements with Europe now because in essence the North Sea is not simply a European source of oil. It affects the European balance of payments, not just the United Kingdom balance of payments.

It would be ridiculous for us to adopt a dog-in-the-manger position vis-à-vis Europe. We need Europe. I want us to use European finance and I wish to see the introduction of European countries into North Sea development in general. We may be the poor man of Europe, but in this case we could be seen to be a poor man bearing gifts.

5.35 p.m.

Mr. T. H. H. Skeet (Bedford)

The hon. Member for Dudley, West (Dr. Phipps) always makes an interesting and thoughtful speech, and I hope that his comments on the Common Market will be closely studied not only by the Minister of State but by the Department. I hope that it is not going too far to suggest that if his speeches are not closely studied he should serve on the Board of the British National Oil Corporation rather than the noble Lord Balogh, who seems to have been divested temporarily of his responsibilities.

The hon. Member for Dudley, West mentioned Australia and the petroleum revenue tax. I was interested to hear him say that the Australian Government are considering adopting PRT arrangements. Australia is different from this country. There is an element of common sense in some of the things that it is doing. It has completely rejected, after comprehensive study, the adoption of a wealth tax, which is being considered in this country. I am not aware that Australia proposes the nationalisation of local oil companies operating in the offshore areas between South Australia and Tasmania, or those in Western Australia. There will be no retrospective arrangements concerning existing licences such as those for which provision is made in Sections 17 and 18 of the Petroleum and Submarine Pipelines Act.

Therefore, the Australians are acting in a much more modest way than the British Government have operated. If they are to adopt a PRT, perhaps they will adopt the solution recommended by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin), namely, introduce a tax, without going through all the bureaucratic arrangements which will lead to great administrative difficulties.

The hon. Member for Dudley, West referred to the British National Oil Corporation. There does not seem to be much expertise in the Corporation and therefore the hon. Gentleman would be a willing and erudite contributor to its discussions and management. I wish that the hon. Gentleman had served on the Committee which considered the Petroleum and Submarine Pipe-lines Bill. There I moved an amendment to the effect that, if we had to have a BNOC, the capital should be subscribed partly by the market and partly by the nation, in other words, the Government. The Minister of State rejected the amendment, but it would have enabled small enterprises—indeed his own drilling company—to buy shares in the Corporation. The hon. Gentleman seems to be coming round to the idea of the Alberta Energy Company. He may eventually be able to persuade his colleagues to accept my suggestion, but perhaps the Minister has at the back of his mind the fact that the BNOC will not last for many years but will be merged with the British Gas Corporation.

Dr. Phipps

I am pleased to hear that the hon. Gentleman is so confident of the success and profitability of the BNOC that he expects private industry to want to invest heavily in it.

Mr. Skeet

The hon. Gentleman did not listen to my argument. I said that if we must have a BNOC it should be contrived in the manner I suggested. I was not in favour of setting up the Corporation, but the Government were not prepared to accept that. Having one nationalised corporation—the National Coal Board—with considerable investments in the North Sea, the Government proceeded to divest the NCB of all its interests in the North Sea for a song. Instead of paying ample compensation, they wrote off the assets and provided for token compensation, saying, "These will be the assets under Section 2(1)(e) to be handed over to the BNOC".

The Secretary of State is always entertaining. He has a facility for dealing with matters on the surface. He is like a butterfly which flies from twig to twig. Unfortunately, the twigs break. The right hon. Gentleman seldom makes an erudite speech, although he puts points from time to time. This afternoon he enumerated six.

The Secretary of State said that what he was doing would provide a financial and economic framework for oil developments in the North Sea. The Petroleum Development (Scotland) Act 1975 was supposed to encourage the development of sites, but the Act has not been much used. The Government have incurred considerable liabilities. Although the Minister may be satisfied that BNOC has power to place orders and may be able to help some companies in due course, the BNOC has at present only a chairman and one or two staff and has made no attempt to place orders, even in these days of high unemployment.

The right hon. Gentleman's second argument was based on the Oil Taxation Act 1975, which was heavily contested and vastly improved by the Opposition. That Act by itself would have sufficed. There is to be discrimination right from the start. All the companies will have to pay PRT but BNOC is to be spared. That amounts to unfair competition. In terms of European legislation the Act is unfair and should be revised.

Like my right hon. Friend the Member for Wanstead and Woodford, I am in great difficulty in that all I have is the report of the Committee proceedings on the Petroleum and Submarine Pipe-lines Bill. The printers have not been able to get out the final version of the Act.

Most of this legislation is entirely irrelevant. The three pieces of legislation I have mentioned have not and will not produce an extra barrel of oil, and will do nothing to improve our balance of payments position. They result in the creation of a bureacracy which even the Emperors Diocletian and Hadrian would have admired. I do not expect that in future years much of the legislation will be used.

As the hon. Member for Dudley said, one of the acid tests will be whether the Government are successful in their round of licensing next year. The companies are concerned about participation and the rigorous terms offered. They may be assured by the Minister that much of the legislation will not be utilised although the powers will be retained. If that is so, there was no need to pass the legislation and the Government could have followed the recommendations we put forward.

The next argument put forward by the Secretary of State was that benefit will accrue to the British people as a whole. We heard that before when the railways were nationalised. How successful has that been? Fares have gone up, the rolling stock is old, few new stations are being built and the losses are enormous. For all the nationalised corporations £2,000 million and more has been written off in bad debts. I cannot see that the British public have had many benefits from British Rail or, for that matter, from any of the rationalised corporations.

The Secretary of State said that the oil will be developed at optimum speed. That seems to conflict with the new model Clause 16 on pro-rationing. It may never be used, and perhaps one can afford to put it aside and say that the Secretary of State was just telling us what was at the back of his mind. He is to establish a British National Oil Corporation of world-wide ramifications although it consists of nothing more than a chairman, probably an office staff transferred from the National Coal Board and a limited capability. Before he thinks of a national all-comprehensive oil corporation, would it not be better to concede that there are facilities round about him which could be used to considerable advantage? The right hon. Gentleman is surely aware that the Royal Dutch Shell group operates in the United Kingdom. There is Anglo-Dutch, which is 40 per cent. British and 60 per cent. Dutch. Many oil companies operate in the United Kingdom and there is plenty of competition in the market. Why not utilise those companies? Why set up a new one?

Many countries have thought it necessary to set up a national corporation, but has not the right hon. Gentleman heard of ENI in Italy? Has he heard in recent years of that State oil company being interfered with by high-level politicians who have tried to persuade it to adopt a certain course? Has he not learned of patronage? Those are examples of the complications which can occur. I know that politics requires oiling from time to time but if complications are likely to result in the political sphere it is surely better to preserve the independence of companies.

A classic case is that of Pertamina in Indonesia which nearly brought dawn the country. It was badly managed, it borrowed too much and the international banks had to be brought in to sustain the national economy. There are many cases which the right hon. Gentleman can contrast for the sake of argument. To set up an international oil company when there are plenty of competitors in the open market is totally unnecessary for the right hon. Gentleman's purpose.

The final argument advanced by the Secretary of State was the necessity of ensuring that Government control is obtained over the oil. That is an impressive argument. He wants control to ensure that pro-rationing is secured. As I have said many times in the Chamber and in Committee, there will be no pro-rationing for the next five or six years because the Secretary of State has said that he wants to ensure that the moneys are diverted to the replenishment of British industry. The moneys, however, will go into the National Oil Account, little being paid into the Consolidated Fund, so British industry will not be replenished. Is it not apparent that the Oil Taxation Act would have sufficed? That would have given the Secretary of State all the control he wanted. Would not the regulations which have been operating for a few years, with certain additions, have sufficed? Those regulations could have included new model clauses recommended to the companies for their voluntary acceptance. Many of the companies would certainly have accepted them if they thought they were in the national interest.

Was it necessary to include clauses on revocation and clauses about broader restrictions on assignments? Was it necessary to bring in Clauses 14, 15 and 16? They are entirely needless and were brought forward purely to placate the Labour left wing.

The six objectives put forward by the Secretary of State add up to very little. This is a very competitive industry which could have continued successfully winning oil and providing revenue out of which tax is secured.

Turning to devolution—a second Member of the Scottish National Party has now appeared—it is impossible to sustain the prosperity of a nation on the basis of a single commodity, particularly if the price is liable to fluctuate.

My right hon. Friend has suggested one or two figures. He referred to certain figures based on a high oil price of $12 a barrel, but I dare say that in future years the price could fall quite drastically. That is why Europe is talking about having a base price of between $7 or $8 a barrel. If the price came down to $8 or $9 a barrel we would feel the initial draught.

Therefore it is quite impossible to expect the Scottish economy to run on oil alone, even if it could secure the oil. But, of course, Scotland does not have very much else. Britain has been subsidising Scotland for many years. Scotland is largely dependent on the rich coals which come from across the border.

Mrs. Margaret Bain (Dunbartonshire, East)

Scandalous.

Mr. Skeet

It might also be worth mentioning another factor. I hope the Scottish National Party will take this into account, because the Government and the Opposition appear to be single-minded on this point. If there is to be a regional authority, a regional government, with a jurisdiction of three miles, it is rather difficult to see what control over the oil it would have. After all, Britain has secured its oil for the benefit of all parts of the United Kingdom. The United Kingdom was a signatory to the convention of 1959. The oilfields are sometimes nearer and sometimes a little further distant from the median line, but there are no oilfields within three miles of Scotland which would be within the jurisdiction of a regional authority.

When the Minister himself answered my Question on 12th November 1975, at c. 728 of the Official Report, he listed a number of fields. There was Brent, 85 miles from the coast. Looking down the list, I come to Forties, which is 100 miles from the coast, and Montrose, which is 120 miles from the coast. None of them is within three miles. Therefore, while everybody is looking for ways of overcoming some of the difficulties, it would be quite wrong to assume that complete control of its own oil by any separatist movement in Scotland would lead to any solution.

Mr. Gordon Wilson

Is the hon. Member aware that the aim of the Scottish National Party is to obtain national independence? Is he further aware that, in terms of the 1959 Convention to which he has referred, Scotland would be entitled to the oil lying offshore far beyond the three-mile limit, in the same way as the United Kingdom has it at the present time? Lastly, has he never read the Continental Shelf (Jurisdiction) Order?

Mr. Skeet

The hon. Member's last point was discussed in Committee at some length. The jurisdiction Order dealt with the judicial system. It did not deal with the allocation of resources.

The hon. Member says that he speaks for an entirely separatist movement. I thought it was. In this respect I think he will lose a lot of encouragement. If he were prepared to recommend that the aim is to eliminate the distance between London and Edinburgh, or London and Glasgow, I could understand some of his arguments. They could be used in relation to many points made on previous occasions. But the movement is now to be separatist, and I cannot imagine Scotland being independent and having only one single resource which is in any event beyond its jurisdiction.

Even if the international convention were to be renegotiated, would the other Powers agree? They would probably refuse to accede to any alteration of that convention, and it would be quite beyond the responsibility of the United Kingdom Government to concede these powers to Scotland.

I have recommended the holding of a referendum but I do not want to spend too much time on that question, except to say that it is not only for Scotland to record its views one way or the other. Wales and England would also record their views. England might well say that it is in the interests of Britain as a whole that these matters shall remain as they are, with certain modifications which might eliminate the remoteness of Government later on.

I move now to another matter on which I deviate very considerably from the thinking of the Government. I refer to the conference which is to be held in Paris on 16th December. The Foreign Secretary said that he wanted a separate seat at the conference. I fail to understand the reason for this. It may be that at some later date he will say that Britain will be a very substantial oil producer and exporter.

I shall be delighted to hear that we are to export a lot of oil from the United Kingdom, because I agree with the hon. Member for Dudley, West that we have a natural market in this respect in the EEC.

Surely, if the Foreign Secretary wants a separate seat, he will have to be prepared to concede a separate seat to Holland as well, because Holland is a very large exporter of natural gas at the moment, exporting more than it is consuming itself. At the present moment we are exporting nothing. I agree that there is inter-European trade in crude oil and products, but I do not think that we have any present claim to a separate seat at the conference.

There will be four commissions, and I have a recommendation to make in this connection. We have very great interests in metal commodity markets and as a financial centre, as well as in our energy capacity. Therefore why cannot the United Kingdom ask to chair one of these commissions?

If we wish to persuade the other Europeans to accept a floor price, are we the right people to put forward the argument to inveigle them into accepting our idea? Would it not be better to stand behind them so that they may be fully implicated in accepting a floor price which is acceptable to us? I hope that the Minister will consider this recommendation with some interest.

I should have thought that the right way to proceed was to calculate exactly what resources we have in the North Sea. We may be satisfied that there is today something of the order of 20 billion barrels of oil, split between the United Kingdom and Norway, with roughly 14 billion or 15 billion barrels to the United Kingdom and only 5 billion or 6 billion barrels to Norway. If that is the case, we are in a remarkably good position. The total ultimate reserve, I understand, may be as high at 35 billion barrels.

With regard to gas, of the total of 90 trillion cubic feet, the United Kingdom has between 40 trillion and 45 trillion, and Norway 25 trillion cubic feet. We are the larger nation and our requirements are greater, and we can see for many years ahead, without any pro-rationing programme, this reserve being tilised both for home consumption and for export.

Moving from that point, we next have to consider how we are to fit this form of energy into our general resources. We are mindful of the fact that we have an expanding coal industry and want to develop it. Selby is going ahead, and, according to yesterday's newspaper, there are other sites available for development.

It is possibly in the Government's mind that they do not want the North Sea oil development to go ahead too far because it might impede the development of the coal industry. I hope I am wrong about that, but it could be at the back of the Government's calculations. It is possible that they may want to use the BNOC extensively abroad so that it will not interfere with the National Coal Board. But it may be that we shall receive some clarification of that later on.

I can bring some of my ideas to a quick close by mentioning the priorities that I should like to see in any policy endorsed by the Government. We should have an inter-related fuel policy in which all the elements of fuel are considered. But that does not mean the State having to own the lot. It would simply consider them. It should be interesting to hear the arguments of the various sections owning them, particularly the competitive oil industry, which is one of the greatest advantages to the United Kingdom. It also enables us to operate world wide. Here, the BNOC is a total irrelevance.

We have to make up our minds that we have a special responsibility to our partners in Europe, providing that our home market is satisfied and that they are prepared to pay a world price for our goods—in this case, our oil. If they are prepared to pay us the world price, they can have from us what is left over. But to adopt a dog-in-the-manger attitude by saying that we wanted it all for ourselves and that we should ration it in future years would be absurd. Britain must change her views on this important matter.

The other oustanding priority is that our balance of payments, especially our borrowing from abroad, will dictate that we export oil in order to get foreign exchange. But I am on record as saying—I am probably the only member of the Conservative Party to have expressed this view—that we have to make money out of oil quickly before the price starts to decline. If we lose it at its peak, we may lose it for many years. Everyone is arguing from calculations on the assumption of more than $12 per barrel. Anyone who thinks that this will last in perpetuity is totally wrong.

Dr. Phipps

Does not the hon. Gentleman agree that, because there is the possibility of a fall in oil prices, it is even more important to get our European partners involved in our oil as soon as possible?

Mr. Skeet

I accept that view fully. That is why it is distressing to find the Foreign and Commonwealth Secretary claiming a separate seat at the forthcoming conference. If we want to get Europe thoroughly involved in our proceedings, we can push them from behind. It may be in our interests to have a floor price in the North Sea. If we ourselves assert the argument, others will not necessarily follow us. The French will not do so. But if it is a European measure, the French will be more involved and more likely to fall into line. The hon. Member for Dudley, West has brought up an important point. As it has come from him and from me, I hope that the Minister will bear it in mind.

We have the wrong policy for gas. I remember when we passed the Continental Shelf Act 1964, with Section 9 on non-fuel use. It is of vast importance to the chemical industry. Why does not the Minister allow companies not merely to develop their own facilities in the North Sea but to take it aboard direct without negotiations with the British Gas Corporation? It would make sense, it would cut out the middle men, and it would tend to reduce industrial costs.

I hope that the Minister will remember also that he now has an Act on the statute book, the Petroleum and Submarine Pipe-lines Act, which contains a great many reserve powers. He has been advised by many companies that probably this will lead to the stultified growth of some of the smaller fields. Will not he say. "I realise that we may have been wrong. We are prepared to make amends. Much of this will not be operated in the next five or six years."?

I had a discussion by correspondence in the Financial Times recently as a result of which I received a letter from a small oil company. Perhaps I may be allowed to read one pertinent paragraph of it: Prior to the major increased value of oil which began in September 1973, it was necessary to find fields of 300–500 million barrels of recoverable oil to be viable propositions for production. Because of the increased value of oil it probably would have been commercially possible to produce fields of 50–100 million barrels of oil, particularly if they were reasonably near an oil-gathering system. But because of major operating cost escalation, Petroleum Revenue Tax and the threat of Participation, these factors have managed to push the minimum threshold of commercial oil up to 300500 million barrels of oil. This has created a very serious obstacle to developing many known North Sea reserves and exploring for others. North Sea recoverable oil reserves on the United Kingdom side might be increased by 30–50 per cent. should all of the 50–500 million barrel fields be produced. Most of these are not likely to be produced unless Government policy is changed significantly. This is one of the companies engaged in the North Sea. This is advice which has been given to the Minister, and I take this opportunity to incorporate it in the record so that he and his Department may study it.

Does not the Minister see that the very harsh controls that he is putting on the industry will have long-term effects and could lead to a dwindling of effort in the very area upon which the country depends?

6.6 p.m.

Mr. Gordon Wilson (Dundee, East)

I should make it clear at the outset that I disagree almost entirely with all that the hon. Member for Bedford (Mr. Skeet) said. In his remarks about Scotland he showed a scandalous lack of knowledge of where Scotland stands in relation to her assets and her potential. I hope that the hon. Member for Ross and Cromarty (Mr. Gray) will take his hon. Friend the Member for Bedford aside and give him a few details about the strengths of modern Scotland, following which I hope the hon. Member for Bedford will on some future occasion admit how wrong he was to underestimate our country.

This debate turns upon whether the Government's oil policies have been correct. I say straight away that it was my hope that the Conservatives, who initiated the debate, would state what their policy was. I have sat through a number of debates of this kind, including those on the Oil Taxation Bill and the Petroleum and Submarine Pipe-Lines Bill, and, although the Conservative Opposition take stands on matters of detail, I have yet to hear them clarify their policy in terms of its principles. I was hoping that they would say whether they regarded oil as a source of capital or of revenue. Do they prefer maximum output and, if they do, where is their policy about depletion? Is their Oil Conservation Board to be merely a decoration on the oil scene, or do they intend to restrain the rate of production? Have they given any real indication of the level that they consider appropriate as the return to the public purse and of what proportion should go to the oil companies whose interests they so often uphold?

These are questions for the Conservatives to answer. If they are to mount an attack on the Government's policy, they need to state their own position.

However, there is a strong criticism which can be made of Government policy. It is a policy which arises from and which is contained in the various pieces of legislation that they have put on to the statute book. I take as an example the Offshore Petroleum Development (Scotland) Act. We see immediately that very little use has been made of it other than to spend money in a couple of yards without any real gain.

One of the problems—it was put to the Government a year ago, when the Bill, as it then was, was being considered—was that there was a danger of too many yards being brought into existence. Despite the warnings by many hon. Members, the Government insisted on going ahead with the measure. They are now in the position where their own forecasts for production platforms likely to be ordered within the next year have been found to be excessive.

Mr. Skeet

During a period of high Scottish unemployment it is open to the Government to authorise the BNOC to order more production platforms. The mere fact that they have not done so, when they have the power, is an indication that they do not bother about the unemployment situation in Scotland.

