CONTINENTAL SHELF OIL AND GAS

HL Deb 08 May 1974 vol 351 cc500-97

3.4 p.m.

LORD STRATHCONA AND MOUNT ROYAL rose to call attention to the national need to exploit fully and without delay the oil and gas discoveries on the Continental Shelf around the British Isles; and to move for Papers. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. On this day when we are once again confronted with a threat of the total disruption of the industrial life which is the very lifeblood of this country it is my privilege to introduce a debate on a success story where there is a distinct promise of a change for the better in our national circumstances, such as has not been offered to us since the start of the Industrial Revolution. That I do not exaggerate becomes clear when we consider the size and the scale of the opportunity. It needs only a brief study—and I have only made a brief study—of the oil and gas discoveries around our coasts to appreciate the truly awesome scale of the opportunities and also the problems associated with them.

Production by 1980 is now reckoned to reach at least 100 million tonnes per annum. That is equivalent to 2 million barrels per day at 7½ barrels to the tonne. I thought it was useful to give your Lordships those equivalents because this is a very complex subject. This would meet two-thirds of the probable requirements of our fuel by that time, and at the current rate of investment output could easily reach 200 million tonnes a year shortly thereafter, in which case we shall become net exporters of oil. I may add that these figures look quite conservative when seen against the Report published this morning by the Scottish Council for Development and Industry, which even suggests that we may reach 250 million tonnes in the early 1980s.

Accurate figures are hard to come by. For one thing the situation changes and evolves as new fields are discovered, averaging a rate of one new field every three months in recent months. There is also the awkward fact that it is not always in the interests of the oil companies to reveal the full extent of the assessments of their fields. I shall return to this point in a moment, but I think I should give your Lordships a few figures to illustrate the scale of the subject we are discussing this afternoon.

There is now no question that the existence of these resources will literally transform the life of everyone in this country. The price of ten dollars per barrel would produce a balance of payments contribution of the order of £2,000 million to £3,000 million per annum on an output of 100 million tonnes a year, and since the current balance of payments deficit is around £3,000 million at the present time, of which £2,000 million is contributed by our oil imports, we can see a real prospect of eliminating at a stroke the dreaded balance of payments deficit which has been a problem hung round our necks like an albatross holding us back ever since the end of the last War. Furthermore in recent months it has become increasingly clear that this oil is no short-term transient phenomenon. This is no flash in the pan.

It is true that oilfields tend to progress on about a 15 year cycle during the build up to a peak of production and then into a gradual decline, but enough fields have already been discovered to keep the industry busy in our waters for at least the next 40 years; and let us remember that 40 years ago the Persian oilfields were still new. This is the kind of situation that can develop. Moreover, there comes a later phase in the development of an oilfield when some of the smaller deposits can be economically exploited, both because the main capital investment has been amortised over the flow of the major oilfield and also because the advances in technology in, say, 20 years, will make it possible to exploit other reserves, for example, in the turbulent seas off the North-West coast of Scotland out towards Rockall.

In one speech, my Lords, I cannot hope to cover all the financial, technical, social, industrial and environmental ramifications of this tremendous enterprise. All I can hope to do is to try to sketch in a general background which will enable the many noble Lords who are far more expert than I in this field to develop particular points of interest to themselves. I shall draw your Lordships' attention to some of the problems and, I hope, suggest lines on which we might seek solutions. Also, I should like to pose one or two questions to the Government.

My Lords, we have framed the terms of the Motion to cover the whole of the Continental Shelf around these islands as allocated to this country under the 1964 Convention. That, of course, includes both what is now known as the Celtic Sea—the area to the South and West of Wales and Cornwall—and the area to the North-West of Scotland, out towards the lonely outcrop of Rockall to which I have already referred.

BARONESS WHITE

My Lords, if the noble Lord will forgive me for interrupting, it distresses those of us who come from the Principality to have a Scottish football term applied to the Celtic Sea.

LORD STRATHCONA AND MOUNT ROYAL

My Lords, I am grateful for that correction by the noble Baroness, Lady White. I have an idea that "c" is normally soft before "e", but happily—

THE EARL OF LAUDERDALE

My Lords, to many Celts "c" is normally soft before an "e".

LORD STRATHCONA AND MOUNT ROYAL

My Lords, I am not going to talk about the sea to the South and West of Wales and Cornwall. Before coming to the point I was attempting to make, I would mention that we have not yet succeeded—and this will not surprise many of your Lordships—in coming to an agreement with the French about the division of the Continental Shelf in the Channel. I want to refer mainly this afternoon to the North Sea; that is, the gasfields off the East Anglian coast, and what are predominantly oilfields off the Scottish coast running right the way up to the Shetlands. But I thought it was as well to recognise that there are other potential finds in other areas of the Continental Shelf.

My Lords, we should first understand very clearly that the exploitation of this endowment will not be achieved without almost superhuman effort. One hears the word "bonanza" used. It makes me nervous. It seems to imply that oil has arrived like a deus ex machina to bail this country out of its industrial and financial travails; that we have only to sit tight for the next five or six years and we shall float into the Elysian fields on a sea of oil. Unfortunately, the reality is rather different. Certainly, the bonanza in its meaning of a rich body of ore is there all right; that is beyond question. The last four years have unquestionably shown it. But the investment required to give the word its original Spanish meaning of fair weather or prosperity will be prodigious. Something of the order of £1,500 million has already been invested, and a further £8,000 million will be needed between now and about 1980. We are talking now of a Concorde, a Channel Tunnel or a Maplin every year. Given our balance of payments and budgetary restraints, I suggest that no British Government could conceivably find capital on this scale, either out of revenue or by borrowing. We shall have, therefore, to rely on the oil industry, and that means the Americans, to whom we shall have to look for at least half of the required investment. Perhaps we might look at the sort of financial picture this might produce.

I said that figures were difficult and I shall make a lot of assumptions which the noble Lord may correct later. But if we assume a value of three dollars a barrel after tax (and I shall have more to say on the subject of tax in a moment) profits coming out of the North Sea on the basis or 100 million tonnes a year will be around £1,000 million a year. That will be a return of approximately 15 per cent. in a notoriously difficult business.

THE MINISTER OF STATE, DEPARTMENT OF ENERGY (LORD BALOGH)

My Lords, if the noble Lord will forgive me for interrupting, I must ask a question because I do not follow him. How does he get £1,000 million profit from the figures which he quoted'? How does he get his figure of 15 per cent.?

LORD STRATHCONA AND MOUNT ROYAL

My Lords, I hope that I have done my arithmetic correctly. I do not really think I can go through all the sums now. If the noble Lord, Lord Balogh, chooses to correct me later, I shall of course stand corrected, but these figures are the best I could get. I must say that the noble Lord has himself proved rather coy about producing figures on which we could base some of our discussions this afternoon.

I would go on to say that about £500 million of these profits might very well accrue to the American investors. One might reasonably expect that some proportion of this money would be reinvested, either in the oil industry or in other industry in this country, so in this ease we might look for a net outflow of the order of £250 million a year. We will also suffer a financial drain for capital equipment which we shall require, and to pay the salaries of the specialists and experts. Nevertheless, the respected Edinburgh firm of stockbrokers, Wood MacKenzie, who specialise in this sphere, have calculated that the net annual benefit to the United Kingdom could rise to as much as £6,000 million a year.

One does not want to get overoptimistic about them, but they are dramatic figures. I suggest they go so far that one should even think in terms of examining the tendency of this country to want to withdraw from some of its overseas obligations on the grounds of economics. We could get ourselves into a situation whereby we make defence cuts, and cuts in the activities of the British Council, in ways which are irreversible and which we may live to regret as we find ourselves in the position of having greater funds to make available. From the internal budgetary point of view, if we had a 12½, per cent. royalty tax on 100 million tonnes, that would produce £400 million a year, and the Corporation Tax would produce £1,100 million a year. If one adds these two together, one has a yield equivalent to the total Corporation Tax yield today, and I suggest that that is something which would put a glint in the eye of any aspiring Chancellor of the Exchequer.

My Lords, we are moving into the related questions of profits, tax, control and nationalisation. This is an area where we had hoped that some of the wilder statements made during the Election campaign had been tempered by the wiser counsels advocated by the noble Lord, Lord Balogh. Therefore, I find it sad to read that in an address in Oslo last week Dr. Gavin Strang said: We believe that it is only through a measure of public ownership and control that the British people will obtain the maximum benefit from North Sea oil and gas … In the debate on the Queen's Speech in Parliament last month the Prime Minister stated that among other possibilities we were considering the practice followed in Norway on the basis of majority public participation. On the other hand, we believe that nationalisation is unnecessary and irrelevant; and in so far as it is relevant we believe it is bad. It is unnecessary because the nation already considers that it owns the seabed and its minerals and can also control home prices as well as fixing the level of the tax "take". It is bad, because of the danger of discouracing investment in exploration, development and production, just at the moment when we need urgently to press ahead as far as possible with the production of both the fuel and the revenue that comes in with it.

At that same conference my right honourable friend Patrick Jenkin said this: … any measures which might tend to dissuade the international oil companies from putting their maximum efforts into the British Continental Shelf must be considered with the greatest caution. Nor, incidentally, can the proposals for taxing overseas earnings which are in the Finance Bill really be described as likely to win friends or influence people among the American technicians upon whom we depend. A number of my noble friends agree with me. I should like also to add that this is no theoretical abstraction. Only last night I had a drink here with a senior American executive who had hoped to spend the rest of his life in this country but he was making serious plans to up sticks and return very reluctantly to America.

Mr. Jenkin also said this: Of course any British Government, Tory or Socialist, will want to ensure that the British people derive the maximum benefit from this valuable asset. We have to ensure that proper tax is paid on oil profits. This means not only preventing the use of artificial losses elsewhere in the world to erode the tax revenues from offshore oil, but also the introduction of special oil taxes to ensure that the oil companies do not make disproportionate returns on their investments. That there would have to be adjusting tax on windfall profits is totally accepted by the oil companies as well as by the last Government.

Clearly, projections which were made when the oil price was 2 dollars a barrel are completely unrealistic at a price of 10 dollars a barrel. By way of tackling this problem of under-reporting of the finds of the oil companies, I would call attention to the system which I believe obtains in South Africa in connection with the gold mines, where I understand a very favourable tax arrangement is negotiated up to a threshold. The threshold is agreed between the companies and the Government, and once the threshold is exceeded the tax rates escalate very steeply. In this way we might be able to start from the realistic figures. We should recognise that the degree of flexibility which exists in relation to this tax is something for which we should be most grateful, rather than being lumbered with a rigid formula based on parameters which are both outdated and now positively misleading. Are we not remarkably lucky that international undertakings are willing to invest huge sums of capital without an exact knowledge of the return they will be allowed to earn? They are prepared to make this act of faith in the confidence that an equitable modus vivendi fair to both sides can be negotiated with the British Government which also recognises the risks involved in drilling oil wells at about £1 million a time using rigs costing anything up to £40 million. Let us try to be grown up about this. I deplore an attitude of petulant jealousy, where there is fear of the other fellow making too much profit. Surely it is better to concentrate on maximising the size of the cake.

May I now quote my right honourable friend Patrick Jenkin once again: Oil—and the products derived from the oil—must be allowed to flow to the market at prices which reflect their market value. Nothing would do more damage to the confidence of investors—and therefore to the prospects of the British people—if, for instance, the Government were to set up a single buying corporation to fix the price at which it would buy offshore oil. That would, at a stroke, destroy the basis upon which all investment is currently being undertaken in offshore exploration and development. It would be a particularly damaging form of nationalisation. Thus we must go ahead with adjusting our national life, both industrial and private, to the implications of high-cost energy. There is no reason to suppose that North Sea discoveries will have the effect of reducing the world price of oil. Indeed, it is worth bearing in mind that the North Sea oil is inherently expensive oil. Probably it exceeds the cost of Middle East oil by a factor of ten. It costs in the region of one to two dollars a barrel against something of the order of 10 or 15 cents in the Middle East. All the same, this country should be in the happy position of being able to follow a policy of having access to widely diversified sources of energy—coal, oil, nuclear power—free from the threat of international political pressures and with a large measure of control over prices. I hope the noble Lord will be able to tell us more about the Government's views on this matter.

I must revert for a moment to Dr. Strang's remarks in Oslo and suggest that it is high time that we buried the Norwegian analogy, so often called in aid by members of the Labour Party, who apparently believe that the Norwegians are handling the North Sea so much better than we are. I do not for a moment suggest that we should not learn from others; quite the reverse. But this particular argument is thoroughly misleading. The two situations are totally different. Norway is a large country with less than one-tenth of our population; they have no long-term balance of payments problem; and an upward revaluation of the krone would indeed threaten their established industries when they already have full employment.

We have chronic unemployment in some of the areas where North Sea oil would be effective. Norway has a long history of one of the highest investment rates in Europe against our chronic history of under-investment. Their oil imports are one-tenth of ours. They use no gas against our consumption of 12 billion therms, 93 per cent. of which comes from the North Sea. They will be self-sufficient by 1973; we shall be struggling to achieve the same position by 1980. Ninety per cent. of their power is produced by hydro-electric generation against 1 per cent. in this country. They produce no nuclear power while our 10 per cent. is higher than any other country in Europe. Well indeed might my right honourable friend say: The likelihood is that so different are our respective circumstances that what may well be right in one country could be positively harmful in the other. I may add that by the end of this year the situation, which I am sure is what the Norwegians want, will be such that they will probably have six rigs working in their area of the North Sea against something of the order of 40 in ours.

If we need a further cautionary example, let us look at gas from the southern North Sea. There have been suggestions in this House that the price paid to the oil companies was too high. My impression is quite the reverse, certainly in the second round. It has been suggested that there has been a slowing down in the rate at which gas has been brought ashore because of the low returns the oil companies are getting. The figures are, unfortunately, hard to come by because the Gas Council are unwilling to disclose the profits they make from North Sea gas as a matter of policy. But I am told that the quickest way of deriving national benefit from the North Sea would be to speed up the development of the gas finds, and this would yield dividends within 18 months.

