HC Deb 03 February 1981 vol 998 cc257-62

Motion made, and Question proposed,

That provision may be made for the levying from the British Gas Corporation of a levy in respect of certain gas supplied to them and for the payment into the Consolidated Fund of any sums received in respect of the levy or of interest on it.—[Mr. Lamont.]

Mr. J. Enoch Powell (Down, South)

Are we to have some explanation of the resolution?

Mr. Deputy Speaker (Mr. Bernard Weatherill)

It is for the Minister to decide whether he will give the House an explanation now or answer at the end of the debate, when he replies, the questions that are raised.

11.46 pm
Mr. Edward Rowlands (Merthyr Tydfil)

We certainly need an explanation of the resolution. It is an extremely important measure. It paves the way for a major piece of taxation. I hope that the Minister will reply and explain in detail the effect of the resolution and the proposed gas levy.

We wish to put down a basic marker on the proposed Gas Levy Bill. We shall not divide the House, but that should not be seen as an acceptance of the levy.

In one respect the resolution is timely. The Government are at least coming clean. We have to go back many months to find the original explanation of the levy, but according to the Government's press releases it will not increase gas prices because of the arrangements that they are endeavouring to make with British Gas. However, it is evident that British Gas revenues and gas prices and British Gas customers have been and will continue to be used as a significant source of revenue for the Government. British Gas revenue and prices have been and will continue to be a source of Government taxation.

Last Wednesday the Secretary of State confessed to the Select Committee on Energy that he was the culprit for the significant and rapid rise in gas prices. He confessed that he had enforced upon British Gas a monstrous programme of price increases, namely, 30 per cent. last year, another 25 per cent. this year, with more to follow in subsequent years.

British Gas did not wish to impose upon its customers anything like such a programme of price increases in the time scale that has been demanded by the Government. It was the Secretary of State who accepted his responsibility for the increases before the Select Committee.

The inevitable consequence of pursuing such price increases, along with the original target of 9 per cent., is to create a large windfall profit for British Gas. The Government knew that that was likely to happen and they wanted it to happen. It has been achieved at considerable expense to the domestic and industrial consumer, both large and small. The great potential of British Gas profits now justifies the raid on British Gas that is represented by the levy. It is a sort of Dick Turpin act in which British Gas is being expected to pay up and stand and deliver.

What is to be the extent of the levy? How much will it deliver to the Government? At 10 minutes to midnight we are talking not about a marginal tax arrangement involving a few million pounds that can be dropped into some PSBR ocean but about a tax that from 1980 to 1983 could deliver about £ 1.2 billion to the British Government.

The levy will be, as it were, a windfall tax on British Gas. In the crucial year of 1982–83 we could be talking of £¾ billion finding its way to the Government. Is that right? What is the figure? If I am right, will the Minister confirm that this is not so much a windfall tax on British Gas but an election windfall tax for the election that will follow? It will be a contribution to the Conservative Party's expectation of a cut of more than 1p in the standard rate of tax. That is what £¾ billion pounds represents. I should be grateful if the Minister could state the amount of revenue expected from the gas levy that is the subject of this resolution.

As hon. Members on both sides of the House will know, we shall have a chance to debate the gas levy at greater length when the Bill is introduced in the next week or so. I therefore merely state at this stage that we have some doubts, and believe that the levy is a breach of the financial understandings and arrangements that were made between the Government and British Gas last year. It is an open secret that British Gas was a reluctant partner, but a deal was struck last year with regard to the financial arrangements and the whole question of gas pricing. This is an additional and significant breach of that understanding of the three-year financial arrangement that was made with British Gas.

Secondly, until we are able to scrutinise the proposed Bill we do not know what effects of the levy may be upon the longer-term investment programme for the industry. Again, that is a matter that must be subject to scrutiny when the Bill comes before the House.

Despite the idea that this is some kind of retrospective tax on the southern gas fields, going back to pre-1975, and so on, we claim that it is nevertheless part and parcel of an overall Government policy of using British Gas revenues and prices as a form of revenue and taxation.