Mr. Wilson

That question should be directed more towards the Government than towards me. However, according to the estimates of the Offshore Supplies Office, between 55 and 80 platforms will be needed for the North Sea. The latest estimate, announced by the Vice-President of the United Kingdom Offshore Operators' Association, is that only another 20 may be required over the lifetime of the fields. Perhaps the Minister will comment on that.

Mr. John Smith

Perhaps the hon. Gentleman will have a word with his hon. Friend the Member for Argyll (Mr. MacCormick), who has not only strongly supported the development of the site at Portavadie, which is an important addition to our capacity to build concrete platforms, but was recently at my office asking the Government to spend more money on it. It is time that Members of the Scottish National Party started to speak with one voice instead of saying one thing in their constituencies, to attract constituency support, and another, officially, in the House of Commons.

Mr. Wilson

The Minister, who has avoided answering the question, should recognise that my hon. Friend the Member for Argyll (Mr. MacCormick), as long ago as July 1974, stated the policy for platform sites. He was worried about the effect on Ardyne when the Portavadie site commenced. A substantial amount of Government money has been put into that site. No orders have been forthcoming for that yard, but over the past few months a great deal of labour has been recruited, much of it drawn from the locality. That labour was hired on the basis of a Government promise that jobs would be available in the platform industry. These men will now be disappointed. That is why my hon. Friend the Member for Argyll was concerned.

Mr. John Smith

If the hon. Member for Argyll supported the development of the site only after a decision had been taken to develop it, that would be one thing. Can the hon. Gentleman explain why the hon. Member for Argyll gave evidence at the public inquiry into the planning application in support of the development of the site?

Mr. Wilson

It is perfectly true that my hon. Friend the Member for Argyll has to do the best he can for his constituency. However, it is also true that he is on record as supporting the policy of a limited number of sites in Scotland. It is perfectly possible for him to take those two stances.

That does not disguise the weakness in the Government's policy. They deliberately set out to expand the number of sites on a gross miscalculation—almost a grotesque miscalculation—of the number of platforms that will be required. This is why we want the Minister's comments today. It is not enough for him to counter-attack by citing the views of another hon. Member. He is the Minister of State, with all the resources of the Government, so-called, at his disposal. Yet he has made a tremendous mistake on the policy for platform sites, despite the criticisms which other hon. Members made at the time when the Act was passed.

The second weakness in the Government's policy can be illustrated through the Oil Taxation Act. We criticised the Government for imposing far too low a rate of taxation on oil production. Anyone who has studied the matter since and seen the rate of return which, on given fields, can be obtained, knows full well that the Government were forced to cut back on their commitments to introduce an effective taxation policy. I want to quote some figures from an article published in the Petroleum Economist of December 1975. The figures are based on the Wood, Mackenzie estimates. For the Forties field there is a 32 per cent. discounted cash flow return and for the Argyll field a 57 per cent. discounted cash flow return. It is no wonder that the oil companies are trying to peddle the petroleum revenue tax system to Australia. The companies will be better off under it than if the Australians designed their own system.

The Government have not imposed a proper rate of tax on the industry, and will allow excessive profits to be incurred over the years. [Interruption.] It is all very well for the hon. Member for Bedford to "tut, tut" and splutter incoherently from a sitting position, but these arguments were advanced not only during the debates on the Oil Taxation Act but also during the Report stage.

Mr. Alexander Fletcher (Edinburgh, North)

In the extreme event of the Scottish National Party ever having any influence over North Sea oil or any part of North Sea oil, will it impose a much harsher tax régime than the 70 per cent. that the present Government have imposed on the oil industry? In other words, is a 30 per cent. net return to the oil industry too much?

Mr. Wilson

The return that the oil companies will get under the existing system is too high. If the hon. Gentleman had been present during the Report stage of the Oil Taxation Act he would have heard me say that an appropriate rate for petroleum revenue tax would be 75 per cent. rather than 45 per cent.

Mr. Alexander Fletcher

How does the hon. Gentleman work that figure out?

Mr. Wilson

If the hon. Gentleman cares to study the Official Report of that debate he will find a perfectly adequate explanation of the calculations. I suggest that he does so for the benefit of his own education; but the fact is that we have a situation in which the Government's rate of return is lower than we had expected.

I turn to participation under the Petroleum and Submarine Pipe-lines Act. Today the Chancellor of the Duchy of Lancaster made it perfectly clear, in his, in effect, revolutionary statement, that that Act was not intended to be a revenue raising Act. In almost every other country, participation in oil is intended to have an incremental value in terms of revenue. Just how we can substantiate this policy of "no gain, no loss", which the Government are trying to negotiate in a labrythine manner, I do not know. We have received no proper explanation of what they hope to gain by buying oil at a given price and using it at that price. Where is the profit to be obtained, especially if they are competing with existing companies? It is up to the Government to produce some answers. It is the old story—they have an election manifesto commitment but once they come to power they simply try to present a façade. The same could be said of their devolution proposals.

I am inclined to agree with what the hon. Member for Dudley, West (Dr. Phipps) said about employment and the future pattern in the offshore industry. We have to take into account the great number of oil strikes which have been made over the past three or four years. The North Sea oilfields, to give them a neutral title—they are better known under the name "Scottish oilfields"—have been extraordinarily prolific. An average of about one in seven has been successful, and in some areas the proportion has been much higher—as high as one in two. It is hardly surprising that a pattern should emerge in the industry whereby we start from wildcatting and exploration, move to delineation and, finally, to development. It is not unreasonable, bearing in mind the high costs of development, that where a number of oilfields have been proved, the companies would prefer to take development in series. A start would be made with one field building up the oil flow from that, and then using the resultant cash to fund successive investments. This is the pattern which I believe is likely to develop.

It was interesting that the Chairman of Texaco should refer, the other day, to the fact that his company was strongly considering going ahead with new investment. That is certainly one indication of how little weight should be attached to the argument that the Government's policies have held back development. We are, I believe, witnessing a natural process, but there are weaknesses in the Government's policies.

Let me deal first with the maximisation of oil contracts. True, the proportion has been rising, but it has been doing so very slowly over a period. It has been estimated that the Scottish share of contracts must be between 18 per cent. and 25 per cent. It is most distressing that the Government are unable to say what they consider the Scottish share to be. They will give only the British figure, and will not attempt in any way to estimate what share of the contract should go to Scotland.

There is also the question of the maintenance of employment in the oil industry. I hope that the Government will consider doing more than is provided for in their present scheme in the Memorandum for putting pressure on oil companies to place their orders in Scotland. I take up the point mentioned by the hon. Member for Dudley, West when he referred to production platforms and to sub-sea completions which are beginning to be introduced. In the next five, 10 or, perhaps 15 years these will undoubtedly displace platforms as the method of developing new discoveries.

I am not satisfied that Scotland at present has sufficient access to the sub-sea completion industry, and I hope that it will be part of the Government's strategy to invite those with the necessary technology to come to Scotland to settle and to do their experimental work, much of which will be based upon the development of the North Sea oil industry.

I come now to the question of labour relations. Over the years we have seen an improvement in this respect, but only the other day industrial tribunals reported that they were unable to deal with cases brought by workers who claimed they had been dismissed unfairly. Jurisdiction difficulties prevent the tribunals from offering the same protections which are given to workers on shore.

There is also the question of employment on the supply boats which operate on the Scottish Continental Shelf. Here, there is room for some anxiety. The Government have no power to bring real pressure to bear on operators of supply boats and other vessels which work offshore—and I include semi-submersibles—to recruit Scottish or British seamen. I brought a case to the attention of the Secretary of State for Employment and I received in reply a curt letter saying that there were no powers to secure an increased share of that employment for local people.

The United States provides flag protection which ensures that American supply boats must recruit crews from within the United States. If a large and powerful country like the United States can impose such a system, I would hope that in these difficult days of recession and depression the British Government could take another look at their attitude.

Over the last few months, meetings have been taking place between the Secretary of State for Energy and representatives of the Japanese and Swedish Governments about the possibility of their national oil companies participating in operations on the United Kingdom Continental Shelf. Obviously those two countries are interested not only in having access to this very valuable commodity—they do not seem to think that its price will collapse all that quickly—but, more important, in security of supply. I hope that the Government will consider a quid pro quo by which they would be allowed into the next round of licensing like any commercial company provided they were able to persuade companies in their countries to establish industrial investment in Scotland. That would certainly be appreciated by the people at home.

There is a real underlying weakness in the policies of both the Labour and Conservative Parties on oil. This weakness manifested itself during earlier exchanges with the Secretary of State and others about the Scottish dimension. If anyone here is unaware of the speed at which developments are taking place in Scotland in the move towards self-government, he should wake up and find out what is happening. Scotland could very well be self-governing by the 1980s, and it would, in those circumstances, have control over the offshore oil resources. It is therefore necessary for Scottish opinion to be heeded on these matters. Scottish Members of Parliament have been playing an active part and taking an active interest in the oil industry.

I extend my congratulations to the Minister of State on his promotion. I have had no chance to congratulate him personally. In view of the quick movement of Scotland towards self-government it would seem that he may be in danger of losing his seat, and therefore his new appointment—or, if he moves to England and obtains a seat there, he may retain his post but have no Scottish oil to deal with.

6.27 p.m.

Mr. Dennis Canavan (West Stirlingshire)

I have an interest to declare. As a member of the public I suppose I have some interest in BP, because that company has a majority public shareholding. I hope that the next time I have the opportunity of taking part in a debate on energy my interest as a member of the public will have expanded. I hope to see the growth of the British National Oil Corporation and I hope, too, that my right hon. Friend the Chancellor of the Duchy of Lancaster will have got round to completing his negotiations on participation.

I, too, was surprised that the Opposition chose this subject for a Supply debate today. Although the subject is their choice, it has been obvious from their contributions so far they are almost completely devoid of any policy on oil. They may criticise our policies—not very constructively—but they have put forward no alternative suggestions. The right hon. Member for Wanstead and Woodford (Mr. Jenkin), their chief spokesman on energy, and a former Minister, was so bereft of ideas that by the end of his speech the Opposition Dispatch Box was beginning to look like a newsagent's kiosk. The right hon. Gentleman was reading out headlines from practically any old newspaper he could get his hands on. It was almost as though he or his party had no ideas of their own to put before the House. I hope that when the hon. Member for Ross and Cromarty (Mr. Gray) winds up tonight we shall hear more constructive suggestions from the Opposition.

The right hon. Member for Wanstead and Woodford got his statistics wrong. He mentioned a Government estimate of 40 rigs by this year, but the estimate mentioned by the Government was that there would be 30 rigs in operation. The actual figure is 28, two short of the original estimate, but that is not as bad as the right hon. Gentleman was trying to make out. If he cannot even count up to 30, Heaven knows how accurate were his estimates on the public sector borrowing requirement where he was dealing with billions of pounds.

The right hon. Gentleman gave a very depressing picture of the oil industry in general. He blamed the Government, conveniently forgetting that it was the Conservative Government who practically gave away exploration licences like Green Shield stamps. If the policy in the early days of North Sea oil exploration had been similar to our present one, the story might be different now.

The right hon. Gentleman also mentioned uncertainty about investment, employment prospects, and development in particular areas. He talked so much about uncertainty in the industry that that in itself was an argument for more public control and accountability of the industry rather than just letting it be subject to free market laissez-faire forces. It is the Government's job to control a new industry like the oil industry.

There is no point in anyone threatened with unemployment going to the Secretary of State for Employment or the Secretary of State for Energy with cap in hand, trying to keep his job or to get another job, unless the Government, through the Secretaries of State and Parliament, has some control over employment and industry. That is why at the centre of the Government's policy for this industry is good public participation and control.

Taxation is not enough. The Conservative Government's taxation was nonexistent, apart from corporation tax and the other usual company taxes. We have introduced the petroleum revenue tax, but we have not been complacent about it. We have said that it is not sufficient.

It is important to have participation with the oil companies because only through that type of participation can we get economic power. Participation will not give us any revenue-raising power but, according to the Chancellor of the Duchy of Lancaster this afternoon, in the longer term there will be real economic power in being present in the committees where decisions are made—not just about finance and economic development, but about other important things, such as the rate of extraction and the health and safety of the workers. Such participation will also give the British National Oil Corporation the ability to gain expertise in technology, and so on, and will also ensure a far greater say in the dispersal of the fruits of this new industry through development in deprived areas. Indeed, I go so far as to say that the Oil Corporation would be virtually impotent if it were not for participation.

I am sorry that the Chancellor of the Duchy of Lancaster is not present now. Earlier this afternoon in answer to my Question he said that so far only eight out of more than 20 companies involved in North Sea development have agreed in principle with 51 per cent. participation. He has not given any details so far of the participation negotiations. I have asked my right hon. Friend the same question several times. Last month he said that there were only seven companies and that the last two, Scottish Marine and Scottish Canadian, were involved in negotiations about a possible merger.

I ask the Minister to find out whether the eight companies which the Chancellor of the Duchy mentioned this afternoon include those two companies together or singly. I should also like to know the name of the new company. I asked the Chancellor of the Duchy of Lancaster about that matter this afternoon, but he must have forgotten, because he did not give the name of the latest company which has agreed in principle to participation.

No one, certainly not the right hon. Member for Wanstead and Woodford, has mentioned the Burmah situation. I hope that the Secretary of State is successful in his offer not just for a 51 per cent. share in the Burmah North Sea oil field, because I do not see why the Government cannot go for outright public ownership in a case like this.

Several hon. Members have referred to the importance of the development of this industry to Scotland. The whole of Scotland, with perhaps a few churlish exceptions, rejoice at the appointment of my hon. Friend the Member for Lanarkshire, North (Mr. Smith) as Minister of State, Department of Energy. I am sure that as a Scot, representing a Scotish constituency, he will ensure that Scotland's interests are looked after in the new oil developments. The Labour Government located the headquarters of the BNOC in Glasgow and the Offshore Oil Office and drilling technology centre are also based in Scotland. Although the headquarters of those organisations are in Scotland, that does not of itself ensure that there will be enough jobs created by this industry for the benefit of Scotish workers or workers elsewhere in the United Kingdom.

There is growing worry and anger not only in Scotland but elsewhere in Britain about rising unemployment. At present there are 1 ¼ million people unemployed in Britain and 128,000 of them in Scotland. Last night I addressed a meeting in Partick Burgh Hall in Glasgow which was full of incensed trade unionists. There was also a fairly broad representation of the parties. The fact that a member of the Scottish National Party shared the platform with me indicates haw serious the position was. It is not Often that I agree to share a platform with a member of the SNP.

The people of Scotland, Merseyside, teesside, Tyneside or anywhere else will not tolerate the present levels of unemployment. It is time that we took a tougher line with the oil companies and took them by the scruff of the neck and said "Place your contracts here and here, so that you provide jobs for the workers in areas which are particularly threatened with high levels of unemployment." [Interruption.] Opposition Members may laugh at unemployment, but an additional reason for the extension of public control is to defeat unemployment.

There are no major directly oil-related industries in my constituency, but many of my constituents work in Grangemouth which is in the constituency of my hon. Friend the Member for Sterling, Falkirk and Grangemouth (Mr. Ewing), who is Under-Secretary of State for Scotland. We were delighted that the first oil came ashore to Grangemouth last month from the Forties field. I was also delighted to hear the Minister of State tell me last week that at present all Forties oil is being refined at Grangemouth. Will my hon. Friend estimate how tong this will continue, what proportion of the oil from the Forties field will eventually be refined at Grangemouth, and what proportion will go elsewhere, whether or not it be in Scotland?

Moreover, the landing of the oil at Grangemouth was greatly welcomed and put into its proper perspective the Chauvinistic, verging on violent, remarks made by certain spokesmen of the Scottish National Party when the first North Sea oil came ashore a few months ago in the Thames Estuary. They were accusing the English of raping Scottish oil. That oil came from the Argyll field and, even by SNP calculations, it came from the English side of the median line which they are so fond of quoting. The Secretary of State, as a good Socialist Englishman, sent everyone who worked in the Committee on the Petroleum and Submarine Pipe-lines Bill, irrespective of his nationality, a share of the oil. We were all very grateful for his generosity.

The attitude of the SNP to oil and other resources is that, if they are discovered in one's own back garden, they are one's own property. The Secretary of State was right to say that it would be silly for any Government, Scottish or English, to say that the benefits from oil should go exclusively to the Grampian Region rather than be shared with the Strathclyde Region. The hon. Member for Dundee, East (Mr. Wilson) was right to say that Scotland is not just a region. Scotland is a nation, of which I hope that hon. Members accept me as a member. But for nearly 270 years it has been in a special close partnership with other nations. It would be a pity if people with a destructive mentality tried to break up that partnership, in the same way as SNP Members tried in Committee to break up the BNOC into four little pieces, after the Government had set up its headquarters in Scotland.

I agree with the hon. Member for Bedford (Mr. Skeet) about the importance of an integrated energy policy, but the only way to achieve that is by public participation, if not public ownership, especially bearing in mind the public enterprise rôle of gas, electricity, coal, and nuclear energy. We could get a better integrated policy in the long term by sharing our resources with other countries in the United Kingdom. English gas accounts for 95 per cent. of the total gas in the United Kingdom, and 67 per cent. of Scotland's gas comes from the English section of the North Sea.

There is also vast mineral wealth in the Selby coalfield. If SNP Members were to attempt to smash up the National Coal Board in the same way as they want to treat the BNOC, they would not have the support of Scottish miners. Many coal seams in Scotland are difficult to work and it is far more expensive to extract coal from the average Scottish field than from coalfields in England and elsewhere. Scottish miners would not have confidence in SNP policies if they set up a separate coal board. Many miners feel that the advent of oil, particularly when the world price of oil is high, will mean that their jobs will be threatened in the medium term. In the long term, of course, the coal will be there long after the oil is finished. I hope that there will be a viable coal industry in Scotland.

Mr. Gordon Wilson

Is it the case, then, following the hon. Gentleman's argument about English coal as opposed to Scottish, that the policy of the NCB under his Government will be to close down Scottish mines in favour of English ones?

Mr. Canavan

The Labour Government's policy on the future of Scottish coalfields is quite clear. We have invested more money in those fields. However, I doubt whether a Scottish coal board would be viable in itself. The miners also doubt that.

Oil is not a panacea. It will be of great value to all the people in the United Kingdom, particularly in under-privileged and deprived areas: but it is mainly through the BNOC, through participation and the policies of the Labour Government that we shall be able to ensure that its benefits are not reserved for a few multinational companies but are dispersed throughout the United Kingdom.

6.47 p.m.

Mr. Peter Hordern (Horsham and Crawley)

I should start by declaring an interest, as a director of an oil company. I cannot follow the arguments of the hon. Member for West Stirlingshire (Mr. Canavan) very closely—partly, I fear, because of my bad understanding of the Scottish language, to which I have been exposed a good deal in the last hour or so. But I shall follow what he said about participation, and one or two other matters.

I agree with the hon. Gentleman that the prospects held out of North Sea oil for this country are very rewarding. I think that we are all looking forward to the period from 1980, when the revenues from PRT and other taxes will be very beneficial. Unhappily, however, there is also a feeling that during the interim there is not much to worry about—that some preparation can be done but that the money will still flow, and the benefits will accrue from 1980. The period with which I am concerned is the next two years or so, when the financing of the oilfields has to be undertaken, at great expense.

At the recent energy summit, the Prime Minister talked about Britain as a future member of OPEC. I believe that it was the German Chancellor who told him that he heard much more rattling of the begging bowl than banging of the oil drum from the Prime Minister. I believe this to be the case. By any computation, our expenditure in the North Sea will be very large. Estimates can vary a good deal, but it is not far out to suggest that by 1980 the capital expenditure could amount to £ 8 billion. Assuming present interest rates and a 10 per cent. depreciation rate, the total amount each year from now could be about £ 1 ½ billion.

