ANNUAL REPORT

HC Deb 05 November 1975 vol 899 cc452-65

Lords Amendment: No. 9, in page 12, line 3, at end insert: (cc) a statement of the amount by way of petroleum revenue tax and the amount by way of corporation tax which the Corporation estimates would, but for section 9(1) of this Act, have been payable by the Corporation and relevant subsidiaries in respect of their profit for that year;".

Read a Second time.

Mr. Tim Renton (Mid-Sussex)

I beg to move, as an amendment to the Lords amendment, at end insert: 'and a statement of the discounts, concessions and any other benefits that were, in the view of the corporation, available to the corporation by virtue of its being a public corporation'. It is with diffidence that I move this amendment since I was not a member of the Standing Committee which considered the Bill. The fact remains that many Opposition Members regard the BNOC as another hydra-headed monster in the public sector and fail to understand why at a time when there is so much concern about the growth of employment in the public sector and its decline in the private sector, the Government should create yet another public corporation.

Government Ministers, notably Lord Balogh in another place, have assured us constantly that the Corporation would be efficient and that it would trade fairly. The noble Lord said on one occasion that the Government had gone out of their way to stress that when the Corporation was in competition with the private sector it would act commercially.

In moving this amendment, therefore, I am saying, in effect, that the Corporation should declare its hand openly and clearly in its annual report that it has acted commercially and fairly as if it were a private company, and that in cases where it obtains benefits which are not available to a competitor in the private sector, that should be set forth in the accounts.

Before I go further I should declare an interest in this matter as a director of a company which has some interests in oil exploration.

Ministers may say that this is purely theoretical and that it could not arise that the BNOC should obtain such special concessions or benefits. I wonder whether that is the case. I can imagine a situation developing in which, for example, the BNOC was given a monopoly to supply all the oil and gas used by Government Departments or when the Corporation was given preferential treatment in its planning applications for filling stations. These things, if they happen, should be specified in the annual report of the BNOC. I regard them as real possibilities.

6.0 p.m.

At present, in negotiating the 51 per cent. participation in existing licences, the Government are asking the oil companies to have regard to special factors of importance because of the Government's involvement. They are asking the oil companies to grant a discount on the purchase price because oil projects will be that much more creditworthy, they say, as a result of the Government's involvement. Alas, and without in any way wishing to be unpatriotic, I fail to see that the involvement of the Government makes these projects more creditworthy. Indeed, the opposite is the case, in my opinion. None the less, that is the argument that the Government are putting forward, that because of their involvement the cost of obtaining 51 per cent. participation should be reduced below normal.

It is because one sees this special benefit for a public corporation, which is part of the Government's structure, continuing in the future that my hon. Friends and I, have tabled this amendment. We wish these exceptional circumstances to be brought out into the open. When the Secretary of State moves that this House should agree to the Lords amendment, stating that all that the BNOC should theoretically pay by way of PTRT should be specified in the accounts, he will already be going some way to accepting the unusual position in which the BNOC will find itself. I think it is wrong that the BNOC should not pay PRT in the first place, but if it is not to pay, and if a figure is to be produced in the accounts of the amount of tax which it would have paid if it were liable, the Government are already ensuring that the BNOC's accounts will take an unusual form. Let the Government go further and say that in line with their commitment the BNOC will act commercially in the same way as any other independent oil company. Then let them agree that if the BNOC as a statutory corporation obtains special privileges, these should be spelt out in the annual report.

Mr. Tim Rathbone (Lewes)

May I add a few words to what my hon. Friend the Member for Mid-Sussex (Mr. Renton) said about the purpose of this amendment? It is, to pick up one point in his theme, essential to enable people in this House, in industry and those outside analysing these affairs, to have a system of real comparison between these special circumstances which pertain to the BNOC and the operations of the normal commercial oil company. This is particularly important in view of the rejection of Lords Amendment No. 2 to Clause 3 earlier in the debate.

We believe that it is essential to disclose wherever the BNOC may discriminate between purchasers of its crude oil, either to suit its own ends or because of some political end which the Secretary of State may have particularly in mind in his dealings with other countries or with other parts of the oil industry in this country. There should be disclosure wherever the BNOC may charge un-economically low prices in order to gain some advantage vis-à-vis other companies and vis-à-vis other countries by buying a share of the market or, in extreme cases, in deciding to put some other commercial oil company out of business.