No, my Lords, instead of messing about with nationalisation schemes and the National Hydrocarbons Corporation, which would push civil servants into entrepreneurial situations which they are inherently unsuited for, I would suggest there are plenty of other matters to keep the Government busy. For example, it is quite clear that some co-ordinating and controlling agency will be needed if we are to avoid repeating the combination of cut-throat competition and wasteful duplication which characterised the railway era in this country in the last century. A glance at a map of the Gulf of Mexico shows what can happen. I assure your Lordships that it makes spaghetti junction look like a picnic. The oil companies should be told that if they do not set up some adequate regulatory association of their own, the Government will do it for them.

That leads me to a further point that I have not seen very much discussed; are we satisfied with the legal status of these offshore activities? Where, for example, is the boundary between Scots and English law? 'There are many different features of these two laws. I should perhaps like to see Scottish law declared as applying to all the offshore installations. May I, in passing, applaud the Government's decision to move the Offshore Supplies Office to Scotland, although I could wish that they had gone the whole hog and taken it up to Aberdeen where I feel it rightfully belongs.

What are the legal distinctions between drilling ships, semi-submersibles, and platforms sitting on the seabed? There are very complicated safety regulations. Control of pollution is obviously another problem. There remains the difficulty of protection against sabotage and attack. I believe that there is a Question down to be answered next week on this very subject. What would we do if a nation that had not been a signatory of the 1964 Convention plonked a drilling rig down in the area of the North Sea which we regard as our legitimate area?

Another area that would be right for Government action is in creating what one might call a benevolent financial climate on shore. Better still might be direct participation to encourage Scottish development both of technical back-up facilities and investment in the downstream activities, such as refining, distribution, and petro-chemicals. I would envisage that this could be done through some kind of Scottish Oil Fund financed from revenue as the oil cones ashore, and possibly administered on the lines of the Highlands Development Board.

In the long run, we want to see this country established as a reservoir of technical knowledge and experience in all aspects of the oil industry. The export potential here, as the years go by, will be terrific. This would be totally consistent with the kind of industrial pattern that we must expect to see emerging in this country, whereby we go for the highly expertise activities as the primary producers increasingly move into the early stages of processing of the raw materials that they produce. The real field where the Government can make a contribution is in what is now known as the infrastructure. The need here is for the Government to display some faith in the future by providing, for instance, housing and communication facilities. Surely, the latter is uniquely their responsibility. Furthermore, provision of facilities of this kind takes time, particularly if we are to have due regard to the environmental and social considerations.

I am already in danger of going on too long, but I should like to say one or two words about my native Scotland. The exciting prospect opening before us is that Scotland will never again be a poor country, ill-endowed with natural resources. It is a fact, which I hope does not sound too jingoistic, that almost all the oil discoveries so far have been made North of a line drawn from Berwick to Esbjerg in Denmark, and that is the Scottish sector of the North Sea. To rise to the challenge and opportunity presented by the task of exploiting these resources represents a unique chance for the Scots to reassert their native ingenuity and the entrepreneurial skill for which they became famous throughout the world in the 19th century. No longer shall we have to regard the once great craft industries of the Clyde as "lame ducks". They will be producing the rigs and the underwater technology.

Instead of relying on the charitable crumbs from the table of our more prosperous brethren South of the Border to prop up their dying and increasingly uneconomic industries, the Scots can once again emerge as a proud people, earning their rightful place in the world. Of course, there will sometimes be a price to pay for this new-found prosperity in social upheaval and damage to natural amenity. Clearly, it behoves us all to plan most carefully to ensure that these issues are handled sensitively both to minimise and localise some of the more vicious side-effects. I understand that my noble friend Lord Polwarth will have more to say about this aspect, as I am sure will other noble Lords. Personally I am sure that it should not be impossible to find means of diverting some of the vast potential wealth that will be generated into compensation for disturbance and funds set aside for rehabilitation should the wave of activity eventually recede from particular areas.

May I therefore end by reiterating what I believe is the important message. By a stroke of good fortune, which we perhaps do not deserve, this old country of ours is to be given a second chance to re-establish its prosperity and international influence for many generations to come. To achieve this aim will call for nice judgment, and possibly some sacrifices. It will certainly need unremitting effort and enterprise, heavily supplemented by capital and know-how from abroad. I said at the start that this is a success story. Surely there could be no better vindication of the capitalist system than the remarkable achievements of the last four years. In this context, talk of nationalisation in any form seems to me to be irrelevant, doctrinaire, chauvinistic nonsense. I implore the Government to direct their energies and undoubted talents to solving the many pressing and real problems which confront us. My Lords, I beg to move for Papers.

THE MINISTER OF STATE, SCOTTISH OFFICE (LORD HUGHES)

My Lords, before the noble Lord concludes, can he elaborate a little for my benefit on what he meant by his reference to Scots and English law? Can he give an example of where he thinks there might be some difficulty in this matter?

LORD STRATHCONA AND MOUNT ROYAL

My Lords, of course I am no lawyer; but, for instance, the law of murder is quite different in Scotland. I hope that there will not be too many murders on the rigs, but it would be nice to know under which jurisdiction one came.

3.39 p.m.

LORD BALOGH

My Lords, we must all be grateful to the noble Lord, Lord Strathcona and Mount Royal, for having raised a question which is of frightening and enormous importance to this country, that of oil and gas in the Continental Shelf. If properly utilised it could provide the shield behind which we could reorganise and modernise our industries. It could thus decisively help to put an end to our age-old tribulations in the economic field. If I may say so, I was a little astonished by the noble Lord's speech; in one way favourably, and in another way less so. The less favourable aspect was his remarkable political amnesia. He comes here, when we have been in Office for about eight or nine weeks, and accuses us of delay and of dogmatism when there has been no policy announcement by any senior Minister, yet I have repeatedly said that all these matters are under consideration. He attacks us for not giving any figures. Well, the noble Lord, Lord Drumalbyn—whom I do not see here at the moment—could testify that I was lavish with figures in comparison with the previous Government. I spent hours and hours in trying—figuratively speaking—to squeeze the noble Lord, Lord Drumalbyn, yet no squeak came out.

Let me turn to my favourable surprise. First of all, may I congratulate the noble Lord on the facility with which he turned from defence to energy. In this he followed his noble friend Lord Carrington and, if I may say so, much more successfully. Secondly, may I say that especially at the beginning I wondered whether the noble Lord was speaking or whether I had grown a beard and was speaking myself, for his accusations of underestimate, of tardiness in notifying the British industry and of energising them to be able to provide the infrastructure, were all rather familiar. I do not know whether in his studies of the energy field he did me the honour of looking at some of my speeches. In that case I must accuse him of plagiarism. In any case, we shall give figures.

In a way, this debate takes place at an awkward moment because the Report of the Secretary of State for Energy on the Developments on the Continental Shelf—the so-called "Brown Book"—will appear very shortly. It is perhaps that the usual channels do not take these things quite into account, and it would have been better if one could have arranged this debate in two or three weeks' time. Though I am only an adopted son of this country, I must conform to these very awkward notions and as I understand it, therefore, I must not give any detailed or numerate anticipations of that book. I can assure your Lordships, however, that I have been permitted to say that the Report will show substantial, indeed surprising, advances on what the previous Government reported last year to Parliament, and I hope, and am quite sure with the noble Lord, that we shall have made further substantial discoveries. There is a soupçon West of Shetlands which will be sweeter smelling than the best rose. I almost share his estimates, even though perhaps the highest figures are a little bit from dreamland.

Having said that, I assure noble Lords that no one is more anxious to accomplish the ends adumbrated in the noble Lord's Motion than the Government, and more especially the Prime Minister and the Secretaries of State for Energy and Scotland. Indeed, it would be astonishing if this were not so. Who would be for sin? And a sin it would be to neglect to secure for the nation the most valuable asset we have. But, and this has too often been forgotten or neglected, this exploitation must be prudent and in harmony with the best technical knowledge. It is essential to avoid the waste implicit in a robber exhaustion of fields as we have seen it in America. It must be in line with national needs and not only with individual profit. I shall come back to that point presently, both so far as off-shore wealth and its on-shore repercussions are concerned. After all, as the noble Lord very rightly said, what is at stake is the relief to the balance of trade, not payments, of anything between £3,000 million and £4,000 million a year—and I shall talk about the balance of payments later—making this country more or less self-sufficient in energy from the late 'seventies onwards.

The figures which have been released from time to time and which in the past year indicated a production of between 70 million and 100 million tons in 1980, will certainly be reached, possibly earlier; and in all probability these estimates will have to be revised upwards as they have more than once been revised in the past. In the short run, and for reasons which are partly connected with the fact that we are here dependent on a brand new technology at the very frontier of scientific knowledge and productive capacity, there will be slippages. We shall not be able to produce 25 million tons next year, but this should not interfere with reaching the figures for 1980. Nor must we disregard the even more vital consideration that for the Scottish people the economic benefits of this new technical and economic upsurge must be balanced against their impact on their environment. We are determined to ensure that both these aspects are properly considered in the development of the Government's policy.

I appreciate the noble Lord's anxiety about the slippage in the production programme and the difficulties which have arisen in respect of providing suitable places on shore for the immense construction work which has to be accomplished to supply the infrastructure and capital equipment, such as the giant platforms. We must not leave out of account, however, the very magnitude of these works and their environmental consequences.

There is another consideration. The noble Lord very rightly laid great emphasis on the on-shore developments, and that it is not enough to achieve speedy results off-shore. The rhythm of development off-shore must be harmonised with the rhythm on-shore. I would submit to noble Lords opposite and to their right honourable and honourable friends in another place, that the regrettable fact that British industry both North and South of the Border was insufficiently prepared to participate in the provision of the colossal needs of the oil industry, shows that that harmony has not been achieved.

May I say—and this will be important in another respect—that the noble Lord's figures are somewhat exaggerated in this respect. The figure for investment up to 1980 amounts to £3,000 million and not £5,000 million. That will be important in another little field of disagreement between this side and the other side. It was to a large extent the speed and underestimation of the magnitude of the new discovery which resulted in this failure. Thus, unfortunately, Britain, and in particular Scotland, have not so far fully shared in what is undoubtedly going to prove the greatest specialised investment boom ever experienced, certainly in this country and probably in any country. With the over-cautious estimates went the misjudgment of the speed at which the oil industries demands will rise. This caution was unchanged even after 1969 when the Ekofisk discovery totally changed the outlook.

Overestimates undoubtedly pose grave problems, especially political problems, and especially for Ministers. After all, Ministers are human, only too human. Ministers especially are blamed for the slippage, but when they underestimate they are crowned for their terrific achievement. Underestimates, however, have their own perils, by failing to induce on-shore firms to do the necessary and inevitably costly research and development, preliminary to investment, before they are able to make use of the new opportunities given by the development of the oilfields. As my right honourable friend the Prime Minister has repeatedly emphasised, the last time only a few days ago in Glasgow, the Government are acutely sensitive to these considerations. Steps are being taken to move to Scotland more Government machinery, education and training effort, and help to industry. We can hope that in due course expansion of supporting industries both in Scotland and in the northern part of England will bring the benefit of increased work and opportunities for investment. My noble friend Lord Hughes, who is far abler than I to deal with this aspect, will reply to the noble Lord.

The failure of previous Governments to make full use of the opportunities in discovery of North Sea gas and, subsequently, oil, will of course severely impinge on our balance of payments, which should be severely differentiated from the balance of trade. When noble Lords and others speak of relief to our balance of payments—and again I want to underline payments because it is difficult to get a hearing for this difference—especially on current account, they tend to take into consideration merely the decrease in oil imports. They neglect the increase in the imports of the capital goods (including pipes, platforms, vessels, et cetera) and the excess consumption due to the new activity as well as current outpayments on salaries (not spent in this country) of people employed in the United Kingdom. About half, by value, of the purchases for off shore activities in the United Kingdom sector were attributed to overseas supplies in 1973. Noble Lords will recall that the IMEG Report forecast a number of £300 million per annum; in the light of recent new finds in the oil fields the figure is likely to be closer to £500 million. This is some indication of the problem and the proportion.

Last but not least, and probably the most important, burdens will be represented by the repatriated profit payments of foreign oil companies and the dividends of foreign shareholding in British companies. It should not be forgotten that some of the shareholdings in oil companies or parts of oil companies normally counted as British are in fact held overseas. So far as the other major foreign oil companies are concerned, their policy has been to repatriate roughly half their profits, using the other half for re-investment. In the case of North Sea oil, however, the repatriation is likely to be far larger if changes are not made. This is because the companies are likely to earn tremendous super-profits, at present and likely future prices; if taxation provisions are not made, therefore, the loss to the balance of payments will be much greater.

LORD ORR-EWING

My Lords, would the noble Lord suggest how much percentage return in profits is likely? He said "huge returns in profits". Would he give us the percentage on capital invested?

LORD BALOGH

On the companies' internal cash flow, between 60 and 70 per cent. per annum on the investment.

THE EARL OF LAUDERDALE

My Lords, there is one further point. We are following the noble Lord's argument with great interest and advantage. Is he implying that it is not the Government's intention to devise some system of excess profits tax to cream off the windfall profits which everybody, including the oil companies, admit could result due to the rise in oil prices since last October?

LORD BALOGH

The noble Lord has anticipated my speech. While exploration and investment is going on, while the oil is not flowing, this is all in suspense. Most foreign companies will cover their expenditure by borrowing abroad either from their headquarters or from the Euro-dollar market, which is now the cheapest of all markets. We are talking now about the longer run saving to the balance of payments through the discovery of oil. The failure to understand this is, in my opinion, responsible for the happy-go-lucky, indeed reckless way in which the previous Government let the all-important fourth round licences. While it is arguable—though I do not accept it—that in the first three rounds the risk element justified the enormously favourable conditions granted, there was no risk in the fourth round. They already had geological proof of the existence of huge oil fields. With the discovery of Ekofisk in the Norwegian sector, prospects have completely changed, yet the terms of the licences of the fourth round did not change.

