OIL TAXATION (Hansard, 26 October 1983)

§ Mr. Jack Straw (Blackburn)
The resolution paves the way for those parts of the Finance Bill which were lost as a result of the Dissolution on 9 May.
I congratulate the hon. Member for Croydon, Central (Mr. Moore) on his appointment as Financial Secretary to the Treasury, and I look forward to hearing his reply in due course.
Hon. Members will have an opportunity to debate the clauses fully when the Bill returns to the House.
Since the House previously discussed oil taxation on 28 April, yet another change has taken place in oil taxation, which was announced in the middle of September, when the Chancellor had to rush out a decision that he would be withdrawing petroleum revenue tax relief on abortive explorations and other aspects of farm-ins to protect revenue amounting to about £1,200 million.
That is the twelfth major change in the oil taxation regime since the Government were elected in 1979 and it sits oddly with the pledge made in April 1979 by the present Secretary of State for Employment, then the Conservative spokesman on energy, that a Conservative Government would pursue a steady policy designed to secure the fullest advantage to the nation as a whole. We accept that oil taxation is a difficult area, but I hope that the new Bill that the Financial Secretary will be introducing will bring more coherence and permanence into oil taxation.

§ The Financial Secretary to the Treasury (Mr. John Moore)
I thank the hon. Member for Blackburn (Mr. Straw) for his kind remarks. He is right in saying that the resolution paves the way for the introduction of an oil taxation Bill, which will complete this year's Budget package on the oil industry.
The Bill relates to the proposed changes to the rules for field expenditure relief. The technical provisions needed were far too complex to ask the House to pass in the short time available for either of this year's Finance Bills. Last summer, the Chancellor of the Exchequer announced that these changes, which had been dealt with in chapter 2, part IV, of the first Finance Bill, would be the subject of an oil taxation Bill to be introduced in the autumn. That is the Bill to which the resolution relates.
399 The hon. Member for Blackburn mentioned developments in September concerning the Forties field. I assure him that we shall be legislating in the Finance Bill. We want to make sure that the technical details are correct, having taken steps against the potential loss of tax.

§ Mr. T. H. H. Skeet (Bedford)
Clauses 80 to 87 and schedules 13 to 16 were relinquished when the first Finance Bill went through the House. Will any additional matters be included in the new Bill? There have been long consultations between the industry and the Treasury. They have been meaningful, but does my hon. Friend propose to include any additional matters?

§ Mr. Moore
My hon Friend has great experience and knowledge of the industry. He is right to say that there have been long and detailed consultations. They have produced further modest advances. In essence, the provisions were not complete at the time of the Finance Bill and the main change is that, as we announced in April, we have added an equivalent PRT charge on incidental receipts of foreign field owners of pipelines in our waters. They could otherwise have a competitive advantage over our own oil producers in attracting third party sharing.
We have also changed the rules on associated assets and I am sure that that will lead to considerable discussion in Committee. More generally, the opportunity has been taken to improve the provisions that were included in the clauses and schedules to which my hon. Friend referred in his intervention.
I should say a word about the background to the proposal mentioned by the hon. Member for Blackburn. The early pattern of development in the North sea was mainly of separate fields. Each had its own pipelines, treatment plants and other facilities or it was known from the outset that such facilities would be shared. The PRT system was well adapted to that.
However, it has been increasingly clear that the pattern of new developments will include smaller fields relatively close to existing facilities. For these, the natural and possibly the only viable course is for them to pay to use spare capacity in existing assets, particularly pipelines for getting their oil and gas ashore.
The existing PRT rules are not suitable for the new situation. They give relief to operators of mature fields 400 only to the extent that expenditure is incurred for their own fields. The prospect of shared use means that they should lose large amounts of the relief that they already have, and that relief for future expenditure would be restricted. That is no way to encourage the shared use that we need in order to develop the new generation of fields. We must rewrite the relief rules so that full relief is ensured even though assets are, or may be, shared with third parties.
We all look forward to detailed and lengthy discussion of those critical matters, and I urge the House to support the resolution.