We are not arguing the pros and cons of the operation of the BNOC. We are concerned purely with the report. We maintain that if the Government were to accept this amendment it would be in the interests of more open business and more open government.

Mr. Benn

There are two issues before the House—the amendment which has just been moved and the motion that we should agree with the Lords in the amendment about PRT. May I take the amendment first—

Mr. Deputy Speaker

Order. I am sorry to interrupt the Minister, but there is only one question before the House, and that is the amendment.

Mr. Benn

I apologise for linking the two issues, Mr. Deputy Speaker. Perhaps you will forgive me for not having quite understood the order in which we are taking our business. In that case, I address myself to the amendment to the Lords amendment.

Mr. Patrick Jenkin

On a point of order, Mr. Deputy Speaker. I freely confess that this is a matter of my ignorance. Mr. Speaker has selected Lords Amendment No. 9 and the amendment in the name of my hon. Friend the Member for Mid-Sussex (Mr. Renton) for debate together. You have just ruled that because my hon. Friend's amendment is the only one that has been moved, we have to address ourselves solely to that.

Mr. Deputy Speaker

The right hon. Gentleman has established his point. The ignorance is not on the Government Front Bench. It is in this quarter. Therefore, the Secretary of State may discuss the two together.

Mr. Benn

I am so bewildered by confessions of guilt and offers of help that I am not quite sure what I should do. Perhaps I need be no more precise than say that I shall take the two points together. Both relate to the degree of disclosure.

The amendment to the Lords amendment invites the BNOC to operate under—I am not quite sure how to describe it—a bubble of transparency under which no oil company in the world is asked to operate. For hon. Gentlemen opposite, one of whom has fairly disclosed an interest, to suppose that any oil company could operate under a statutory provision that all discounts, concessions or other benefits available to it should be made public, is an absurdity.

Mr. Tim Renton rose—

Mr. Benn

The hon. Gentleman has made his point. I will give way in a minute. If there is one thing that is absolutely clear about the oil industry, whether one is talking about the young John D. Rockefeller or some of the young Arabs in OPEC who are now trying to establish a commanding position in the oil industry, it is that there has not been at any stage disclosure of this character. It would be wholly wrong to ask us, who are entering this industry fresh, to operate under such a disadvantage.

Mr. Tim Renton

I am obliged to the right hon. Gentleman for giving way. He has, not for the first time, failed to read the whole of an amendment. We are not asking the BNOC to declare all the discounts and concessions available to it. We are asking that it should declare those concessions and benefits which are available to it by virtue of its being a public corporation—not those which would be available to it if it were to become an eighth sister with the other seven sisters, but simply those which it receives by virtue of its being a statutory corporation.

Mr. Benn

That does not very much alter the argument which the hon. Gentleman is developing. Different companies in the oil business enjoy advantages of a different character arising from their status, from the arrangements which they have inherited, their links with other Governments and the concessions which they have received from other Governments, and they are in exactly the same position as the BNOC, given that some companies receive concessions embodied in some form of treaty arrangement with the host country, and they are not empowered to disclose them in detail to the world.

One of the great problems that we shall face as we build up expertise in the BNOC is the difficulty of getting to the core of the oil business. It is very difficult for a Government to find out what happens in these great multinational companies. One of our objects is to find out, because we think it would be in the national interest if we knew. But to saddle the BNOC with a requirement to operate under this bubble of transparency, when its partners and others would not be so doing, would greatly damage the national interest. I cannot put it higher than that.

According to the amendment, it would be only in the view of the corporation", so one would be subject to what the Corporation thought would be an advantage to it, and generally that would not have much validity. The House should bend its mind to the fact that getting information is going to be one of the most difficult things to do, and it would be ludicrous for us to provide a requirement for the Corporation which operates in not one of the major companies, including the State companies in other countries. I hope that the House will not be tempted, therefore.

I come now to an area where we have gone along with an appeal for greater transparency—Lords Amendment No. 9, which I commend to the House. It provides that we should make known, in public in the annual report, an estimate of the amount of petroleum revenue tax that the Corporation would have paid if it had been liable to it. We were sensitive to the arguments on this subject in Committee. We recognised that there were those who wanted the PRT to extend to the Corporation. I do not want to go over the arguments again because we had them out fully before the Bill went to another place. We have been at pains throughout these debates to point out that, given the national oil account into which all the Corporation's revenues will be payable gross, and given the financial duties which will be laid down under Clause 5, it is of no consequence to its competitors whether it pays PRT or not. I adhere to that view.