I do not want to go into these details. The issues were thoroughly aired in the P.A.C. Report. But hardly anyone would deny now that the terms, to say the least, were generous. Thus on all counts the policy of the last Government was open to criticism and I did my best to bring this to the notice of your Lordships to the point of groaning repetitiveness. Consequently, the gain in the balance of payments will be much smaller than in the balance of trade if no changes are made in the terms of taxation and participation. Yet, as your Lordships on both sides of the House will recall, we had no indication whatever in the past of fundamental changes in the previous Government's attitude to this question, though some of the right honourable friends of your Lordships now claim that the Conservative Government did not rule out even carried interest participation. We heard nothing in this House from the noble Lord, Lord Drumalbyn, and afterwards from the noble Earl, Lord Limerick. Indeed, until the P.A.C. Report changed the atmosphere, we had no firm indication that the sacrifice of British revenues to oil companies implicit in the licences and taxes would be stopped; and even when the P.A.C. Report showed that a vast amount was at stake all we had was a promise to change the law.

I must say, however, that I do not blame the oil companies for this. They made use of a perfectly legitimate loophole in the tax situation. Pre-tax profits at present prices, and a conservative estimate of landings, might be as high as £3,000 million per annum by 1980. In my opinion they might well be far greater if the oil landed is greater than is now anticipated, which I think is a conservative estimate. The "take"—royalties, rents, taxes and all—would not reach 50 per cent. for some time and might be permanently lower in certain circumstances if we do not change. This contrasts with a total take of up to 80 per cent. or 85 per cent. of States in the Gulf. The Prime Minister has adumbrated the various ways open to us to remedy this situation and I quoted his suggestions in my reply in the second day of the Queen's Speech. I shall therefore not go into it in detail. Let me give the noble Lord some facts. Activity—exploration, development and production—proceeds at a faster level in the United Kingdom than anywhere else on the Continental Shelf. Not only that, but 200 exploration wells remain to be drilled on the basis of the present production programmes.

Finally, I now turn to the general economic and financial aspects of the problem. One of the most eminent oil men, Mr. MacFadzean, Chairman of the Shell company, said when addressing financial analysts in London in November last year: I should at the outset caution against the belief that, just because oil-exporting countries have increased the price of the competitive supply, profits from North Sea Oil will automatically be vast. The level of Government 'take' from North Sea profits is under constant scrutiny, and it would be unreasonable to think that this level will not be influenced by developments in other producing countries. Profits sufficient to stimulate exploration and development will. I am sure, be made—but I would curb some of the more extravagant optimism". With this I could entirely agree. The allocation of the profits belongs, within reason, to the owners of the national resources; that is, the countries themselves. Yet we have been hearing voices saying, "Nationalisation of North Sea oil is the greatest folly". I should like to point out two things about that statement. If nationalisation means taking into public ownership no-one can nationalise oil; oil has been nationalised on-shore in 1934 and off-shore in 1964. If, on the other hand, the expression means the participation of the State in its exploitation, that has been accomplished smoothly and without any untoward consequences to production and development levels by nearly all countries which have substantial oil resources, even those which are not members of OPEC.

It will not do to describe Government's policy of adequate participation as a catastrophe and to cry "nationalisation" while at the same time admitting that participation by the State has been and is being smoothly negotiated and accepted by the oil companies in most countries of the Middle East and Venezuela and Norway. What is more, it works very well. Indeed, we have it: the Gas Corporation and the Coal Board in the public sector are participating in a number of consortia without any visible ill effects to production or to the oil companies. Direct taxes on profits and participation in profits do not threaten the basic profitability of investment because they cannot cause losses. In the meantime, the host Government would have to foot its part of the development costs—as in Norway and elsewhere—which, if the declarations of the oil companies are to be taken seriously, would be a great help to them in strengthening the cash flow available for development. I must say to the noble Lord that if he wants higher savings he should not advocate the expatriation of super profits to America.

I have always emphasised that the Labour Party and Government attach the very greatest importance to collaboration and free negotiation. Confrontation in this field, as in others, is the last thing we desire. At the same time, we are determined to fulfil the pledges given in the Election Manifesto and the Queen's Speech: My Ministers will set in hand urgent action to improve energy supplies, to secure their efficient use and to ensure that oil and gas from the Continental Shelf are exploited in ways and on terms which will confer maximum benefit on the community, and particularly in Scotland and the regions elsewhere in need of development. The oil companies are very well aware that action in four directions is under active consideration. We shall first have to modify existing tax rules to make corporation tax more effective. Secondly, we must devise new ways of taking care of the completely unexpected problem of the vast windfall of profits due to the OPEC action in the crude oil market. Thirdly, we have to devise a system by which the Government can participate directly in off-shore oil. Fourthly, we need to improve arrangements for essential physical controls of the production and transportation of the oil, so that they conform to good oilfield practice and common carrier needs. The last Government bequeathed us a completely chaotic situation in regard to pipelines.

As my right honourable friend the Prime Minister said, our aims in no way conflict with the oil companies receiving an adequate remuneration for the great services they have rendered and will continue to render. There is no shadow of a cause for fear concerning the Government's policy and we should all refrain from either threats or scandal-mongering, which can only exacerbate the problem and possibly bring about the very consequences which all of us wish to avoid. The more extreme the statements, the more certain is the risk of moderate opinion being overridden by militants on both sides who are fed by emotion, not moderated by knowledge.

As I have said before, I have on purpose refrained from talking about the regional on-shore aspects of the discoveries in the North Sea, as my noble friend Lord Hughes, who is a Scot, is a much more competent person to deal with those points. I should, however, like to assert that—and in this I completely share the view of the noble Lords opposite—it is absolutely essential that this manna from heaven should not be dissipated and our future not imperilled by failing now to safeguard our national interest or failing later to use the revenue obtained for a constructive development of our technical capacity and productive ability, so that the whole nation can emerge from the monotonous shadow of economic crisis.

4.6 p.m.

LORD ASHCOMBE

My Lords, having chosen to make my maiden speech on a subject which is both highly technical and of supreme importance to the country, it is my first wish to sit down in the shortest possible time. Unhappily, my noble friend Lord Strathcona and Mount Royal has taken away much of my text, but I will "bang on" as best I can.

The technicalities of the exploration and production of oil and gas are very well known. I shall therefore confine my remarks to principles rather than long-winded and probably inaccurate statements of production and the resulting problems, principles which could seriously jeopardise a well-advanced programme. As a maiden speaker I have no right to be controversial, but the dividing line between common sense and possibility of wastage of one of our few really great remaining assets is very thin. If I overstep the mark I hope I may beg your Lordships' indulgence, and I apologise in advance for any mistakes I may make.

The potential energy and benefit to this country from the North Sea is a "bonanza"—a word which has been used before—which we could not have envisaged a few years ago. It is only a part, but a very important part, of the total madness. The environmental prob-It is unfortunate that we have neither the financial nor the technical ability to go it alone, but we must face this hard fact, and the help that we have had from the international oil companies who have made our progress possible must be fairly recognised. My observations may be trite, and they will have been fully discussed by those who have access to all the technical data concerning energy. However, I would say emphatically that to waste or delay a programme which is well on the way to completion would be total madness. The environmental problem of shore installations is a controversial subject on which we could lose an important initiative. No one can pretend that these installations have an aesthetic value, but we cannot have our cake and eat it. Norway has taken its own view, but Norway's problems, both national and international, are not comparable with ours.

The Middle East war, the blame for which cannot be laid at our doorstep, has provided the international oil companies, who have the majority interest, with profits in excess of those originally expected. Our main problem, as I see it, however naive I may appear, is that some constructive renegotiation—as opposed to de-negotiation—must be made with the international oil companies so that we may both get a fair share of what are primarily our national resources, the exploitation of which is made possible by their expertise.

Many British companies are well advanced in the technology of gas and oil production and I hope that international companies can be encouraged to use their services. So far as the natural gas element of the North Sea oilfields is concerned, unlike the Middle East we cannot afford to waste this by flaring. If some method could be devised whereby a market for this gas is available to the power stations, it could go some way toward solving the problem of wastage. I realise that other bodies consider the power stations to be their own preserve, but for the sake of national benefit a degree of give and take should be possible—a pious hope in the present climate. Participation by private enterprise, but not nationalisation, has been achieved for the gas contracts so far made. Some element of control is necessary, but I should hate to see a programme that is so far advanced further delayed by mistaken national pride or international greed. Let us hope that we do not kill the goose that lays the golden egg.

4.11 p.m.

VISCOUNT THURSO

My Lords, it is always a pleasure to follow any noble Lord making his maiden speech in your Lordships' House because one is given the privilege of passing on that warmhearted welcome which is the custom in your Lordships' House. But in the case of the noble Lord, Lord Ashcombe, I am particularly pleased to be following him, in that I remember him well at school, and although he may have lost a hair or two around his fringe he has lost none of his intrinsic charm. I am confident that your Lordships' House will be very much the richer for the contributions that we look forward to receiving from him. When the noble Lord, Lord Ashcombe, and I were schoolboys we used to talk about finding oil in Britain in more or less the same kind of terms that one talked about going to the moon. Now we have done both. We must therefore resist the temptation to think that, in fact, a miracle has happened which has changed all the parameters by which we measure and organise our lives.

Much has been said in this debate of a technical nature and, I am sure, after examining the speakers' list which we have before us, that much more will be said of a technical nature in the later stages of the debate, with many statistics bandied about. But I should like to reduce my contribution to simple terms and words which the ordinary citizen can understand. I shall try to show that the real problem about which we are talking is not a technical one, nor a financial one, but simply a human one. We are being given a chance, which has been sent to us literally by Heaven itself, to show that mankind in these islands has learned something over the years, that we have learned to control our greed, that we can order our affairs to deal with a sudden excess of wealth and that we can do it in such a way as to improve the lot of all our citizens and develop a fulfilling way of life in this country. In short, we are being given a chance to show that we can do better than did our forefathers when they discovered coal beneath the surface of the land, or when they found the long hill sheep and when they enclosed the common lands and introduced a more advanced system of agriculture. Simply because we never expected to find oil we must not allow ourselves to be carried away with excitement. Nor must we allow others to blind us with science.

The position is really quite simple. First, it could have been foretold years ago that geologically it was quite likely that oil and gas lay below the surface of the Continental Shelf around our shores. Their discovery awaited the development of suitable technology and, therefore, the discovery of oil and gas, as we know it in the North Sea, is no miracle. Secondly, the North Sea oilfield is unlikely to reach the same vast volume of resources as the Middle East oilfields, although it is a large oilfield and it will be a major one compared with any others in the world, apart from the Middle East oilfields. It is also unlikely that any other oilfield of the magnitude of the Middle East will ever be found again. Thirdly, predictions of resource availability become yearly more reliable and more accurate. One cannot therefore say, "Look at the North Sea, we never expected to find oil there, so there may be more, and there may be more elsewhere. Therefore, as some people say, we shall always go on finding more and more."

What happened in the North Sea has not greatly surprised geologists, although it may have surprised us, those of us, at any rate, who are laymen, and that surprise may have been reflected as surprise in our Press. It is clear that we are beginning to see the end of pure speculation and are beginning to be able to forecast the total availability of oil on the surface of the globe. Fourthly, we must recognise that as the exploited oil-bearing strata are used up, so the cost of finding and producing oil grows and grows. In the North Sea this is particularly important, because there only the larger oilfields really repay the enormous capital cost of bringing in the equipment to win the oil. The small fields, which undoubtedly will exist under the surface of the North Sea, such as one finds on land in places like Texas, will probably be uneconomic. This is why, in my view, there are so many sub-commercial areas of oil being found at the moment in the North Sea. An oilfield in the North Sea has to be big to recoup the capital cost of tapping it.

So we have a major energy resource belonging to us all within our Kingdom's boundaries, but it is finite. When the oil is used up there will be no more; therefore, how do we set about using it responsibly as men and using it humanely as legislators? In the first place, we are rich now and we must remember that we do not have to pump up all our oil to prove that we are. The longer we can let the oil lie before we use it the more valuable it becomes. In the second place, we must not go on a spending spree just because we have all this wealth. We must keep our heads, behave as sensible people rather than as excited nouveaux riches who have suddenly come into a fortune. If we are not to deserve the disdain and obloquy of our grandchildren, we must use this wealth to create a physical, social and economic environment which is satisfying for our people to live in, an environment which can be sustained into the foreseeable future. This is a point of view which you will find more clearly held in Scotland than in any other part of the United Kingdom. It is there that we can see what can be done with this enormous wealth which lies off our coasts, and it is there that people are crying out loudest for it to be used wisely.

We must accordingly take a long-term view of the energy consumption which we consider desirable in this country; we must not leave this solely to market forces and to the pressure of the greed or the present needs or desires of companies or even of individuals. This does not suggest that, in exploiting the oil which we have found, there should be a mad rush to get the quickest exploitation; and in this context we on these Benches are somewhat critical of the terms of the Motion which we are discussing. We must protect ourselves against the painful effects of interruption of supply, like those which we experienced during the Middle East war, but it suggests that we should exploit our resources up to the volume of our own needs.

We must consider also the need for a healthy balance-of-payments situation, or a healthy balance-of-trade situation, and this suggests that we should exploit up to our needs for oil but not necessarily that we should export oil. It will always pay us better to get our national return from oil by selling goods manufactured with its aid than by selling the oil itself. In the shorter term, we must use this discovery and the development phase of our own oilfields to build up our own industry—and this is tremendously important in Scotland. If we can get the speed of development right, then Scotland will be enabled to play a big part in the development of this Scottish resource. This consideration demands that development should not be over-swift, so that Scottish industry, and British industry as a whole, has time to gear itself to the job.

