HL Deb 11 July 1974 vol 353 cc741-52

4.0 p.m.


My Lords, with the per mission of the House I would repeat a Statement made by my right honourable friend the Secretary of State for Energy in another place.

"The Labour Party election manifesto expressed 'Labour's determination to ensure not only that the North Sea and Celtic Sea oil and gas resources are in full public ownership but that the operation of getting and distributing them is under full Government control with majority public participation'.

"The Government have also made it clear that it is their intention to ensure that as a result of the exploitation of these resources maximum benefit is conferred on the community, and particularly on Scotland and the regions elsewhere within which the older industrial revolution industries were developed and which have suffered for a generation from the decline of those industries.

"I have to-day presented a paper, copies of which will be available to honourable Members in the Vote Office."—and to noble Lords in the Printed Paper Office—" which sets out the action which the Government intend to take to achieve these objectives.

"First, we propose an additional tax on profits from the Continental Shelf and the closing of various loop holes in the rules governing existing taxation of oil companies' profits.

"Secondly, we propose to make it a condition of future licences that the licensees shall, if the Government so requires, grant majority participation to the State in all fields discovered under those licences.

"Thirdly, we shall be inviting the companies to enter into discussions with us about majority State participation in existing licences for commercial fields.

"Fourthly, we shall set up a British National Oil Corporation through which the Government will exercise its participation rights.

"Fifthly, we shall extend our powers of physical control over offshore operations, including production, and over pipeline developments.

"Sixthly, we shall set up a Scottish Development Agency and make similar arrangements for Wales as oil exploration develops in the Celtic Sea.

"These are comprehensive and far-reaching proposals. They show the Government's determination to act, and to act quickly, to ensure that the nation gets full benefit from our newly discovered wealth, while leaving a substantial role for the oil companies."

My Lords, that is the end of the Statement.

4.3 p.m.


My Lords, we thank the noble Lord, Lord Balogh, for repeating that Statement. The Statement quoted the reference in the manifesto to the Government's control of distribution, but can the noble Lord confirm that the absence of any further reference to it means they have abandoned this proposal? If so, we shall welcome that. May I ask the noble Lord when the paper to which he referred will be available in the Printed Paper Office, because it was not available there at 3.15 this afternoon?

With regard to the specific points, we welcome unreservedly the first proposal. Indeed, this is exactly in line with the intention of the previous Government and we contend that it makes the second, third and fourth proposals unnecessary. But how strongly we would object to the second and third proposals depends on the terms of the participation mentioned in the second proposal, and on whether the Government are really serious when they talk about having discussions. I hope that the noble Lord will be able to confirm that they really mean discussions, and not just straightforward Government dictation to the companies.

As regards the fourth proposal to set up the British National Oil Corporation, which follows from the second and third, I have two questions. First, where is the noble Lord to get the expert staff? I hope that he will not put that admirable band of civil servants into entrepreneurial-type situations which they are manifestly unsuitable to handle. Secondly, can the noble Lord convince us that our experience of Government-owned situations is such that the problems of exercising Government control, through the medium of organisations such as they proposed here, has been solved? Finally, we welcome without reservation the fifth and sixth proposals, because, once again, these are in line with the intensions of the previous Government.


My Lords, may I join in thanking the Minister for repeating the Statement in your Lordships' House, and in welcoming from these Benches the Government's determination to be swift and to ensure that the nation gets full benefit from our newly discovered wealth. In doing so, we welcome particularly the sixth item in the Statement; namely, the setting up of a Scottish Development Agency and a Welsh Development Agency. Indeed, it has always been Liberal policy to do this, and it was Liberal policy before any one else thought of it—even the Scottish Nationalists! I should like to ask the Minister whether these Agencies are to be linked with the oil revenue in such a way that, as it were, their pump is primed with Scottish and Welsh oil? Is it clear that these Agencies are not only to build up the oil communities now, but are also to prepare for the run-down of other areas, so that when oil developments cease new industries will be coming on to take their place? We also welcome the fifth proposal in the Statement, particularly if it will help in controlling both the standards of diving and the loss of life currently taking place in the North Sea.