It is true, on the other side of the balance sheet, that the Government will get a good deal of revenue. I believe that the Department of Energy claims 70 per cent. as the total take by means of royalties, PRT and corporation tax. But little of that revenue will arise before 1978 or 1979. So it is with the next two or three years, during the heaviest period of capital expenditure, that we should be most concerned.

It is in this respect that one must ask what is the relevance of BNOC and the Government's proposals for 51 per cent. participation. I understand that the purpose of the Corporation is to form the logical result of participation and nationalisation. Will the Minister of State tell us what, exactly, the Corporation will be doing? One of the points made by the Labour Party is that it will be capable of a good deal of refining—that it will have refining capacity, throughput operations, and so on. The hon. Gentleman must be aware that there is a glut of refining capacity, which is likely to persist for many years. If the Government want refining capacity, there is no need to build it. Plenty of it is available now to the Government if they want it. I believe that the Government have been offered refining capacity. Whether they will buy it, I do not know. There is no point in creating any more, but that, apparently, is one of the purposes of forming the Corporation.

The Government already have effective control of 20 per cent. of our North Sea oil through the holdings of the British Gas Corporation and the National Coal Board, the two together amounting to about 20 per cent. It is not as though the Government really need to obtain a great deal more participation in order to give something to the Corporation to do. They do not need any refining capacity, or a rôle competent to give extra production.

What could be added to the 20 per cent. is 12 ½ per cent. royalty payments, which could be taken as oil payments rather than cash payments. If one adds royalty payments to the 20 per cent., it amounts already to a significant part of the North Sea oil interests—about 32½ per cent. Therefore, what does 51 per cent. participation amount to? What, in particular, does the formula "no gain and no loss" really mean? What is it supposed to do? If no financial gain is to operate behind it, what is the purpose of 51 per cent. participation? I did not hear the hon. Member for West Stirlingshire refer to this, but I understood that the idea of a 51 per cent. participation, or of any nationalisation, was to garner the fruits of future exploitation.

Mr. Canavan

Perhaps the hon. Gentleman did not understand my Scottish accent when I tried to explain that participation would give the Corporation the power to be involved in the decision-making, including decision-making with regard to economic consequences.

Mr. Hordern

I am grateful to the hon. Gentleman for speaking so slowly so that I could understand, but he has made the position much worse. It is bad enough already to find a good reason for the existence of the Corporation; if he now says that it is to take control of economics, and so on, that is a very much worse reason.

I am anxious to press the Minister of State for an explanation of the purpose of participation. How is it to work? Let us assume that the Government approach the oil companies and say, "In respect of future capital development we would like to provide 51 per cent. of the money that might be required." That might be a way—I suspect that it will be—to go about it. I was in the United States in September, and I talked to the representatives of several large American oil companies. I understood from one of them that that was the very formula which was being put to them. I regret that one of the largest apparently told the Government negotiators, "We understand that the Government would like to lend us money and will give us 51 per cent. of any future requirements, but we can borrow money more cheaply elsewhere." I understand that that is indeed so. It is no wonder that these companies do not find the offered terms very attractive.

If that is all it comes to, the Government are saying that 51 per cent. participation means that they are going to lend the oil companies money from their own borrowing requirements, and that the companies will have to dip into their own coffers or use their own borrowing powers to develop their North Sea interests. Is that the basis of the negotiations now being carried through with the oil companies?

I hope that the Minister of State will be able to reply to this point, because someone must know. The Chancellor of the Duchy of Lancaster has said that there are to be no gains and no losses—no extra penny of revenue arising from the operation. What is the point of it, therefore? Again, who is negotiating with the companies? Is it the Chancellor of the Duchy of Lancaster, or is it the Secretary of State for Energy? I do not know what the Secretary of State is going to say when he goes on his postponed visit to the United States.

Mr. Rost

If he is allowed to go.

Mr. Hordern

Yes, if he is allowed to go. I am sure that the Americans, with their usual great courtesy, will be delighted to hear him. I am sure that he will draw record crowds. But I hope that he will stick to what the Chancellor of the Duchy of Lancaster has said. It is under the Chancellor that the present negotiations are proceeding. But what is going on?

Mr. Ronald Atkins (Preston, North)

I am interested in the hon. Gentleman's point about the raising of capital for development of oilfields in the North Sea. Do I understand from what he has said that the bulk of the capital raised will come out of the resources of the oil companies, and will not be raised in the market?

Mr. Hordern

I do not think that the hon. Gentleman understands the process. In the normal course, the oil companies would be operating largely on the market, but I understand the Government's proposition to be that they need not borrow in the market, largely because the Government will be raising money that they will then lend them, getting in return the commercial yield normally provided by the companies. In other words, the basis for negotiation is that the oil companies themselves will be given market rate loans by the Government, and therefore they will not themselves have to borrow. That seems an extraordinary way of going about the negotiations. If that is not the proposition, the Minister of State should tell us exactly what the basis is, because everybody would be interested to know.

Whether that is the basis on which the Government intend to negotiate with the oil companies—we understand that these are voluntary negotiations, so the oil companies do not have to accept—the Government will have to borrow vastly more money than has so far been generally recognised or stated by them. Let us suppose that the total amount of capital expenditure is £1½ billion a year, which I believe it will be in the next two or three years. The Government's share would be £750 million a year. It is well known that BP will need to raise a good deal of money in the next year or two to finance the Alaskan operation and the North Sea section, and that Burmah will need to finance its own expenditure in the Thistle and Ninian fields, which will require a good deal of money, quite apart from the money that the Government may pay out as compensation for one or both these fields, as the case may be.

It would not be far wrong to say that the Government will need to borrow £1,000 million a year for the next two or three years on the oil account alone. That has not entered into any computation. Nor has it been included in the borrowing requirement. It was not included in the last White Paper on public expenditure for the next five years, and it is doubtful whether it will be included in the next, much delayed, five-year public expenditure White Paper, which we were promised by Christmas but which we may now get by the middle of January. It will be interesting to see whether this additional borrowing requirement will be included in that White Paper when it is finally published.

Where is the money to come from? It is generally supposed that already this year the Government need to raise £12 billion, and now, according to all the evidence one can find, it seems certain that they will have to raise at least another £1 billion a year on top of that to finance their North Sea oil developments.

I understand that, by coincidence, the winter Supplementary Estimates were produced this afternoon, and they show that Government expenditure has so far this year increased by about 44 per cent., and that it is expected to increase by about 45 per cent. for the year as a whole, and this at a time when revenue has risen by just under 30 per cent. That is a very large gap, and it is a measure of a problem which the Government face. They must finance an enormus amount of money already, yet they are adding to the burden through their North Sea oil commitments, and all because, so far as one can observe, in their election manifesto they made this absurd commitment to 51 per cent. participation.

This 51 per cent. participation has not made, and does not make, any revenue sense. The Minister of State knows it, his Department knows it, and other Ministers know it. Perhaps only the hon. Member for West Stirlingshire, whose speech I did not follow as closely as I should have wished, does not know. The truth is that only the left wing of the Labour Party does not understand. Hon. Members on the Left do not realise that they will have no benefit whatever out of this 51 per cent. participation, and all they are likely to do is to find themselves trying to finance an impossible objective during the next two years with a borrowing requirement certainly of £12 billion and probably of £13 billion.

Again, I ask where the money will come from. The position is already serious. It is already recognised that the country will have a large balance of payments deficit to finance this year. No one suggests that that deficit will be any better next year—the estimates range from £1.6 billion to £1.8 billion—and all this money must be borrowed in the markets of the world, from overseas lenders.

Overseas lenders are becoming a little more difficult about lending money to the British Government. We were told only a fortnight ago that we were to draw upon our oil facility and borrow £800 million, I think—this was an automatic device—and then borrow on our general account with the International Monetary Fund. If the newspapers are to be believed—I think there is some sub- stance in what is said—the Americans are getting more and more concerned about lending us money, because they think that we intend to impose import controls, and they will not let us have import controls and immediate recourse to the IMF. In fact, any suggestion of extra expenditure will entail stricter conditions imposed upon us by the International Monetary Fund.

The Government will not be able to borrow this money for developing the North Sea without the most stringent conditions put upon us in all sorts of other ways by the International Monetary Fund. The Fund's inspectors are already coming to look over the books. They will be here every three months, just as they were in 1968 and afterwards. We shall be right back at the old game. It is nonsense to suppose that the International Monetary Fund is interested in financing a "phoney" operation such as this 51 per cent. participation.

Only one section of the British people is concerned about 51 per cent. participation, or even believes that it can be a reality, and that is the left wing of the Labour Party. I am sorry to have to tell hon. Members on the Left that, as in so many other matters, they are in for a grievous disappointment.

7.3 p.m.

Mr. Joseph Dean (Leeds, West)

I have heard nothing yet in this debate on oil policy, chosen by the Opposition, which has been any different from what we heard during the debates on the Petroleum and Submarine Pipe-lines Bill. The Opposition have trundled out the same old arguments. When we were debating the Bill, I said that the difference was one of philosophy between the two parties, in that the major Opposition party believed that this new-found source of wealth was better left to exploitation by the private sector and that the benefits for the community should be garnered by a tax system. I emphasised at that time that my philosophy and that of my party—I make no apology for repeating it—was quite the opposite, that the energy crisis in the winter of 1973, which put the country on a three-day working week, had proved that this new-found source of wealth was of such fundamental importance to the nation's economic future that we could not allow it to go into private ownership and just depend on fiscal regulations to recoup our share of the cake which had been found in the sea off our coasts.

Nothing reinforced my judgment that that view was right more than what was said in a book published a few months ago, indicating that the Prime Minister at that time, the right hon. Member for Sidcup (Mr. Heath), had during those trying days sent for the four chairmen of the leading oil companies with which we were dealing, including British Petroleum in which, I believe, we had almost a 50 per cent. holding, and asked for special consideration for the United Kingdom because of our association with those companies. It was made clear to the right hon. Gentleman that there was nothing doing, that, despite all those long associations and the fact that some of the companies had had over-generous agreements given to them when they took up their licences, the United Kingdom was in no special position but was just another customer in the queue.

I could not illustrate my point more dramatically. If that was the system, I could not see, and I still cannot see, those same people behaving any better towards this country now that we have this newfound wealth in the North Sea.

Before I continue my argument, I must congratulate my hon. Friend the Member for Lanarkshire, North (Mr. Smith) on his appointment as Minister of State. Having spent quite a long time with him in Committee during the passage of the Petroleum and Submarine Pipe-lines Bill, I have no doubt that it is a very good appointment, and I know that the policy pursued by the Labour Party and our Government, as well as the interests of the country as a whole in its energy resources, will be admirably served by my hon. Friend.

This debate is not about devolution, but only about two hon. Members so far have not referred to it. The right hon. Member for Orkney and Shetland (Mr. Grimond) touched on the subject, and I think that he used the term "Assembly". At Question Time today my right hon. Friend the Chancellor of the Duchy of Lancaster touched on the subject of a Scottish Parliament, then quickly with- drew the term and said "Whatever name you give it".

I remind the House that all that Parliament has before it at present is a White Paper, and it is not the surest of things that there will be a Scottish Assembly or a Scottish Parliament. That may be the decision which this Chamber takes at the end of the day, but it is far from being a reality, and some of the tactics being adopted by certain hon. Members in an attempt to compel such a course are very dangerous.

One of the saddest features of the present scene is that the Scottish National Party in its approach to oil and to anything else has adopted a divisive policy, saying that nothing is right save what it says, while in the end saying nothing. Hon. Members speaking for the SNP criticise the Government's policy, they attack the major Opposition party, whose Supply Day this is, for producing little or no counter-policy, but at the same time they produce no policy themselves save the slogan "Scottish oil", which would be debatable in any court of law wherever it was sought to draw the line.

There is no sense of reality in that. Indeed, a good many people take the serious view that all that the SNP has succeeded in establishing in regard to North Sea oil is a sort of mythical squatter's right which will never prove to be a reality, anyway.

The right hon. Member for Orkney and Shetland said that a Scottish Assembly should have some control over revenue from North Sea oil. How does one quantify "some control"? If we have a national oil company, which little bit do we hive off?

I am a third-generation immigrant Scot living in Lancashire and representing a Yorkshire seat. Am I entitled to say "Let us have extra for Yorkshire out of the new-found coalfield at Selby, which will long outlive any oil found in the North Sea"? How daft can one get?

Mrs. Bain

I am sure that the hon. Gentleman was hoping that someone on the SNP Bench would tackle him on this issue. Does he accept the United Nations Charter, which gives small nations the right to self-determination? If he rejects it, does he believe that the House is right to reject the democratically expressed wishes of the people of Scotland that the benefits of national resources should go to the community concerned? Does he believe it right that the people who suffer most in the development of those resources should gain most from that development?

Mr. Dean

The hon. Lady had the most emphatic answer to the question whether Scotland wanted separatism and the right to self-determination when the people of Scotland voted by two to one to remain in Europe. I did not favour our remaining in Europe, but Scotland voted overwhelmingly for it. That argument must be left where it is.

My party's policy is to have a majority public share in the wonderful area of wealth that has been found, so that it can be used for the benefit of the economy as a whole, which includes Scotland. It saddens me when SNP Members parade Scottish poverty as though Scotland had been badly treated by Westminster Governments and had not had a fair share of the cake. The trouble in Scotland is the same as it is in England, Wales and most other countries where the Governments do not control capital. No one will convince me that a Scottish Assembly would control capital in Scotland. Such an Assembly would have the worst possible effect. It would have no control, because it would be a large-sized parish-pump council, and nothing more.

One of the worst aspects of the SNP's divisive approach was seen when the hon. Member for Clackmannan and East Stirlingshire (Mr. Reid) asked a supplementary question a fortnight ago, when the difficulties of the Chrysler situation were manifesting themselves. He said, in effect, that the Government must not take a decision that would sacrifice Linwood for the workers of Coventry. That is a two-way argument. Voices south of the border say "No". Nothing could be more of a disservice to working-class people, whether in Scotland, England or Wales, than that approach. Late this afternoon I met shop stewards from Linwood and from Coventry, and I found that it is not their approach. If Coventry is closed, it will mean that in the end Linwood will be closed, and vice versa. The nationalist approach is the worst possible. When some people shout "Not us in favour of the English", others start to shout "Not us in favour of the Scots".

I hope that the resources from oil will be used to help the regions. Members of the SNP say that Scotland has been under-privileged. I have figures showing that for every pound per capita spent in England on industrial or redevelopment grants £5-plus is spent in Scotland and £6-plus in Wales. That is not bad treatment.

The rate support grant is one of the biggest bones of contention. Under the domestic elements of relief, the Scottish ratepayer receives 52 per cent. more than his English counterpart, and the Welsh ratepayer receives 66 per cent. more than the English.

If the Scottish National Party wants to fight a political battle, I wish that it would do it on a different philosophy, and not argue that Scotland has always done badly out of central Government. Whether under Labour or the Conservatives, there has been a shift towards grants for the right areas, for wherever there is under-privilege, unemployment and threatened redundancy. I support that policy. I wish that members of the SNP would open their eyes to what has been going on, and admit it.

The problems have nothing to do with the question of government. They are to do with capital and where it lies. Trade unionists the world over are trying to find a way to stop the multinational companies from misbehaving. If SNP policy ever comes to fruition the party will have a voice in no forum.

Let us knock for six the idea that the Scottish regions have been badly dealt with. There are still areas of deprivation in Scotland, but there are still some very bad areas of deprivation in England. I hope that when we debate devolution we can see the end of devolution once and for all and get round to getting the economy of the country right. Whether or not we have devolution, unless we put the economy right there will be poverty in every region.

One hon. Member touched on the question of safety for divers. Since we last debated the subject there have been more tragic deaths. Those of us who have seen the programmes on television highlighting the terrible risk taken by the divers ask that all necessary steps, no matter how expensive, be taken by my right hon. Friend the Secretary of State—know that I am pushing on an open door—to give divers the maximum safety so richly deserved for such a terrible and dangerous job.

7.18 p.m.

Mr. John Hannam (Exeter)

The hon. Member for Leeds, West (Mr. Dean) spoke at length about the devolutionary aspects of the oil industry. I shall not go down that cul de sac.

After several previous debates on various aspects of oil legislation, in this debate we are trying to broaden the argument. We keep asking the Secretary of State and the Government relevant questions about the state of the oil industry, but we have to look into a kind of crystal ball. Having committed themselves to State intervention in the industry on a massive scale, the Government have to keep on saying that all is well and that everything is going according to plan. The trouble is that because we do not receive details of exactly what is happening in the industry we cannot judge the results. In a debate such as this we can try to compare the present state of the industry with what it would have been if the Government had not started on their path towards State control.

As they see the failure of their policies developing, Ministers try to bluster their way through and to attack any critics who question what is happening to the industry, on the dubious ground that those critics are being anti-British. That argument must be exploded, because it is the role of everyone who is worried about the future of our economy to inquire about the exact state of any industry. Labour Members are doing that when they examine the motor car industry. A Government who are pursuing what we consider to be outdated and doctrinaire party political policies which are damaging our national assets, or potential assets, could be considered to be anti-British. That argument can be turned in both directions. The results of the recent approach to the EEC for a seat at the oil conference are an indication of what damage can be done to this country by a Government and their policies.

It was easy, in the "post-OPEC" price spiral situation, to slide through such catch phrases as "It is Britain's oil and the British people should have the benefits of it". A confused and frightened energy-consuming nation could not be expected to challenge the charade of Labour's proposals for 51 per cent. participation and the subsequent creation of a totally unnecessary British National Oil Corporation.

Throughout last year we battled out in Committee and on the Floor of the House the various pieces of legislation dealing with the oil petroleum tax and the nationalisation proposals. Those Bills were ill-thought-out and damaging to our nation's future. The Bill dealing with the petroleum tax was amended to such an extent that it is now considered to be acceptable to the oil industry. In those debates we forecast the ill-effects that would follow. But we were attacked as being the spokesmen for the oil industry. The description of this attitude was summed up by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin)—namely, that what was bad for the oil companies is good for the country. One recalls the comment made by the Secretary of State for Employment during the miners' strike that what was good for the miners was good for the country.

What we were doing, as a responsible Opposition, was to put forward what we considered to be the right proposals for taxation and depletion regimes, with regulatory controls, so that the nation would benefit from maximum taxation and royalty revenue, while at the same time being able to control, if necessary, the programme of exploration and depletion to ensure as long a period of benefit for the country as possible. Whether that would mean a slowing up of depletion or a speeding up would in future depend on the price structure of oil in the years ahead. If demand for oil continued to decline, and if at the same time discoveries of oil resources in the world increased, oil prices could drop dramatically in a few years' time. It might pay, as my hon. Friend the Member for Bedford (Mr. Skeet) emphasised, to go for a greater maximum depletion policy. But if oil demand gradually picks up, although prices could in real terms decline a little the medium-term value of our North Sea oil will remain high and a planned depletion programme will be called for.

However, that is all in the future. If we had the right structure, these patterns of oil pricing and developments could be adjusted to by a regulatory authority. But what we have instead, as a result of a minority vote cast by this country for this Left-wing Government, is a set of policies which, as this debate highlights, is turning our great North Sea oil bonanza into what one newspaper called a potential "North Sea Bubble".

This highly technological, vastly expensive industry has got itself into a bureaucratic muddle, with the bull-necked BNOC wallowing in the same water. The only excuse given by the Secretary of State for Energy, other than to use the stale phrase "It is in our manifesto", is that most other countries have done it and therefore we must follow suit.