Neither must we forget, in this context, the planning considerations and the effects of development on the social structure of smaller communities, whether they be in Scotland or off the Celtic Sea in Wales. This is an emotive area. One can get very emotional about a stretch of lovely coast; but, by and large, the people who live alongside these coasts welcome the developments brought on by oil and it is the outsiders, who already have plenty of developments of their own, who want to conserve a windswept sandy waste or save a picturesque but deserted headland. My Lords, I live not very far from Dunnet Bay, and there we had an absolute disaster in the shape of losing a very much needed development which could have been helpful to the development of the oil industry, and which could have brought very much needed jobs into the County of Caithness. Unfortunately, because it was opposed too long, the company interested in building oil rigs on Dunnet Bay found another site in Ireland with less conditions attached, and went there.

"All right", you may say, "you have a stretch of coast with planning permission on it. Try to sell it to somebody else." But who else wants it? Who else wants that kind of coast for that kind of production platform?—at the moment, nobody that we can see. At a time when the prototype fast reactor at Dounreay is running down and paying off men this source of employment, which might have used up a very small percentage of the enormous empty beaches which surround the County of Caithness, has been lost as a place on which oil production platforms might be produced.

My Lords, I often go by train from Thurso through Invergordon to Inverness, and on that journey one sees the developments which have recently taken place in that area, well known to the noble Earl, Lord Cromarty, which, to my mind, are very much in scale and even add a flavour to the view. Certainly, they add enormously to the prosperity of the area, and I can tell your Lordships that we further North, who do not have these developments, very much wish that we had them on our shores. We must speed up our planning permission procedures, but, in this context, we must not deprive people of their say. In every plan, however, the long-term aspect, the impact on social structures and the development possibilities must be kept in the forefront of our mind, because it is not what we do today that will count it is how we deal with the injection of prosperity which this can give to the arm of Scotland, and how we grow on into a new prosperity with new centres throughout the length and breadth of the Scottish mainland.

Finally, there is the question of money and the oil companies. It is stupid just to say, "Nationalise "—and I was very glad to hear the noble Lord, Lord Balogh, saying what I have always thought; that, in fact, the oil has always been nationalised, and it is therefore pointless to talk about nationalising any further. What we are talking about, when we talk about revenue from the oil companies, are things like taxation, barrelage payments and excess profits tax; we are not talking about nationalising the oil industry. Nationalisation would merely show an avaricious attitude similar to the worst that any oil company itself can show.

I should like to see the oil companies left to carry out their own business—a business which they well understand and which we often do not. But I should like to see them contribute a goodly sum in cash to the general good through the Exchequer. Let them make profits sufficient to be efficient in our interests, but let us control the rate at which they produce so that they do not merely go on a "get-rich-quick" spree at the expense of our resources of oil. The oil companies are quite prepared, as we have already heard in this debate, to be taxed and pay more than they have been paying, and to pay more when they make more profit. There is much to be said for a barrelage tax, but it has the disadvantage of being an undiscriminating levy which could hit the low-profit producer. Perhaps the best of all would be some form of excess profits tax related to individual companies and to the profitability of individual fields.

However we raise the money, the responsibility and the onus still remains upon our shoulders to spend it well and wisely. What we must do is try to be more informed, and approach the problem more scientifically than did our ancestors. We know that this resource will run out, and as we develop it we must be looking for its successor. We must be looking for ways to conserve it as a resource, and to make it last as long as possible. We must be looking for ways of making it grow for us, for industry and employment, and for life and community development in areas which are near the oilfields. I am thinking particularly of Scotland and Wales in this context. If we can do this, we shall be doing very much better with our oil than simply going for fast development. We shall also be doing very much better with our oil resources than our ancestors did with other resources which they have handed on to us.

4.30 p.m.

THE EARL OF LAUDERDALE

My Lords, it is a pleasure and privilege to start by congratulating the noble Lord, Lord Ashcombe, on his maiden speech. He introduced it with a promise of brevity, and I wonder whether, if there is a rebuke to be made, it might be that perhaps he was too brief. What we heard was good: what it promised for the future was good. He trod bravely amid the minefields of technical matter. He reminded us that we cannot have our cake and eat it; and perhaps that in itself was not an unworthy sentiment to utter in a debate of this sort. It would be crude of me not to congratulate also, if I may do so with respect, my noble friend Lord Strathcona. For his first performance at the Box in this difficult field we all felt sympathy for him, as we do for anybody—and as I do for myself—in trying to learn about this difficult subject. We look forward with pleasurable anticipation to his further leadership and exposition from our Front Bench in this field.

With the noble Viscount, Lord Thurso, to whom it is always a pleasure to listen, I find myself in at least partial agreement. He attacked the sin of greed and rightly drew our attention to it. Did we not need, he asked, a long-term view of the desirable level of energy consumption? I myself have been toying for some time with a speech on the merits of nil growth. Perhaps also I might just ask him not to be too depresesd about the distressing event in regard to the planning delays of Dunnet Bay. Within hours of Chicago Bridge pulling out, I got in touch with a firm in which I have an interest, which I must now declare—Peter Lind—and said, "What about going to Dunnet Bay?" We took a close look at it, and I am afraid that so far the technical answer has been rather unsatisfactory; but then Chicago Bridge wanted to build a steel platform and we are interested in gravity structures. To the noble Lord, Lord Balogh—I think I see him back again, though I am wearing my reading spectacles at the moment and I am not quite sure—I was going to throw one or two gentle bouquets, but I must ask him to wait a little until they come.

I am reminded, nine weeks after the present Government took office, of a lady in the village of Keiss in Caithness, who said of a Socialist canvasser that she had listened to, "There was a long spiel". Then at the end of it she said. "All these long years "—she is 95—" I have heard the wind blow; I have never seen it yet." So nine weeks after the present Government took office, I ask: what is the purpose at the present time of Parliamentary debate or even of Questions in this House? Apart from the noble Lord, Lord Garns-worthy, who has been kindly to me this afternoon, I must say that my observation of Question Time in this Chamber under the present Government reminds me of people throwing darts at a plate-glass window—they simply glance off again. The debates have been little better.

Seven weeks ago we focused on industry and energy during one day of the debate on the Loyal Address. I then put some questions to the Government as follows: Would the Government confirm what was said by the last Secretary of State for Energy, that "oil in the British sector of the North Sea is British, and that is that"? There was no answer. I asked whether the Government would quickly introduce the Bill, which was already on the stocks, for compulsory purchase powers for platform building sites: no answer. I asked what was the Government's policy on financial aid for research in off-shore technology: no answer. I put two Questions relating to delicate foreign affairs aspects of the oil problem. I asked whether the Government would try to hasten de-limitation of the licensing areas North of the 62nd parallel and in the North-West and South-West approaches: no answer. I asked whether the Government would give their minds to the significance and importance of getting the OPEC countries on to the Council of the International Monetary Fund—thereby, one would hope, making those countries more willing to accept payment for oil in Special Drawing Rights. There was no answer. We might as well have saved our breath perhaps but, in case for some reason my Questions were not read the next day or not audible on that occasion, I have repeated them now and shall look forward to hearing some answers either later in this debate or else by letter—though it would perhaps be more satisfactory if they could be answered on the Floor of the House.

If silence were not bad enough, there are dangerous new uncertainties which have set off alarm bells around the globe. Although the noble Lord, Lord Balogh, to-day has used one or two phrases which diminish one's gloom a tiny bit, may I draw attention to the following points. The inflationary curve has now become exponential in shape, so that a unit cost of £250 five years ago is now £600, but in the last 18 months it has risen from £400 to £600. That is the financial climate and, therefore, if a consortium is planning to invest on the scale of £150 million on a single field the danger of under-calculation by 25 per cent. is a very serious danger. But that is the climate in which the exploration companies are operating.

I submit that it is in the interest of Socialist policy and of the Socialist view in Britain, as well as being in the interest of the Tory view of Britain, that exploration should continue and develop. This really means that investment should continue in the oil fields and expand. What, then, have the Government done by way of an incentive? I note the important distinction which was made when the noble Lord, Lord Balogh, this afternoon referred to Government or public participation in the exploration business, rather than referring (as he did in the previous debate) to "physical as well as financial control". For that lightening of the gloom, I thank him—and I am sure that when we read his words to-morrow with great care, others will feel able to support these thanks. But those words have come now, and in the meantime much else has been said. For example, we have had a speech, which has already been referred to by my noble friend Lord Strathcona and Mount Royal, given by Dr. Gavin Strang (who has not yet cut the teeth of his 31st year), addressing the world from Oslo and using the term "physical and financial control". It is true that is the same phrase which the noble Lord himself used in the last debate and it does seem that there has been an improvement in the meantime—

LORD BALOGH

My Lords, may I ask whether "participation" does not mean that one participates in the physical and also in the financial part of an enterprise?

THE EARL OF LAUDERDALE

I am grateful to the noble Lord for putting in the form of a question the point that I was trying to elicit from him because that no doubt is less embarrassing to him in his position in the Government. There is all the difference in the world between participation, whether physical or financial, and control. This is the distinction. I am very grateful to the noble Lord, and we shall all be glad to hear the point he has made, albeit interrogatively and in advance of the Brown Book which we understand he has seen but of which he must not disclose any inside knowledge. I fully understand why he has to express himself in that interrogative way. Until to-day the picture was that the oil companies were being threatened with physical and financial control—physical control when the Department of Energy's Petroleum Division have the same number of staff for the entire off-shore Continental Shelf as one oil company would have for one oilfield. So physical control in the original sense of the term was a pretty unlikely proposition and was quite frightening.

The next thing for which we have to be grateful to the noble Lord, Lord Balogh, is the hint—if not more than that—that we may look to some exercise in the excess profits field. He will forgive me if I repeat something which is mis-stated in the previous debate—we have exchanged correspondence about it. My own calculations are taken from the Scottish stockbrokers, Messrs. Wood MacKenzie, to whom my noble friend Lord Strathcona has already referred. They are that if a price of around 11 dollars a barrel is considered to be equal in this part of the world to the world price, and if the Government's take is of the order of 7 dollars a barrel, or something of that kind, by about 1980 the Government can look forward to a revenue of the order of £4,000 million a year. Everybody that I know in the industry, and many sensible people outside it, agree that it is an excess profits exercise that is needed to satisfy all our interests without embarking on futile essays in control. In this respect I find myself at one with the noble Viscount, Lord Thurso.

We have also recently had another rather discouraging piece of information. The Secretary of State for Industry, Mr. Varley, has said, as he puts it, that the control and fiscal package which the Government have in mind will not be unveiled until the autumn. That means another six months of uncertainty, and uncertainty is not what the industry needs at the present time. Then there has been muttering among many oil companies—and I hope the Government will find an opportunity to deny the authenticity of these rumours—that the Government are bent on a "fundamental and retrospective renegotiation" of present licences.

There is one other aspect which creates uncertainty: however much people in this country may regard the American oilman as a wild, rich man, soaking up our wealth, we need him here. There are not many oil men in the world, and there are other places where they can work. I understand that buried in Mr. Healey's Finance Bill there is a measure to multiply the previous taxation of these people's earnings remitted for expenditure in the United Kingdom by something like five times. We heard earlier from my noble friend Lord Strathcona of an oil executive he knew who wanted to stay here but is now thinking of going away. The danger is that these people might go away. It is by no means certain that the multinational "majors" will stay in the North Sea indefinitely—at any rate on the scale that has been forecast of late. There are ever-widening offshore opportunities in South East Asia, around Australia, off the West Coast of Africa, in the Mediterranean, and indeed, off the East Coast of the United States.

Given a world shortage not only of oil men but of oil exploration rigs and gear, it could well happen that should a comparable geological situation be discovered somewhere else, and a more sympathetic financial and political climate exist, the rigs will start to sail away. If the question is posed, "How will these 'majors' carry out the present drilling obligations of their licences?" the answer is very simple: they will negotiate what are known as "farm outs" to more speculative, less competent, less financially robust minor companies, and some of them have a pretty shoddy record. They could in many cases fulfill their licence obligations in that way. There is a real danger that unless the climate here, financially and politically, (as well as the geological situation) is better than anywhere else, then we could see the rigs disappear. To think that the multinationals are so deeply entrenched here that they could not pull out is simply to confuse fact with imagination.

There is a second danger of another sort altogether—I refer to defence. Industrial Western Europe competes with the United States and Japan for critical energy resources in the non-Soviet world. But Western Europe cannot match the United States in technology; Western Europe does not match Japan in industrial and social discipline. Therefore, Western Europe is in the weakest position of the three. An appalling complacency about energy prospects has grown up among the Common Market countries, and just recently a first draft of the E.E.C. Commission's new document Proposal for new European Energy Policy, the product of the Commission's Directorate General for Energy, has sidled into subterranean circulation among officials and, I understand, even Ministers are occasionally allowed to see this document! Since the Common Market's headquarters in Brussels are made of glass there are no real secrets, anyway.

It has got around that this document suggests an oil policy for Western Europe whereby oil imports could be cut from more than 500 million tons a year in 1973 to less than 400 million tons a year in 1985, by the following means: First of all there is the assumption that the British sector produces about 150 million tons of crude oil a year by 1980; secondly, that natural gas imports are multiplied by three, from 100 billion (i.e. 1,000 million) to 300 billion cubic metres a year, of which it is proposed a third shall came jointly from OPEC countries and the Soviet bloc. The third assumption relates to nuclear power generation—that nuclear power capacity can be multiplied ten times between now and 1985. So there could be a rise from the 12.2 million giga watts at the present—and I understand that a giga watt is a very big megawatt—to 56.8 million giga watts by the end of 1980, and up to 200 million by 1985.

