HC Deb 08 February 1982 vol 17 cc720-1
2. Mr. Eggar

asked the Secretary of State for Energy what representations he has received about the relationship between the level of North Sea taxation and the level of oil field developments.

The Minister of State, Department of Energy (Mr. Hamish Gray)

A considerable number.

Mr. Eggar

I am not surprised at that information. Is my hon. Friend aware that decisions on a considerable number of field developments depend crucially upon the Chancellor's review of the tax regime? Can my hon. Friend assure us that the Department of Energy is putting all possible pressure on the Treasury to ensure that those developments go ahead?

Mr. Gray

My hon. Friend will be aware that the proposals put forward by the United Kingdom Offshore Operators Association have been discussed by Ministers in both the Department of Energy and the Treasury. I am sure that my right hon. and learned Friend the Chancellor is giving careful attention to the suggestions of UKOOA. We shall know the result of his deliberations in due course.

Mr. Grimond

Will the Minister tell us what proportion of North Sea takings currently goes in tax? Secondly, does he consider that development has been retarded by the extremely heavy rate and multiplication of different rates of tax now in force?

Mr. Gray

I cannot give an exact answer on the first part of the right hon. Gentleman's question, but the proportion is substantially more than 80 per cent. In answer to the second part, this matter is currently receiving careful consideration.

Mr. Douglas

Does the Minister agree that his right hon. and learned Friend's deliberations, the results of which are due in March, will have a significant influence on the valuation to be put on BNOC? That being so, how is it possible for the Standing Committee now examining the Oil and Gas (Enterprise) Bill, the House, or anyone else to put a valuation on those assets in the absence of the details of taxation?

Mr. Gray

The hon. Gentleman will not be asked to put a valuation on them in the immediate future, and he has a relatively short time to wait for the results of my right hon. and learned Friend's deliberations.

Sir Anthony Fell

Is the Minister aware that any speeding up of gas exploration in the North Sea would provide at least some assistance for the town of Yarmouth, which is currently very hard pressed by unemployment?

Mr. Gray

I know of my hon. Friend's concern, which he has expressed in the past. We are very hopeful that the measures currently being taken by the Government will speed up North Sea gas development.

Mr. Rowlands

Besides the fact that the Government seem to be using taxation as a form of depletion policy, will the Minister comment on authoritative press reports at the weekend that BNOC intends to take the lead in cutting oil prices by a further $1.50? What will be the effect of that on revenues and development in the North Sea? Will the Minister ensure that a full statement is made to the House if such a significant and major step is envisaged by BNOC? Have the Government been consulted about this?

Mr. Gray

The hon. Gentleman will realise that that is a matter entirely for BNOC, which in recent months and years has responded to the market in terms of oil prices and no doubt will continue to do so.

Mr. Nelson

Does my hon. Friend accept that there is now a real danger that by the end of the decade the level of North Sea oil production will have declined very substantially and that many of the attendant benefits will have been lost? Does he favour a single progressive form of taxation which would be more closely related to investment, such as the form proposed by the Institute of Fiscal Studies, and would result in a far higher level of investment now when it is most needed?

Mr. Gray

It is the objective of the Department of Energy to encourage maximum exploration in the North Sea. So far that policy has been well rewarded, but I take note of my hon. Friend's comments. I have no doubt that my right hon. and learned Friend the Chancellor will also take these matters into consideration before he makes his statement.