However, when I asked the right hon. Gentleman, in our last debate on this topic, which Western industrialised nations—other than Norway, which is a small fishing and agricultural country, with only 4 million people—have imposed majority participation upon their oil industries, I failed to get an answer. However, I hope that that question can be answered tonight. It is a most relevant question, in present circumstances.

It has been argued again and again that—I quote the words of a well-known "North Sea study group"— Nationalisation would therefore be likely to delay the exploitation of the new wealth of energy which lies under the North Sea. That prediction came not from the oil companies or from the Conservative policy group but from the Labour Party's North Sea study group in 1967. That was before the massive increase in costs that has now rendered all but a few of the North Sea oilfields marginal.

If the Labour Party had not sold the pass to its left wing, and if its proposals had taken into account these changing circumstances, embracing increasing costs, I am sure that its policy would have been much closer to ours and would have involved new tax and royalty arrangements and a regulatory body to control depletion and a scheme for financing marginal fields, if that were deemed necessary in the national interest.

That scheme of finance might have involved a Government stake in the consortia concerned during the period involving a loan, possibly on an ICFC basis. That arrangement would have been generally accepted by industry on both sides. But, instead, we have this great landed whale of BNOC, stranded on the beach, with a total lack of enthusiasm on the part of anybody to help drag it into deeper water.

Our economy, in its stricken state, is becoming dangerously mortgaged on the security of our North Sea oil. Therefore, every day lost in landing oil places a grave burden on the British economy. Between 1970 and 1974 our oil development progressed as rapidly as anywhere else. The number of explorations wells drilled in British waters rose from 22 in 1970 to 65 in 1974. But the cost of these developments is frighteningly high. One latest estimate for a major oilfield in the difficult areas of the North Sea is that the capital investment needed is of the order of £3,500 per barrel per day of peak productive capacity-25 times the cost of Middle Eastern oilfields. The Shell-Esso Brent field system will require capital expenditure of about £1¾ thousand million—almost £500 million more than the entire Royal Dutch Shell Group's net income for 1974.

No wonder that Shell launched a major attack on the Government's North Sea oil participation plans last week. The company's managing director disclosed that the company had lost money on its United Kingdom operations last month, and he said that he felt, if I may quote his own words, less than enthusiastic about participation and the prospect of an inexperienced British National Oil Corporation attempting to match the North Sea efforts of dozens of oil companies". He regarded that prospect as "awesome to contemplate". He continued: Participation will not benefit Britain in any tangible way. It must therefore be regarded as a political public relations exercise. This irrelevant and expensive manifesto commitment is killing the confidence of the oil investors, and also killing the supply of investment finance. I could produce an equal number of newspaper cuttings from investment journals highlighting the lack of finance coming forward to the industry, but it is the lack of knowledge of the Government's activities that is causing so much concern. Activity on new fields appears to be zero; rig building is at a standstill; investment also is at a standstill; and BNOC seems to be a "one-man-and-his-dog" operation.

The recently retired Minister of State proudly announced, a week ago in the other place, that another fish was on the hook—in other words, that another oil company had agreed to participation. But on what terms? The secrecy insisted upon by the Government for these negotiations allows the Secretary of State to imply, smoothly and plausibly, again and again, that all is going well and that the companies are quite happy with the progress being made in negotiations. I just do not believe that to be true. Every indication that one can get from those involved is to the effect that they are not happy with the way in which the negotiations are being carried out. They feel that the Government are using their unfair bargaining strength over loans, farm-outs and future licence allocations to obtain a less than "no-gain, no-loss" agreement with those companies. We should have the answers to some of those questions, to enable us to judge accurately the true state of affairs in the North Sea.

1 wish to put some questions to the Secretary of State. When can we expect self-sufficiency in the North Sea? The projected date has been given as 1980, but one now hears talk of 1982 and 1983.

Secondly, how many industrialised countries, other than Norway, insist on majority participation?

Thirdly, is it true that the interest repayments on the Government's borrowing will be double the revenue that we can expect from the North Sea?

Fourthly, how many production platforms are being ordered for next year? However the Government try to gloss over the seriousness of the fall-back in oil activity, it is becoming apparent to us all that the policies of the Government will cost the British taxpayer thousands of millions of pounds. They will slow up the vital developments in the North Sea and force many of the oil experts engaged in our North Sea activities to move to other parts of the world, where the political and tax climate, as well as the weather conditions, are more favourable.

Obsession with State intervention is a disease in many areas of British industry, but no more so than in this highly complex oil industry, on which our whole economic future depends.

7.31 p.m.

Mr. Ronald Atkins (Preston, North)

I would not have intervened in this debate but for the accusation that has been directed against the Government Benches, of the so-called doctrinaire attitude of the speakers. In fact, it was the doctrinaire attitude of the hon. Member for Bedford (Mr. Skeet) that induced me to try to catch your eye, Mr. Deputy Speaker.

The hon. Gentleman compared the nationalised corporations with the Government participation in British North Seal oil. Starting, as do so many Opposition speakers, by directing criticism against the nationalised industries and services, he referred, first, to railway losses and the losses of other nationalised industries—those very losses that followed the last Conservative Government's action in holding prices when the costs of the nationalised industries rose. Of course, successive Governments have had a hand in this kind of policy, but at least the consumers benefit from that action. Therefore, I do not complain too much even at what the last Conservative Government did, except that the Labour Government have to pay the price of that policy. It is particularly annoying when the Opposition, who have caused the increase, complain about the Government's raising prices and, at the same time, about the losses sustained by the nationalised industries.

I believe, in any case, that the position of North Sea oil is different. If the Government abandon their claim for fair shares, the British consumer and taxpayer will lose. It is because the British Tories are so doctrinaire at all times that they knock public industries and services as their favourite Aunt Sallys.

This kind of situation is unknown in Europe. It is possible to conduct a debate in European countries without knocking the nationalised services and industries, of which there are very many in Europe. It is for this reason that in many cases the publicly-owned services and industries are in a weak position in this country, as compared with the situation in Europe. It is sad, therefore, that the Opposition should retain their prejudices while they consider oil taxation and revenue—revenue which is so vital to the British economy. They would deprive the British consumer and taxpayer of a great bonus. They would turn their backs on Britishers, and make compatriots of American big business.

The British Government are acting in much the same way as other Governments who are newly developing their oil resources. It is notable that the Opposition complain that it is a Left-Wing Government who are doing this. But if we look to the Middle East we find Governments far from Left Wing who, in their national interest, are trying to get what they can out of their national resources.

Another speaker said that Britain was the only country in the West, apart from Norway, which was trying to get a fair share for its nationals. We should not ignore the fact that Norway is in precisely the same position as Britain. No other Western countries in Europe are in a comparable position. Looking further west, to America, there is a very different situation. Oil was developed there about 100 years ago, and there was the old laissez-faire system when the scale of operation was much smaller. Consider Venezuela as a Western country. Venezuela is in the hands of the oil companies. We do not want that to happen to Britain. Even ignoring the question of patriotism, it would be sensible to get as much for Britishers as possible in our negotiations with the oil companies.

It has been said that we are too generous to the oil companies. The Leader of the Scottish National Party insisted that we should get more. I agree with his suggestion that more orders should be placed in Scotland for the construction of oil-drilling equipment, and so forth. I wish that he had said that more orders should be placed in the United Kingdom for making that equipment. But is it the responsibility of the Government? Perhaps the Government should have done more about this, but is it entirely their responsibility? The hon. Member for Bedford cannot say that the companies concerned are nationalised. Where is the private enterprise—indeed, any enterprise, if it comes to that? These companies have been letting the country down. They have had great opportunities—opportunities for which private industry often asks—and they have not made the most of them.

The Scottish National Party also demands that oil revenues should be used entirely for Scotland. I would not object to that idea if it meant that the grants and assistance now going from England for the maintenance of Scotland and the services there were withdrawn, and if these oil revenues were spread over a longer period than the life of the oilfields—longer than 30 years—so that when the oil revenues came to an end Scotland would have something to live on.

Mrs. Bain

Does the hon. Gentleman accept that the importance of oil and its revenues lies not in the short-term but in the long-term benefits which come from sensible investment in the economy to provide employment in the future?

Mr. Atkins

I think there is too much euphoria about the permanent benefits of oil. In the long run it will depend upon the ability of any nation to use its various resources, and not oil alone. The Scottish National Party will do a great disservice to the country if it gives the impression that oil resources will automatically give this country, or even just Scotland, prosperity. It is not true.

Mr. Gwilym Roberts (Cannock)

Does my hon. Friend not agree that even if one were to accept this absurd racialist argument, if the Scottish border were extended, the great bulk of the oil would be in English seas, or to the north of Scotland?

Mr. Atkins

I agree. If a Scottish Parliament is to be based on oil revenues derived from the North Sea, Scottish independence will be the shortest-lived proposal of any Parliament in history, because once the oil revenues were spent Scotland would be penniless. It would be foolish to base any independence or separatism on that. It is unfortunate that the SNP should use newly-discovered oil resources as a reason for separatism. If it were to succeed, Scottish independence would be of very short duration.

I am sure that the Scottish people will see through the racial bigotry and avarice sometimes expressed by Members of the SNP, because I am convinced that bigotry and avarice form no part of the Scottish character. I think that the Scottish people will see through the tactics of the SNP before long.

The hon. Member for Horsham and Crawley (Mr. Hordern) spoke about the difficulties of the Government in raising capital for oil development in the North Sea, and he estimated that there would be a Government borrowing requirement of £1,000 million every year. Although I questioned him, I was unable to discover why he thinks it more difficult for the Government than for the oil companies to raise the money, because if the Government do not raise the money the oil companies will have to raise it, and in the same market. The difference is that if the Government raise the money they will reap the profit from it. Otherwise, it will go entirely to the oil companies, most of them foreign.

The hon. Gentleman questioned the creditworthiness of the Government, but I am sure that it is no weaker than that of the oil companies. Certainly it is no weaker than that of the Burmah Oil Company, which has asked the Government to bail it out. It seems that any private company that fails turns, in the last resort, to the Government. Companies come cap in hand to the Government when they need help, but at other times their leaders criticise the Government, saying that they have no power or creditworthiness. A large stake in the oilfields of the North Sea will strengthen the Government's creditworthiness and will be security for any future loans we raise.

The hon. Member for Exeter (Mr. Hannam) spoke about the minority vote for the Labour Government. He seems to have overlooked that what we are talking about is policy, and not the last General Election, and the Government's oil policy certainly represents the majority view in the country. I am utterly convinced that the great majority of the British electors support the Government's oil policy. That is the chief reason why the Opposition are afraid to produce an alternative policy. In the interests of the economy about which the Opposition pretend to be so concerned, it is a pity that they do not forget party doctrine and support the Government in a policy which is obviously in the interests of the nation.

7.45 p.m.

Mr. Peter Rost (Derbyshire, South-East)

I do not propose to deal at length with the rather pathetic, doctrinaire and unconvincing attempt of the hon. Member for Preston, North (Mr. Atkins) to defend further nationalisation. His argument appeared to be a justification for extending nationalisation because existing nationalisation was such a success and was so popular. If he really believes that—there cannot be many hon. Members opposite who still believe it—he must be even more out of touch than the public believe Members of Parliament to be. No doubt he will put that to the test with his electors in due course and perhaps will get a result which astounds him.

I wish to discuss the realities of the situation rather than deal with arguments for or against doctrinaire nationalisation. We have heard some persuasive arguments from this side of the House in attacking the Government's policy which is causing crippling delay, uncertainty, and a lack of confidence in the development of the North Sea resources. The Government should be censored, not simply for the uncertainty, delay and lack of confidence, but, above all, for the evidence that they are displaying of a complete lack of priorities.

At a time when the Government are having, at long last, to face the realities of trying to make the country live within its means; at a time when the nation is faced with bankruptcy; at a time when the Government are, at long last, attempting to control inflation and stem the unemployment which their failure to control inflation is creating; at a time when they are being forced to face the errors of their two years of gross mismanagement and overspending of taxpayers' money; and at a time when the Cabinet is in almost daily emergency session scratching round for ways to borrow more money from abroad, or to cut some of the wasteful spending which their policies have promoted, the Government continue to pursue a policy which will give a new nationalised industry an initial dollop of at least £900 million, plus an annual income of about £1,000 million from royalties which will be siphoned from the Treasury, plus relief from petroleum revenue tax which the rest of the oil industry will have to pay. They have promised that the benefits of North Sea oil will accrue to the people. Their policies will result in exactly the opposite.

The Government are scraping round for more money from the International Monetary Fund. Their intention in borrowing this money is, not to balance the nation's housekeeping and put our affairs in order, but to continue over-spending, to allow us to live beyond our means, and to finance completely unnecessary and damaging doctrinaire Socialist nationalisation. That is why we are being invited to borrow more money from abroad.

The Prime Minister is at such a loss to suggest policies to save the country that he continually asks the Opposition for help and advice: and we are continually telling him what he should do. We have told him time and again, every day for months, what he should do if he wants to save the nation from bankruptcy. However, he does not listen, because it does not suit the Labour left wing to accept the advice which we have offered him and which he knows is the only answer.

We shall tell the Prime Minister again. He should sort out the priorities for the nation. It is a matter, not just of cutting overspending, but of stopping policies which will increase spending still further. That is why the proposals for the North Sea are such a disastrous contribution to the irrelevance of Government policy.

The Government continue to pursue policies which will greatly increase spending at a time when spending elsewhere is having to be cut, when the National Health Service is a battleground, when teachers are unemployed and education is suffering, when defence expenditure is being cut to the bone, when the social services and welfare are being starved of finance, and when the whole nation is being asked to make sacrifices. One might be able to justify this spending if it achieved something, but it does not. It will make matters worse.

The first question we must ask about the Government's priorities is whether they have the money to spend on the BNOC and 51 per cent. nationalisation. If they have the money or can raise it, why in every other sector are cuts being made which will create severe hardship to the nation and increase unemploy- ment? If the Government have the money or can raise it, why cannot it be spent in areas of the economy where it will be cost-effective and contribute towards solving our problems rather than aggravating them?

We are about to get the Government's White Paper on public expenditure up to 1980. What allocation will be made for financing 51 per cent. nationalisation and the BNOC? We have heard today of supplementary estimates for Government expenditure in the period from the Budget to the end of the year. The House will be asked to grant another £3,000 million for excessive Government spending above the Budget forecasts. That takes no account of the money that will be required to set up the BNOC and to pay for the nationalisation of 51 per cent. of North Sea interests. That is still to come.

The Government should be censured for their misguided priorities. There is no money available for the extension of nationalisation. Even if money wet-0 available, it could be used more effectively in other areas. An area in which such vast expenditure could be used beneficially is the promotion of energy conservation. If we have this money to spend on nationalisation which will produce no benefits, why should it not be spent on encouraging the more economical use of energy?

We are continually told that there is no money available to provide incentives for thermal insulation, or to provide incentives to industry to re-equip with energy-saving machines. We are continually told that there is no money available to improve the efficiency of the electricity generating system so that some of the waste can be utilised. We are continually told that there is no money available for research and development on securing the rational use of energy. Yet all that expenditure would be cost-effective: it would produce direct benefits to the national economy. It would pay for itself over a period, because it would allow us to consume less energy, thereby directly benefiting the balance of payments position and allowing us to deplete our finite resources less quickly. Moreover, an allocation of capital to the more efficient use of our energy resources would save public expenditure on financing increased capacity.

We shall increase the nation's crisis it we allow this money to be spent upon BNOC and 51 per cent. nationalisation. We shall increase unemployment and inflation. If the money is available, as the Government maintain, by spending it elsewhere we can improve the ability of the nation to get back on its feet.

The Government have made no attempt to assess the priorities. They are not interested in an energy strategy or in allocating national resources in such a way that the nation as a whole will gain the most benefit. If they were, they would drop the proposals for setting up a wasteful and unnecessary nationalised industry in the oil sector and use the funds elsewhere.

The Select Committee on Science and Technology has shown how energy conservation would produce direct benefits to the economy. If the Secretary of State for Energy has these thousands of millions of pounds to spend on North Sea participation, he should seriously consider whether the money could not be better spent in the national interest elsewhere. Even if the British economy were doing well and we were not suffering from a financial crisis, high inflation and rising unemployment, the Government's policy for the North Sea would be unjustifiable, misguided, dangerous and damaging. At this time it is absolutely suicidal. I regard it as a criminal misappropriation of taxpayers' money. We have these hugely expensive nationalisation plans, for which there is a blank cheque. I regard it as deliberate sabotage of Britain's prospects for economic survival.

Mr. F. P. Crowder (Ruislip-Northwood)

I entirely agree with everything that has been said, but would it not be only fair to the Socialist Government to enlarge on the tremendous attributes which the people have received from the nationalisation of the railways, of gas, of electricity, and so on? Will my hon. Friend enlarge on the theme—what a wonderful thing nationalisation has been for England?

Mr. Rost

I am most grateful to my hon. Friend. I should have thought that we on this side do not regard it as necessary to repeat it, because the coun- try is only too well aware of it, but there are hon. Members on the Government side who still need to be convinced that the argument for the extension of nationalisation has never been made and has certainly never been proved. It will not do to pretend that the nation's problems can be solved by increasing the borrowing requirement, and by vastly extending the commitment in overseas loans, in order to squander that money in a way which will not produce an effective return in terms of the nation's ability to survive and solve its problems.

Time and time again the Government have stated that their North Sea participation plans will be on a "no loss, no gain" basis. Time and time again we have been told that the British and international oil industry has served the nation well. Even the Secretary of State is proud to admit that oil is beginning to flow. Time and time again we have seen the failure of the extension of nationalisation elsewhere.

Today, when the nation is faced with the severe problem of having to cut back the exorbitant overspending of the Government, it seems quite ludicrous and criminally negligent, as I have already described it, for the Government to allocate vast increases in public money in this way, building up a national oil industry that is completely irrelevant, completely unnecessary, deliberately damaging to the private sector, and deliberately sabotaging the capability of this country to survive as a mixed economy and maintain its standard of living.

Because the Government have their priorities wrong and are not prepared to order their priorities in a way which will serve the national interest, the Government should put the BNOC and their proposals for the nationalisation of North Sea oil into cold storage—and, just to be safe, they should put the Secretary of State into cold storage as well.

8.4 p.m.

Mr. Peter Doig (Dundee, West)

The hon. Member for Derbyshire, South-East (Mr. Rost) trotted out the usual old bogy of his party concerning nationalisation. We have heard it over and over again. If he cares to examine closely the facts relating to the nationalised industries, he will find that the vast majority of them have been profitable over a very long time.

Mr. Crowder

Which ones?

Mr. Doig

Electricity and gas, to mention only two. The only time they have lost money has been when the Government in power at the time prevented them from making increases in charges, which any private firms would have made. It was only in the interests of the public that these increases were held back for a period. If the hon. Member for Derbyshire, South-East, cares to look at the record of interference by Governments of both parties, he will find that any losses occurring were for that reason.

As for output, the nationalised industries have a far better record than the vast majority of private companies. The feeling that their performance has not been good has arisen from the fact that in the main the newspapers are opposed to nationalisation.

For all my previous working life, to my sorrow, I was compelled to work for private firms, and I was amazed at the incompetence, the mistakes on a colossal scale, which were made within them but which never received any publicity whatever. We have only to look at what has happened to some big companies recently and to consider the number of them which have asked the Government for massive loans to keen them in force in this great private enterprise system?

Such companies have had to come to the Government simply because they have made mistakes. No doubt some nationalised industries make mistakes, but far more mistakes are made in private industry. All these mistakes are forgotten, however, because the newspapers do not give them any publicity. That is understandable, because none of the newspapers, as far as I know, is nationalised. If any newspapers are nationalised, I have not heard of them. Perhaps some of them have been to the Government for a loan. I do not know. They are all opposed to nationalisation and, for that reason, they give a slanted view. In view of the number of newspapers which have gone bankrupt, we know that newspapers are not so very efficient. Therefore, they should not lay down the law to other people.

