§ '(1) The sums to be paid to the Agency by the Secretary of State under paragraph 1 of Schedule 2 to this Act shall be re-assessed annually and shall be increased each year up to the limit prescribed by section 13(3) of this Act by an amount proportionate to any increase in the preceding year in the revenue's accruing to the Treasury from the exploitation of North Sea oil, in accordance with the provisions of a scheme to be prepared by the Secretary of State.
§ (2) A draft of any scheme prepared by the Secretary of State under subsection (1) of this section, shall be laid before Parliament and shall not come into effect unless approved by a resolution of the House of Commons.—[Mr. Grimond.]
§ Brought up, and read the First time.
§ Mr. Grimond
I beg to move, That the clause be read a Second time.
The clause may not be perfectly drafted, and what we ask must be circumscribed to comply with the rules of order. It might be desirable to take a greater proportion of oil revenues for Scottish purposes and to assist the financing of the Agency, but we are confined by the legislation to the amounts laid down in Clause 13. The purpose of the clause is reasonably clear—namely, to link the finances of the Agency to oil and to increase funds as the revenues from oil increase.
I do not intend to go over all the arguments about the ownership of Scottish oil and to whom it belongs. It may be Shetland oil or Orkney oil. It is conceivable that it belongs to the North of Scotland, to Scotland or to Great Britain, and it may be that the world—particularly the underdeveloped countries—has some interest in North Sea oil. However, there is no doubt that Scotland has an interest in this oil.
I am anxious to maintain Scotland's interest in England's coal and in the gas that is to be found in the southern part of the North Sea. I am pleased that my constituency is gaining considerably from the arrangements we made with the oil companies. Therefore, I am not one of those who claim that all the oil should belong to Scotland.
344 It is a little hypocritical to pretend that it is a peculiarly Scottish form of selfishness to claim some interest in the oil. These types of operations in the North Sea between the riparian countries have not been carried out since the Pope divided the world between the Portuguese and Spaniards. There is a case for some correlation between some of the oil revenues and the Agency.
My reasons for this are, first, that it is a general principle in the United Kingdom that taxes are not allocated to particular purposes. I accept that as a general principle and it may be valid. However, there are other occasions when, if we allocated taxes for particular purposes, we might bring home to people more directly what certain economic factors amount to and we might improve their attitude towards taxation and its expenditure.
Secondly, Scotland, and in particular the North of Scotland, has suffered a great deal from being treated as a poor relation. It is widely believed that the Highlands and Islands of Scotland subsist largely on subsidies. I am not sure that this is true. It is true that the revenue of local councils in my constituency is largely provided by the central Exchequer. However, if we take into account the amount of excise duty paid by the Highland Park and Scapa Distilleries in Orkneys the picture is different. Millions of pounds go out of Orkney in excise duty, a fact which is not appreciated by the public.
When oil was discovered, unfortunately a great deal of it had already been mortgaged. It is not sufficiently appreciated that oil revenues are already heavily mortgaged. Nevertheless we hope that the oil will bring great wealth. Therefore, the Highlands and Islands and the North-East of Scotland are entitled to say that for many reasons, including economic, psychological and political ones, this enormous accretion of wealth off our coasts should be reflected not only in our economy but also in the attitude of people towards us and in the view that we are an area which must be subsidised.
I fear that if the main funds of the Scottish Development Agency come straight from the Exchequer, it will be felt that they are being provided by England. That will not be true, but if a certain proportion of them—not all of 345 them—are related to oil, it will be appreciated that Scotland is now very much in the black and out of the red. Further, it is desirable that people in the North of Scotland should feel that as the oil production develops, a proportion of the revenues—I do not ask for more than that—should be used to build up investment there. I know that the Government will argue that that may happen through the Exchequer, but it is desirable that the people should realise that it is happening.
It may be feared that oil, already being so heavily mortgaged, will be frittered away in other ways, and, whether one likes it or not, it is a powerful Scottish National Party argument that Scotland should claim the oil and finance all sorts of wonderful things with it. I do not go all that way by any means, but there is something to be said for a certain proportion of the oil revenues being seen to go into investment in Scotland. It is for that purpose that we have tabled the clause.
§ Mr. Iain Sproat (Aberdeen, South)
Very few hon. Members can make a more agreeable or persuasive speech than the right hon. Member for Orkney and Shetland (Mr. Grimond). He has done his best on this occasion in a rather rough sea, but I wish to put on record my objection in principle to the idea of linking directly and specifically the amount of money which Scotland obtains from the United Kingdom Treasury with the amount which the United Kingdom Treasury obtains from North Sea oil.
