§ 2.51 p.m.
§ LORD BALOGHMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ [The Question was as follows:
§ To ask Her Majesty's Government whether, in view of the recent disclosure of exceptionally high rates of profit on natural North Sea gas, these profits have to be mainly transferred to America over the exchanges and thus largely burden our balance of payments; whether they will institute an inquiry under a competent impartial chairman and fortified by expert accountants, before negotiations begin in 1972 about the prices of gas to be paid by the Gas Council; and whether they will ensure that profits are reduced to more reasonable levels.]
§ THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)My Lords, in judging profitability it is necessary to take into account all concessions, including those on which oil has not been found. Foreign investment is welcomed provided that the company holding the concession is registered in this country. The profits are thus subject to United Kingdom taxation, and the balance, after deduction of tax, may of course be remitted abroad to foreign investors, though in practice such balances are often retained in this country for re-investment. 327 Her Majesty's Government are satisfied that the Gas Council have the necessary knowledge and expertise to handle their future price negotiations, and do not accept any need for an inquiry to establish what prices they should pay.
§ LORD BALOGHMy Lords, I thank the noble Lord for his repetition of an unresponsive reply which he gave on the last occasion on which I touched on this subject. May I ask now whether he thinks that 80 per cent. per annum is such a reasonable profit as he describes, and does he think that what God gave to us the Government ought to give to America?
§ LORD DRUMALBYNMy Lords, I can only assume that the noble Lord reaches this 80 per cent. profit by basing it upon the estimate of profits possibly to be made in the future on the original subscribed capital, entirely ignoring the fact that a great deal more capital has to be put forward in order to earn those particular profits.
§ LORD RHODESMy Lords, can the Minister say that if and when we join the Common Market we shall adopt the same policy towards private profit from North Sea gas as that which the other countries which abut the North Sea now have?
§ LORD DRUMALBYNMy Lords, I think that is rather a different question from the one that is on the Order Paper, but I should be happy to answer it if the noble Lord would put it down.
§ LORD RHODESMy Lords, there is not a chance to put any Question down on this Paper: so many people put their names down one week after another.
§ LORD HARVEY OF PRESTBURYMy Lords, will my noble friend confirm that had the companies which are carrying out the exploration not been allowed to retain a reasonable profit, future exploration would not take place? And we desperately need this oil.
§ LORD DRUMALBYNMy Lords, I entirely agree with what my noble friend has said; and I would remind the noble Lord, Lord Balogh, if I may, that "reasonable" is a highly subjective word. "Reasonable" in this context must mean reasonable in line with the purpose—that 328 is, to get as much gas for this country as possible.
§ LORD BALOGHMy Lords, may I ask the Minister whether he thinks that the Americans were terribly handicapped when they fixed a maximum of 12 per cent., as against the 80 per cent. in this country? May I further ask the Minister whether the Communists were too capitalistic when they obtained the gas at about two-thirds of the price?
§ LORD DRUMALBYNMy Lords, I am sorry, but I did not quite catch the second part of that supplementary question.
§ LORD BALOGHThen I will repeat it, if the noble Lord wants me to. I asked whether the Communists were too capitalistic when they obtained their gas from the Persians at two-thirds our price.
§ LORD DRUMALBYNMy Lords, I think the question of what price is reasonable has to be judged in a number of contexts. It is not just the question of the extraction of the gas itself, but also the question of the encouragement of exploration. On the first part of the supplementary question, experience showed that the Federal Power Commission in the U.S.A. had to increase its price in order to encourage exploration because exploration was not being carried out to the extent which was necessary to sustain the supply.
§ LORD BALOGHMy Lords, does the Minister not realise that the Americans increased the price because there was a little inflation, but that they are still at 12 per cent. of original investment?
§ LORD DRUMALBYNMy Lords, obviously I cannot answer as to the particular figures that the noble Lord has given, but I think that what I have said is related to the conditions in this country, and that is what matters.
§ LORD SHACKLETONMy Lords, may I ask the noble Lord whether the Gas Council think they ought to be getting their gas cheaper; and, if so, has he any views on what the difference in price to the consumer would be? Furthermore, is he aware that questions from my noble friend invariably raise issues which the Government, within the terms of the Question, feel unable to answer, and will he give very careful 329 consideration to these comparative figures?
§ LORD DRUMALBYNMy Lords, I am always willing to give the closest consideration to everything which the noble Lord asks, and that is what I have done in this case. I only wish that his questions were in such a form that one could give a simple "Yes" or "No" to them, but they are not. So far as the question about the Gas Council is concerned, I have no information that the Gas Council think that the price they are paying is too high. It is a fact that the last price that was arranged was higher than the original price for the first round of negotiations. But, of course, one has to consider the other side of the picture also, and that is that some of the suppliers of gas were highly dissatisfied with the original price that was settled for the first supply, which is the supply that the noble Lord is talking about.
§ LORD PARGITERMy Lords, is the noble Lord aware that the general public are very disappointed at the price they have to pay for natural gas, having regard to all the promises which were made that gas would be cheaper? Will he see whether anything can be done about this question of profit, and so on, in order to bring the price down?
§ LORD DRUMALBYNMy Lords, people are always optimistic about the future, and it is a very good thing that they should be.
§ LORD RHODESMy Lords, is it not a fact that no other country in Europe which abuts the North Sea allows the exploitation of North Sea gas for private profit in the way that we are doing in this country? Can he answer that?
§ LORD SHACKLETON"Yes" or "No".
§ LORD DRUMALBYNMy Lords, I answer for matters which are within the power of Her Majesty's Government and which are the responsibility of Her Majesty's Government. My Lords, I think the answer to that is, "No".
§ LORD HARVEY OF PRESTBURYMy Lords, is it not a fact that most of the prices agreed were fixed by the Labour Administration?
§ LORD DRUMALBYNMy Lords, I am afraid the answer to that is "No", because they were fixed by the Gas Council.
§ LORD FERRIERMy Lords, is not this exchange of question and answer an example of the value of Unstarred Questions, and does my noble friend agree that we should not clutter up the Starred Question period if the noble Lord were to put down matters of this sort in such a way that they could be debated?
§ LORD BALOGHMy Lords, does the noble Lord realise that we did debate this subject, but that when I raised this question in a debate on international companies there was absolutely no answer forthcoming from the Minister responsible for answering?
§ LORD DRUMALBYNMy Lords, the noble Lord is aware that one of the reasons why there was no answer was that he was not present to hear it.