But, having maintained that view, we have no objection to and welcome the idea of the estimate being made public so that people can see how the division of revenue lies between the notional PRT and the earnings of the Corporation. We are not proposing an audited figure but an estimate. I hope the House will recognise that we have gone as far as we feel we honestly can to meet the anxiety of those who have argued that without PRT applying there would be no possibility of sorting out how well the Corporation was doing in its own right. In that spirit, I ask the House not to accept the Opposition amendment to Lords Amendment No. 9 but to agree to the Lords amendment.

6.15 p.m.

Mr. Patrick Jenkin

My hon. Friend the Member for Mid-Sussex (Mr. Renton) and my hon. Friend the Member for Lewes (Mr. Rathbone) have performed a valuable service in drawing attention to the kind of advantage and benefit which a corporation set up, as this one has been, with highly novel features, not least its financing and the extent to which it exists under Government control and patronage, has as compared with those of its principal competitors.

The Secretary of State resists our amendment on the ground that no other company is subject to the same kind of detailed scrutiny and obligations. There was also an echo of the argument that the Government need to have a State oil company in order to gain an understanding of the workings of the oil industry. This is the kind of thing which I would expect an effective regulatory authority to concern itself with. It is the sort of authority we outlined to the House earlier in the passage of the Bill, an authority which would want to make sure that companies enjoying the kind of advantage that this one will have were not competing unfairly and were subject to the same kind of constraints and operating factors as the rest of the industry.

I can see the difficulties of trying to make the Corporation write into its own report some of the advantages and privileges that the Bill will confer upon it, but I offer this comfort to my hon. Friends—that, if they are not disposed to press their amendment, at any rate they will know that the Conservative Party has taken account of such proposals in those it has put before the country and has spelt out in the debates on an independent regulatory body. That is the way to get information about the oil industry.

I hope that one of these days the right hon. Gentleman—whose attention we need to call for again—will make it his business to call on Mr. George Govier and his team on the Alberta Energy Resources Conservation Board to find out just how much they know about the industry operating in that Province simply because for years they have had the necessary regulatory functions under Alberta legislation.

One does not need to own or compete with an industry in order to understand how it works—I will go on saying that until I am blue in the face—because the waste of money involved in this exercise simply to gain information, which is the Government's only argument, is totally absurd. My hon. Friends may take comfort from the fact that our way of getting this information is likely to be a great deal more economic than that of the Government.

I recognise that Lords Amendment No. 9 is in response to a pledge given on Report in this House and it is welcome as far as it goes. It is right that the Corporation should declare publicly the value of the PRT exemption which it is to enjoy. But I must place firmly on record that we regard it as profoundly unsatisfactory that the Lords amendment needs to be put into the Bill at all. It is necessary because the Corporation is to be exempt from the special tax which will apply to every single one of its competitors on the Continental Shelf.

Lord Kearton, in his first public speech as Chairman of the BNOC, called upon the industry for partnership and good will. Partnership and good will are meaningless and empty concepts if the partners are to start by playing the game according to entirely different rules. Lord Balogh said in another place: There is not a shred of evidence that the money can be used as a type of subsidy in whatever form. It is not a subsidy; it is a remission of tax."—[Official Report, House of Lords, 24th September 1975; Vol. 364, c. 375.] I suggest that that is a totally absurd argument when looked at in an economic context with commercial companies competing against each other in the market. If there are two competing firms, and one is paying a heavy impost on its upstream products and the other is free from that impost, no one will convince me that that freedom from tax is anything other than a straight subsidy.

We must look at this once again. I must apologise if the Secretary of State and his colleagues accuse me of lecturing the Government, but the Government seem so deaf to all rational argument that we are reduced to lecturing. The context is the need to inspire the confidence of the industry and give it the reassurance that it has a viable future under this régime. It is in that context that the exemption from PRT, which makes Lords Amendment No. 9 necessary, is deplorable.

There are two other considerations. The first is the parliamentary control of public spending, which is surely in the forefront of all our minds. This device will over the years remove billions of pounds from effective parliamentary control. It simply means that what would have gone to the Exchequer as PRT and then have to be borrowed under borrowing powers by the BNOC will bypass that procedure and simply slide straight from the BNOC through the national oil account back into the coffers of the BNOC, which will be able to use it to finance capital and current expenditure which will make the £900 million in the borrowing powers in the Bill the mere tip of an iceberg.