I remind the hon. Member that his Government passed the Bill to nationalise the seabed. I also remind him that his Government were unwilling to gamble with the taxpayers' money in order to exploit our oil resources. It may have been for the reason that they thought it was a bad gamble. On the other hand, it may have been because they wanted all the profits for private enterprise. The fact is, however, that they were not prepared to take the gamble with taxpayers' money, and therefore they did not do it. They agreed instead to a Bill which parcelled out the oil and sold it off in sections.

When somebody gambles we do not say to him, after he has won, "You cannot have your winnings"; but that is what the Scottish National Party wants to do. This is what it has been trying to do all the time. It says "If you have struck it rich, we want a far bigger share. We want slower extraction of the oil." In other words, it wants all the time to clamp down on the profits of those who were successful with their gamble.

What about those who were unsuccessful? Does the Scottish National Party offer to give them back the money they lost, or to give them any share of the resources? I have never heard of that. The Scottish National Party does not say it at its public meetings. It has never plugged that line. The line it takes is "If you gamble and you win, we shall take as much of your winnings as possible, but if you lose we shall forget all about you."

I suggest to the Scottish National Party that, if any other source of natural wealth is found at any time in the future, nobody will gamble on it, if that is the attitude that is to be taken. No one will have the slightest interest in developing any natural resource.

I remind the hon. Member that Tory Governments know how to borrow money. It is not just Labour Governments that borrow money. It is interesting that, when they take office after a Labour Government, the Conservatives start off with a large surplus, and when they finish they have a big deficit. Surely the hon. Member knows that. He has been in the House long enough to have studied the figures. How do Conservative Governments make up the difference? Do not they borrow the money?

Mr. Rost

I am sure that the hon. Member would not wish to mislead the House. If he studies the figures he will know that the last Conservative administration repaid several thousand million pounds of debts left by the previous Labour Government.

Mr. Doig

If the hon. Gentleman looks a little closer at the National Debt figures, he will find that that statement is not strictly accurate. We have always had to start with a balance of payments deficit as a Labour Government. Invariably we have ended—and will do again if we stay in long enough—with a balance of payments surplus. We would have one now if it were not for the price of oil, strange as it may seem, and large though the deficit was that we inherited.

The hon. Member for Dundee, East (Mr. Wilson) said that we were not taking enough money from the oil companies. He complained that we were taking only, 70 per cent. and that this was lower than he expected. That brings us back to the gamble. If someone gambles, are we being very generous in giving him back 30 per cent., bearing in mind that he has taken the risk?

The Scottish National Party would make it worse. It wants a slower rate of extraction. Its representatives have said so again and again. The result of that, of course, would be that the point might be reached where it was no longer profitable and that the oil companies pulled out altogether. If that was their experience, nothing would ever come back. If someone gambles and wins, he has the right to collect most of his winnings.

If the Scottish National Party ever got power, who would protect the oil rigs in the North? Sea? Scottish National Members object now to the British Navy being used to protect our food supplies and our fishermen even a very limited scale.

Mr. Gordon Wilson

Would the hon. Gentleman care to say, first, what food supplies the British Navy is capable of defending these days? Secondly, if he is referring specifically to the fishing industry, would not it be better if the Navy dealt with the fishing boats fishing in what should be Scottish territorial waters if the limits were extended?

Mr. Doig

The hon. Gentleman knows that fish is one of the best forms of food for the people. It is much cheaper than meat. When we consider that and then go on to consider that we are prepared to allow a small country, without international agreement, to extend its limits to 200 miles and stop the traditional fishing which has gone on from this country by fishermen for a very long time—

Mr. Gordon Wilson

It is not Scottish—

Mr. Doig

I am not a narrow Scottish nationalist like the hon. Member for Dundee, East. I am a British citizen and I look at the situation from the point of view of Britain as a whole. Without any legal backing, British fishermen are being prevented from fishing in their traditional areas. When we decide very reluctantly to send naval vessels there to protect these fishing boats from being vandalised, which is what it amounts to, lo and behold, the SNP objects to naval vessels even going there. If Scottish National Members are not willing to defend our food supplies, does anyone believe that they will be capable of defending our rigs and the oil in the North Sea? I should not like to be in the shoes of the oil companies if they have to supply their own navies as well as everything else. But that is what is advocated by the SNP.

According to the SNP, what started off as North Sea oil was, when the party discovered that this gimmick could win it a lot of votes, rapidly renamed "Scottish oil." It meant that, instead of having to divide it amongst a population of 50 million, it need only be divided amongst 5 million. However, the Shetlands have most of this oil off their shores. Applying the same logic and renaming it "Shetland oil", accepting the Scottish oil argument, the incentive is even bigger. Although the SNP makes promises at election time about what it will do for 5 million people in Scotland with the revenue from the oil, how much more can the Shetland people promise, not to 5 million, but to 5,000 people with the same revenue? The Shetland people could all become oil sheiks and millionaires. So the incentive there is even greater.

Anyone starting along this road must remember that he may not be able to stop just where and when he wants to. I suggest that the SNP should keep this in mind and not go along a dangerous road of this kind. It is rather like going down a steep hill without brakes: it is very risky.

Then the SNP claims that the recent local election results in Scotland show that the party will form the next Government. But let us look at the facts. In the last General Election, in which the SNP did better than ever before, even with all its promises of what it would do with the money from North Sea oil, it managed to return 11 Members to the House. However, the Labour Party returned 41 Members. On that basis, where is the mandate for the SNP in Scotland from the Scottish people?

Then again, we had the referendum on the EEC. What was the result in Scotland? It was that two-thirds of the Scottish people wanted to remain in the EEC. It would be totally illogical to think that they wanted to stay in a bigger grouping and at the same time to move to a smaller grouping.

There is one big fallacy in the argument of the SNP. If it is followed through, it means that in any part of Britain where natural wealth is discovered the money resulting from it should be spent solely on that area. Can anyone imagine the outcry from those self-same people who represent the SNP in the House if the oil had been discovered off the south-east coast of England, the wealthiest part of Britain? Would they then have said "After all, it is their oil, so we had better allow them to have all the profits and none should come to Scotland"?

Mr. Robert Hughes (Aberdeen, North)

Not a chance.

Mr. Doig

That is their attitude. If we work along the basis that, wherever natural wealth is discovered it should be confined to the people round that close area, all that will happen is that in Britain at some time in the future we shall have highly wealthy pockets and very poor ones.

The other danger that people never realise when they listen to this one-sided story from the SNP is that in the only time in history that Scotland may be slightly better off than the rest of Britain, we forget completely what has been done for our country in the past. We used to have an unemployment level of 50 per cent.—

Mr. Gordon Wilson

It is still very high.

Mr. Doig

It is nothing like 50 per cent. When we used to have unemployment of 50 per cent., we received Government help to such an extent that we finished up with too many industries and screams from private businessmen to the then Board of Trade to stop bringing any more new industries to the City of Dundee. That is how successful it was using British money to help our city and the people of Scotland in general. I was one of the 38,000 unemployed in the city of Dundee and knew what working conditions were like. Compared with working conditions today, they were shattering. I wish that the hon. Member for Dundee, East had seen them, because he would have had a better appreciation of the problem.

The one time in our history when we are slightly better off, we decide to break away from the rest of the United Kingdom. What happens when in 20 or 30 years' time the oil dries up? The people of Scotland will be unable to vote to go back into the United Kingdom because the English aryl Welsh will probably not take them back. If I were an Englishman, I would not take them back.

The Scottish National Party has misled the public on a colossal scale with wild promises that it could never carry out. It has succeeded in convincing a number of people. However, we can convince some of the people all of the time and all of the people some of the time, but not all of the people all the time.

Several Hon. Members

rose—

Mr. Deputy Speaker (Sir Myer Galpern)

Order. The Front Bench speakers have kindly agreed to postpone the commencement of their replies until 9.10 p.m. Therefore, there are roughly 50 minutes in which six hon. Members may speak. If each hon. Member takes only eight minutes, it can be done.

8.21 p.m.

Mr. Alexander Fletcher (Edinburgh, North)

I listened with great interest to the speech of the hon. Member for Dundee, West (Mr. Doig), who believed that it was more important to deal with separatism and the Scottish nationalists than with the question of Government policy for North Sea oil. Too often this seems to be becoming something of a mania for Labour Members, because the problems facing Scotland are the same as those facing Britain, namely, the inadequacy and irrelevance of Government policies as applied to Britain as a whole. It would be more beneficial in debates such as these if Labour Members would address themselves to the main question of policies affecting the United Kingdom as a whole and make a bigger effort to get those right, because by so doing we should go a long way towards solving the temporary difficulties that exist in Scotland at present.

It is reasonable to have expected that after a year in which two major Bills on North Sea oil have been enacted—the Oil Taxation Bill and the Petroleum and Submarine Pipe-lines Bill—the Government would welcome this opportunity and debate in Opposition Supply time to explain to the House and to the country at large the tangible benefits that may emerge and will flow from oil from the North Sea. Once again the House and the country are disappointed because in his opening speech the Secretary of State spoke, yet again, about the objectives of Government policy rather than about the reality in any practical way. He spoke in a manner that was totally divorced from the reality of the problems facing Britain and the development of North Sea oil.

It is a great pity that the Secretary of State and his colleagues continue to insist that nationalisation is a good thing, that it is the best patent medicine that the Government can offer to the British people. The truth of the matter is that it is the only medicine that they have to offer for any problem that faces this country.

Every practical example of nationalisation proves time and again just how unworkable nationalisation is in practice. That is why in his speeches the Secretary of State always sticks to theoretical examples and to an emotional statement that all that is being done is being done for the good of the people, without explaining what benefit will accrue to the people from any further nationalisation. The people know only too well the dis- advantages that derive from the amount of nationalisation that exists at present.

We have had two examples of this today—one from the Secretary of State and one from the Chancellor of the Duchy of Lancaster at Question Time. The Chancellor could not then name a single benefit which would accrue to the British people from the Government's participation policy. I asked him specifically this afternoon how the balance of payments would benefit, whether we would get oil more quickly, whether we would get more revenue from the oil, and whether participation would provide a greater incentive for companies to search for new fields in the North Sea. Neither the Chancellor of the Duchy nor the Secretary of State has answered those perfectly simple and straightforward questions. After two years in office they should be able to give a reply.

It was very much in contrast with this head-in-the-sand attitude of Labour Members that my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) spelled out clearly and honestly the British people's concern at the Government's policy of borrowing and spending now with the not-too-distant prospect of vast interest charges when the oil starts to flow. My right hon. Friend issued a warning which the country will heed and which Labour Members will ignore at their peril. He hit upon the danger point of the Government's policy, not just for the North Sea but for the economy generally. The British people will put up with difficulties and hardships today if they can confidently believe that the flow of oil will bring relief in the future, that there is some light at the end of the pipeline.

All Britain will be justifiably furious if in a few years' time the people find that, having made sacrifices today, they are denied the benefits because they have been squandered through nationalisation, bad housekeeping and a sheer inability of Ministers to take proper advantage of the opportunities offered by North Sea oil.

The key question in this debate concerns the specific advantages of Government policy to which we can look forward. We want to hear something definite now rather than to reply upon targets or objectives for the future. I hope we shall hear that from the Minister of State. I happily offer him my congratulations on his promotion. I hope that in his reply he will try to disregard many of the contributions by his hon. Friends which did not go to the heart of the matter, and will deal with this key question. I believe that this is how the people see the situation. If there is greater concern in Scotland it is because we in Scotland are in many ways a little closer to the action. We can see the activities and we know what is happening. In the Firth of Forth, off the Fife coast and up the East coast of Scotland, oil-related activities are in progress. Most Scottish Members, including my hon. Friend the Member for Ross and Cromarty (Mr. Gray) are in close contact with what is going on.

We Scots are canny by nature and we do not relish the prospect of spending a decade developing North Sea oil and the following decade using the profits to pay the interest charges on borrowings from third countries. Nevertheless, that is the likely effect of present Government policy. That is what concerns Scotland. That is the key to the problems which exist in Scotland. There is no selfish desire to ditch the United Kingdom for a few years so that Scotland can indulge in some bumper oil boom, as depicted in the Scottish National Party propaganda. Scotland is concerned that the wealth of the North Sea should be husbanded for the benefit of all the British people.

We in Scotland, like the rest of the United Kingdom, depend on a strong and prosperous British economy for our success and survival. We shall continue to depend on that much more than on oil or on any other single commodity.

I was particularly pleased that when opening the debate my right hon. Friend the Member for Wanstead and Woodford emphasised the dangers inherent in the Government's extravagance and debt-ridden policies. That is why this subject was chosen for debate. There is nothing more important than that we should try to attract the Government's attention to the inadequacy and total failure of their North Sea oil policy.

8.32 p.m.

Mr. Gwilym Roberts (Cannock)

I am glad that the hon. Member for Edinburgh, North (Mr. Fletcher) dealt with the matter in British terms and not in Scottish terms, as some previous speakers did. However, I was alarmed at the note of gloom he struck. It seems that whenever I hear a speech from the Opposition it is full of gloom and despondency. Indeed, in these days the Opposition seem to have a vested interest in gloom.

I should like to strike a rather different note and to suggest that we shall shortly see a British economic miracle. Oil has a vital part to play in that miracle. I do not say that because of the contribution which it can make to the balance of payments. We all realise how valuable that contribution is. The Government have already taken steps to wipe out the non-oil deficit, and with the coming of oil there will be enormous progress in that direction. However, that is not the basis of my argument. The basis of my argument is the investment and industrial confidence which is produced by energy sources.

Let us examine the whole history of industrial investment and energy sources. Invariably one finds, in European terms at any rate, that the growth of major energy sources is associated with the growth of industrial investment. I believe that by the end of 1976 the fact that some of the oil is coming and that there is more to come will completely revolutionalise confidence in industry. I have spent part of my life in the area of economic forecasting. I predict that the industrial turn-up will take place more quickly than many hon. Members on both sides of the House anticipate. We may see the beginning of it towards the end of 1976. I believe that the turn-up will be more rapid, and greater, than many forecasters expect.

My right hon. Friend the Prime Minister frequently tells us that in the 1980s we shall be responsible for 45 per cent. of the EEC energy production. In my view, that is the key to industrial growth and industrial investment generally. Of course, this type of growth is dependent on the policies that the Government are prepared to generate. Earlier, my hon. friend the Member for Dundee) West (Mr. Doig) discussed the major argument for participation. He dealt with the important part that participation must play if the country is to get the full benefit of our oil resources. Participation is important in pricing.

There must also be no yielding to the racialist and tribalist arguments sometimes advanced north of Hadrian's Wall and west of Offa's Dyke. This is an economic problem, which has nothing to do with obscure tribalist ideas.

The third basic condition is that industry should be adapted and prepared for this new spurt of industrial investment. We have heard talk of winners from Chequers. In industry, it is not just a question of finding winners but of creating them. It is important to have the sort of industrial policies which can create them.

Energy development should be regarded as a whole and oil should not be used in areas where other forms of energy are usable. As the oil accumulates, we must not abandon our commitment to the whole energy industry. Electricity generation should be left largely to coal, perhaps associated with nuclear fuel, and oil should be used in other areas. That is important if Britain is to have, as I believe it can have, the sort of economic miracle that will dwarf anything that we saw in Germany.

I believe that the future is bright, that the turn-up will come. The Government must generate the sort of policies to enable British manufacturing industry and industry generally to take full advantage of the considerable opportunities before us.

8.38 p.m.

Mr. Neil Macfarlane (Sutton and Cheam)

I am one of many hon. Members on this side who would applaud if the economic miracle charted by the hon. Member for Cannock (Mr. Roberts) came about. I am certain that it would receive widespread approval. However, we may think that the Government's present path to that miracle is a little obscure and fudged in the nation's eyes.

I should start by saying that for the better part of 20 years I was an executive with BP, although my only contact with the organization now is based on the fact that it is the custodian of my pension. I hope that the voters of Sutton and Cheam will not send me back to seek that pension in the near future.

I have had some experience of the oil industry and I have its interests at heart. I hope that the hon. Member for Dundee, West (Mr. Doig) would forgive me if I said that when I entered the Chamber earlier I had the impression that the debate was about devolution rather than offshore oil. There is widespread concern among the oil fraternity about future supplies in this country. This Government have not assessed the parabola of supply and the associated problems after 1990.

The United Kingdom requires about 120 million tons per annum of crude oil. Certainly, towards 1980–81 we shall be moving towards that figure. We need to know what the Government are doing to encourage more investment in order to ensure greater exploration throughout the 1980s. I hope that Lord Kearton and Lord Balogh understand fully what is required and will not underestimate the nature of their task with the new Corporation. Alas, my fears tell me otherwise.

The American companies, which hitherto have provided large injections of cash into North Sea exploration, are extremely concerned about Government policy. It is well known in oil company circles that many of them have been deterred from coming here and are looking for other seas to explore, particularly in the Gulf off the New England coastline. It is a sad commentary on the Government's creation of the new corporation that they have unquestionably deterred much-needed investment in this sector.

Mr. John Smith

Will the hon. Gentleman explain the logic of American oil companies leaving Britain because of our participation policies and going to the Gulf?

Mr. Macfarlane

It is a sad commentary that the hon. Gentleman is patently unaware of the situation, for that is what is happening. It is a fact of life. He should acquaint himself with what is happening. The Government have deterred a lot of potential investment in the North Sea by their actions. Unless they understand what the oil companies are saying, they will founder within the next year or two. It is sad that the hoped-for supplies throughout the 1980s will not reach the estimates made by the Conservative Government and the oil companies. I congratulate the Minister of State on his promotion, but I hope that he will give constructive thought to the situation and tell us how he sees the future of our supplies throughout the 1980s and 1990s. This is a very important aspect.

8.43 p.m.

Mr. Robert Hughes (Aberdeen, North)

Whenever we discuss North Sea oil, it seems that we are either super-optimistic or super-pessimistic. On the one hand, North Sea oil is seen as the national saviour, with all kinds of benefits to the country; on the other hand, it is seen as a despoiler of the national heritage, with nothing but evil to come from it. As so often, the balance of judgment lies between the two.

One certain factor, however, is that the resources available are immense. In terms of self-sufficiency, the oil will give a great deal of benefit. We shall be able to have a great deal of freedom from the trauma of the balance of payments, and that could give the economy an enormous boost. The revenues will enable us to do a lot of things that we now find it difficult to do—for example, to spend more on housing, the National Health Service and the social services. We want to see the money used in the broadest possible way.

But we are not yet in the position of having such revenue available, and the problem at the moment is how to benefit from the work going on in order to attain industrial development. It is calculated that about £5,000 million has been spent on North Sea development, and that by the time it is fully developed about £50,000 million will have been needed. There is here a tremendous potential industry which can do extremely well if it has the will. But oil technology, exploration and production are not easy to come by. There has been a tendency on the part of the oil companies to neglect the British market. That is why I welcome the Government's initiative in concluding an agreement with the oil companies operating in the North Sea to produce a code of practice with regard to purchasing.

My hon. Friend the Minister of State has done an excellent job in bringing in that code of practice, and the oil companies are to be congratulated on being willing to go along with the production of such a code. I hope that there will, as a result, be much more work coming to British industry, together with a recognition that a good deal has already come.