As we have suggested over the past 18 months, this policy is imposing an unfair burden, here and now, upon domestic and industrial consumers, small firms and individuals. It especially hits small companies, which are desparately trying to compete in export markets. Again, there is no evidence in the resolution or, indeed, in any Government statement, that the levy, and the income and revenue derived from it, will be used to alleviate the unnecessary burdens on small consumers, be they domestic or industrial. On the contrary, we suspect, first, that it will be used to pursue a blinkered objective of initially reducing the public sector borrowing requirement, and secondly, that if the revenue from the levy reaches the scale, that I have asked the Minister to indicate to us, it could be a very selective and potentially successful bribe to the electorate in 1983–84. That is why we shall scrutinise the forthcoming Bill with those realistic suspicions in mind.

11.53 pm
Mr. J. Enoch Powell (Down, South)

This is a Ways and Means resolution. The hon. Member for Merthyr Tydfil (Mr. Rowlands) and, indeed, the whole House have been under somewhat of the same disability as we should encounter in dealing with the Budget resolutions in the absence of a Budget speech from the Chancellor of the Exchequer. As the House would find itself doing in those circumstances, we are, as it were, attempting to understand the Budget resolutions on the Green Paper and to make out as best we can what are the arguments for them, what might be the financial parameters involved, and so on. The hon. Gentleman has done his best, and I think he has deserved well of the House by giving it some fragment of a Budget debate worthy of the Ways and Means resolution laid before us.

I have to say, however, that it was a singular piece of tactlessness on the part of those inscrutable beings who arrange Government business on the Order Paper to place this item immediately after two Northern Ireland orders. We have been reminded by the hon. Member of the immense yield that is expected from the surplus profits of the natural gas industry in Great Britain. Such was the wisdom of the managers of Government business that they thrust this under the nostrils of the representatives of the one part of the United Kingdom—the one-fortieth of the United Kingdom—that is denied altogether the benefits of North Sea gas.

Mr. Tim Eggar (Enfield, North)

Surely the right hon. Gentleman is aware that 50 per cent. of domestic gas consumers in Scotland, Wales and England are not able to get North Sea gas.

Mr. Powell

Yes, but I am also aware that they get the same tariff as if they were getting North Sea gas.

It would be impossible for me, with the views that I have expressed year in, year out about the unwisdom of so large an uncovered PSBR, to refuse my general assent to the Government's desire to obtain revenues to close the wider ever yawning gulf of the PSBR. But I feel that without any diminution of my probity in this matter, I can nevertheless with justification say to the House "Look on this picture and on that". The one picture is that of a Government who find themselves with a marvellously productive milch cow. A possible figure was £750 million. No doubt we shall have more precise figures from the reluctant Minister when he replies. However, £750 million was mentioned by the hon. Member for Merthyr Tydfil as the possible yield, in the next 12 months, of the sort of levy that might be contemplated. That is the one picture.

On the other picture, there is a Province that labours under the disadvantage, in all its industrial and employment problems, of much higher energy costs than prevail in the rest of the Kingdom. It is a Province that is separated from participation in the energy resources of the rest of the Kingdom by a very large question mark—namely, whether the Government's calculations, on which they base their contention that it is uneconomic to link Northern Ireland to the gas and electricity grids of Great Britain, are well-founded.

Those are projections that have been modified, modified again, and disputed not only by impartial external surveyors of the scene but by the Economic Council for Northern Ireland. It would be impossible for Northern Ireland Members, faced with this Ways and Means resolution, not to draw the Government's attention to the fact that with a barely visible diminution of what they will secure by this levy they could link Northern Ireland to the energy economy of the United Kingdom as a whole. There is no other single measure that would bring more assistance to the industry and employment of that Province.

I do not think that this is the occasion of choice, as the doctors say, for a wide-ranging debate upon the future of the gas industry in Northern Ireland or upon the economics of a pipeline. I do not intend to pursue it much further, except to say that, as so often with many apparently economic issues, when we lift the economic fig leaf we find politics below. Of course, it is a political issue.

We understand that the Government are perfectly prepared to enter into practical discussions with the Government of the Republic as to the piping of gas from Kinsale, in the South of Ireland, to supply Ulster; apparently, having once put down their foot, they are not prepared to consider or reconsider the link across the 12-mile North Channel that separates Ulster from the mainland of Great Britain.

This is a political as well as an economic issue. It is a question whether that part of the United Kingdom is to be bound in with the energy economy of a separate State or is to be part of the energy economy of the United Kingdom. Having raised this issue in the context of a Ways and Means resolution, it would not have been right if I had not reminded the House that the issue was both political and economic.

