HC Deb 10 July 1979 vol 970 cc338-46

Question proposed, That the clause stand part of the Bill.

Mr. John Horam (Gateshead, West)

This clause makes another quite important change in the fiscal regime to which we are subjecting the companies —in this case, of course, the British National Oil Corporation. I do not wish to say too much about it, and we on this side do not intend to oppose the change, but on such an important matter it would be wrong to allow the clause to pass entirely without comment. I see the hon. Member for Bedford (Mr. Skeet) in his place and apparently ready to say a few words himself.

The proposition here is that BNOC be subject to petroleum revenue tax for the first time. This is a significant change in principle. As I understand it, the argument in favour is that BNOC should be on the same footing as other companies operating in this field. Although that has some merit as a principle in itself, I think that it is one for which the oil companies have always argued, and I am not sure that it is right to agree to it simply as something about which the companies have felt strongly. I rather suspect that, whatever principle one conceded to them, they would always ask for more and be critical of what they would regard as the special privileges of BNOC.

On the other hand, I accept that when BNOC is in partnership with an independent company and it comes to the taking of investment decisions, there is some practical merit in having the same fiscal regime for both BNOC and the independent company, quite apart from the more general principle of their operating on the same footing. I understand those to be the arguments in favour.

On the other hand, the contrary argument—that is, the argument in favour of maintaining the present position—is clear, namely, that in the final analysis the profits of BNOC go to the Government just as the tax will go to the Government, so that it is merely an accounting change and the net result is not significantly affected.

I think that our position on the matter is that we doubt that the change was really worth making, but since the Government propose to make it we see no real sense in opposing it at this stage.

I do not know—perhaps the Financial Secretary can help us—when the petroleum revenue tax will affect BNOC. I imagine that it will not be for some years yet, and I hope that the hon. Gentleman can tell us in practical terms when the corporation will be so affected.

Perhaps we may discuss the wider question of BNOC briefly in this debate since this is the only specific opportunity we have to do so. The Government are undertaking a fairly comprehensive review of the corporation's operations, and they have indicated that the result of that review will be made known, presumably to the House, before the Summer Recess. That will be literally in the next two weeks or so, I imagine, and I should like that confirmed. It is important that we know what the general situation will be before we go into recess for the summer.

On the general question, the Conservatives made their position clear when they were on these Benches and the right hon.

Member for Bridgwater (Mr. King) was their spokesman. Their objection was to what they described as the de facto regulatory functions of BNOC as opposed to the commercial activities, because they believed that the current situation gave BNOC some special privileges and there was also an overlap between the regulatory or advisory functions and the commercial activities of BNOC.

I imagine that right hon. and hon. Members now on the Government Benches include in that criticism the fact that BNOC has a seat on the operating committees in the North Sea. My hon. Friend the Member for Dunfermline (Mr. Douglas)—he is not in the Chamber at the moment—spoke of the importance of this from the point of view of the oil companies. He said that it was more important to them, they regarded it as a more significant advantage for BNOC, and they were more worried about it than about the sort of fiscal regime which they or BNOC had to face. That may well be true.

The point here is that the information which BNOC and ultimately the Government obtain from the seat on the operating committees is extremely valuable to the Government's general comprehension of what is happening in the North Sea and therefore to their understanding of the right level at which to tax it, for example. I do not see how one could gain information about these things in any other way. Perhaps one could convert the BNOC person on the operating committees into a Department of Energy person, but I am not sure that in practice one would have the people available to do that. I do not imagine that one could staff the system up in the way required without at the same time reducing the availability of people for BNOC, and in practical terms I cannot feel that that would be an adequate substitute for having a BNOC representative on the operating committees.

There are two other points to be borne in mind in this context. If one generally weakens BNOC, one weakens its function in controlling the general oil situation in the North Sea. We know, for example, that the Government at present want to influence that situation and are trying to influence it by asking BNOC to renegotiate its contracts with United States customers with a view to keeping more of the oil in this country. If one weakens BNOC by in some way diminishing its powers and influence, one will affect that side of things, namely, the right of the Government to influence the amount of oil going out of the country and the amount remaining in.

Secondly, BNOC is now beginning to establish contacts with other State oil companies elsewhere in the world, for example, in Brazil, Venezuela and some others. We all know how the world operates in this respect, and I think it quite understandable that other State oil companies and Governments incline to take more notice of a State concern than they might of an independent concern.