I find it odd, however, that such an agreement should have been necessary in the first place. It is a little curious that a code of practice is needed. What has happened to the thrusting adventurous commercial instincts of British industrialists, the sort of people who are always lauded to the skies by the Tory Party—people bursting with initiative and wanting to get into these new opportunities if only the Government would not hold them back? Why have we heard them saying that they have not had a fair deal and that the oil companies have not really been playing fair wth them? Perhaps there is a fault in British capitalism itself. Perhaps they are not all that they are made out to be by the Tories. Certainly, the desire to go forward without Government help does not seem to be there.

Commercial enterprises in this country are always coming to the Government for assistance, either before the event when they see trouble coming, or when they find that things are not going their own way. It would do a lot of good if the Tories would sometimes recognise the role that the Government have played.

Since exploration began, there has been constant concern, and we have wondered how we could ensure that the people would benefit from the exploration and development of the North Sea oilfields. How could we prevent the rape of resources for the benefit of the few? How could we prevent history repeating itself, remembering, as we do, the way that the coal mines were exploited? Anyone who understands the history of coal mining knows how the owners took out as much as they could and put very little back.

In my view, the Government have chosen the best course in setting up the British National Oil Corporation, because it will have the right to explore either on its own account or in partnership with companies now in existence or with those that may come on the scene, and it will have the right to produce, the right to refine, and the right to develop petrochemicals and to do all manner of things related to North Sea oil. I believe that we shall see public enterprise at its best in the operation of the BNOC. The Corporation has the capacity to be of great benefit to us all.

The Conservative Opposition are always complaining about nationalisation. They should remember that it was that rabid radical, Sir Alec Douglas-Home, as he then was, who nationalised the basic asset of North Sea oil. That should never be forgotten, and I pay tribute to him for seeing beyond narrow party advantage and party dogma and recognising that these assets should be nationalised.

The Tories always denigrate nationalisation, saying that no one can point to a nationalised industry that has been a success. I can point to several that have been successes. For example, we hear little about the Atomic Energy Authority, but the work done by that Authority in all the fields it has tackled has been an outstanding succeess. We hear very little, incidentally, about British Airways, but British Overseas Airways Corporation and British European Airways are two examples, now combined in British Airways, of the most outstanding airlines of the world. I defy any hon. Member to say otherwise. If it had not been for the great purchases that our airlines made, we should not have had an aircraft industry in either engines or airframes. These are outstanding achievements, and it does no good to run down nationalisation on every possible occasion.

For far too long, public ownership has been confined to industries desperately in need of capital and allowed to run down for a long time. I welcome the decision that, for once, we shall get in on the ground floor. Hon. Members make the fair point that they expect the BNOC to operate on a commercial basis, that it should make its judgments with the idea of making profits, or surplus value—whatever one cares to call it—but certainly on the basis of taking normal commercial judgments. But what happens when the Government do take ordinary commercial judgments?

Let us take the example of Burmah Oil, which was in difficulties and had to seek Government assistance. There was an immediate complaint by the Conservatives that the Government were not treating the shareholders properly. The Government were, in fact, behaving like a normal commercial organisation, taking over assets at the best possible price. We are being asked to subsidise the shareholders. That is a curious way for the Conservatives to behave. They want their bread and butter at the same time, and they want their bread buttered on both sides.

I want to say something about the concern we all have for the conditions of people working in the North Sea. No one who does not know the North Sea can imagine how hazardous the conditions are. Through my family connection I have knowledge of those conditions. I know that my right hon. Friends are concerned, and that the Department of Employment is also involved. Many of those who work in the North Sea are not covered by industrial relations legislation. If they feel that they have been unfairly dismissed they cannot appeal to the industrial tribunal

Recently, in at least six cases in the north-east of Scotland, the tribunal has said that it has no jurisdiction, because of the deficiency in the law. That deficiency is the responsibility of the Conservatives, who, when they were in Government, excluded people working in the North Sea. In the Employment Protection Act we have taken the power to make Regulations. There must be consultations with the industry and the trade unions. I am the last person to say that there should not be consultations, but I ask my right hon. Friends not to drag the consultations on for too long. I ask them to conclude them speedily, so that we may have the Regulations as soon as possible.

I cannot end without saying something about the attitude of the Scottish National Party. When my hon. Friend the Member for Dundee, West (Mr. Doig) said that British vessels off Iceland were being protected so as to safeguard our food supplies, I was appalled when the hon. Member for Dundee, East (Mr. Wilson) said that it was English vessels that were being protected, as though English trawlers were not entitled to protection by the British Navy. That kind of narrow nationalism does the Scottish people no credit. It also neglects the fact that there happen to be Scottish trawlers there as well. Whether that makes it better or worse is neither here nor there.

There is no such thing as Scottish oil. We want the resources used for the benefit of everybody. When English Members complain about Scottish vessels fishing off the south coast of England we do not hear from SNP Members that the fish are English. The fish are apparently there for Scottish fishermen, whatever part of Scotland they come from. Let us have less of the humbug from the SNP.

We Socialists are Socialists because we believe that all people wherever they are—in Great Britain, Europe and the world—have essential basic interests. We want to see people change their environment and benefit from their natural resources. For far too long the ordinary people of this country have failed to benefit from the country's resources, because those resources have been controlled by the few for the few. The Government's position on nationalisation and participation is to the benefit of the people of Britain as a whole, and working-class people in particular. I give the Government every support in what they are trying to do.

8.55 p.m.

Mr. David Crouch (Canterbury)

When the House discusses energy problems, I tend to think in terms of coal. I know that the House will forgive me if, even when we are examining the problems of resources from the North Sea, I still tend to think in terms of our coal resources. I do not take this view because I am hidebound or old-fashioned in thinking about our coal resources, but because I believe that it is right to put some figures before the House.

We in this country consume the equivalent of 350 million tons of coal a year. I am told that that amount of coal, if put on a base in Trafalgar Square, would reach three times as high as Mount Everest. We use a third of that amount in coal and the rest of our energy supply comprises oil and a small contribution from nuclear resources. That is our energy pattern in this country. We rely mainly upon oil as our source of energy. What worries me is that we are continuing to rely on oil as our main source of energy in the immediate future without considering other sources of energy.

I am concerned about the fact that we appear to be slowing up the development of the extraction of new coal resources, particularly at Selby. We talk about being self-sufficient in oil terms in this country within the next five years, but we do not hear much about developing the new Selby coalfield within five years. Rather, we are told, it will be within a period of 10 to 15 years. We are told a great deal about the problems in that coalfield. It has been said that the London to Edinburgh line will need to be diverted at a cost of £30 million, and we also hear about environmental problems at Selby. We are sitting on a source of energy that is easily worked, and yet we are not giving that source of energy the right degree of priority. That is why I wish to emphasise, even in a debate on oil, the importance of coal as an energy source.

I am concerned how we react to the great opportunity that exists in the North Sea today, and I am also concerned about the vast investment required to extract and deliver oil to our shores from the North Sea. The investment amounts to £18 billion between now and 1983. We know what that cost means to us as a nation. We also know that last year it cost us about £4,000 million to import oil, mainly from the Middle East. Therefore, it is worth expending the vast capital sum in the North Sea oil resource because it is costing us so much to import oil. However, the investment per barrel of oil in the North Sea amounts to between £2,000 and £4,000 per barrel, whereas the comparable figure in the Middle East is £100. In economic terms we are dealing with remarkable figures. I am saying not that we should not make this investment but that to avoid spending enormous sums on importing oil, we should consider other forms of investment.

We are talking in the short term about the period up to 1985. We should be looking at the period up to the end of the century. By that time we should probably have exhausted North Sea gas resources and it is likely that, by then, we shall have exhausted oil from the North Sea as well.

I should like to be given the Government's thinking as to the situation within the next 25 years. What investment do they believe is necessary to embrace other sources of energy in our island. We are told that all will be well in five years' time because the oil will be flowing, we shall not need to import oil from the Middle East, and indeed we shall be members of OPEC. We are also informed that the Government consider that investment to be worth while. But what plans have the Government for investment in other forms of energy for our children at the end of the century?

I recall a lecture by Sir Jack Rampton which I read recently, in which he spoke of possible new sources of power which we ought to be considering, such as wave power—that is, tidal power—wind power and solar energy. I even heard last week of geothermal energy, which is concerned with hot rocks. Large amounts of money are required for investment in the development of these other possible energy sources, but we should not be frightened of those figures.

I believe that wave power around our island is probably the most promising source of energy, but solar energy must not be discounted. It is not necessary to live in the deserts of Saudi Arabia to experience the value of solar energy. Solar energy can be obtained even in a cloudy climate such as we have in this country. Today solar energy is not just a possibility, it is a probability, and, indeed, I would say that it is a reality. Last Saturday a constituent, an enterprising business man who had obtained a patent for developing solar energy in this country, came to see me to discuss the possibility of making the necessary approach to the Department.

Also there is wind power. I hope the House will not think it facetious to talk of windmills again. I am told that 1,500 windmills 100 ft. high will generate energy equal to that produced by the average power station in this country. We certainly have enough wind. Some hon. Members have referred to the wind in the North Sea, but the wind in my constituency last week was over 100 m.p.h., and that is near Dover.

I hope that the Minister of State will assure us that the Government are not taking a short-sighted view, that they are not bemused by the opportunity presented by North Sea oil, and that they will consider the sources of energy which will be available in the next 10, 15, 20 and 25 years and how much investment they are prepared to put into the development of those energy sources.

9.2 p.m.

Mr. Russell Fairgrieve (Aberdeenshire, West)

This debate is about the effects of Government policy on offshore oil. The matter to which I wish to refer in particular has been touched on by my hon. Friend the Member for Sutton and Cheam (Mr. Macfarlane). Already doubt has been expressed by the national and international oil companies in the North Sea as to how they stand. This doubt is the result of Government policy. Those companies are now worried. It was no Government, no bureaucracy, no Civil Service which initiated oil development in the North Sea a decade ago; it was private competitive industry. Those are the people who got the oil from the North Sea, and they are the people who are now being clobbered.

Now we have the BNOC, which, in my opinion, is totally and utterly unnecessary. We can get everything we want from the North Sea without any more nationalisation. We can get it with taxation, controls and various Government Regulations, without the Government trying to become entrepeneurs in a difficult competitive industry. What interested me as a member of the Standing Committee that considered the Petroleum and Submarine Pipe-lines Bill was the fact that the Minister kept saying "Here is a new-style corporation, no longer the Morrisonian type of nationalisation, which does not work." This was nothing like the nationalisation of coal, the railways and the steel industry. This was something new. It was to be competitive, commercial and up to date. The first decision that was taken on this new competitive organisation was that the BNOC was to be relieved of the necessity to pay petroleum revenue tax. That decision must have been interesting to the Corporation's competitors.

The second decision was to locate the Corporation's productive headquarters in Glasgow. The oil is in the North Sea, off Aberdeen, yet the headquarters is to be on the Clyde, although all the oil companies, national and international, are putting their production headquarters in Aberdeen. Is that a commercial decision?

After looking around to see who should head the Corporation, the third decision was taken—to appoint a retired Socialist sympathiser from the textile industry to head this new, virile BNOC. Those first three decisions are not commercial; they are doctrinaire and Socialist.

The oil revenue should be spent on the infrastructure of Scotland. It should be going to the oil capital of Europe, to be spent on a dual carriageway from Edinburgh, via Perth and Dundee, to Aberdeen. That is the No. I call on the oil revenue. The infrastructure cost of the oil areas should no longer be borne by the ratepayers but by the taxpayers.

The most important aspect of the oil is not the length of time for which it will last but what we learn from it. We should regard the North Sea as a technical college on our doorstep and treat it as an opportunity to learn, so that at the end of the century, when there is drilling for oil in the China Sea or off the South American coast, and people want experts in offshire oil technology, they will go to Scotland for it, just as they went to our shipbuilders on the Clyde in the first Industrial Revolution.

For the first time in history, the oil industry has not had to go to a desert it has been able to come to a university city, with its technical colleges. We have the university and the Torry and Rowett Institutes. We should take advantage of this opportunity and learn to become the greatest marine technologists in the world. Apart from the oil under the sea, there are minerals and food. Here is a chance to learn. We must not adopt the philosophy of narrow nationalism and selfishness. What we learn from the North Sea we must be ready to contribute to Scotland, the United Kingdom and the world.

9.8 p.m.

Mr. Hamish Gray (Ross and Cromarty)

I join hon. and right hon. Members who have offered their congratulations to the Minister of State on his promotion. Those of us who served with him throughout the Committee proceedings on the Petroleum and Submarine Pipe-lines Bill know that there he won his spurs, and we wish him melt in his new post. I had hoped to be able to add my congratulations to Lord Balogh and wish him a happy, peaceful and permanent retirement, but the Secretary of State said that when the names of the BNOC were announced that of Lord Balogh would certainly be among them. There were cries from the Opposition Benches, not unnaturally. In a sense it is appropriate that he should go to the BNOC because it is rapidly becoming an over-seventies club. We can only hope that what it lacks in youth it will make up for in experience.

The debate has highlighted the concern which exists, particularly on the Conservative side of the House, about the future of the whole British oil industry. While some of us would perhaps not go quite as far as my hon. Friend the Member for Bedford (Mr. Skeet)—who suggests that we must make as much money out of oil as quickly as possible before the price decreases—others have voiced genuine fears about what is happening in the industry.

The Government's policies have done nothing to give confidence to any of our major industries. The damaging legislation of the last Session of Parliament has already been followed by a Bill to nationalise the shipbuilding and aircraft industries and by horrific proposals concerning dock labour. Few industries have escaped the effect of Government interference. Those which have not been caught directly will surely have beeen adversely affected by the spin-off results of various Government policies.

The constant belief of Labour Members that nationalisation—or at least sizeable Government involvement—is the cure for all commercial or industrial difficulties is incredible in view of some of the devastating results which such theories have produced in the past.

I think it was the hon. Member for Aberdeen, North (Mr. Hughes) who asked. "What on earth is the matter with all the private companies in this country today? Why have not all those private companies been getting into the oil business in Scotland? What is wrong with them?" The answer is quite simple. It is that private companies, and especially smaller companies, have practically been taxed out of existence, and that as long as Governments bring in legislation which is so discriminatory against this section of the community, we can hardly expect the entrepreneurial type of approach for which the hon. Gentleman was looking.

Today, however, it is the direct effect of Government policies, particularly on the oil industries, that we must examine. But before I deal with our views on this matter, I should like to return briefly to the remarks of the Secretary of State. I thought that it was extremely unfair of him to attack my right hon. Friend this afternoon for not mentioning the Burmah shareholders.

My right hon. Friend made perfectly clear, in a powerful statement last week, the views on the Conservative side of the House regarding the Burmah situation. I will tell the right hon. Gentleman, for his information, that at this very time a group of Burmah shareholders—I am led to believe that it is quite a sizeable group—is considering the issue of a writ against the Government and the Bank of England.

The situation is very delicate, and I shall not comment upon it at this stage, but I think it is as well for the right hon. Gentleman to know that some of these shareholders feel so strongly in the matter that they believe that their case could well be tested to their advantage in the courts.

Mr. Benn

The hon. Gentleman will know that I was referring to what his right hon. Friend said last Wednesday about the offer in respect of the North Sea assets. My statement had nothing whatever to do with the BP shares, and the point to which I was drawing the attention of the House was that, having described our efforts as highway robbery on a Wednesday, the right hon. Gentleman thought it so unimportant as not to merit even a back reference in his speech today in a Supply Day debate, which we understood the Opposition had taken in order to reinforce his criticisms last week. But we did not hear a single word about it.

Mr. Gray

The right hon. Gentleman is usually very skilful at defending himself, but I am afraid that today he has not improved the situation one little bit. Indeed, that was not the point I made at all. I was merely saying that it was quite wrong of him to attack my right hon. Friend when he had made his position clear. It may be—we do not know—that perhaps my right hon. Friend knows more than the right hon. Gentleman or myself about the situation. That may well have been the reason why he did not raise it.

The situation on the financing of North Sea oil exploration is quite simple. Practically all the financing has been private financing and, although Ministers go to great pains to point out the limitations of the policy of the former Conservative Government, it is undeniable that the large sums of money which have been invested in this area were achieved only because the investment seemed worthwhile at the time despite the enormous risks involved, and the United Kingdom is now benefiting as oil starts to flow.

BP has estimated that £18,000 million will be required to develop the United Kingdom Continental Shelf. This is £9,000 million-plus on the basis of the policy of 51 per cent. participation, and that seems a conservative figure compared with some forecasts. For example, one national newspaper recently estimated anything up to £50,000 million for the ultimate development of the reserves. Some of the reserves may never be developed due to technological difficulties. All this investment is being put at risk because of the 51 per cent. participation insisted upon by the Government and because of the creation of the British National Oil Corporation.

My hon. Friend the Member for Horsham and Crowley (Mr. Hordern) was very worried about the borrowing requirement. We know the attitude of the Government that participation will cost very little more than a few hundred million pounds. This has not convinced anyone, and I would be extremely happy if the Minister cared to elaborate a little on this. It seems to me that, apart from the present Cabinet, no one else believes that this is how the 51 per cent. will be achieved.

Both these were wholly unnecessary. A regulatory authority could without any difficulty have dealt with controls, depletion, pipelines and refineries. The normal taxation via the Treasury with an excess profits tax to cream off the windfall profits could have been achieved quite easily.

I was interested earlier to hear the hon. Member for Dudley, West (Dr. Phipps) make a very worthwhile contribution to the debate and give his view about the fears which exist in the oil industry at present. Opposition Members have been arguing this case for some time. We found it most refreshing to hear a Government supporter who has such a direct interest in the oil industry giving his views. Apparently the hon. Member for West Stirlingshire (Mr. Canavan) 'thinks this amusing. He finds the most amazing things amusing. It is interesting Ito hear the views of someone with such knowledge as that of the hon. Member for Dudley, West.

Here, we have a healthy industry with a good record and a sound future which in the eyes of this Government appears to have committed only one sin in that it makes profits. What is to happen to it? It is to have the fatty sludge of nationalisation injected into its veins, narrowing, if not completely blocking, its coronary arteries. There can be only one result. It will never be the same industry again. It will never achieve quite the figure that it has in the past—a figure needed in high risk areas.

The former Minister of State—the member of the BNOC Board elect—said in another place that the North Sea was no longer a high risk area. I do not know that the North Sea Oil Company Limited would agree with him. On 3rd December, it put out a Press release in which it said: North Sea Sun Oil Company Limited…announces that the exploratory well 22/8–1 will be abandoned and plugged due to severe mechanical difficulties. Any future drilling on this block will be dependent upon technical studies now being encountered. I went to the trouble of checking on the amount of money which this consortium had sunk, if hon. Members will excuse that expression, in this venture. I found that from 22nd July, when the rig was placed, until the beginning of December the costs have been in excess of £4 million. In what is not considered a high risk area this is quite a lot of money.

Considerable apprehension exists among the oil companies and others connected with the oil industry. Not only in investment do we see the results of the Government's doctrinaire attitudes. All connected with the industry fear what the future holds. How far will Government participation go in relation to the 51 per cent. and how far will the net be cast?

Nowhere is there more apprehension at present than in platform building. This is an extremely labour-intensive part of the industry, for 25 per cent. of all direct employment in the oil industry is in platform construction. Orders have not approached anywhere near Government forecasts, and the question of companies deciding whether they should go for steel or for concrete platforms has nothing to do with the situation. There is great apprehension about Government policy. That is why there is such a scarcity of platforms. It is unlikely that in 1976 there will be more than six orders placed and it is more likely that only four will be placed. Professor D. I. Mackay, Professor of Political Economy at Aberdeen University, is quoted in the Fraser of Allender institute Speculative Papers No. 4 as saying: The initial Department of Energy estimate was that 55–80 platforms would be required for the UK sector of the North Sea by 1980 with the total number ordered likely to be near the top end of that range. Our own estimate first prepared in early 1974 and published in February 1975 has always been substantially lower than this and suggested a demand of 52–64 platforms to 1980 with a 'best guess' of 57. The Department of Energy latest estimates (43–61 platforms with a 'best guess' of 53) are consistent with this view. It seems strange that a university study group can get its figures more accurate than those at the Department of Energy, where one would expect that all wisdom in this area lay.