That is a bad principle for reasons which the right hon. Gentleman indicated. How would we equate Scotland's getting money out of North Sea oil in direct proportion to the revenue which accrues in Yorkshire or East Anglia from the Selby coalfield or East Anglian gas, not to mention the vexed question of where we would draw the line between England and Scotland? Would we subtract the revenue from Auk and Argyll and, if Shetland went independent, subtract the income from the northern oilfields?
I do not wish to go into detail on those matters. In principle it is absolutely wrong to try to divide Scotland from England in distributing the benefits which accrue from our natural resources. The principle which I should like the House to establish is that Scotland should get no 346 more and no less than her level of need requires in the perspectives of the United Kingdom. Otherwise, what would happen when the oil revenues fell? Would Scotland receive less than she received the year before because suddenly the oil supply dried up? The level will certainly fall in 20 or 30 years. The amount of money which Scotland receives should be dependent on the level of need in Scotland and not upon what revenues accrue from the North Sea.
§ Mr. Sproat
That is why Scotland receives £120 per capita from the United Kingdom compared with £100 for the people of England. It is precisely because the Government have adopted that generous principle that Scotland has received what she has.
§ Mrs. Margaret Bain (Dunbartonshire, East)
Does the hon. Gentleman accept that any extra expenditure in Scotland is an indictment of the policies operated by successive Governments which mean that additional social security and unemployment benefit must go to the Scottish people because they cannot obtain good jobs in their own country?
§ Mr. Sproat
Try telling people that in Aberdeen, where there is a tremendous shortage of labour. If I were to go into that point at length, I should be out of order.
Let us suppose that the oil revenues in Scotland were increasing and that more money was coming to Scotland while unemployment was increasing far faster in other parts of the United Kingdom than in Scotland. Several regions in England have much worse unemployment figures than Scotland. Would it then be said that we should not give more money to those areas and that it must be given to Scotland because the oil revenues were increasing? That would be a ridiculous and inhumane principle for us to adopt.
I finish on a practical note. In reply to the laughter from the Scottish National Party Members, I must point out that I object to this suggestion in principle and practice. If the Treasury knew that Scotland received more money under one method, it would receive less from 347 another source. Therefore the whole exercise would be self-defeating.
§ 8.45 p.m.
§ Mr. Gordon Wilson
The argument about whom the oil belongs to occurs from time to time. I am told that the hon. Member for Berwick and East Lothian (Mr. Mackintosh) described it as Europe's oil. In that case the French would certainly lay claim to it. I inspected the map of the designated areas under the Continental Shelf Act. It is a pity that we cannot record these maps in Hansard.
Although there is disagreement on these matters, there are many economic and industrial problems in Scotland. Economists argue that if we built up an area such as Scotland, it could prove of real strength to the United Kingdom. The economic policies pursued for years by the United Kingdom have not in general proved successful. They have had little effect on the Scottish economy. We are left with many problems. We all know of the social and industrial problems in Scotland. Scotland badly needs reflationary policies, but it is problematical whether the United Kingdom Government will adopt them.
Had I been allowed to speak on a new clause suggested by two of my hon. Friends and myself, I should have dwelt on the need for reflating the Scottish economy by injecting about £300 million a year into it.
This clause raises the question of the buoyancy which should be built into the funding of the Scottish Development Agency as the oil revenues appear. We have discussed the boom in offshore jobs and those directly or indirectly related to the oil industries. Some areas of Scotland have benefited, including the constituency of the hon. Member for Aberdeen, South (Mr. Sproat).
Economists now say that the number of offshore jobs will reach a peak in about one and a half to two years' time. When that happens, people now working in the oil industry will become unemployed, partly as a result of the mistaken oil policies pursued by successive Governments. Once the number of people employed in the industry has reached between 45,000 and 60,000 it will begin to go down, although at the same time oil revenues will begin to flow. Perhaps the 348 revenues made available can be used to give additional buoyancy to the Scottish economy at a time when direct investment for the development of offshore fields slows down. Therefore a good case may be made out, even in unionist eyes, for the expenditure of oil revenues in Scotland. Our principal claim is that Scotland is a national community and that we have the right to develop and use our own natural resources for the benefit of our own people.