When I was involved not in oil matters but in transport and I was engaged in efforts to win contracts for British companies abroad, I found that people overseas often wanted to know why we did not give a specific Government guarantee behind a British contractor such as Wimpey. They could not understand when we said that it was a private organisation with its own sources of finance and that we did not need to give it any further guarantee. They were puzzled about that and considered it to be a disadvantage of the British way of operating.

7.30 p.m.

If the position of the BNOC is weakened in the United Kingdom, it will find it more difficult to build on the experience and expertise that has been gathered in the short time that it has been in existence, with the result that it will not do as well in overseas contracts as we hope.

When the Government consider these matters, I hope that they will bear in mind all aspects of national interest and will not make changes based merely on preconceived ideas of how a nationalised industry or State company should operate.

I understand that the Financial Secretary may not find it possible to reply to all the matters that have been raised. Possibly a spokesman from the Department of Energy should be present, that Department being at least partly responsible for these matters, the Financial Secretary being responsible, presumably, for the fiscal regime that BNOC faces.

The Financial Secretary may be able to enlighten us on when we are to hear more fully about these matters of national concern.

Mr. Skeet

The purpose of the clause is to make the BNOC liable to petroleum revenue tax. I must resist the temptation to talk at length about the corporation because of the review that is likely to appear fairly shortly and because it would be out of place to do so in this debate.

During the passage of the Petroleum and Submarine Pipe-lines Bill in 1975 we argued whether the corporation should be made liable to PRT. It was argued by members of the Labour Government that it was unreasonable to expect a State corporation to be liable to tax. I am glad that Labour Members have now accepted the Government's view that the corporation should be treated in the same way as other companies and all the other producers in the North Sea and that it should have no special privileges. That is a great admission on their part.

If the clause is enacted, it will not be particularly profitable for the Government because the corporation will not be liable to any PRT until about 1982 at the earliest. I hope that the Treasury will bear in mind that royalties, rentals and other such payments are paid into the national oil account for the benefit of the corporation. Surely that practice should be stopped. Whether it is within the contemplation of the Government to abolish the national oil account under section 40 of the 1975 Act or to keep it is another matter, but it would be reasonable, if the Government wanted to secure the necessary funds for their development purposes, for royalties paid by the oil companies and by the corporation as well to be used for general revenue purposes.

I content myself by saying that I fully approve of the clause. I shall confine my remarks on future occasions to modifications of the terms and duties of the corporation. On this occasion, I feel that it would be inappropriate to do so as we have no idea what the Government propose to do with the corporation. We do not know whether they propose to modify it, to take away its advisory powers and special privileges, or to remove it altogether as a corporation.

Mr. Dalyell

I do not rebuke the Secretary of State for Energy for not being in the Chamber. The right hon. Gentleman may have other things to do. However, I am glad to see the presence of the Under-Secretary of State for Energy. Some of us think that Department of Energy and Treasury affairs have been so interwoven in the debate that it might be better in future for representatives of the Department of Energy to be present.

I have a personal interest as a number of my constituents work at BNOC, Glasgow. We understand that the Government are entitled to a review, but they should understand that they must be fair to a substantial number of employees who, after all, are their own employees. Those who work at BNOC, Glasgow are wondering about their jobs. I am not a Glasgow Member, but some of the corporation's employees travel to my constituency. There is considerable and natural anxiety about the future. The Government Whip, the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton), knows full well what I mean.

The sooner that the review is finished and produced and consultations have taken place—the hon. Member for Bedford (Mr. Skeet) knows what I am talking about—the better. There are those who must make decisions about their own lives. I emphasise the argument that was advanced earlier by my hon. Friend the Member for Dunfermline (Mr. Douglas). There are some extremely skilled people employed by the corporation. Some of those employees have come from Burmah. These people could easily obtain jobs in other parts of the world. It behoves the Government to make their decisions fairly quickly in their own interests.

Surely the corporation is not in a deep sense like other companies and to be treated like other companies. It is one of the vehicles available to any Government to deal with foreign Governments in this area of activity. The Under-Secretary of State for Energy may gainsay this if he wishes, but I doubt very much whether, without the corporation, there are resources in his Department to perform many of the tasks that hon. Members on both sides of the Committee have been suggesting should be carried out by the Department of Energy and the Treasury. If that is denied and it is said that the Department is fully staffed and is able to cope, I shall be rather surprised. Surely the corporation is an integral part of the Department.