My Lords, on the first of the paragraphs in the Statement, we welcome an additional tax to mop up, as it were, any windfall profits. But in relation to the second and third points, we wonder whether it is wise in this instance to be doctrinaire. On these Benches, we would welcome participation with the oil companies in developing this great resource, and we feel that there is, and should continue to be, a substantial role played by the oil companies. Therefore, we wonder whether the word "majority" is over-doctrinaire, and whether these sections would read better—and, indeed, intend better—if the discussions were about State participation, without any necessary commitment to "majority" and referring merely to an optimum percentage.

4.8 p.m.


My Lords, I thank the noble Lords for their constructive questions, which I shall do my best to answer. I do not think that the noble Lord, Lord Strathcona and Mount Royal, was quite right in saying that we have abandoned any pledge in the Manifesto. The Manifesto has been widely misrepresented, especially in the Press, which is notoriously not very pro-Labour. Public ownership has been assured by previous Governments and what we are doing here is to ensure public control. The noble Lord asked whether the Government are serious about their pledge to negotiate rather than to dictate and I can give him that assurance. The Government are always serious.


Some Governments are.


My Lords, we share that view. I had a very shrewd suspicion that some noble Lords opposite might take up the point of participation. I was very intelligent in anticipating this point and have loaded myself with some quotations, and some arguments. I wish, first, to quote a notably "Bolshie" writer; namely, Patrick Jenkin.

Maybe it was only for Norwegian consumption rather than British con sumption, but he said in Oslo: It may even mean in some circumstances the Government securing its proper share of revenues from particularly profitable fields by taking carried interest in some of the concerns; e.g. by exercising an option to buy back especially in successful fields. Though that would be controversial". He anticipated me in this debate: …in Britain, at least a Conservative Government has by no means ruled it out". Why was Mr. Patrick Jenkin right not to rule it out and why are we not right in putting it in?

Participation has these essential features: it will provide much needed easement of the common companies' finances. At the moment, most companies are suffering from financial strain, and, of course, the Government would immediately reimburse them for any past expenditure and thereby ease their liquidity problem, while at the same time not touching the profitability at all.


My Lords, is the noble Lord suggesting that the Government are not in a certain amount of financial difficulty at the present time?


My Lords, I am convinced that the present Government's capacity to borrow is unchanged, although it has been strained as a result of the actions of the previous Government.


My Lords, has my noble friend observed that not only do noble Lords on the opposite Benches welcome the proposals but they are actually taking credit for them. Does not that indicate that the proposals—about which there has already been a great deal of euphoria in the City of London, which is a remarkable transformation—are somehow a departure from the impression gained from the original Manifesto? Does this not also indicate that we get no thanks whatever for moderation, and ought we not to take that into consideration and not give too much away—not have too much appeasement—because the other side of your Lordships' House either claim the credit for it or they are ready to pick holes in the proposals?


My Lords, my noble friend is right in drawing attention to the fact that noble Lords opposite try to claim credit for what they consider the better features of our proposals. However, I must correct him in this way. The so-called North Sea oil shares, especially what I might call the secondary oil shares—not so much the primary oil shares but the secondary oil shares—have shown a sharp fall, which does not indicate that the City was overjoyed at our proposals as mooted in the newspapers; and we talked yesterday about leaks in these matters.

Participation provides security and security is very much needed, the security for which many countries adopted this type of participation in the oilfields. Strategic control is a very important objective and participation provides for this. However well-intentioned the major international oil companies may be, their corporate objectives, singly or collectively, will not always correspond to the national interest, and they are subject to pressure by other Governments. If we have a certain minimum quantity of oil absolutely in our hands, this is very important and in my opinion the most happy solution. Of course, experience also proves this point. There is hardly any major oil country—and we are now to become a major oil country—which in the end has not adopted, after great struggles, a participation agreement. Moreover, it seems to us that those countries cannot possibly offer the kind of stability which Britain can offer in the North Sea for these oil companies. Our relationships with the oil companies have been very correct. We shall negotiate with them, and I have no doubt that we shall come to an arrangement with them. Of course, I am full of praise for my civil servants; anyway I ought not to say so if I were not, because one is here to listen to me and supervise me. Nevertheless, it seems to me that it is interesting to observe that the greatest banks and companies go to retired civil servants in order that they should manage their affairs, so that noble Lords' efforts to minimise their entrepreneurial spirit is, I think, ill-taken.


My Lords, it is unusual to interrupt a Minister when he is answering supplementary questions, but really this is becoming a speech. May I ask the noble Lord to address himself to the point made, which was majority State participation. All these answers have been on participation. If he will address himself to this matter, may I ask him specifically to deal with the question of whether majority State participation means a majority on the board? If it does mean a majority on the board, then who is to have the responsibility for the management of operations?