I cannot understand why the hon. Member for Aberdeen, South is so strongly opposed to the hypothecation of oil revenues for Scotland when that was the policy put forward in his election manifesto. I remember challenging the hon. Member for Glasgow, Cathcart (Mr. Taylor) in the Scottish Grand Committee to say what percentage of the oil revenues would be made available for Scotland. The hon. Member said that he would not like to be specific about figures but that a Conservative Government would be generous to Scotland in that respect. If it is accepted Conservative policy that the oil revenues should be made available to Scotland on a specific or hypothecated basis, why are the Opposition changing their tune?
§ Mr. Teddy Taylor
If the hon. Gentleman looks at the record, he will see that we did not accept the principle of hypothecation. Scotland's problems are likely to be substantial, and we do not accept a specific percentage for the good reasons put forward by my hon. Friend the Member for Aberdeen, South (Mr. Sproat).
§ Mr. Wilson
But the Conservative Party accepted that a proportion should go to Scotland. Special emphasis is placed on the oil revenues. The Conservatives cannot try to wriggle out of that commitment simply because there has been a change in the leadership. Presumably the Conservative Party conference has something to say about the policy contained in the manifesto which is not always given down on tablets from on high.
§ Mr. Rifkind
Hypothecation means that a predetermined percentage automatically goes to the body in question. It does not mean that each year the Government determine what is in the interests of an area and give priority to 349 that area because of the geographic location of the oil.
§ Mr. Wilson
I do not want to get involved in an argument about this. I suggest that the hon. Gentleman looks at his own manifesto and discovers which platform he occupied in the election. If what he says is so, it is for him to change his party's policy. The Conservative Party accepted that Scotland should get a specified share of oil revenues set apart from other taxation. Be that as it may, the new clause has allowed this important question to be ventilated in the House, as I am sure it will be aired many times in succeeding months.
§ Mr. Sillars
The clause is deficient in that it does not specify what proportion of the revenue should go to the Exchequer and ultimately to the Scottish Development Agency. It is not enough simply to say that some of the oil revenues should go to the SDA and fail to specify how much, whether it be 5 per cent., 10 per cent. or, as was suggested by a Liberal spokesman who appeared on television with me, 50 per cent. The right hon. Member for Orkney and Shetland (Mr. Grimond) shied away from putting a figure to it.
We are discussing the clause within the context of the United Kingdom, and oil will always have to be discussed in the context of the United Kingdom, irrespective of what happens—
§ Mr. Sillars
It appears that someone has changed his mind. From being an anti-Marketeer he has become a pro-Marketeer. I have not changed my mind.
Irrespective of where we stand within the EEC or within the United Kingdom from a Scottish standpoint, in my view the oil must always be regarded as a United Kingdom resource. The consequences of any other policy are so dreadful that I do not think any sane, sensible person would contemplate them. As the hon. Member for Aberdeen, South (Mr. Sproat) said, there are grave dangers in a policy which specifically allocates resources from one area of the economy. I do not think that hon. Members representing the Scottish National Party have considered that matter fully enough within the context of the United Kingdom. Even new 350 Clause 8 standing in their name, which has not been selected, refers to £300 million.
§ Mr. Hamish Watt (Banff)
Is the hon. Gentleman suggesting that Scotland could not manage with its own resources if they were properly handled by a Scottish Government?
§ Mr. Sillars
I do not want to discuss at this stage the economic integration between Scotland and the rest of the United Kingdom. However, the hon. Gentleman should take into account that if we engaged in the immoral practice of removing all the oil assets from the rest of the United Kingdom it would lead to a collapse. That might be regarded as a propaganda point by the hon. Gentleman's party, but it would have to explain to the Ferranti electronic workers, the workers in the car plants at Linwood and the textile factory workers who sell to the English why their jobs had been lost practically overnight. Those jobs could not be replaced within 24 or 48 hours.
I return to the danger of allocation from one particular resource. Many problems arise. All may seem well when it so happens that we have an asset which allows one political party to go round the country boasting about the potential wealth that may be gained from one resource, but there are swings and roundabouts in every political and economic situation. Let us consider the other side of the coin. If we argue that we should get a specific allocation from one potential resource, we must accept on the deficit side that we carry a greater degree of the burden than ever before.
Let us consider the Scottish situation. There is an enormous transport subsidy because of the geographical character of Scotland. I stand open to correction, but I believe that the transport subsidy for the Highlands and Islands is about £3½ million. Given the plans of the SNP it would be a great deal more than that, the SNP having promised the moon to the Highlanders and Islanders.