These assumptions are exceedingly dangerous. The first danger is that the British sector might not produce the whole 150 million tons a year of crude oil which the Commission are counting on. This is where British Government policy in this field relates ultimately to West European and Atlantic defence in which the Government have professed a profound, and to me welcome interest, If one third of the gas increase which is expected is to come from the Soviet bloc and OPEC countries, surely that is a real hostage to fortune. Then to try to multiply nuclear power capacity by ten is, in the view of some, so unrealistic as to imply a terrifying overstrain of the engineering capacity of the whole of Western Europe, carrying with it hideous risks of radioactive breakdown, leakage and poison. So the assumptions of this document are terrifyingly complacent, and it is in that context that it is all the more important for the defence of the West that our energy policy is not beclouded by needless anxieties and needless threats.

What about other aspects of an energy policy proper at this time?—and I am referring particularly to oil. What about infrastructure? Have the Government a policy to assist the Zetland County Council in the provision of housing for an extra 12,000 population over the next decade, raising the population from 18,000 to 30,000? What is their policy with regard to the 50,000 people expected to move into the Moray Firth and Cromarty Firth areas in the coming decade, or sooner? What about roads? One can find in the Library a most useful folder, which I commend to noble Lords: Trunk Road Progress Map. If your Lordships want to buy it, it costs £2.10. This shows that only limited improvements are forecast on the A.94 from Dundee to Aberdeen, and absolutely none on the A.92 from Perth to Aberdeen. I recommend the noble Lord, Lord Hughes, who is going to wind up, perhaps to take an ordinary mid-week day and drive from Perth to Aberdeen on that road and see how his temper is by the time he reaches the other end.

LORD HUGHES

My Lords, I did so only a fortnight ago.

THE EARL OF LAUDERDALE

My Lords, I commend the noble Lord on his excellent temper. He has obviously been able to simmer down in the meantime. But before we leave him and the roads, I would say that we look forward to hearing whether he is still as determined as he was in Opposition to see the A.9 dualled between Perth and Inverness, and dualled quickly.

Then there is the business of platform construction sites. I have asked my Question whether the Government are going to bring the relevant Bill forward—it is already there waiting to be brought forward. Then, what about the Government's attitude to refineries? Is it the Government's policy to make sure that all crude oil found in the British sector is not only landed in Britain but refined here? What is the Government's attitude to the prospect of another five Scottish refineries which are currently talked about: two at Hunterston, that is one on the coast and one inland, one at Campbelltown, one at Sullom Voe, the Milford Argosy project for a Service refinery, and there is even talk of one in Caithness, and further expansion of Grangemouth. What do the Government think we need in terms of refinery capacity? What can we contain and absorb?

What about pipelines? I was very interested to hear the noble Viscount, Lord Thurso, draw attention to the fact that some fields left to themselves are less than commercial as they stand. The implication is that one needs common user pipeline facilities to bring them together and make them worth while. Have the Government a policy on this? What about the proliferation of pipelines? There is one to be laid from the Piper Field up to Orkney, crossing the pipe that is due from the Frigg Field down to St. Fergus. What is the policy there?

My Lords, I said that before I finished I would, if the noble Lord, Lord Balogh, was good, throw a bouquet or two at him. This is a pleasant pastime between himself and myself. Well, how pleasant it was to hear him say how lavish he had been with figures in the past and how distressed he was, by implication, at the British system which clamps him down and keeps him almost silent. What an awkward moment it was in this debate when he knew the contents of the Brown Book, but could not say! We must not of course anticipate. He even said, "I am a pacific man now"—and how agreeable but strange that was!

The noble Lord, Lord Balogh, is scarcely recognisable to-day. Once we saw him as a maurauding hunter roaming about the world like a roaring lion seeking whom he might devour, and of course it behoved us to resist him stead-fast in the faith. Now we behold a quiet, evasive, almost secretive animal, his spots quickly changed for better camouflage as the mantle of Government responsibility wraps itself about him. Before mixing in the dubious company of Mr. Varley and his less than 31-year-old lieutenant, Dr. Gavin Strang, he was declaring himself more moderate; and with each speech over the last two years we had from him he was always more moderate day by day. I beg him not to weary of well doing.

LORD MAYBRAY-KING

My Lords, before the noble Earl sits down—I did not want to interrupt his peroration; he is a very dear friend of mine—may I say that he has asked the Government to do all kinds of things for this new industry. Can he tell us what share he thinks the Government ought to have in the profits the new industry is going to make, because of the dramatic rise in the price of petrol?

THE EARL OF LAUDERDALE

My Lords, I am much obliged to my noble friend for that question. He may not have been in the Chamber when I covered that point, but on a price of 11 dollars a barrel, and a 1980 or 1985 production of 200 million tonnes a year, one can see a Government take of 7.2 dollars a barrel giving a revenue to the Government of about 4,000 million pounds sterling. I should have thought that that was probably enough, meantime.

4.57 p.m.

LORD LYELL

My Lords, I should like to add my warmest congratulations to the noble Lord, Lord Ashcombe, on his excellent and very clear maiden speech which we have all enjoyed. I hope we shall be hearing much from the noble Lord in the future. Since about 1970 we have had many debates on Scotland in this House and about the various oil and gas fields which lie off the shores. Since last autumn the Middle East war has shown how very valuable are all these oil and gas reserves to us. Thus, ever-increasing financial sums are at stake both in the value of the oil extracted and in the aspect of saving imports. First, the value of the oil itself is becoming ever more important, but this leads to greater possibilities of pressure being applied to local authorities, to planning boards and to individuals, by both Government and the oil companies in their keenness to extract this oil and bring it ashore. The second aspect of import savings is, I believe, not just financial but also touches on saving us from political blackmail from the oil-producing nations and other nations which might have an interest in restricting access to oil and other sources of energy.

I would say just a few words about the impact of this urgency to bring the oil ashore, which at the moment is evident in Scotland. There is already I believe one totally completed pipeline which will carry oil from the Aberdeenshire coast down to the refinery at Grangemouth; and plans are already at an advanced stage for two new gas pipelines following roughly parallel lines. So far all these projects are proceeding at a very satisfactory speed indeed. The oil companies are welcome in many areas of Scotland because of their calm, able and very reasonable negotiations with every interested party. But recently there have been several cases where the rush to pump oil ashore has given rise to rather complicated legal discussions, and I think there are few men of courage and intelligence who are able to say, "No" just for a moment to a national need.

Nevertheless, there is a huge danger that oil developments will irreparably damage existing infrastructure, not just in the West of Scotland but in the East. In that matter, I suppose I have to declare a small interest in that I farm in the East. But within the last two years the development of oil has brought about many far-reaching changes, and even greater changes are to come. Secondly, I think there is a danger that the oil will bring hideous scars to Scotland and, with all respect to the noble Baroness, Lady White, who is to follow me, possibly even to Wales. I do not know about Ireland. But there are possibilities that the wholesale development of oil and on-shore facilities will lead to terrible scars to the landscape. We still have evidence of these scars in Scotland, with terrible coal heaps and vast slag hills.

Thirdly, I believe there is a danger that this haste to bring oil ashore will encourage some people, possibly with more influence—possibly oil companies or planning authorities—to trample over the rights of individuals and to quote this great need to bring ashore oil. I just hope that this will not be too much the case. Nevertheless, I think that there is a risk. But the oil companies themselves, I believe, have a large part to play in bringing the oil ashore, in looking for it and in seeking out new reserves. I think that they are fully aware of their obliga- tions to the areas where they land the crude products from the North Sea.

There is a similar obligation where the rigs and the other appliances are constructed all round Scotland and in England and, of course, outside Britain, but the existing methods of inquiries and settling disputes where these rigs do impinge upon existing facilities are often the cause of delays to international oil companies and, therefore, are rather unpopular. I wonder whether we might look for other more swift methods of settling any possible disputes. At the same time, very great efforts are being made to deal with all objections. However, several noble Lords who are going to speak after me live in the affected areas and they will have greater knowledge than I do at this moment.

We have heard from the noble Lord, Lord Strathcona, of the quite lengthy risks of drilling. I have read in some articles that, apart from the weather and the unique conditions in the North Sea, there is an approximate ratio of one successful strike in 17 attempts to sink wells, and as I am told that the minimum cost to drill one borehole is in the region of £3 to £4 million, one appreciates that there is a possibility that one could spend upwards of £70 million before one strikes oil. But probably there are geological factors involved in this as well.

The noble Lord, Lord Strathcona, has also made an eloquent plea to encourage the oil companies to continue their drilling at all speed right round the coast of Great Britain—not just in the North Sea but in the Celtic Sea and, indeed, off Rockall. I should like to add my voice to his and I beg the Government, through the noble Lords, Lord Balogh and Lord Hughes, not to irritate these experts without whose help we cannot possibly extract the oil speedily, or even at all. I am no oil technician, nor am I a legal expert, but I happen to live in the area. It is encouraging to me to learn more and more that supplies of oil and gas are not likely to be a mere 10, 15, even 20-year phenomenon, but are likely to last for 40 years and even for longer than that. I never envisaged this, even 6 or 7 years ago, but it is, I would submit, a somewhat permanent aspect of drilling and pipe operations. It seems that for the next 40 or 50 years North-East Scotland will have its future assured, and possibly for another 50 years after that. Recently I had cause to make a personal visit to Aberdeen, and apart from being totally lost in the new structures, the new buildings and one-way streets, I had occasion to find five different nationalities in one particular restaurant. Apart from Dutch and French, there were also Canadians and Americans and one team of Germans, and I thought that this was a new departure for Aberdeen. I think the noble Lord, Lord Hughes, and myself are looking forward to the time when such developments arrive and are more permanent in Dundee.

There is also the prospect of great social upheaval all over Scotland, since the West of Scotland is at the moment seeking a new role in the industrial life of Europe. I am sure that there is plenty more that we shall hear from the noble Lord, Lord Hughes, and also from the noble Lord, Lord Polwarth, both of whom have done so much in their own way to develop the industrial framework of Scotland in the past 20 years. Within the last 10 years Scotland has grown. There is a new industrial complex starting up in the Dundee and Aberdeen area and this, I believe, will be a very far-reaching aspect. I agree so much with the noble Lord, Lord Strathcona, that this gives all of us Scots here, and also in the homeland, a chance that will not come again within, certainly, a hundred years of finding new industries and new ideas for industrial employment all over Scotland.

The noble Earl, Lord Lauderdale, has for years promoted this excellent scheme of Oceanspan. I do not think he mentioned it in his speech, but to me the name "Oceanspan" and the noble Earl are totally synonymous. I believe that if we can go ahead with this concept, the chance will come to cast away for ever the belief that industrial life in Scotland and in Northern England is totally dependent on the crumbs from English or Continental European tables. In the 19th century coal and iron made Scotland world famous—not merely for the resources, the energy and the ability of its people, but also for the products which they exported.

We must heed the warning from the noble Lord, Lord Strathcona, that revenue from oil companies will not be guaranteed without genuine good will and the co-operation from the Government, from local authorities and from any individuals who can possibly give it. But there should be one note of caution to Lord Strathcona over the smaller fields of oil. Scotland has a very high proportion of worked-out and costly coalmines. It is impossible to foresee the level of wages and the other factors which will arise in the next 40, 50 or even 100 years. I should not like Scotland to become the scene of worked-out oilfields in the same way as are many of the coalfields at the present time. However, apart from that risk I think that the prospect is very bright. Where possible Scotland could, with reason, look for help in solving its problems, whose causes go back 150 years or more and I believe that we can look for help from much of the revenue from the oil which indeed lies in the Scottish North Sea.

While no expert on oil usage would ever be able to predict the future too far ahead, I think that the need for it is likely to continue growing over the 40 or 50 years we have heard about; and it is most gratifying to learn that the reserves are likely to last even beyond the lifetime of the children of to-day. There is no doubt at all, however—I have seen so much evidence of this myself within five years of more or less permanent residence in Scotland—that Scotland will seize the chance to develop its offshore oil. There is so much to do in Scotland to try to develop, and I believe that the facilities that are needed to extract the oil and gas and, indeed, to bring it ashore will be a marvellous foundation for the progress which for the next 50 years can be and is going to be made North of the Border.

5.8 p.m.

BARONESS WHITE

My Lords, it falls to me to offer my compliments to the noble Lord, Lord Ashcombe, on his most interesting maiden speech. If I might use my own Celtic language, I would say, Croeso cynnesof, which means "a very warm welcome', and I hope that we shall have further opportunities of hearing him, perhaps at greater length.

I would not wish in this debate to enter into the area of discussion as to the relationship between the Government and the oil developers, particularly in such abstruse matters as financial relationships and taxation, beyond saying that when my Party was on the other side of the House I watched with considerable interest and admiration the work of my noble friend Lord Balogh and his pertinacity in following this particular subject at a time when very few other Members of your Lordships' House took great interest in it. I think we owe him a tribute for that, and I personally was very glad when he obtained his present position, even if it has slightly muted his style.

LORD ORR-EWING

My Lords, would the noble Baroness not agree that we also remember equally vividly his tremendous opposition to the nationalisation of North Sea oil in many of his speeches?

BARONESS WHITE

My Lords, I think I am nevertheless perfectly correct in suggesting that it was my noble friend Lord Balogh who first raised the point of the far greater wealth which was likely to accrue to the oil developers than was recognised in most parts of this House, and certainly from our point of view he deserves the fullest recognition and gratitude for that.

The speech with which I found myself in most accord so far in this debate was that of the noble Viscount, Lord Thurso, not least because he was one of the relatively few of those who have taken part in the debate who indicated awareness that these resources, welcome as they are, and important as they are, nevertheless are still finite. The fact that we have been fortunate enough to find ourselves unexpectedly in this position does not mean that we should be prodigal in their utilisation. I should like to have heard a little more concern for conservation of our energy resources and for a study of methods (which it would be inappropriate to go into in this debate) of what some of the younger generation call "alternative technology"—not to be confused with the "intermediate technology" which is part of the jargon of the overseas aid lobby.