It seems madness to dismantle the corporation and at the same time to sell BP shares. It is no good saying " Your Government did it ". That is true, but some Labour Members did not like that action being taken by the Labour Government and they said so at the time. However, the Labour Government did not put in jeopardy the Government's controlling interest in BP. To do so now would be a disaster. That is the attitude of the trade unions at Grangemouth, which are deeply affected.

Mr. Skeet

We have learnt from Montecatini Spa of Italy that a controlling influence can be 15 per cent. of the shares. There is a controlling syndicate and ENI is one of the companies. There are other enterprises. However, a 15 per cent. interest is sufficient to control the company. If there is control with a shareholding below 50 per cent.—I am not suggesting that the BP holding will go very much below 50 per cent. as I do not know what is in the Government's mind—surely that is sufficient. Another example is CFP, the French company. The French Government's investment is 35 per cent. Is that not enough?

Mr. Dalyell

Montecatini Spa is not that great a success. For four years in a previous incarnation I was a member of the energy committee of the European Assembly. My Italian colleagues across the political spectrum—from the Christian Democrats on the right to those such as Alterio Spinelli from the Communist Party—were for ever telling the Commission how unsatisfactory the oil refinery set-up and many other aspects of the oil industry were in Italy. I would not take the Italian oil industry as a model for anything. Some of us would think it deeply unsatisfactory if the controlling interest in BP were taken out of the hands of the British Government.

The Financial Secretary to the Treasury (Mr. Nigel Lawson)

I was pleased that the hon. Member for Gateshead, West (Mr. Horam), in initiating this brief debate on clause stand part, made it clear that the Opposition did not wish to oppose the bringing of BNOC into the PRT net. He acknowledged that BNOC should be on all fours with other oil companies. That is our view too. It is not new. It is one that we expressed in Opposition when the Petroleum and Submarine Pipelines Bill was considered in 1975. It was not because the oil companies wanted BNOC to be subject to PRT that we decided it was right to put it on all fours with other companies. There was something particularly odd about the previous position. It was a half way house. The hon. Gentleman suggested that the State oil company should not be liable to tax. However, it has always been liable to corporation tax, so there was a curious half way situation. It was liable to corporation tax but not PRT. Now, like any other oil company, it will be liable to both.

The hon. Gentleman asked me when BNOC would pay PRT. That is difficult to say. It depends on a great many imponderables. My hon. Friend the Member for Bedford (Mr. Skeet) suggested 1982. That is as good a guess as anyone can make.

The hon. Member for Gateshead, West went on to deal with wider questions that were also touched on by my hon. Friend the Member for Bedford and the hon. Member for West Lothian (Mr. Dalyell). All three hon. Members referred to the future of BNOC. The hon. Member for Gateshead, West also mentioned British Petroleum. Much as I should like to go into that matter, it would be out of order to do so. That question was debated last Friday. It was a pity that the hon. Gentleman was not present to hear the debate on North Sea oil that was initiated by my hon. Friend the Member for Gosport (Mr. Viggers). The question of the disposal of BP shares was debated at that point. I made plain my view and that of the Government. If Hansard were printed, the hon. Gentleman would be able to discover what that view was. However, he should have no fears on that score.

As for the future of BNOC, I am at a disadvantage as my right hon. Friend the Secretary of State for Energy, who is the Minister responsible, is conducting a review of BNOC. It is not yet completed, and it would not be right to prejudge its results. However, I take the point that the hon. Gentleman wishes to make that the results of the review should be put to the House at the earliest possible moment.

The question whether BNOC should have seats on the operating committees was also mentioned. That subject, too, is under review, and there are various options. Even though the Department of Energy may not be equipped at present to deal with these functions—I make a hypothetical case as the review is not yet completed—if it were decided that they should be carried out by the Department of Energy rather than by BNOC, the necessary manpower could be recruited if it were not already available in the Department. All those options are now open as a result of this clause.

It is equitable and sensible that BNOC should be in the same position as every other oil company. That is of assistance when there are possibilities of joint ventures with other oil companies that are liable to tax. It is also obviously sensible when thinking of all the options that are open to BNOC. One future option is introduction of private capital into BNOC as well as the extent to which there may be changes in the ownership of some, if not all, of the assets of BNOC. Those options are open provided that BNOC has exactly the same tax regime and is treated in exactly the same way under tax law as other oil companies. That is why we put this proposition in the Bill. It makes no difference, one way or the other, to the yield to the Exchequer. That is not at issue. The point is the principle and practicality of having the same tax regime for the BNOC as for all other oil companies, whether in the North Sea or elsewhere.

Question put and agreed to.

Clause 21 ordered to stand part of the Bill.

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