A matter that worries me very much is the situation in the Scottish coalfields. I represent a coalmining area in Scotland. God has been good to us as regards North Sea oil but not terribly good in the geological conditions he has laid down in the Scottish coalfields. We stand this 351 year in the face of a substantial loss, not because the Scottish miners are lazier than the English miners, are unable to work as hard or lack technical experitise, but because they are faced day in and day out with enormous geological faulting in the Scottish coalfields.
If we accept the right hon. Gentleman's clause we must accept that it should be applied to all resources, including the coalfields I represent. A much more stringent financial attitude would have to be applied. That would result in about 20,000 miners losing their jobs in Scotland. We could not say to the United Kingdom Treasury "On the oil we get all the assets. On the coal we want you to ignore the deficits involved." We could not have it both ways.
§ Mr. Gordon Wilson
Does the hon. Gentleman accept that if we are prepared to accept the assets we should be prepared to assume the responsibilities—that is, the position which has always been adopted by my party? There is no doubt that a Scottish Government would be well able to undertake their responsibilities, including the maintenance of the coal industry, in the same way as the United Kingdom has done, or go even further.
§ Mr. Sillars
I look forward very much to the next election when the SNP candidate in South Ayrshire explains to the Ayrshire miners that one of the consequences of his party's argument—perhaps an SNP candidate will not be standing against me after the speech of the hon. Member for Dundee, East (Mr. Wilson)—on North Sea oil is that we must accept the demands of the Scottish coalfields and the Scottish coal industry—[Interruption.] Yes. It follows automatically.
Hon. Gentlemen have not taken into account the problem of the agricultural input in Scotland, given geographical factors. It takes a great deal more in terms of agricultural input in Scotland to produce a given amount than in many other parts of the United Kingdom. It is a question of swings and roundabouts. The Liberal Party and the Scottish National Party have not said that they are prepared to accept the swings and roundabouts. They want to gain all on the swings and lose nothing on the roundabouts. That is a stupid and immature policy and I shall vote against it.
§ 9.0 p.m.
§ Mr. Buchanan-Smith
I hope that the Scottish National Party has noticed the survey financed by the Social Science Research Council and published in The Scotsman last week, dealing with attitudes in Scotland and other parts of the United Kingdom. It was revealed that a majority of those who support the SNP in Scotland do not believe that the majority of the revenue from Scottish oil should necessarily be applied in Scotland. That is a significant finding. The greed which members of the SNP have displayed tonight is not shared by their supporters.
I find that among people in Scotland there is a much greater sense of belonging to the United Kingdom than members of the SNP in this House suggest. The people of Scotland want to share their benefits throughout the United Kingdom. I ask the hon. Member for Dundee, East (Mr. Wilson) to read the new clause It is one thing to talk in general terms about Scotland's getting some of the benefits from oil but it is quite another to start talking of hypothecation. Hypothecation means a pre-determined fixed precentage of the revenues being applied. That is what the new clause is all about. We who oppose hypothecation cannot be accused of not wanting to see benefits returning to Scotland as a result of the development of North Sea oil.
Hypothecation would be dangerous for Scotland. If we had had it in the past, when things were going less well for us in terms of natural resources, the results would have been disastrous. To go for such a policy now when we have these natural resources would be mean, petty and grasping in the extreme. It is not the present or the past but the future which worries me. There are grave disadvantages to this policy of hypothecation. First, it is rigid. The percentage is fixed. It does not alter to take account of a changing situation. Secondly, if oil revenues start to decline—I believe that they will, and the hon. Member for Dundee, East is more pessimistic than I—we shall need a higher level of investment.
§ Mr. Gordon Wilson
I was talking about oil-related jobs, not about revenue. I was saying that revenue should be used 353 to give additional buoyancy at a time when jobs related to oil development were decreasing.
§ Mr. Buchanan-Smith
I apologise if I read more into the hon. Member's remarks than he said, but it makes my remarks no less valid. The time will come when we shall see oil revenues declining. What will happen then? Our children will be living in those times and I do not want to see them saddled with hypothecated revenue at a fixed level, which may have benefited our generation at a particular moment of time. I do not want to see them without the benefits of be belonging to a wider United Kingdom which will help them over the period when industrial change again takes place, as the oil industry starts to decline.
My last point was very strongly made by my hon. Friend the Member for Aberdeen, South (Mr. Sproat). We have to judge this in relation to needs. We want to see the oil benefits from the North Sea coming back into Scotland, as soon as we have the revenues—we do not have much yet—in order to do all the necessary things in terms of communications, infrastructure and so on. We want to see it a year or two ahead, as the hon. Member for Dundee, East said, so that when we pass the peak in jobs we shall be helped by the diversification of industry.