In addition, those employed in the manufacture of platforms are extremely worried. Last week they visited the House of Commons and saw the Secretary of State. I had the privilege of meeting some of them afterwards. At that time, 27th November, the energy correspondent of the Glasgow Herald wrote: It is ironic indeed that only a couple of years ago it was widely felt that more platform sites were urgently needed if orders were not to be lost to foreign yards. At the time the view was valid, but the unforeseeable decline in North Sea activity over the past year has caused uncertainty in the platform building industry. At present all the Scottish yards have platforms under construction but several of these will be completed next year and unless new orders are placed there will be redundancies. The shop stewards were extremely worried. They expressed their fears freely to me.

The Secretary of State has to take a decision on this matter. It will be a difficult one. He has to decide whether he should influence the placing of orders. If he so decides, he must give preference to yards which can offer certain criteria. It is essential that the past record of delivery should be considered. The record of labour relations in the yard must be taken into consideration. Consideration must also be given if a highly skilled team of management and work force is already functioning well, and if redundancies would lead to high unemployment due to lack of alternative work. Where people have moved their homes and their families to a new area, that is a factor which must be considered, too.

It is little wonder that the shop stewards are bewildered. On the one hand, whenever they meet the Secretary of State for Energy they are told that orders are very scarce and that there are unlikely to be more than four or six next year. At the same time they hear the Prime Minister on the radio or television speaking at the Guildhall about the flow of oil becoming a torrent.

I shall shortly be meeting the management and, I hope, representatives of the work in my constituency at Nigg Bay. Here is a yard which offers unique facilities, has a spendid record, is close to the majority of fields and enjoys a direct, obstruction-free route. Nevertheless it has no follow-up order.

Mr. John Smith

That yard is very busy.

Mr. Gray

It is very busy at present and it will be until the spring of 1977, but that does not mean that its work force is not extremely worried about what will happen after that.

If the United Kingdom is to benefit from this industry the programming of platform building is essential. The work force must be able to see the prospect of continued employment and the management must be able to plan ahead in the knowledge that follow-up orders are available. The stability of the whole industry depends on confidence at all levels. Exploration and production both depend to a large extent in confidence, and the Government's policies, unfortunately, do anything but give confidence to the industry.

I must deal with the attitude of the Scottish National Party. It is unbelievable that it should cling to its production figure of 50 million tons a year which in present circumstances is totally unrealistic. Much of the investment to facili- tate extraction at a rate of 100 million or 120 million tons a year has already been made. What will the nationalists do? Will they say that they will not permit the higher figure and therefore offer investors their money back? Of course that is impossible.

Will they go round the platform yards in Scotland and tell the work force that they are cutting back to 50 million tons and that there will be no jobs after two or three years? Do they intend to do the same at the pipe coating yards and at all the other centres where jobs have been created in Scotland? Will they tell the petrochemical industry in Scotland that it is unlikely that its full capacity will be needed? Are they planning to create more redundancies and more unemployment? Do they intend to dawdle and dither while other forms of energy are researched? Are they not aware that the cost of extracting oil from the North Sea is unlikely to become any cheaper, and do they not realise that they would be likely to be sitting on an asset of diminishing value? Whichever way the nationalist policy is viewed, it can be seen as a howling disaster.

Mr. Gordon Wilson

Has the hon. Member read the article I wrote in The Scotsman on the subject of a pragmatic depletion policy? If he has he will know that in it I accepted current production on the basis of the hardware which has been put into the North Sea, but that I suggested instead that we move over to a programme of developing the marginal fields, utilising the high revenue fields and concentrating on those which are labour-intensive?

Mr. Gray

I am grateful to the hon. Member for Dundee, East (Mr. Wilson) for giving me such a good synopsis of his article. I shall bear in mind what he said.

The Government have done one or two beneficial things. They recently set up a committee on the involvement of Scottish industry in oil. That was done on 26th September, and I now ask the Minister for information about progress by that committee. There now appear to be about 50,000 indirect and direct jobs from oil development. The number of offshore jobs could rise to nearly 25,000, but that is perhaps an optimistic figure. Jobs must outlive the present oil boom. The Government must take every possible step to ensure that that is achieved.

The market for oilfield machinery is expected to double in the next 10 years according to an article in the Washington Weekly Energy Report of 3rd November. That machinery includes drilling, production and tubular equipment. The increased markets are not restricted to those areas. The "Buy British" campaign outlined in the Financial Times of 21st November gave an interesting catalogue of North Sea requirements over the next decade. However, we must ensure that we do not overlook the potential of the Latin American and Indonesian countries as well as of China and the USSR. I do not suggest that we try to compete in those areas and tow platforms to places so far away. However, there is a wide-ranging market and I hope that the Government will do everything possible to ensure that we have a full share of it.

I shall not speak much longer because I agreed with the Minister to a time limit in this debate. In his opening remarks my right hon. Friend asked a number of questions to which the Secretary of State did not reply. I hope that the Minister of State will consider answering those questions when he winds up the debate. My right hon. Friend referred to a conclusion which was drawn in an article in the Financial Times. He asked the Secretary of State whether he challenged that conclusion. If he does not, will the Minister care to comment on it now?

The second question which my right hon. Friend asked was whether the Secretary of State disputes the statement that extra debt interest payments alone will be double the anticipated revenues from United Kingdom oil in 1980. The Secretary of State did not answer either of those questions but he did more or less confirm that the whole charade of sale and buy back which has been offered to some companies, is the Government's way of obtaining participation.

The debate has been useful. It has been most interesting for hon. Members who served on the Committee to have the views of other hon. Members who did not serve on it. I thank my right hon. and hon. Friends for the valuable contributions which they have made.

9.33 p.m.

The Minister of State, Department of Energy (Mr. John Smith)

I should like to thank all hon. Members who have congratulated me on my present appointment. I greatly appreciate the kind comments that they have made. In view of some of the remarks that have been made I should like to say what a privilege it is for me to succeed such a devoted public servant as Lord Balogh, who, over many years, has done a great deal to satisfy the public interests of this country. The most important aspect of his work was, in opposition, to expose the deficiencies in the Conservative oil policy, and, in Government, to take constructive action to correct the deficiencies which this Government inherited.

The curious feature of this debate has been the way in which the great assault upon Government policy, which was presumed to take place on a Supply Day, petered out so early in the day. I do not know what a fly on the wall would have thought of the Shadow Cabinet deliberations last week on what subject they would select for a Supply Day debate this week, but I expected that if the Opposition thought that the offshore oil policy merited a Supply Day debate we should hear a scorching criticism of our policy. Moreover, one would have expected it to be related to recent events, especially in view of the remarks which the right hon. Member for Wanstead and Woodford (Mr. Jenkin) made about the Burmah support operation. As the Secretary of State observed trenchantly during the debate, we heard little about that matter today.

All we heard were the faded and battered arguments that we heard throughout the debates on the Petroleum and Submarine Pipe-lines Bill. The right. hon. Gentleman has not changed his presentation. Again, out of his yellowing folder, came the headlines of the Daily Telegraph, trotted out in succession as if they amounted to some critique of Government policy.

I imagine that what was in the right hon. Gentleman's mind when he originally thought of a Supply debate on this topic as a Trafalgar or a Waterloo, turned out to have as much justification as the War of Jenkin's Ear. The truth may be that someone told the right hon. Gentleman some of the facts of the Burmah situation between the decision to have this debate and his speech today.

The most depressing factor about Opposition Members' speeches was their tendency to interpret every difficulty in the North Sea as though it were a resounding condemnation of Government policy. They are so anxious to stress what they see as the difficulties that they do this country a great disservice. It is a great disservice to say that exploration and development work in the North Sea is coming to a halt, as many hon. Members said today.

So, in face of the rumours and the Daily Telegraph headlines, I should like to give the House some of the facts about North Sea oil development this year. In this year, we have broken all records, I think, in terms of the level of offshore activity at each stage of the exploration and development process. First, 27 or 28 exploration rigs are drilling, as compared to 24 or 25 last year, against a Government forecast of 30—not a forecast of 40, as the right hon. Member well knows. He should go back and look at the last issue of the Brown Book: he will find it there. I have told him several times before that he is wrong to use the figure of 40. Perhaps he will now check the record again and see how wrong he is.

This year, 23 oil discoveries and one gas condensate find have been made, and we expect many to be promising after appraisal is completed. That is almost double the number of oil discoveries in any one year since oil exploration started, six years ago. Six giant oil platforms have been completed, towed out, and successfully installed, two ahead of schedule.

I was glad that the hon. Member for Ross and Cromarty (Mr. Gray) paid tribute—albeit, perhaps, only to one yard—to the success of the British platform yard capability. Far too few people realise that two oil production platform yards in this country successfully completed two platforms well ahead of schedule, and that one of them did it without losing a single day through industrial disputes. These are some of the facts not only about the oil industry but about the British industrial situation generally. We could hear much more about them than some of the talk that we get from the Opposition.

Mr. Skeet

The Minister says "we" have achieved all this with rigs in the North Sea. Does he mean the Government? So far as I know, the Government do not have one rig or platform. Should he not say that it is private enterprise doing this work, harassed by the Government?

Mr. Smith

The hon. Member may be unfamiliar with the concept of allying himself with the public interest, but when I say "we", I am talking in terms of the successes of the nation. I think that the development of our North Sea resources is a success for the nation—a success which has been persistently knocked by the Opposition.

We have also been told that development finance for the North Sea is drying up. If that is so, it is a curious fact that by the end of this year £1,300 million will have been committed in development expenditure for the United Kingdom sector. We did not hear a word from the Opposition about the fact that oil is now flowing from that sector.

Mr. Tim Renton (Mid-Sussex)

All the facts which the hon. Gentleman has been trotting out stem from orders placed two or three years ago before the present Government came to power. Is it not also the case that the construction yards in this country have not received one new order for a production platform in the last six months, although the Government have put £15 million into those yards?

Mr. Smith

The hon. Gentleman should appreciate that I was rebutting an argument put forward by hon. Members opposite today that development finance had dried up. I was pointing out that this was not true. I reminded the House that about £1,300 million had been committed during this year. For example, the financial controller of BP sees no difficulty in raising finance for the quarter, while the Chairman of Texaco, has stated: We are planning to continue an active drilling programme in the United Kingdom/North Sea in 1976 with the objective of proving sufficient reserves in individual areas to support the installation for producing facilities. That is a declaration of confidence that Block 15/16 is going to be commercial. The hon. Member for Mid-Sussex (Mr. Renton says that this work results from decisions taken several years ago, and that is correct. The exploration comes first. But this year we have so far math 24 new finds, and that will lead to a considerable expenditure on exploitation.

Mr. Patrick Jenkin

My hon. Friend the Member for Mid-Sussex (Mr. Renton) put a sound point which the hon. Gentleman has not answered. Will he tell us how many new financing deals have been fixed since the last General Election? If he looks at the record, we will see that there have been none at all.

Mr. Smith

The right hon. Gentleman knows that 14 fields have been declared commercial and that financing has been found for 11 and financing for a twelfth is well under way. That is the important point. North Sea oil development will have its ups and downs, its successes as well as its difficulties, and it is an obligation on all of us who comment on the energy scene to give a balanced picture. But I am afraid that the zeal of the Conservative Party to throw any sort of criticism at the Government leads it sometimes to betray the national interest and show lack of concern for the success of North Sea oil development.

It is somewhat strange that the Opposition should choose oil policy as a stick to beat the Government, in the light of the Report of the Public Accounts Committee in a previous Parliament. That Report severely criticised the Conservative Government's oil policy, or lack of it. The present Government inherited no taxation proposals, no depletion controls, no proposals for participation. The hon. Member for Sutton and Cheam (Mr. Macfarlane) spoke of energy policy throughout the 1980s and 1990s, but how that could be done without depletion controls it is hard to imagine. The Public Accounts Committee criticised a previous licensing ground.

The right hon. Member for Orkney and Shetland (Mr. Grimond) asked about the effect of more recent legislation upon the Zetland County Council Act. The Petroleum and Submarine Pipe-lines Act does not affect or impinge upon the powers and responsibilities conferred under the Zetland County Council Act.

The right hon. Gentleman also raised the question of broken pipelines, and I understand his concern when a piece of pipeline detached itself from the seabed and floated to the surface. Our inspectors have been in touch with the company, and a full investigation has been carried out. We are satisfied that it has been thorough. As a result of the report, we will consider whether we should make regulations giving us power to cover any situation which may seem defective. We shall have difficulties—for example, there has been another more recently in the Beryl field. We must accept that extraction of hydrocarbon resources from such difficult waters will cause difficulties from time to time. Our obligation as a Government—indeed, our obligation as a Parliament—is to make sure that we have the most effective and tight Regulations that we can devise covering safety, the prevention of pollution and the prevention of accidents, but we shall not, I think, always be able to defeat the elements in the North Sea.

My hon. Friend the Member for West Stirlingshire (Mr. Canavan) asked some questions about the Grangemouth refinery. I am afraid that I cannot give a detailed answer about what the future refining policy will be there, but I remind him that the whole of the Forties field oil could not be refined at Grangemouth, because the full facilities at Grangemouth will not be large enough to do that. However, I have noted his concern.

My hon. Friend the Members for Leeds, West (Mr. Dean) and Aberdeen North (Mr. Hughes) asked whether we were taking sufficient care in the privision of safety regulations. The House knows that there has been a good deal of concern about diving safety. I believe that we now have the most advanced diving safety regulations in the world, and I understand that the Norwegians intend to copy our regulations almost word for word. We have also started an under water diving training centre.

A great deal of the fight and criticism in the debate turned on the question of participation. It is clear that the Conservative Party does not yet understand the reasons for participation. This cannot be due to any lack of explanation from the Government side. My right hon. Friend and many other Government spokesmen have frequently spelled out the reasons; indeed, my right hon. Friend did so again today. I shall state them once again, for the special benefit, perhaps of the hon. Member for Horsham and Crawley (Mr. Hordern) who seemed particularly confused.

There are several reasons why the Government, in common with many other Governments, wish to see State participation in the development of our oil resources. First, we shall thereby obtain title to the oil once it leaves the ground. The oil in the ground is already in State ownership, that having been provided for by a previous Conservative Government, but our title to it would disappear once it was extracted. We want to have a say in the disposal of participation oil, which will be of great strategic importance to this country.

Second, we do not want to be outsiders in the development of our own oil resources. If we did not have the British National Oil Corporation and we did not have participation, we should be outsiders. We want to have some knowledge, and we want to gain expertise and have a capacity to exercise some control over the development of our national resources. I should have thought that those were crystal-clear objectives, and sound reasons for having participation.

Mr. Hordern

The hon. Gentleman has done no more than expound purposes which would have been achieved without 51 per cent. participation in any case. Those could certainly have been secured. He has himself admitted, as did his right hon. Friend, that 51 per cent. participation will not bring in a penny of extra revenue. The House would like to know who is responsible for this participation and who is responsible for the negotiations. Is it the Secretary of State for Energy, or is it the Chancellor of the Duchy of Lancaster? Where is the Chancellor of the Duchy?

Mr. Smith

With respect, that is rather a hotchpotch of questions. First, I note that the hon. Gentleman does not appear to challenge the desirability of having the title and a say in the disposal of oil. Without the BNOC having an influence in the operating committees and the development of fields we should not have that inside interest and control which is essential in the national interest. That is what has led so many other countries to follow the route of participation. To many of them it is not a matter of political debate as it is here, and many of them which accept that it is a desirable objective are by no means Left Wing in character.

I hope that I have succeeded to some extent in explaining some of the reasons to the Opposition, but I recognise that their difficulty is that they do not seem to have learned from their mistakes in the past. I suspect that, like the Bourbons, they have neither learned anything, nor forgotten anything. We still hear the same old arguments trotted out against participation.

We heard some argument today from the Scottish National Party, too, but I noticed that the hon. Member for Dundee, East (Mr. Wilson) at no point said anything about the SNP policy of slowing down the rate of development to 50 million tons a year. In view of the frequency with which this idea is trotted out throughout Scotland, I found it surprising that it was not mentioned once today. I now understand the reason. The explanation of current SNP policy that the hon. Gentleman gave to the hon. Member for Ross and Cromarty was so convoluted that it was no doubt difficult to explain that idea. However he words it, the increasing slowing down of the rate of production of North Sea oil would slaughter the platform production industry, the module fabricating industry, and all the associated engineering works all over Scotland.

The Scottish National Party tends to speak with one voice in a constituency and another here. The hon. Gentleman gave a perfect example when he criticised the Government's decision to develop Portavadie as a concrete production platform site. I remind the House of the background to the concrete platform story in this country. Because we did not have sites, some years ago we lost four important concrete platform orders to Norway. Those platforms are now being towed into position and are a charge on the balance of payments affecting the record of this Government. In order to correct the situation, we have taken steps to ensure that there is an adequate supply of platform production capacity in this country.

Mr. Gordon Wilson

Too much.

Mr. Smith

The hon. Member for Argyll (Mr. MacCormick) is always asking me to spend more money on that platform site. He has consistently advocated the development of the site. He is conveniently absent when SNP Members take another line in the House. It is the same old business of one word here and another in the constituency. Members of the SNP should reflect now and again that whilst it is easy to be all things to all men, it is not a worthy posture for a political party.

Mr. Gordon Wilson

It should be remembered that the Government's estimate of platform orders is well below the figure they originally had in mind. If they had followed the slow development policy that the SNP suggested they would never have got into all the trouble they are in now.

Mr. Smith

I notice that the hon. Gentleman did not once refer to Portavadie or my accusations about the two-faced attitude of the SNP. We have taken a decision to develop there, with public money, a new platform site, which I believe is essential. It is difficult to predict whether the demand will be for concrete or steel platforms. If the tendency is towards concrete platforms, we must have the capacity if we want to build up our indigenous industry.

The hon. Member for Ross and Cromarty referred to the offshore supplies side of the work of the Department of Energy. I am grateful that he did, because it is often ignored. There is still an enormous market for the provision of equipment for the British sector of the North Sea—a market that can be gained by British industry. We are taking important steps towards increasing our share of that market. The code of practice and memorandum of understanding agreed between the Government and the United Kingdom Offshore Operators Association have now been signed by 36 of the 42 member companies. That is a signal advance towards obtaining a full and fair opportunity for British industry. I hope that British industry will follow up the opportunities that it will create.

The hon. Gentleman also referred to export capacity. We were very anxious to develop an export strategy. The Off- shore Supplies Office will be represented at all four international exhibitions to be held in the coming year. I believe that its support for British industry will result in our industry's achieving a greater share of the orders for the North Sea and abroad.

What we have seen today, in the criticism of the Government's participation policy, is yet another stage of the moving front of Conservative policy.

Hon Members will remember that little more than a year ago the taxation proposals of the Government were first issued. There was a great howl from all the oil companies who spoke about Draconian measures and all the rest of it. [Interruption.] It is right that proposals should be modified as they go through Parliament. That is the purpose of Parliament. Some companies still complain that the Government's new policies are excessive. But I believe that our taxation policies are just about right. [Interruption.] I do not know why Opposition members try to shout me down, since, in their tour of office, they were supposed to have undertaken a review of taxation, but it did not amount to very much.

We have had a mixture of confused mis-explanations from former Conservative Ministers. When we produced the Petroleum and Submarine Pipe-lines Bill, which sought to remedy certain Conservative deficiencies, again there were considerable criticisms from the Opposition. The previous Conservative Government so mismanaged the licensing arrangements that they issued licences for a period of 46 years without any further provision.