But the second argument is one about which I should have thought backbenchers opposite would have had some sensitivity. The Labour Party is already licking its lips at the thought of the huge profits which the BNOC will generate for the nation—profits which were perfectly capable of being yielded by an effective tax system. Here at last, they say, is a profitable State concern. Here will be the justification for the doctrine of nationalisation. But what value will one be able to place on that? Profitable it will be, but it will be exempt from PRT. It will not have to pay the same taxation as the rest of the industry. What faith can anyone place in a system if the only way of ensuring the profitability of the concern is to give it this colossal built-in fiscal privilege?

In Committee, I rehearsed some of the hard practical reasons why we are against this—the conflicts that it will inevitably raise between partners, one of whom is subject to the tax and the other not, when deciding on investment programmes offshore; and the difficulties in pricing products moving downstream if one of the partners is free of PRT.

I remain entirely unconvinced that the Lords amendment goes any way towards remedying the real evils which will flow from this monstrous fiscal privilege that the Government have thought fit to confer on their brainchild. It will go no way at all to avoid the disadvantages. The only thing that it will do—I must make it clear that this at least we welcome—is to make it plain for all to see just what the value of this fiscal privilege is year by year, because the Corporation will have to put an estimate in its annual accounts of what it would have paid if it had been subject to the same fiscal régime as the rest of the industry.

One might say that we should not look a gift horse in the mouth and that even a spavined old nag like this amendment should be welcomed in the context of the monstrosity which the Government are inflicting in the clause. I therefore do not advise my hon. Friends to object to the amendment. It is a help so far as it goes, but it is an amendment which, if they had been upright and honest about it, the Government should never have felt to be necessary, because the BNOC should pay the same taxes as every other oil company operating off our coasts.

Mr. Grimond

Even if the amendment to the amendment is rejected, I hope that the BNOC will take note of some of the things said in connection with it. The House would welcome some statement in the Corporation's annual report if it gets the type of concession or contract which has been mentioned.

In Committee, I drew down some fire on my head, not only from the Ministers but even from the right hon. Member for Wanstead and Woodford (Mr. Jenkin), by suggesting that there might conceivably be circumstances in which hypothecation might be examined. I do not think that I went any further than that. In a sense, of course, the arrangements now made with the national oil account are a species of hypothecation. I suspect that the Government are giving a hostage to the SNP—whose members are not here to take advantage of this interesting suggestion. If a Government once divert revenue from the Treasury of the United Kingdom for special purposes, they weaken the case that the revenues of the United Kingdom must be considered more or less as a whole and paid into one Treasury for the benefit of all the islands of the United Kingdom.

I wonder whether at some point in our debates we may have some explanation by the Government of a statement made in the other place. As it is a statement by a Minister, I take it that I can quote it as official policy. I do not say that it should necessarily be dealt with on this amendment. The noble Lord, Lord Balogh said that it had been pointed out …that there is a loophole in the Oil Taxation Act whereby a company in partnership with BNOC might enjoy a larger oil allowance. I can tell the noble Lord that this matter is under consideration and that we shall have to consider amending legislation."—[Official Report, House of Lords; 29th October 1975; Vol. 356, c. 536.] This House should be informed before we finally part with the Bill whether even after—God knows—the 500 amendments moved by the Government to this Bill, in the next Session we shall have amending legislation. That shows the extraordinary muddle in which this matter stands and is another argument against diverting the resources of the nation at this difficult time into an exercise which, by the Government's own criteria, can only make our situation worse.

Mr. Leadbitter

The right hon. Member for Wanstead and Woodford (Mr. Jenkin) talked about going on until he was blue in the face and said that the Government were deaf to rational argument. That is an odd and colourful situation for two Front Benches to get themselves into. The right hon. Gentleman seems to have forgotten one interesting point while pontificating about PRT. He has not put down an amendment to Clause 9(1), which says that the Corporation shall not pay petroleum revenue tax. Therefore, he was—[HON. MEMBERS: "No, no, no. "] Yes, yes, yes.

Mr. Jenkin

The hon. Member may be on to a bad point. We are discussing Lords amendments. I imagine that their Lordships would have felt that an amendment on a financial, fiscal, matter to reverse a decision in the lower House would have been outwith the spirit of their powers. As no such amendment was on the Paper, therefore, there was nothing that we could do about it.