That fact is well understood by the people of Northern Ireland. They will become all the more bitter if, when they see the yields expected from this levy, they also realise that none of that wealth and none of those resources are to be placed into the trembling balance of a decision whether Northern Ireland should enjoy what every other part of the United Kingdom enjoys from a resource that is not local, partial or provincial, but a resource of the United Kingdom as a whole.

12 midnight

The Under-Secretary of State for Energy (Mr. Norman Lamont)

The right hon. Member for Down, South (Mr. Powell) is, of course, absolutely right. This is an unusual procedure. The House is at something of a disadvantage, because we are debating a Ways and Means resolution that relates to a Bill that will not be published until tomorrow. It is an unusual procedure, because the Bill was founded upon a Ways and Means resolution.

The right hon. Gentleman asked for an explanation. The House will recall the announcement made by my right hon. Friend on 8 May to the effect that the Government had decided in principle to impose a levy on the British Gas Corporation in respect of gas purchased from the United Kingdom continental shelf and sold to the corporation under contracts not subject to petroleum revenue tax. The Gas Levy Bill will put that intention into effect. Obviously, there will be a full debate on the precise provisions of the Bill and of the intended levy on Second Reading.

The aim of the levy is to recover part of the gain accruing to British Gas as a result of the rising value of the gas that it purchases under these old, low-priced supply contracts. Those contracts are exempt from petroleum revenue tax. It is appropriate for the levy to be restricted to petroleum revenue tax and to exempt gas. The rates of levy to be specified in the Bill have been set in the context of the existing policy of economic pricing for gas. The levy in itself will, therefore, have no effect on domestic or industrial prices.

The British Gas Corporation's existing financial target will be adjusted to take account of the levy. The hon. Member for Merthyr Tydfil (Mr. Rowlands) asked about the revenue that would be raised by the levy and the Bill. I shall not go into all the details, as they will be fully discussed on Second Reading. However, on the basis of the most recent financial forecasts put forward by the corporation, the levy would raise £130 million in 1980–81. In 1981–82 it would raise £420 million, and in 1982–83 it would raise £750 million. Therefore, the hon. Gentleman's addition was absolutely correct.

The effect of the levy is to transfer the gain from North Sea gas from the corporation to the Exchequer, to the benefit of the country generally. According to the procedures of the House, it is necessary for the Bill to be brought in by way of a Ways and Means resolution. As I said, there will be a full debate on the principles of the Bill on Second Reading. I cannot reply to the points raised by the right hon. Member for Down, South. I noted what he said, and particularly that he disputed that it was not economic to supply gas to Northern Ireland. I shall draw his remarks to the attention of my right hon. Friend the Secretary of State for Northern Ireland.

Mr. Bob Cryer (Keighley)

The Minister said that there would be no effect on the pricing policy of the Gas Corporation. Is he distinguishing between actual pricing and policy? Will the product of the levy be a charge on the supply of gas? Otherwise, how will the money arise?

Mr. Lamont

The levy will be a levy on the costs of the gas corporation. It will not affect the pricing policy of the corporation. That has already been determined and worked out on the basis of the market price of gas and the long-run marginal cost. The pricing policy of the corporation has already been worked out. The financial target is being adjusted to a post-levy basis. It does not alter the policies being implemented by the corporation. It makes sure that the surplus funds from the corporation are transferred to the Exchequer permanently for the use of the community as a whole.

Question put and agreed to.


That provision may be made for the levying from the British Gas Corporation of a levy in respect of certain gas supplied to them and for the payment into the Consolidated Fund of any sums received in respect of the levy or of interest on it.


Queen's Recommendation having been signified—

Motion made, and Question put forthwith pursuant to Standing Order No. 94 (Ways and Means motions)

That, for the purposes of any Act of the present Session to impose a levy on the British Gas Corporation in respect of certain gas supplied to them it is expedient to authorise—

  1. (1)the payment out of the Consolidated Fund of any sums payable under the provisions of the Act relating to the repayment of levy to the Corporation and the payment to the Corporation of interest on sums repaid;
  2. (2)the payment out of money provided by Parliament of any increase in the expenses of the Secretary of State which are attributable to the Act.—[Lord James Douglas-Hamilton.]

Question agreed to.

Bill ordered to be brought in upon the foregoing resolutions by the Chairman of Ways and Means, Mr. Secretary Howell, Mr. Leon Brittan, Mr. Hamish Gray, Mr. Norman Lamont and Mr. John Moore.

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