That, surely, as my hon. Friend the Member for Aberdeen, South said, is the way to judge it—by our needs, and by what is required to help the communities that are having to adapt to the problems of the oil industry. It must be related to the needs of Scotland in the future and to the need for new jobs. If we want the best benefit from North Sea oil it is in that sense that it should be done, and I hope that the Government will approach it in that way as well.
§ Mr. Millan
In moving the new clause the right hon. Member for Orkney and Shetland (Mr. Grimond) said that he did not believe that all the benefits of North Sea oil should accrue to Scotland, and that this was a United Kingdom resource. I agree with him on that. He also said that he did not believe in hypothecation, but then said that he believed in a qualified hypothecation. I do not believe that one can have a qualified hypothecation. Either one believes that this is an acceptable principle or one 354 does not. If one does not believe that it is an acceptable principle, I do not think one can then introduce the principle, as it were, by a kind of back-door method, which is basically what the clause attempts to do.
As my hon. Friend the Member for South Ayrshire (Mr. Sillars) said, one cannot adopt the principle of hypothecation only in circumstances in which one thinks it will be of benefit and then ignore all the circumstances in which a similar principle could be very detrimental to Scottish interests.
The right hon. Gentleman has introduced a kind of hypothecation, although it is expressed in a way which is perhaps not wholly clear, and would in practical terms produce, even from his point of view, rather eccentric results—certainly results different from those that he envisaged when he spoke to the clause.
What he has proposed is really a rather odd kind of arrangement. First, he says that the increase in this part of the SDA's financing shall be increased proportionately to any increase in the preceding year in oil revenue. That is, with respect a straight arithmetical calculation. It does not require to be worked out under the provisions of a scheme to be prepared by the Secretary of State. That, really, is a contradiction in terms, because it suggests a certain flexibility in the situation—looking at circumstances, and so on. It is contrary to the earlier part of the clause, which would involve a straight arithmetical calculation.
Oil revenues will increase very rapidly indeed over a short period of years, so that, unless we started from a very small amount, we should reach a very large amount very rapidly. To avoid reaching a disproportionate amount we should have to start in the early years of the SDA with a budget which would be quite inadequate for the job that the Agency would have to do.
The new clause is even more defective, because it relates the question of oil revenues to only a part of the Agency's activities—industrial development. I understand exactly why the right hon. Gentleman has done this. He says that the one thing, above all, that the people of Scotland will look to from North Sea oil, is a sense that Scotland's economy and industry are prospering. I agree 355 completely. That is the objective. That is why we have done certain things which have benefited his and other areas, in directing more oil-related jobs to Scotland and seeing that they are spread throughout the country.
The right hon. Gentleman knows that in his area there is a great deal of new prosperity, which has come directly from North Sea oil. That will continue. His local authorities have been adept at looking after the interests of their inhabitants. He knows that certain long-term benefits will come to his area almost regardless of what happens in terms of increases in oil revenue generally. There have thus been considerable advantages to his area, and to other parts of Scotland.
To direct to North Sea oil this piece of the Agency's financing—public dividend capital—which is related to industrial development, would be a mistake in terms of practical implications and not just of principle, which in any case I do not accept. It would have the result that that part of the Agency's capital would be far more likely to be spent not in the North of Scotland but in the old industrial areas, which is where the main industrial effort should be directed.
The formula in the new clause would not demonstrate a direct benefit in the North of Scotland. The benefits, if they came at all, would go to other parts of Scotland. It is a misguided or badly drafted clause from that point of view as well.
Nevertheless, I take the point that it is very important, psychologically and in terms of human dignity, and the rest, that areas in the North of Scotland or elsewhere should not feel that they have always had to be subsidised by the rest of the United Kingdom and the rest of Scotland. It is important that people should feel a sense of economic independence, which can come only from economic well being.
It has been part of the Government's policy in the right hon. Gentleman's area and in the oil development areas generally, as well as in other parts of Scotland, to demonstrate the real advantages of North Sea oil, to get them, to the maximum extent, to all areas, but particularly 356 to areas which have felt the major impact from North Sea oil exploitation.
The Government's general policies will be directed towards these ends. I do not believe that those ends could be achieved consistent with the policy of no hypothecation or by financing a part of the Agency's activities in the way that the new clause would provide. For all these reasons, I could not recommend the new clause to the House.
§ Question put and negatived.