It was interesting that only this very week the Institution of Professional Civil Servants, which represents many of the scientists in Government service, sent a memorandum to the Prime Minister, which I think has been circulated to some Members of your Lordships' House, in which they strongly emphasised this aspect of our current situation. They asked that far more attention should be paid, not merely to financial budgets and manpower budgets but also to resource budgets, and that these newfound gains of ours should be used as intelligently as possible and not wasted.

One of the reasons why I wished to intervene briefly in this debate was that there should be at least one voice from the Western Approaches. We in Wales are likely to come a rather poor third in the matter of oil and gas exploitation. Scotland is far ahead and there have been significant finds off the Irish coast while we in Wales are still at the point of exploration without having had any finds of commercial magnitude. I am told by my geological friends that there is little doubt that we have got reserves of both gas and oil in the vicinity of the Welsh coast but that for geological reasons they are likely to be less generous than those of the North Sea. It seems to me that rather late in the day the Royal Navy's ocean survey ships, in cooperation with the Institute of Geological Sciences, are starting to prospect as well. It may be that they will come to our rescue and will find out with perhaps greater accuracy just what does lie beneath the seabed in the Celtic Sea.

Like many Welshmen in the last few months—it may be that I am the only Welsh woman—I have made the pilgrimage to Scotland. We are all very anxious that we should profit by the experience of Scotland and, where necessary, learn from some of their mistakes. I was particularly delighted to find that the noble Earl, Lord Wemyss and March, is to speak to-day because I had the pleasure of being entertained by the National Trust for Scotland and having their problems explained to me when I was there. I also had the opportunity of going not only to St. Andrew's House but also up to Aberdeen, Peterhead, the Cromarty Firth and Nigg Bay. I did not in fact go to Wester Ross because so far there is, happily, nothing to be seen there in the way of development.

In spite of the terms of the Motion moved by the noble Lord, Lord Strathcona and Mount Royal, in which he urges that we should exploit without delay the oil and gas discoveries on the Continental Shelf, I would urge that speed is not everything. I certainly would not wish to hold back unnecessarily any desirable development and I recognise what the noble Lord, Lord Strathcona and Mount Royal, said, that the analogy with Norway is not by any means complete. In balance of payments matters and so forth, their position is very different from ours, but I have been reading with great interest the report made to their Parliament by their Minister of Finance in February of this year in which (among other things) he said that the Government of Norway, attaches great importance to maintaining a moderate tempo in the exploitation of petroleum resources. This is important in order to achieve a long term exploitation of the resources and also out of regard for the restructuring problems of our economy. It seems to me that mutatis mutandis this holds good also for Scotland and for other parts of the United Kingdom if we are fortunate enough to have oil finds in our vicinity, because I was much impressed by the speed of development in Scotland. It is such a short time in which all this has happened. I am speaking of those who are particularly concerned with planning and conservation matters. There is no doubt at all that our friends in Scotland were not fully prepared for what has hit them. It is largely for that reason that we in Wales are very much interested in what has been happening in Scotland and wish to learn from them. Nevertheless I do not think that there have been serious delays. I was particularly glad that the noble Lord, Lord Polwarth, contradicted a peculiarly mischievious piece which appeared in The Times not long ago, which suggested that there had been a number of unnecessary delays in granting planning permission in Scotland. To the best of my belief the only two instances in which this could possibly have been suggested were the long inquiry at Drumbuie and the experience at Dunnet Bay to which the noble Viscount, Lord Thurso, referred. I can understand his disappointment at what happened at Dunnet Bay, although I would remind him that Dunnet Bay and Drumbuie are by no means similar in their natural configuration. But I am far from convinced that the kind of legislation which the last Government were proposing, which would have by-passed the planning procedures, would have been a wise step and I was very happy indeed when my right honourable friend the Secretary of State for Scotland announced that it was not proposed—at any rate, at present—to go ahead with such panic legislation.

Equally, though, I should be unhappy if we were to regard the normal planning procedure as being satisfactory for situations in which, for example, there are five applications at the present time, as the noble Earl, Lord Lauderdale, reminded us, for possible new oil refineries. I am advised that, so far as the oil refining end of the business is concerned, we already have an adequate capacity for our domestic requirements in existing refineries, and that to have five new refineries would be quite unnecessary. But if we carry out the normal planning procedure, each of these five applications will be considered separately and there will be no opportunity to take a synoptic view; there will be no opportunity to compare the merits or demerits of one proposition with another, and I would ask my noble friend Lord Hughes whether he is in a position to tell us what thoughts the Government have on this subject. We have had experience in Wales. After all, Milford Haven is lined with oil refineries, but they bring only limited benefit to the areas concerned. We should be under no illusion about that.

I was in Pembrokeshire recently, following my Scottish visit, to bring myself up to date with the situation there. They were telling me that so far these great companies, which are up and down the Haven with their refineries, have added virtually nothing to the opportunities for skilled employment or training to local people. These companies bring in their highest class technologists from outside; they provide no training, and they provide no apprenticeships, or anything of that sort. Obviously, they provide opportunities for a certain amount of very welcome unskilled or semi-skilled work, but these opportunities are not large in number. So that the coming of these large companies is not so advantageous as many at one time hoped. Still less do they provide any oil-based industry other than the refining of the crude oil.

I was the Minister at the Welsh Office when the latest of them applied for permission to develop a site in the neighbourhood of Milford Haven, and I asked that company then whether, in the interests of West Wales, they could not only carry out the refining process but develop, even on some relatively modest scale, some kind of petrochemical industry which might help. We have had nothing of that sort from any of these companies, although in South Wales we have other enterprises, some based on the oil which is sent by pipeline to Llandarcy near Swansea. So the whole question of the planning procedure and the maximisation of benefit seems to me to be of very great importance if we have oil brought ashore.

We are also much concerned at the apparently relatively short-term life of some of these platform installations, and with what is to be done about the reinstatement or rehabilitation of the sites if the need for them comes to an end. I know that this has been a matter of considerable concern in Scotland, as it is in Wales. We have not yet found any method of ensuring that there will be the resources or the finances, when an enterprise has petered out, to reinstate the area in which these activities have been carried on. Those of us who have suffered, as the noble Lord, Lord Lyell, suggested, from the dereliction left by worked-out coal mines, do not wish to find ourselves in a similar position with worked-out platform-sites or other installations.

My Lords, I was interested to see in a recent report of the Oil Development Council in Scotland, of which the Marquis of Bute is Chairman, that they are suggesting there should be some method by which the developer should have to take out a bond to ensure there will be resources for rehabilitation or reinstatement. One such was asked for from the Fred Olsen Company in Lewis. They refused, and went ahead with the development. I know that, in slightly different circumstances, the former Pembrokeshire County Council tried to obtain some sort of assurance of this kind, both in planning consent terms and by trying to get a clause into a Private Bill, without any success. I understand that the Institute of Chartered Surveyors has sent to the Minister for Energy proposals for a national fund for rehabilitation or reinstatement to be financed by a levy, because the time to get the money is while the company is in prosperous business, and not when the enterprise is finished. I should be very much interested if my noble friend Lord Hughes, could give any indication of Government thinking on the problem, which is causing very considerable concern among all of us who are connected with amenity and conservation societies.

Then there is the whole question of land and land speculation. I believe that the declared policy of the present Government of taking into public ownership land for development would help to solve this problem, because if one has what many of us think is intelligent planning, which is to designate certain sites as possible sites for development and others as areas in which for environmental reasons there should be no development, then, plainly, one opens the door to land speculation and to injustice as between one landowner and another. So I hope very much that the Government will go ahead with this policy, because it is one of the few ways in which we can solve the situation. I have seen evidence of this in the area of Aberdeen where there has been considerable speculation. We have also experienced this in Wales in a different context. I was particularly interested in the Report of the committee of the Oil Development Council in Scotland, introduced by the Chairman, the Marquess of Bute, who said: We recommend the Government to examine the possibility of public ownership of sites for major development. I think there is no-one else in the House who comes from South Wales, but there, the Bute family is regarded par excellence as landowners. When one has the Marquess suggesting public ownership of land, something must really be happening! I should very much like to know the attitude of the Government.

My Lords, one would also like to know what the Government are doing in the spheres of research. It is depressing to find how far behind we seem to be in oil technology. We want to know what resources are being devoted to that. And there are other areas of research which require sustenance. If one is to protect the environment, one needs to know more about it before one is competent adequately to protect it. I made inquiries in Scotland, for example, about the valuable work done by the Nature Conservancy Council they are active in Wales, too. They were very frank and said that they were taken completely by surprise by the speed with which the oil developments took place in Scotland. They had by no means completed their investigations into areas which needed to be carefully protected on environmental or scientific grounds. They were simply caught up with it because they did not have enough staff or sufficient resources. We are anxious that we should be better prepared in Wales than they appear to be in Scotland. We can be so only if we have adequate support from the Government in this direction.

My Lords, I will make it quite clear that the environmental societies with which I am connected are not against development as such, because we fully appreciate the value of the resources and, particularly, their value to the poorer parts of our country in the North and West. All we are saying is that as a civilised society, we should take adequate steps to plan intelligently and to make certain that, where we decide development is possible and desirable, it should be as compatible as we can make it with its natural surroundings.

5.29 p.m.

LORD BARNBY

My Lords, this is an extremely interesting subject because it has so many angles. We must be appreciative of the fact that my noble friend Lord Strathcona and Mount Royal put down this Motion and gave in his eloquent and most informative speech, a good send-off to a debate which is so timely. Oil is an interest which is generated by the energy crisis, and the various angles of it have been brought out in the several speeches that we have heard this afternoon. I would particularly mention the interesting speech that we heard from my noble friend Lord Lauderdale, putting forward plenty of questions for Lord Hughes to answer. We were particularly glad to hear the maiden speech of my noble friend Lord Ashcombe, and we hope we shall hear him often in the future.

For myself, the subject of oil is particularly interesting because it stimulates memories of my own boyhood in the closing stages of the last century. The only time we thought of oil was in the nasty smell of kerosene which filled the lamps, which have now been replaced everywhere by electric light. There were no automobiles; horse transportation was the only way in which people circulated. And it recalls to mind the thrill I used to feel in driving my father's very fast American trotters, when the only thing one needed to pass on the road then was other horse-drawn traffic. I might add, too, that as for Arab sheikhs, one only thought of them in the context of Omar Khayyam; and of course where admonition was required the gunboat was usually found the satisfactory way of settling.

The problem which we face today, as I have already said, is many-sided. I myself accept the fact that the oil is there and that the mechanism is already developed which would bring it ashore. I am neither an engineer nor a geologist; I shall confine myself to the particular angle of getting the oil ashore. I must repeat an interest already declared on a previous debate, that I am both a shareholder in and a director of a civil engineering firm which is strongly interested in this field of gas and oil development. Here I would express my thanks to the noble Lords, Lord Hughes and Lord Polwarth, for the readiness to help in any inquiries that I have made. I would also refer at this stage to an excellent letter, which many of your Lordships will have read, from Mr. Gordon Campbell, the Secretary of State for Scotland in the last Administration, which appeared in the Daily Telegraph. It set out very much what I am going to address myself to, and in that same edition I think there was a very straightforward leading article by the Daily Telegraph.

There is great confusion in this matter between the platforms made of steel and those other monsters which have been described, which are made from concrete, the former for the shallower depths, the latter for the great depths which alone the concrete platform can deal with. The difficulty at the moment, of course, is the finding of sites which have the necessary qualifications for building the initial stages, from which then they can be floated off into deep water. In this matter my noble friend Lord Cromartie is particularly informed, and I do not doubt that we shall enjoy hearing something from him about it. His importance in the area which is vital to this problem puts him in a position of singular importance in this development.

The real difficulties are the environmental problems which have to be surmounted, and it is that which in the main causes my own intervention. I am afraid that it may well be that the delay in the giving of permission for the building of these platforms will, if not ended within the next very few weeks, delay by a year the getting ashore of a very large amount of oil. The platforms can be towed into position only in the months of July and August, and they will not be ready unless permission is soon granted.

If I may be pardoned for bordering on the frivolous, environmental objection may well be justified in the defence of the beauties of the country, but I cannot forgo recalling in the early days of World War I, when my unit and others were despatched to the East Coast of England to resist the expected German invasion. I was given instructions to make the necessary defence preparations, and, having submitted them, I was told by my commanding officer that because they were sited on the golf course environmentally such destruction could not be permitted and other sites must be found. Let us hope that in this particular situation these difficulties are overcome. Curiously enough—and it is hard to believe—it seems that the area where appropriate sites can be found falls very much within a very small area of Loch Carron, with which my noble friend Lord Cromartie is particularly familiar.

At this point I would refer to a reply given to my noble friend Lord Dundee, when Lord Hughes said, in reply to a suggestion by Lord Dundee, that all the formalities for one particular site had now been completed and the decision lay entirely with the Minister. Lord Hughes appears to have said at Col. 6 of the OFFICIAL REPORT on April 30: It is not the case that all the procedures have been completed. Then he said: … objections have been lodged, and these will have to be the subject of consideration …". I raise this because, whatever the real situation is—and I would repeat the readiness of the noble Lord, Lord Hughes, to be forthcoming about this— it is important that there should be a quick decision.

It is alleged, I hope correctly, that were such permission given for such a location, the difficulties regarding environmental damage at that particular site would not arise. There would mostly be marine transportation, so that there would not be roads needed for supplies; and secondly, the personnel would probably be lodged on a disused former liner, so they would therefore not damage the environment. Further, it is possible that by landscaping one could avoid great damage. We must remember that if the production of these platforms will only carry on over a period of 10 or 14 years, restoration to the original will not be difficult.