Mr. Leadbitter

I am aware that the Lords were inhibited somewhat in dealing with financial matters. That is why they have contrived this particularly mild amendment, which requires a statement to be made in the accounts. What I am saying is that it was not beyond the ingenuity of the Opposition to deal with this. After all, the right hon. Gentleman has produced an amendment to an amendment. They claim that they are ingenious; they could surely have produced some words to deal with this matter.

Mr. John Moore

I hesitate to cross swords with someone who has made so many speeches with which I agree, but may I refresh the hon. Gentleman's memory? It was in response to an amendment that I moved in the House that the Secretary of State committed himself to the amendment which then came from the Lords. It is on the basis of a movement by this side of the House that we are committing ourselves to agreeing to this amendment.

Mr. Leadbitter

I have no dispute with the Lords amendment. As I said, it requires a statement to be placed in the account. There is no difference of opinion here. But I was dealing with the legitimate and reasoned argument about the need for PRT to be charged on the Corporation. The right hon. Member for Wanstead and Woodford said that he would go on about it until he was blue in the face. He has been ingenious enough to put down an amendment to an amendment. Surely, with all his experience, he could have done the same here.

6.30 p.m.

The hon. Member for Mid-Sussex (Mr. Renton) has an oil industry interest. That explains the unreasonable bias adopted by some Conservatives. It is natural that if an hon. Member has an interest he will table amendments to sustain that interest. There is nothing immoral in that, but it is probably careless. The multinational oil companies have influence and privileges such as the BNOC can never have. Is the hon. Member suggesting that legislation should be passed requiring the Corporation to disclose all its discounts, concessions and other benefits so that they may be pronounced upon by the private oil companies?

The Conservatives say that they want to avoid unfair discrimination and that they want fair competition. They seem to suggest that the oil companies are innocents in the real hard commercial world. One of the Government's functions is to try to persuade the oil companies to work in partnership with the interests of the United Kingdom. I shall not, therefore, go beyond what I have already said, but the question arises whether the practices of the oil companies are more efficient than those of the BNOC will be.

If it is right for the BNOC to declare in its accounts full details of its concessions, discounts and benefits does the hon. Member therefore accept that the multinational oil companies he seeks to represent should do the same? I shall gladly give way to the hon. Member if he wishes to reply.

Mr. Tim Renton

I shall intervene when the hon. Member has finished.

Mr. Deputy Speaker

I think that the hon. Member for Hartlepool (Mr. Leadbitter) was coming to a conclusion, anyway.

Mr. Leadbitter

I was, indeed, Mr. Deputy Speaker. I was doing a spot of fishing, and I was hoping that the hon. Member for Mid-Sussex would respond to a reasonable question. If he is not prepared to respond to that invitation, does he agree that in the world of commerce, multinational interests may not be too concerned with safeguarding British interests? Does he think that the Corporation should declare its hand to its competitors—a practice which is not accepted by the oil companies? It is obviously against the interests of BNOC to do so. The Corporation seeks to work in harmony with the oil companies and to utilise our total resources for the benefit of our people.

Mr. Tim Renton

The hon. Member for Hartlepool (Mr. Leadbitter) said that he was doing a spot of fishing, but, like so many people, he has unfortunately caught up his fly in the bush behind him. He has failed to read the amendment through. In it we specifically seek to provide that BNOC should declare those discounts and concessions which are available to it by virtue of it being a statutory corporation. We are therefore asking the Secretary of State or his successors to follow up promises made on the Floor of the House today and in Committee that BNOC would act as a commercial company, no more, no less. We want this promise put into effect through BNOC's annual report.

The Secretary of State said that we were suggesting that BNOC should operate in a transparent bubble. The only transparent thing was the right hon. Gentleman's lack of argument for rejecting the amendment. He fell into the same trap as did the hon. Member for Hartlepool. We are not asking that BNOC should be stripped of all its seven veils; simply that it should act like any other major oil company, and that when, by virtue of its being a statutory corporation, it has a special privilege or concession, that factor and that factor alone should be revealed. Nothing that I have heard from the Secretary of State today leads me to do other than suggest to my hon. Friends that they should support the amendment.

Amendment to the Lords amendment negatived.

Lords amendment agreed to.

Subsequent Lords amendment disagreed to.