In view of criticisms made of previous Labour Governments, I should point out that the Public Accounts Committee drew a distinction between the first three rounds of licensing and the fourth round. The first three related principally to gas, and the fourth dealt with oil. That is an important distinction between the policies of the present Labour Government and the previous Conservative Government.

The Conservatives are now full of talk about participation. That is now the moving front of the Conservative Party. But when the Government have successfully concluded the participation exercise, that argument will die down. In years to come people will look back on the development of North Sea oil policy and all this will appear obvious. They will wonder what all the fuss and controversy were about.

Our objective, as a Government, has been to seek to do all we can in the national interest to develop gas and oil resources in the North Sea and to secure the situation for the future. That is the basis of a great future of this country. As we move towards the 1980s, we shall be an energy-strong country. We shall be the most important country, in energy terms, in Western Europe, and one of the most well-based in the world.

Mr. Skeet

At what cost?

Mr. Smith

That is a concept for the faint hearts of the Conservative Party to ponder.

Mr. Patrick Jenkin

rose—

Mr. Smith

I wish to make one reference to the way in which we see the present situation. My hon. Friend the Member for Cannock (Mr. Roberts) rightly drew attention to the fuel energy situation

and to the fact that in addition to our oil resources we have substantial coal resources that will last us for centuries—indeed, long after our oil resources have been exhausted.

We are conscious of the need for a genuinely integrated energy policy. Given the strength of our indigenous resources, believe that this country can achieve an integrated energy policy that will maximise the efficient use of all our fuel production.

Therefore, instead of the Opposition tonight attacking the Government, they should be praising us for securing so much in the national interest. When the history of this matter is written we shall have achieved not only an effective policy for the development of oil and gas resources but a policy for our coal industry and also for our nuclear power industry. This is a policy of which we should be proud, and I am sorry that, once again, the Conservatives have chosen for their weapon the boomerang.

Question put. That this House do now adjourn:—

The House divided: Ayes 275, Noes 293.

Division No. 10.]	AYES	[10.0 p.m.
Adley, Robert	Clark, Alan (Plymouth, Sutton)	Fry, Peter
Aitken, Jonathan	Clark, William (Croydon S)	Galbraith, Hon. T. G. D.
Alison, Michael	Clarke, Kenneth (Rushcliffe)	Gardiner, George (Reigate)
Amery, Rt Hon Julian	Clegg, Walter	Gardner, Edward (S Fylde)
Arnold, Tom	Cockcroft, John	Gilmour, Rt Hon Ian (Chesham)
Atkins, Rt Hon H. (Spelthorne)	Cooke, Robert (Bristol W)	Gilmour, Sir John (East Fife)
Awdry, Daniel	Cope, John	Glyn, Dr Alan
Bain, Mrs Margaret	Cormack, Patrick	Goodhew, Victor
Baker, Kenneth	Costain, A. P.	Goodlad, Alastair
Banks, Robert	Crawford, Douglas	Gorst, John
Bell, Ronald	Critchley, Julian	Gow, Ian (Eastbourne)
Bennett, Sir Frederic (Torbay)	Crouch, David	Gower, Sir Raymond (Barry)
Bennett, Dr Reginald (Fareham)	Crowder, F. P.	Grant, Anthony (Harrow, C)
Benyon, W.	Davies Rt Hon J. (Knutsford)	Gray, Hamish
Biffen, John	Dean, Paul (N Somerset)	Grieve, Percy
Biggs-Davison, John	Dodsworth, Geoffrey	Griffiths, Eldon
Blaker, Peter	Douglas-Hamilton, Lord James	Grimond, Rt Hon J.
Body, Richard	Drayson, Burnaby	Grist, Ian
Boscawen, Hon Robert	du Cann, Rt Hon Edward	Grylls, Michael
Bottomley, Peter	Durant, Tony	Hall, Sir John
Bowden, A. (Brighton, Kemptown)	Dykes, Hugh	Hall-Davis, A. G. F.
Boyson, Dr Rhodes (Brent)	Eden, Rt Hon Sir John	Hamilton, Michael (Salisbury)
Braine, Sir Bernard	Edwards, Nicholas (Pembroke)	Hampson, Dr Keith
Brittan, Leon	Elliott, Sir William	Hannam, John
Brocklebank-Fowler, C.	Emery, Peter	Harrison, Col Sir Harwood (Eye)
Brotherton, Michael	Evans, Gwynfor (Carmarthen)	Harvie Anderson, Rt Hon Miss
Brown, Sir Edward (Bath)	Eyre, Reginald	Hastings, Stephen
Bryan, Sir Paul	Fairbairn, Nicholas	Havers, Sir Michael
Buchanan-Smith, Alick	Fairgrieve, Russell	Hawkins, Paul
Buck, Antony	Farr, John	Hayhoe, Barney
Budgen, Nick	Fell, Anthony	Heath, Rt Hon Edward
Bulmer, Esmond	Finsberg, Geoffrey	Henderson, Douglas
Burden, F. A.	Fisher, Sir Nigel	Heseltine, Michael
Butler, Adam (Bosworth)	Fletcher, Alex (Edinburgh N)	Hicks, Robert
Carlisle Mark	Fletcher-Cooke, Charles	Higgins, Terence L.
Carr, Rt Hon Robert	Fookes, Miss Janet	Holland, Philip
Chalker, Mrs Lynda	Fowler, Norman (Sutton C'f'd)	Hooson, Emlyn
Channon, Paul	Fox, Marcus	Hordern, Peter
Churchill, W. S.	Fraser, Rt Hon H. (Stafford & St)	Howe, Rt Hon Sir Geoffrey
Howell, David (Guildford)	Mitchell, David (Basingstoke)	Smith, Dudley (Warwick)
Hunt, John	Moate, Roger	Speed, Keith
Hurd, Douglas	Monro, Hector	Spence, John
Hutchison, Michael Clark	Montgomery, Fergus	Spicer, Jim (W Dorset)
Irvine, Bryant Godman (Rye)	Moore, John (Croydon C)	Spicer, Michael (S Worcester)
Irving, Charles (Cheltenham)	More, Jasper (Ludlow)	Sproat, Iain
James, David	Morgan, Geraint	Stainton, Keith
Jenkin, Rt Hon P. (Wanst'd & W'df'd)	Morris, Michael (Northampton S)	Stanbrook, Ivor
Jessel, Toby	Morrison, Charles (Devizes)	Stanley, John
Johnson Smith, G. (E Grinstead)	Morrison, Hon Peter (Chester)	Steel, David (Roxburgh)
Johnston, Russell (Inverness)	Mudd, David	Steen, Anthony (Wavertree)
Jones, Arthur (Daventry)	Neave, Airey	Stewart, Donald (Western Isles)
Jopling, Michael	Nelson, Anthony	Stewart, Ian (Hitchin)
Joseph, Rt Hon Sir Keith	Neubert, Michael	Stokes, John
Kaberry, Sir Donald	Newton, Tony	Stradling Thomas J.
Kershaw, Anthony	Nott, John	Tapsell, Peter
Kimball, Marcus	Oppenheim, Mrs Sally	Taylor, R. (Croydon NW)
King, Evelyn (South Dorset)	Page, John (Harrow West)	Taylor, Teddy (Cathcart)
King, Tom (Bridgwater)	Page, Rt Hon R. Graham (Crosby)	Tebbit, Norman
Kitson, Sir Timothy	Pattie, Geoffrey	Temple-Morris, Peter
Knight, Mrs Jill	Penhaligon, David	Thatcher, Rt Hon Margaret
Knox, David	Percival, Ian	Thomas, Dafydd (Merioneth)
Lamont, Norman	Peyton, Rt Hon John	Thomas, Rt Hon P. (Hendon S)
Lane, David	Pink, R. Bonner	Thompson, George
Langford-Holt, Sir John	Price, David (Eastleigh)	Thorpe, Rt Hon Jeremy (N Devon)
Latham, Michael (Melton)	Prior, Rt Hon James	Townsend, Cyril D.
Lawrence, Ivan	Pym, Rt Hon Francis	Trotter, Neville
Lawson, Nigel	Rathbone, Tim	Tugendhat, Christopher
Lestor, Jim (Beeston)	Rawlinson, Rt Hon Sir Peter	van Straubenzee, W. R.
Lewis, Kenneth (Rutland)	Rees, Peter (Dover & Deal)	Vaughan, Dr Gerard
Lloyd, Ian	Rees-Davies, W. R.	Viggers, Peter
Loveridge, John	Renton, Rt Hon Sir D. (Hunts)	Wakeham, John
Luce, Richard	Ranton, Tim (Mid-Sussex)	Walder, David (Clitheroe)
McAdden, Sir Stephen	Ridley, Hon Nicholas	Walker, Rt Hon P. (Worcester)
MacCormick, Iain	Ridsdale, Julian	Walker-Smith, Rt Hon Sir Derek
McCrindle, Robert	Rifkind, Malcolm	Wall, Patrick
Macfarlane, Neil	Rippon, Rt Hon Geoffrey	Walters, Dennis
MacGregor, John	Roberts, Wyn (Conway)	Warren, Kenneth
Macmillan, Rt Hon M. (Farnham)	Rodgers, Sir John (Sevenoaks)	Watt, Hamish
McNair-Wilson, M. (Newbury)	Rossi, Hugh (Hornsey)	Weatherill, Bernard
McNair-Wilson, P. (New Forest)	Rost, Peter (SE Derbyshire)	Wells, John
Madel, David	Royle, Sir Anthony	Welsh, Andrew
Marshall, Michael (Arundel)	Sainsbury, Tim	Whitelaw, Rt Hon William
Marten, Neil	St. John-Stevas, Norman	Wiggin, Jerry
Mates, Michael	Scott, Nicholas	Wigley, Dafydd
Mather, Carol	Shaw, Giles (Pudsey)	Wilson, Gordon (Dundee E)
Maude, Angus	Shaw, Michael (Scarborough)	Winterton, Nicholas
Maudling, Rt Hon Reginald	Shelton, William (Streatham)	Wood, Rt Hon Richard
Mawby, Ray	Shepherd, Colin	Young, Sir G. (Ealing, Acton)
Maxwell-Hyslop, Robin	Shersby, Michael	Younger, Hon George
Mayhew, Patrick	Sims, Roger
Meyer, Sir Anthony	Sinclair, Sir George	TELLERS FOR THE AYES
Miller, Hal (Bromsgrove)	Skeet, T. H. H.	Mr. Cecil Parkinson and
Miscampbell, Norman	Smith, Cyril (Rochdale)	Mr. Spencer Le Marchant.
NOES
Abse, Leo	Buchan, Norman	Davies, Bryan (Enfield N)
Allaun, Frank	Buchanan, Richard	Davies, Denzil (Llanelli)
Anderson, Donald	Butler, Mrs Joyce (Wood Green)	Davies, Ifor (Gower)
Archer, Peter	Callaghan, Rt Hon J. (Cardiff SE)	Davis, Clinton (Hackney C)
Armstrong, Ernest	Callaghan, Jim (Middleton & P)	Deakins, Eric
Ashley, Jack	Campbell, Ian	Dean, Joseph (Leeds West)
Ashton, Joe	Canavan, Dennis	Delargy, Hugh
Atkins, Ronald (Preston N)	Cant, R. B.	Dell, Rt Hon Edmund
Atkinson, Norman	Carmichael, Neil	Dempsey, James
Bagier, Gordon A. T.	Carter, Ray	Doig, Peter
Barnett, Guy (Greenwich)	Carter-Jones, Lewis	Dormand, J. D.
Barnett, Rt Hon Joel (Heywood)	Cartwright, John	Douglas-Mann, Bruce
Bates, Alf	Castle, Rt Hon Barbara	Duffy, A. E. P.
Bean, R. E.	Cocks, Michael (Bristol S)	Dunn, James A.
Benn, Rt Hon Anthony Wedgwood	Coleman, Donald	Dunnett, Jack
Bennett, Andrew (Stockport N)	Colquhoun, Mrs Maureen	Eadie, Alex
Bidwell, Sydney	Concannon, J. D.	Edge, Geoff
Bishop, E. S.	Conlan, Bernard	Edwards, Robert (Wolv SE)
Blenkinsop, Arthur	Cook, Robin F. (Edin C)	Ellis, John (Brigg & Scun)
Boardman, H.	Corbett, Robin	English, Michael
Booth, Albert	Cox, Thomas (Tooting)	Ennals, David
Boothroyd, Miss Betty	Craigen, J. M. (Maryhill)	Evans, Fred (Caerphilly)
Bottomley, Rt Hon Arthur	Crawshaw, Richard	Evans, Ioan (Aberdare)
Boyden, James (Bish Auck)	Cronin, John	Evans, John (Newton)
Bradley, Tom	Crosland, Rt Hon Anthony	Ewing, Harry (Stirling)
Bray, Dr Jeremy	Cryer, Bob	Faulds, Andrew
Brown, Hugh D. (Provan)	Cunningham, G. (Islington S)	Fernyhough, Rt Hon E.
Brown, Robert C. (Newcastle W)	Cunningham, Dr J. (Whiteh)	Fitch, Alan (Wigan)
Brown, Ronald (Hackney S)	Davidson, Arthur	Fitt, Gerard (Belfast W)

Flannery, Martin	Luard, Evan	Rowlands, Ted
Fletcher, Raymond (Ilkeston)	Lyon, Alexander (York)	Sandelson, Neville
Fletcher, Ted (Darlington)	Lyons, Edward (Bradford W)	Sedgemore, Brian
Foot, Rt Hon Michael	Mabon, Dr J. Dickson	Selby, Harry
Ford, Ben	McCartney, Hugh	Shaw, Arnold (Ilford South)
Forrester, John	McElhone, Frank	Sheldon, Robert (Ashton-u-Lyne)
Fraser, John (Lambeth, N'w'd)	MacFarquhar, Roderick	Shore, Rt Hon Peter
Freeson, Reginald	McGuire, Michael (Ince)	Short, Rt Hon E. (Newcastle C)
Garrett, John (Norwich S)	Mackenzie, Gregor	Short, Mrs Renée (Wolv NE)
Garrett, W. E. (Wallsend)	Mackintosh, John P.	Silkin, Rt Hon John (Deptford)
George, Bruce	Maclennan, Robert	Silkin, Rt Hon S. C. (Dulwich)
Gilbert, Dr John	McMillan, Tom (Glasgow C)	Sillars, James
Ginsburg, David	McNamara, Kevin	Silverman, Julius
Golding, John	Madden, Max	Skinner, Dennis
Gould, Bryan	Magee, Bryan	Small, William
Gourlay, Harry	Mahon, Simon	Smith, John (N Lanarkshire)
Graham, Ted	Mallalieu, J. P. W.	Snape, Peter
Grant, George (Morpeth)	Marks, Kenneth	Spearing, Nigel
Grant, John (Islington C)	Marquand, David	Spriggs, Leslie
Grocott, Bruce	Marshall, Dr Edmund (Goole)	Stallard, A. W.
Hamilton, James (Bothwell)	Marshall, Jim (Leicester S)	Stewart, Rt Hon M. (Fulham)
Hardy, Peter	Maynard, Miss Joan	Stoddart, David
Harper, Joseph	Meacher, Michael	Stonehouse, Rt Hon John
Harrison, Walter (Wakefield)	Mellish, Rt Hon Robert	Stott, Roger
Hart, Rt Hon Judith	Mendelson, John	Strang, Gavin
Hattersley, Rt Hon Roy	Mikardo, Ian	Strauss, Rt Hon G. R.
Hatton, Frank	Millan, Bruce	Summerskill, Hon Dr Shirley
Hayman, Mrs Helene	Miller, Mrs Millie (Ilford N)	Swain, Thomas
Healey, Rt Hon Denis	Mitchell, R. C. (Soton, Itchen)	Taylor, Mrs Ann (Bolton W)
Heffer, Eric S.	Moonman, Eric	Thomas, Jeffrey (Abertillery)
Hooley, Frank	Morris, Alfred (Wythenshawe)	Thomas, Mike (Newcastle E)
Horam, John	Morris, Charles R. (Openshaw)	Thomas, Ron (Bristol NW)
Hoyle, Doug (Nelson)	Morris, Rt Hon J. (Aberavon)	Thorne, Stan (Preston South)
Huckfield, Les	Moyle, Roland	Tierney, Sydney
Hughes, Rt Hon C. (Anglesey)	Mulley, Rt Hon Frederick	Tinn, James
Hughes, Robert (Aberdeen. N)	Murray, Rt Hon Ronald King	Tomlinson, John
Hughes, Roy (Newport)	Newens, Stanley	Tomney, Frank
Hunter, Adam	Noble, Mike	Torney, Tom
Irvine, Rt Hon Sir A. (Edge Hill)	Oakes, Gordon	Tuck, Raphael
Irving, Rt Hon S. (Dartford)	Ogden, Eric	Urwin, T. W.
Jackson, Colin (Brighouse)	O'Halloran, Michael	Varley, Rt Hon Eric G.
Janner, Greville	O'Malley, Rt Hon Brian	Wainwright, Edwin (Dearne V)
Jay, Rt Hon Douglas	Orbach, Maurice	Walden, Brian (B'ham, L'dyw'd)
Jeger, Mrs Lena	Orme, Rt Hon Stanley	Walker, Harold (Doncaster)
Jenkins, Hugh (Putney)	Ovenden, John	Walker, Terry (Kingswood)
Jenkins, Rt Hon Roy (Stechford)	Owen, Dr David	Ward, Michael
John, Brynmor	Padley, Walter	Watkins, David
Johnson, James (Hull West)	Palmer, Arthur	Watkinson, John
Johnson, Walter (Derby S)	Park, George	Weetch, Ken
Jones, Alec (Rhondda)	Parker, John	Wellbeloved, James
Jones, Barry (East Flint)	Parry, Robert	White, Frank R. (Bury)
Jones, Dan (Burnley)	Peart, Rt Hon Fred	White, James (Pollok)
Judd, Frank	Pendry, Tom	Whitlock, William
Kaufman, Gerald	Perry, Ernest	Willey, Rt Hon Frederick
Kelley, Richard	Phipps, Dr Colin	Williams, Alan (Swansea W)
Kerr, Russell	Prentice, Rt Hon Reg	Williams, Alan Lee (Hornch'ch)
Kilroy-Sllk, Robert	Price, C. (Lewisham W)	Williams, Rt Hon Shirley (Hertford)
Kinnock, Neil	Price, William (Rugby)	Williams, W. T. (Warrington)
Lambie, David	Radice, Giles	Wilson, Alexander (Hamilton)
Lamborn, Harry	Richardson, Miss Jo	Wilson, Rt Hon H. (Huyton)
Lamond, James	Roberts, Albert (Normanton)	Wilson, William (Coventry SE)
Latham, Arthur (Paddington)	Roberts, Gwilym (Cannock)	Wise, Mrs Audrey
Leadbitter, Ted	Robertson, John (Paisley)	Woodall, Alec
Lee, John	Roderick, Caerwyn	Woof, Robert
Lestor, Miss Joan (Eton & Slough)	Rodgers, George (Chorley)	Wrigglesworth, Ian
Lewis, Arthur (Newham N)	Rodgers, William (Stockton)	Young, David (Bolton E)
Lewis, Ron (Carlisle)	Rooker, J. W.
Lipton, Marcus	Roper, John	TELLERS FOR THE NOES:
Litterick, Tom	Rose, Paul B.	Mr. Laurie Pavitt and
Loyden, Eddie	Ross, Rt Hon W. (Kilmarnock)	Miss Margaret Jackson.

Question accordingly negatived.