My Lords, if I was guilty of such conduct then I apologise, but I feel that I was not guilty of that conduct because the noble Lord opposite raised the question not of majority participation but of participation. I have to answer him first. I was just about to go on to answer the noble Viscount, Lord Thurso. He asked about majority participation, and the noble Lord, Lord Wade, went further and asked whether this means board membership. Of course, this is a consequence of the very extensive propaganda campaign which has been conducted in this country on this question. Of course we are not going to nationalise companies, or place members on the boards of companies. The participation is in consortia, in exactly the same way as has been the participation of the Gas Council, now the Gas Corporation, and the National Coal Board, whose participation has been successful, harmonious and productive, and has provided us with the nucleus of that expert knowledge which both noble Lords asked me to find.


My Lords, I wonder whether the noble Lord, Lord Kaldor, would recognise that I am not Lord Wade.




My Lords, has the noble Lord finished that statement, because many of us have other questions to ask briefly, in the hope of getting brief replies; we know they will be lucid. May I ask whether the paper that he mentions refers to conservation policy, as he himself promised would be the case some weeks ago? Secondly, is the aim of the policy to attract or to repel exploration activities? Thirdly, since he quoted Mr. Patrick Jenkin, does he con sider that the policy proposed for par ticipation is at all similar to the Nor wegian practice of a carried interest?


My Lords, it is en tirely like the Norwegian carried interest. Conservation policy will obviously be pursued, with expert knowledge, through the participation. As to powers of control, through the fifth point that I read out, which perhaps the noble Earl missed, we shall extend our powers—


My Lords, I have got all five points. What we cannot find out is whether there is a state- ment of conservation policy in this document.


Yes, my Lords, there is—to extend our physical control over offshore operations, including production. If that was not clear to the noble Earl, well I must have been very mistaken in my former opinion of his perception. So far as the noble Viscount, Lord Thurso, is concerned, and his question about majority, majority membership in a consortium does not mean that one bosses the consortium. Most of the consortia agreements in the North Sea obviously provide for a very detailed safeguarding of minority interests, and certainly this will not in any way cause the oil companies, who are experts in these matters, to quail before extending their operations further. I think that I have now answered the noble Viscount. If I have not, if I have missed anything out, I apologise.


My Lords, without prejudice to the other points in the Statement, may I welcome the proposal to set up the Scottish and other development agencies, and ask whether the White Paper contains information about the constitution, the functions and duties of such bodies or, if not, when we may expect them? Secondly, in view of the immense importance of this Statement, and presumably the Paper accompanying it, will the Government give your Lordships time to debate this matter before we rise for the Recesss?


My Lords, as to the last point, I would suggest that the usual channels should be used. As to the first point, there are outlines of the Scottish agency in the—it is not quite a White Paper—statement which will be obtain able after 4.15 p.m. in the Printed Paper Office. I hope that a further Statement will be made on the Scottish aspect before we rise for the summer holiday.


My Lords, if it is true that there is to be majority participation (which has not been supported by any Party on this side of the House), and there is to be negotiation with existing licence holders, there presumably will be a mixed economy in the North Sea, some companies which have a majority Government ownership and some com panies which have refused participation. rejected it, and are independent. Can we be sure that this will be fair competition? In the past, Government companies have been able to borrow their finances and other working capital at much more advantageous terms, and this cannot be fair competition and cannot be for the good of the speedy and efficient development of North Sea gas and oil.


My Lords, I should not have thought that the companies, the consortia in which the State is participating, will have any advantage from that point of view at all. The whole situation merely means that a certain part of the consortium is in public hands. So far as the basic operational documents and conditions are concerned, they will not be affected at all.


My Lords, is my noble friend aware that all of us who are in any way involved in the oil industry should be grateful to the noble Lord and the Secretary of State for the speed with which they have published their recommendations, which have put an end to the suspense which was doing a great deal of damage to the industry? Is he further aware that we shall need a certain amount of time to consider whether they get just the right balance between the needs of the industry and the rights of the nation?


My Lords, I thank my noble friend for those words.


My Lords, would the noble Lord clarify one thing? In so far as the Government appear to foresee powers to impose public participation on future licensees and pro poses to discuss the situation—


My Lords, may I interrupt? The word "impose" is not correct; it is "negotiate".


