Oil and Gas Taxation

HC Deb 11 June 2002 vol 386 cc706-9

2. Mr. Alex Salmond (Banff and Buchan)

What consultations she had with ministerial colleagues on the Budget changes to North sea oil and gas taxation. [57380]

The Secretary of State for Scotland (Mrs. Helen Liddell)

I have regular discussions with my ministerial colleagues on a wide range of matters, including fiscal matters, affecting Scottish interests. Budget decisions are of course a matter for the Chancellor of the Exchequer.

Mr. Salmond

I add my congratulations to the Under-Secretary on reaching her new position, and I also congratulate Ireland on reaching the next stage of the World cup finals.

Is it not true that the Secretary of State was not consulted on tax changes in respect of the North sea, and nor was Pilot, the industry consultation body? Is it not clear that even if a fraction of the 50,000 job losses estimated by the industry are indeed lost, the constituency of every Member in the Chamber will be affected? We now know that the Clair field will offer no fabrication aspect for Scottish yards, and the loss of 800 BP contractor jobs was announced last week. With that in mind, does the Secretary of State accept that oil workers are very anxious about their current job prospects? I know that she is a Labour politician and has to defend the proposals, but she is also—

Mr. Speaker

Order. The hon. Gentleman's question is far too long.

Mr. Salmond

Representations to the Chancellor—

Mr. Speaker

Order. It is time to sit down.

Mrs. Liddell

I am sure that my hon. Friend the Under-Secretary will take note of the hon. Gentleman's remarks. The decisions that the Chancellor has taken in relation to North sea fiscal policy should not have come as any great surprise. In 1998, when the oil and gas industry taskforce was being established, the Chancellor undertook a review of the North sea fiscal regime, and pointed out that he was considering petroleum revenue tax and a supplement on corporation tax. When the oil price dropped to $10 a barrel, the Chancellor made it clear that for the duration of the Parliament he would not take any action in respect of the North sea fiscal regime, but would keep the matter under review.

As part of that review, the Treasury was represented on the oil and gas industry taskforce and on Pilot, which I chaired for about two years, by no less a figure than Sir Steve Robson. At that time, very few Treasury officials were ranked higher than him. It was the discussions within Pilot that led us to reach a decision on the North sea fiscal regime, which is designed to help companies that are investing in the North sea.

Predictably, the hon. Gentleman tells only half the story. We have introduced first-year allowances for the North sea of 100 per cent., which means that for those—

Mr. Speaker

Order. I call Mr. Connarty.

Mr. Michael Connarty (Falkirk, East)

I was enjoying that answer because it was so comprehensive.

Jim Sheridan (West Renfrewshire)

It was better than the question.

Mr. Connarty

Yes, it certainly was.

As secretary of the offshore oil and gas industry all-party group, I should point out to my right hon. Friend that the industry is concerned about the structure of the tax. We do not know whether the 10 per cent. increase will be permanent, or vary if the price of oil falls to the low levels of the previous Parliament. However, in general—

Mr. Speaker

Order. This is a supplementary question, and the Secretary of State will try to answer it.

Mrs. Liddell

This is a complicated issue and I apologise for spending time on it. Naturally, the industry does not like paying additional taxation, but it has a much higher rate of return—some 34.3 per cent., compared with 11.2 per cent.—than all other non-financial companies. The Chancellor made it clear in the Budget statement that he is trying to bring about stability in the North sea fiscal regime. Indeed, the taxation changes are designed to ensure that companies that invest in the North sea pay less tax, and that those that do not do so pay more. As Secretary of State for Scotland, I find that very attractive. I find equally attractive the fact that the money is being used to ensure better health care in Scotland—something that my party has argued for, and delivered, for some time.

Mrs. Jacqui Lait (Beckenham)

I add my congratulations to the Under-Secretary, and my commiserations to the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes). I was glad that I was able to congratulate him on his forthcoming wedding anniversary in good time. I also welcome the hon. Member for Banff and Buchan (Mr. Salmond) to what is possibly one of his last appearances at Question Time before he moves to Holyrood.

The Secretary of State suggested that she was aware that the taxation of oil companies was likely to go up in the Budget. What representations did she make to the Chancellor on behalf of the 18,000 people who might lose their jobs in Scotland because of the effect of the tax changes?

Mrs. Liddell

One of my hon. Friends says from a sedentary position that the Tories just make numbers up, and that is what the hon. Lady is doing and what the hon. Member for Banff and Buchan (Mr. Salmond) has just done. The taxation regime is balanced. It includes the 10 per cent. supplementary charge on corporation tax that takes into account the profitability of the UK continental shelf companies. It includes a first-year allowance of 100 per cent., which means that marginal fields will pay less tax, and it also commits to setting a date for the abolition of royalties.

It is a sensible procedure, aimed—I remind the hon. Lady—at securing resources for increased expenditure on health and education in Scotland. That is what the Scottish people want, and it is fair that profitable oil companies should make their contribution to the health and well-being of the people of Scotland in return for the exploration and exploitation of a natural resource.

Mrs. Lait

The 18,000 people who may lose their jobs will not necessarily find that their health improves. Will the right hon. Lady leave behind her previous role as energy Minister and concentrate on her role as Secretary of State for Scotland? In all her answers, she has not made it clear whether she represented the views of Scotland to the Chancellor or, as usual, she was the Cabinet's voice in Scotland. Will she clarify that point?

Mrs. Liddell

I am Scotland's voice in the United Kingdom Cabinet, which has more Scots in it than the Scottish National party has sitting on the Benches. The Budget is in the best interests of Scotland, because Scotland's health record is one of the worst in Europe. We have to improve the health of the people of Scotland as well as improve the economy, and that is the reasoning behind the Chancellor's sensible Budget.

We discussed with the oil industry over three or four years the difficulties that the industry is facing because of the maturity of the UK continental shelf. That is something that the previous Conservative Government never took it into their head to do. We have brought unemployment in Scotland down to its lowest level for a generation. More people are now in employment than have been for 40 years and that is a record of which I am proud and, I believe, the people of Scotland are proud.

Mr. David Stewart (Inverness, East, Nairn and Lochaber)

Does my right hon. Friend acknowledge the record profits made by multinational oil corporations such as Shell and BP? Is not the Chancellor right to tax them appropriately? However, does my right hon. Friend share the disappointment felt in the highlands, and in Scotland as a whole, about the loss of the BP Clair platform to Norway? Will she join my campaign to investigate the details of the Norwegian bid?

Mrs. Liddell

I pay tribute to my hon. Friend's campaign to secure the Clair jacket, for Nigg in particular. The decision was a commercial one, but I hope that greater concentration will now be put on getting subcontract work from the Clair jacket to ensure continuation of supply employment in Scotland.

My hon. Friend is right about the taxation. I was not surprised to hear the hon. Member for Beckenham (Mrs. Lait) advocate from the Opposition Front Bench that taxation should not be increased to provide better health care in Scotland, but I was very surprised to hear the hon. Member for Banff and Buchan do so. His colleagues in the Scottish Parliament—which he is soon to rejoin, we hear—say that they want increased public expenditure in Scotland. He says that he does not want—

Mr. Speaker

Order. The views of the hon. Member for Banff and Buchan (Mr. Salmond) are nothing to do with the right hon. Lady. She is here to answer for the Executive, and she should do so.