Should other applications not be granted, it would seem important to know whether an inquiry would be necessary on all sites. We know what public inquiries are. They take months, and they would destroy the whole point of rapid construction of platforms. They would be built in Scandinavia, with all the loss in wages and the other expenses of production, and it would result in a serious delay in getting the oil ashore. Time is essential in this. It is interesting that so many other noble Lords who are familiar with this question have also emphasised this particular need for speed.

5.43 p.m.

THE EARL OF CROMARTIE

My Lords, first of all, I should like to congratulate the noble Lord, Lord Ashcombe, on his maiden speech. I hope that we hear him again. The noble Lord, Lord Barnby, referred to me, but I shall not talk about any particular area. I had not intended to take part in this debate, but being the Convener of the County in the middle of the oil discoveries, I decided to tell noble Lords briefly—and I stress the word "briefly"—of some of the problems which face a county of great area but with a small and dispersed population.

For many years, those of us who were involved in local government tried to get light industries located over the whole area as the traditional jobs, such as farming, forestry and fishing, were employing fewer and fewer men and women due to mechanisation, chemical farming, et cetera. This resulted in a steady drain away of our young people to the industrial areas of the South and to the Commonwealth, which was a sad repetition of past history. The first real progress was the introduction of the aluminium smelter at Invergordon in 1968, when the powers-that-be realised that Ross and Cromarty was not part of Finland or Russia.

Then suddenly came oil, which has completely altered the picture and will continue to do so for some time. The North Sea oilfields, and now the more recently discovered fields south-west of Orkney and stretching south into the Minch, mean that those who build the oil rigs want very deep water and sheltered havens, and these exist only around the coasts of the Highlands of Scotland, which closely resemble the Norwegian fiords where rigs are being built in some numbers. Many of us would have liked to see some of these projects going to the Clyde where unemployment is still a serious problem. But there happens to be a sand barrier at the entrance to the Firth of Clyde, which would prevent many types of rig being towed out to the open sea.

There are two main problems with which we are faced. One is the social impact of very large numbers of workers being introduced into areas of small population; and especially is this the case on the west coast, where the impact of 2,000 men on small crofting communities could be quite disastrous. It is difficult enough in the Cromarty Firth area at Nigg where, as some noble Lords will know, a lot of young men have been living aboard two liners, drawing immense wages with, incidentally, a pub within 150 paces of the end of the gangway. This position could be improved if we could get on with building houses, which unfortunately in Scotland is a slow process, as by the time one has waded through the coils of red tape in St Andrew's House, costs have escalated and the Scottish Development Department's indicative costs are out of date.

To build a normal, traditional council house takes two years. A primary school takes three years, and a secondary school four, and it is obvious that if one is to build houses one must build schools at the same time. I am hoping that following a visit to Norway we may be able to follow their good example and build pre-structured timber houses (which incidentally are quite excellent) in a much shorter period. In Norway it takes a fortnight to put them up. Taking into consideration the transport costs, these houses are expensive, but I have some hopes that a factory might be set up in my own county of Ross and Cromarty to do the job on the spot or, at any rate, near it.

There are two problems which have to be faced. I think I have made the housing problem quite clear. If we had more houses, a great many of our other difficulties would be solved on the eastern seaboard and the crime rate, which has escalated, would probably drop. The other problem is the social impact on small populations, and it is very necessary for Governments, planners, and the lot to realise that, by too rapid "progress" they can completely destroy a way of life, which is a very heavy responsibility on anyone, even on those who know little of the area and live 600 miles away from it.

Finally, there are two closely related subjects on which I hope noble Lords opposite, especially the noble Lord, Lord Hughes, will give me their support. Our road programme, especially for the West, has been ruthlessly cut. I would at the start ask the noble Lord whether he would squash a rumour, which I believe is rife, that there is to be a cut-back on the improvements to the A9, which is our only main road to the North of Scotland. I am sure that he will. He looks at me as if he is saying, "It is a lot of nonsense. It is going to go on". I hope that that is so.

The cutting of this road plan is a very short-sighted policy, as without a doubt there will be oil rig building and related industry somewhere on our Western seaboard.

Added to this is the fact that the pound is not of very great value in Europe, so that vast numbers of tourists who would have taken their holidays in such places as the Costa Brava now make for the North-West Highlands. May I beg the Government to realise that unless they do something to curb MacBraynes' threatened increase in ferry fares, very real hardship will result in the outer isles. Will the noble Lord the Minister also persuade his right honourable friend the Secretary of State for Scotland to say, once and for all, that the Kyle railway line is reprieved, and not leave it as a year by year exercise?

5.50 p.m.

LORD TREVELYAN

My Lords, we are all most grateful to the noble Lord, Lord Strathcona and Mount Royal, for initiating this debate on a matter of such great importance to our country. I should first declare my interest as a director of the British Petroleum Company, but I would assure your Lordships that any observations that I have to make—which will be on the relations of the companies and the Government—have no special application to that Company, but apply to all companies engaged in the exploitation of oil in the North Sea.

I am glad to know that the closest possible contact is maintained between the oil companies and the Ministry of Energy, because the speedy and full exploitation of our North Sea oil resources depends on a satisfactory understanding being reached between the companies and the Government. I have no desire, and it would be wrong for me to try to anticipate those discussions with the Ministry. I am concerned to-day only to make a few suggestions for guidelines which I believe should apply to the dealings of the Government with the oil industry over North Sea oil in order that an understanding between the industry and the Government can be achieved.

Obviously, the interests of the people of this country should be paramount in general. They should not be sacrificed to a political doctrine of whatever complexion but should be calculated on an objective consideration of the practical results of a policy. There must, of course, be a calculation of what is a reasonable division of North Sea oil profits between the companies and the public purse. This division, while taking full account of the public interest, should not be such as to remove the incentives to provide investment and maximum exploitation of our native resources for the public interest. The period of uncertainty in the policy of Government should not be prolonged in such a way as to affect the raising of the necessarily large capital sums required. Full account should be taken of the overseas interests of British companies which in some cases amount to nine-tenths of the company's turnover and which could be greatly harmed by injudicious interference with the company's normal methods of operation. No system should be established which would have the effect of diminishing the substantial foreign exchange earnings of British companies. The dangers involved in a monopoly purchase system should be fully understood.

Full account should be taken of the disadvantages of an auction royalty system which would discourage the development of marginal fields and the complete exploitation of the oilfields. Whatever financial system is established should distinguish between the exploration period and the subsequent period of commercial production. The treatment of accumulated tax losses of British companies should not put them at a disadvantage in comparison with foreign companies. Any new tax system should assure a proper return to the Government but should not damage international confidence in the United Kingdom as a country in which to invest, through fears of retrospective confiscation. It should provide a framework which will encourage the flow of sufficient funds to develop the North Sea and will not discourage the development of marginal fields. It should be simple to administer and should not penalise efficiency.

I trust that noble Lords do not imagine that finding and producing North Sea Oil is as easy as digging a hole on the beach till the sea water flows into it. Anyone who has seen the truly fantastic engineering feats now being completed on Teesside, in the Firth of Forth and at Nigg should realise what an immense investment, what technical innovation, and what risks are involved in the truly staggering pioneering effort required to extract the oil from very deep water and bring it on shore. The discussions between the companies and the Department of Energy should be conducted with good will and frankness, without suspicion on either side, and should take account of the public interest and the interests of the companies whose success will be of great importance to the country for many years to come.

5.55 p.m.

THE EARL OF WEMYSS AND MARCH

My Lords, I very seldom come to your Lordships' House, which I am sure is a matter on which your Lordships will wish to congratulate yourselves. However, I thought it was my duty to come this afternoon in case any of your Lordships should happen to mention this public inquiry about the proposal to build oil production platforms at Drumbuie, which has indeed been mentioned though, somewhat to my relief, only by the seventh speaker in a fairly long list of speakers, and that was the noble Baroness, Lady White, who I may happily say is on my side about this matter. I cannot, like the noble Baroness, give anything like a round tour of Scotland, as she has done so well. I want to confine myself, and I hope for not too long, to this particular problem of the desire of the contractors to build the Condeep in the deep waters of Loch Carron.

Your Lordships will doubtless know that this Condeep is a Norwegian design of vast size—it is about one and a half times the height, in all, of St. Paul's Cathedral—and two of them are now being built together. The noble Earl, Lord Cromartie, and I were among those who saw the beginning of these constructions in Norway last October. There are two being built at Stavanger side by side, respectively for the Brent and the Beryl fields in the North Sea. It requires a very tight specification for the sort of site in which it can be built. It requires relatively deep water just off the shore, something like 120 feet, and very deep water quite nearby, something like 600 feet, and that must be sheltered. This is a perfect specification for our Norweigan brethren in their remarkable fjords. Though when you look at a map of the West coast of Scotland or even of Ireland you might think that we have fjords, too. It turns out, surprisingly, that we have only one, and that, roughly speaking, is Loch Carron. Hence the needle-point decision on which we are all trying to rest.

On the other side of the question of the Condeep monster, it appears—and the evidence we have heard at the public inquiry shows this very clearly—that it has what I might call a very narrow range of desirability. It has been ordered by these two companies, as I said, to be made in Norway, but it turns out, on a careful look, that you do not need this particular structure for depths under 500 feet. It is now apparently the consensus of engineers that you cannot use at all, or, at least, not safely, a platform standing on the bottom of the sea for depths of 600 or more. So that confines Condeep to a narrow range of depth between 500 and 600 feet and, as I always desire to be generous, I admit that if the bottom conditions are particularly difficult—soft and muddy—it might have to be a widened range and the lower limit a bit shallower than 500 feet. For these 500 feet depths, or a little less—and if I may say so, I think the noble Earl, Lord Cromartie, was slightly at fault here—the platforms are being made now, or will be shortly, on the Clyde, perhaps not quite up to the same specification as Condeep but approaching it.

I do not think that I am going too far and being too picturesque when I say that the design of the Condeep could be compared to the larger types of dinosaurs which used to adorn this earth long before your Lordships' time, and which have since become extinct. The only difference is that Condeep is already extinct before the only two specimens which I hope will ever be made have yet been completed. Moreover, although the contractors are seeking to make the Condeep in Scotland, it appears that none of the oil companies has yet asked for one to be made in Scotland. As the reporter trenchantly remarked, the oil companies or their representatives did not even bother to come along and say to him whether, and if so why, they wanted these things made for their use. Therefore, my Lords, I would take issue with the noble Lord, Lord Barnby, who implied that we, the objectors of this public inquiry, have been holding up the extraction of the oil. With great respect, I claim that that is entirely untrue.

As your Lordships probably know, there are at present nine sites licensed in Scotland and one in England for the building of oil production platforms of various types. Of these ten, only four or five are actually in action. Nobody has vet ordered a rig to be built at any of the other five or six sites, so no true accusation of delay can be levelled there. Moreover, as I believe the noble Lord, Lord Polwarth and Mr. Gordon Campbell said, there have been very few planning troubles caused by environmentalists or anybody else, with the exception of one to which I referred and one in which I have an interest—Loch Carron and of course Dunnet Bay—and, in the case of Dunnet Bay, soon after they received planning permission the contractors decided to go off elsewhere.

If I may return briefly once more to the application for planning permission in Loch Carron, our main objections are to the vast scale of the suggested construction in areas which, as the noble Earl, Lord Cromartie, the Convenor of the County, has already said, are thinly populated and could not well take it. Indeed, we are quite sure that if this had to happen it would lead not merely to the inconvenience of the local people and to the spoiling of the scenery, however sad that might be, but to something far worse—to the total obliteration of the local communities at Drumbuie and in its neighbourhood, with no counterweighting benefits. It would harm rather than encourage any other form of industry. It would leave no residual benefit behind when it stopped, whether five years or in twenty, and meantime it would completely disrupt—as has been too well seen in the tougher communities of Easter Ross and elsewhere. It would entirely disrupt the employment pattern that exists to-day. Our local crofters in the West have loyally resisted this proposal. There has been something said and written about the locals voting in favour of it, but it depends what you mean by the "locals". Those who have voted in favour are not so very local; they are quite a long way away in terms of the scale of that country.

In answer to Mr. Gordon Campbell's letter in the Daily Telegraph, I would refer your Lordships to a reply by a local gentleman, Mr. Charles Macrae. I myself wrote a reply to Mr. Gordon Campbell's letter in the Daily Telegraph I am glad that the paper printed Mr. Macrae's letter rather than mine, because it is a much better letter than mine and comes from someone who lives and works at the place. He said: It is not true that the country needs the monster concrete platforms … The country will get all the oil it needs in the next 10 years without using the Drumbuie type of platform, and by the end end of that time there will cer- tainly be a better type of oil platform for the deeper water. Before I come to alternative types, I should like to say that we have proved that in the Loch Carron area there are alternative sites; on the assumption—which I reject—that this has to happen somewhere, particularly the Crowlin Islands and, to a lesser degree, other places where the work force would not literally live on ships, as has been described in connection with rigs. But the scheme would be more isolated and would therefore have a lesser immediate impact on the local population than if it had to take place at Drumbuie.

I should also like to refer to the social conscience, which I found very much emphasised by responsible people on our visit to Norway. They spoke of the desirability of keeping these Condeeps, or any other enormous constructions, out of the "small remote communities" as the Governor of the county of Rogaland, Mr. Knudsen, described them. Thinking of little Drumbuie with 30 people, and the whole of the Kyle of Lochalsh peninsula with 1,400 or 1,500 people, we asked Mr. Knudsen what he meant by "small remote communities". Apparently, he meant places up the fiords which he named, of 1,000 to 4,000 people. That is not our idea of small communities on the West Coast of Ross-shire. They do the right thing in Norway, of course. They keep these things beside the big towns as we should do were it not for the physical requirements. They have them at Stavanger (83,000 people), and at Bergen where I believe the population is even greater. Those are very large towns by Norwegian standards. Like Norway, I hope that we in the West Highlands—and the National Trust for Scotland is certainly not trying to prevent it—will have small industries related to oil or anything else, and not these vast unsuitable schemes which disrupt the whole community merely for the sake of profit.