My Lords, I am much obliged to the noble Lord for correcting me, and his usual perspicacity comes to our aid. The proposal to negotiate under the threat of withholding a licence is a pretty tough negotiation. Does not this amount to holding a pistol to the heads of the existing licensees with regard to their present position?


My Lords, as I said before, the existing licences are to be renegotiated, and the renegotiation should be taken in the strictest sense of the word. It will be negotiation and not dictation. So far as the new licences are concerned, I am astonished that noble Lords opposite do not want to emulate the Norwegians, who have secured 60 per cent, participation and altogether a take of 85 per cent. It is true that noble Lords opposite and their friends in another place claim that they had made complete plans to impose at least as great a stake, but this did not come out at all in the debates we had in this House, and in which I think I took some active part.


My Lords, I must apologise to the House for not having been present when the noble Lord repeated the Statement. I was performing a public duty. Is the noble Lord in a position to say how many of the proposals in the Statement or the White Paper will require legislation, and which they are?


My Lords, obviously a number of them, especially those about physical control. Whether they can be put into one paper or a number of papers, I do not know. We shall also have to have a Money Bill on the various compensation parts of the Statement. There will be a number of points on which there will have to be legislation.


My Lords, is the noble Lord in a position to define them at all. or must we await further information on that?


My Lords, I am afraid that you will have to await further clarification because we are taking very seriously the point about negotiation, and obviously those negotiations are very important in this respect. We shall have to come to an agreement with the oil companies on various points of a technical nature, which will possibly demand legislation.


My Lords. I hesitate to take up any further time on a Statement, but may I ask the Minister to answer one question that I specifically asked and which he did not answer? Are the revenues of the Scottish Development Agency to be linked with the flow of oil revenue? In other words, is the Scottish Development Agency to be as rich as the oil flow?


The whole oil flow?


In proportion.


My Lords, I hope that we shall not do that, because obviously the Scottish Development Agency ought to begin work before the oil begins to flow, and ought to be financed before the oil has yielded any tax, or participation in the profits. The advantage at the moment for not having a fixed proportion is on the side of Scotland. We shall have to consider later on in what way, and under what sort of controls, which obviously also depends on the problem of the constitutional changes which are proposed by one Party or another.


My Lords, this discussion has continued now for nearly half an hour. Perhaps we cannot complain of that as it is an extremely important Statement. I must say that the noble Lord the Minister gave some very full replies earlier on in the exchanges. All I should like to say is that I have listened for the last 30 minutes—and I do not suppose that I am alone in this—with a sinking heart to what has been said. The future of the British economy depends to a greater extent than anything else within our control on the exploitation of oil from the North Sea, and yet we hear these exchanges on ownership and control, and the political dogfight continues, when the paramount need—the noble Lord must accept this; he made a special study of this before he found himself in his Government office—is to get on with producing the oil at the fastest possible rate and by the most appropriate methods of modern technology and modern management. I hope that in ending this discussion, for now at any rate—we shall probably have to return to it—the noble Lord will give an assurance that the highest sense of priority and urgency will be given to the question of the exploitation, marketing and production of oil from the North Sea, because if the political argument takes over we shall pay for it.



The noble Lord, Lord Windlesham, forgets that there are always at least two sides to the question. I should have thought, for instance, that some Scottish noble Lords very much resent—and I agree with the Statement—that the oil should be produced in the quickest way to the maximum point, irrespective of conservation arguments. I do not wish to take up all these matters; there is no sort of proof from Kuwait to Nigeria, from Australia to Norway, that the sort of proposals which we have made in any way detract from the exploitation of the oil wells of those countries. It seems to me to be a very strange relapse to the Munich spirit of saying that we must appease everybody including the oil companies. We should be firm, but friendly and absolutely sincere at the same time, honest with what we want and what we expect from them.


My Lords, the noble Lord, Lord Windlesham, referred to the passage of time that has elapsed since the discussion began. I then noted that the clock was at 29 minutes past the hour; it now stands at 32 minutes. We will have an opportunity of reading the White Paper. The matter is one of great importance. Although time is short, if the usual channels would wish to arrange a debate on the subject the Government would be very forthcoming in meeting such a wish. If the House would accept that as an expression of understanding of the importance of the subject perhaps it would approve my suggestion that we now move to the next business.