All the sites I have mentioned are socially undesirable, but in different degrees. We are resisting this one, and other objectors have said that, although the public inquiry is ostensibly about only Drumbuie, an alternative site in the neighbourhood would also be objectionable in varying degrees. There is the important issue—and I feel sure that your Lordships appreciate these things—of the inalienability of land which has been donated or bequeathed to the National Trust in Scotland, England, Wales or Northern Ireland. This is a very important issue indeed, which is essential to the safeguarding of the Trusts and to the continuance of the generous support which they get from all forms of benefactors—those who give land and those who give other support. But in this case the inalienability is only a problem within a problem. As a result of the difficulty of the question of inalienability, the matter has to go to Parliament before the land can be taken from us. But if, as a result of this extra hurdle, another site is chosen it will still be the wrong answer.

I should like to say just a word on the alternative structures. We have heard—and this has been illustrated in The Scotsman and probably in other newspapers as well—about the floating type of platform which is less dependent on the depth in which it has to work than the types which stand on the bottom. It is apparently thought steady enough to support a bridge crossing the Straits of Messina between Sicily and the mainland of Italy. If it is steady enough for that, it is surely steady enough for us. Even more important, I should like to ask the noble Lord, Lord Balogh, and the noble Lord, Lord Hughes—

LORD IRONSIDE

My Lords, as regards a floating platform, will the noble Earl agree that there are tidal difficulties in the North Sea, whereas in the Mediterranean this factor does not exist?

THM EARL OF WEMYSS AND MARCH

My Lords, I thank the noble Lord. I do not know whether I heard all that the noble Lord said, but I certainly agree that there are difficulties. I am not an engineer. All I know is that some engineers are saying that these structures are most reliable. I agree that there are no tides in the Straits of Messina but when you get a little below the surface of a tidal sea there are virtually no tides. I may be wrong about that.

VISCOUNT NORWICH

My Lords, would not the noble Lord agree that although there may not be any tide in the Mediterranean the Straits of Messina run between Scylla and Charybdis, with just about the strongest current anywhere in the entire sea.

THE EARL OF WEMYSS AND MARCH

My Lords, I should hesitate to try to sail, even with your Lordships, between Scylla and Charybdis. I do not know enough to enter into a debate on it, but I thank the noble Lord for his intervention. I am quite sure that even though Scylla herself may be a bit washed-up and Charybdis calmer than it was in the days of Odysseus, there are very many difficulties, but I do not think that these platforms, which some of the engineers who know about them advocate, should be lightly dismissed.

If I may turn to what one may term the sub-sea completion, I understand that these things—and there are at least two types—are already working satisfactorily off the mouth of the Mississippi. This is in a depth of only 375 feet but, if they can work at that depth, there seems to be no particular reason why they should not work in greater depths. They are connected with platforms or tankers just by a flexible pipeline. There seems to be no doubt from what the engineers are now saying that this sort of structure—an alternative to the floating platform—will be almost essential, or at least will be the best apparatus when one reaches depths greater than 600 feet, beyond which the platforms which stand on the bottom are, I am informed, generally accepted to be unstable and probably unsafe. Therefore, they are necessary below 600 feet; they are, in their mass and construction, probably cheaper and, above all from the point of view of those of us who have to wrestle with these problems on the West Highland coast, they do not have these terribly tight and demanding specifications for the physical sites on which they have to be built. I would beg Her Majesty's Government to put all the force and all the influence they can behind the development of this sort of structure which, it seems to me, is the answer for the future.

My Lords, I have already gone on too long, but I must say a word about the entirely illogical and, I think, almost immoral threat of legislation with which we were confronted by the Statement made in another place by the former Secretary of State for Scotland on January 31. The Scottish Administration—though let us let bygones be bygones—have not in our opinion done nearly enough to get a proper study of the whole problem made, and have allowed us instead to drift into this expensive and time-wasting public inquiry which is not yet quite technically over. However, that being so, and being pushed very hard, I think, from behind, by the newly-hatched or newly-fledged Department of Energy in London, it was then decided—with a logic which I personally cannot see, due to a little local difficulty which was big for us but small in the context of the whole country, to introduce a Bill to take compulsory powers round the whole of the United Kingdom. Why? Surely that is going rather far? In the particular context of the Drumbuie inquiry, why did this have to be done just at the point when the applicants' case had just about finished and not even one word of the objectors' case had been heard? To put it mildly, this was unfair, and surely Providence after that put it into the heart of the Leader of the Conservative Party that there should be a Dissolution and we were saved, as I might say, by the bell.

My noble friend Lord Polwarth revealed all too clearly, in a recent letter to The Times, with no mask, what would have happened had the former Government remained in office. From that we have been saved, and I think I must say "thank you" to Her Majesty's present Government for the steady and fair line which they have taken since they came into office. In particular, I am grateful for the statements of Mr. Willie Ross, the Secretary of State for Scotland, and Dr. Gavin Strang of the Department of Energy about allowing the public inquiry to continue and to finish in a proper way. This allows the Secretary of State for Scotland to make his decision and not to reintroduce the former threatened legislation, or at least not in that form.

There is one other point. I hope that there is no quarrel between us, and I should like to pay tribute to the noble Lord, Lord Polwarth, and the Oil Development Committee of which he was the chairman for arranging the production of the report by Lord Bute and his Committee to which the noble Baroness, Lady White, has already referred. If I may respectfully say so, Lord Bute is not the Chairman of the Oil Development Council, but of its Committee on the Environment. It is nevertheless a very excellent report and I would commend the reading of it to all those among your Lordships who are interested and to any other person outside. The Report defines "environment" as the whole social and socio-economic environment, not just the scenery. It speaks of licensing policy; it speaks of the correct planning strategy procedure and provision and, above all, and most importantly, of the rehabilitation of land and how we should get round to carrying out this rehabilitation. It mentions a very important point—the need for better or larger staffs of planners to implement all this. I hope, my Lords, that this report may be the bridge between all of us who have got too much into a position of confrontation about all this. If this report, which was inspired by Her Majesty's late Government, could be accepted by Her Majesty's present Ministers—as I trust it will be—I hope that it will bring something on which we can all work and something which will give us the basis of the better planning of these terribly difficult problems which face us in the future.

A fairly recent statement by a representative of the OPEC countries has, I think, made it clear that in raising the price of oil so dramatically, they were not only trying to be beastly to us—perhaps as an answer to the gunboats—but that they had deeper thoughts, and ones which I am sure your Lordships have also, about the better conservation and the more sensible use of the finite resources of this earth, which means inevitably their slower exploitation. We are only here on earth as stewards of God's world, and I beg and pray that we shall remember this and that there will be not so much rushing for profit but a proper use of what we have and of what is given to us to use.

6.18 p.m.

LORD BALFOUR OF INCHRYE

My My Lords, I should like to join in the congratulations which have deservedly been given to the noble Lord, Lord Ashcombe, upon his maiden speech and to say that, like other noble Lords, we look forward to hearing from him further in our future debates.

I wish to speak only briefly on the aspect of the environmental revolution which is taking place on the East Coast of Scotland and, in particular, in Easter Ross, with which I am well acquainted, living in the neighbourhood as I do. The whole concept of Highland life is being changed and what has been in the past an agricultural community is becoming an expanding industrial one. Populations are changing in work and in their social habits; local labour has already been absorbed and further labour is being imported. The noble Earl, Lord Lauderdale, has given a figure—though I am not in a position to say whether it is right or wrong—of 50,000 workers coming in in the next ten years. Whether wage levels are high or low, I think that we should all agree that wages are not the end-all and be-all of life.

Economic success, to judge from the speeches of Ministers and noble Lords on this side of the House, seems to be assured for the future by the oil and ancillary industries. Unfortunately success, on which human happiness depends, is far from being assured. Environmental conditions are far from good. Housing is lagging behind desperately; people are living in what I call caravan cities. We know that old ships, which have been tied up to provide mooring accommodation, are being used increasingly, while at Nigg Ferry there is one small hotel and one small bar. In Tain there is but one reasonable hotel, the Balnagowan—an admirable institution but quite inadequate for the requirements of the expanding district. Again I quote the noble Earl, Lord Lauderdale, who spoke about the lack of houses and who gave a figure of 12,000. Thousands more houses and extra schools are required; industrial training will have to take place on a far larger scale than hitherto; communications, health, recreation and social amenities are all required in greater number.

My Lords, I listed some of the authorities of Central Government, local government and the Scottish Office which are affected, including the Treasury, finance branches, agriculture, housing, health, communications—road, rail and air—the Department of Industry for Employment and Training, fuel and shipping, recreation and law and order. I quote some 14 areas of activities, all of which must be tackled. There are Departments dealing with each activity and it is imperative that plans should be programmed, agreed and phased, one with the other, and that decisions should be reached rapidly; for if one of these activities should get badly out of step, one laggard could have a bad effect on all the others.

Central Government cannot delegate these responsibilities to local authorities who are overworked and, I think, understaffed. Above all, the plans which I have mentioned need overall day-to-day supervision on the spot. They need co-ordination and constant urging on the spot, and constant decisions. St. Andrew's House' best friend could not say that St. Andrew's House is a dynamo of instant energy, pouring our decisions, clear, rapid and forceful. I do not believe that the present administrative processes of the Government are geared to this new and great necessity, and with great diffidence I want to put to the noble Lord, Lord Hughes, and through him the Government, a suggestion which I hope will at any rate be considered.

We all realise that the "No" attitude of mind within Departments is so easy, but I am sure that the noble Lord and his Department will consider my proposal with sympathy. I recall that Governmental organisations used to have a Commissioner for what we used rightly to call "distressed areas" and which afterwards we called "special areas". I wish to remind the Minister that during the war Mr. Churchill's Administration introduced the principle of resident Ministers. At one time I happened to be one myself. As resident Ministers we were the projection of the Government in our particular localities. I believe that a resident Commissioner, at any rate for Easter Ross—it is not for me to say what the West Coast would want because I do not know—who would not have executive powers but have access to all Ministers and be responsible to one particular Cabinet Minister, would. I believe, be a possible means of co-ordinating, urging and watching locally the constant progress of social requirements for our environmental life, keeping them in phase and parallel, seeing that no one fell behind and so affected the others.

The resident Commissioner would set up his own local co-ordinating machinery. It would be his task to ensure that there was no clogging of progress and he would have to cut through, with access to Ministers and finally to the Cabinet if required, the thicket of Departmental delays. Jogging on as we are in these vital environmental matters is just not good enough. If my idea is rejected, and it may well be of course, it is up to the Government to frame a better organisation for the objective of environmental plans and progress which at present is, I regret to say, far from assured.

6.26 p.m.

LORD ORR-EWING

My Lords, I should like to add my congratulations first and foremost to the noble Lord, Lord Strathcona and Mount Royal, for raising in such an able and masterly speech a subject which we have discussed many times in your Lordships' House, one which is of tremendous importance for the wellbeing of our country and our future. I should like to add my congratulations also to the noble Lord, Lord Ashcombe, on his masterly maiden speech. I hope that we shall hear many more from him.

We have heard many figures discussed, but I like to compare the North Sea capital investment with that of the whole of the rest of British industry, for these figures are so startling; they make us realise the tremendous potential which is within our grasp if we organise and man our oil industry correctly. The total capital expenditure of all United Kingdom industry in a single year is £1,900 million. The North Sea requires next year £1,000 million; that is to say, it wants rather more than half the total capital expenditure of all United Kingdom industry put together. As my noble friend said, it is obvious that this cannot come solely from our country; that is why we must call on both people and equipment from the areas which have the skill and the expertise—and that necessarily means, primarily today, the United States.

I want to address myself to what we ought to do to attract the people and what we ought to do in the form of taxation to make sure that they come and do not leave us. I, like everyone else, was entertained by the tremendous change in approach from the noble Lord, Lord Balogh, now that he has become a responsible Minister. He has certainly had a massive change of spots in a short time. He has spoken in nearly every North Sea debate over the years and he therefore has left behind him a mine full of information and quotations. We may not actually be able to strike oil, but we can certainly strike some gems by way of quotations. I am not going to quote them because I think it would be unkind. I am here to try to stimulate the Government and ask them to mend their ways, and I feel I may not achieve that object if I abuse them at the same time.

LORD HUGHES

My Lords, I am sorry to interrupt the noble Lord so early in his speech, but is he suggesting that anything which my noble friend Lord Balogh said is contradictory of what he said before?

LORD ORR-EWING

I am sorry—yes, I am, my Lords. I was trying not to be provocative, but since I have been Stimulated—yes. I have heard the noble Lord, Lord Balogh, say on many occasions that he did not believe there was any possible solution to the North Sea problem in extending nationalisation. Now, of course, he has to say rather the reverse, because as I am going on to explain in a moment the Manifesto says exactly the opposite—and I have it here. I always carry it about for the first six months after a General Election; it is very useful in debates. It is always in my briefcase. It says this, talking about the loss of energy: The new situation has greatly strengthened Labour's determination to ensure that not only the North Sea and the 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 a majority of public participation. It goes on later: It is public ownership and control that will enable the British people, through its Government, to fix the pace of the exploitation of oil.

LORD HUGHES

My Lords, with respect to the noble Lord, that is no contradiction of what my noble friend said this afternoon. It is pointed out that a Conservative Government nationalised oil under the land in 1934; that a Conservative Government nationalised oil under the sea in 1964, and that what is now necessary is to ensure adequate control of the remainder of the process. We therefore have nationalisation and control put together, as in the Manifesto.

LORD ORR-EWING

My Lords, I am most grateful to the noble Lord for his apologia.

LORD HUGHES

It is not an apologia.

LORD ORR-EWING

My Lords, I was not seeking to say that what I quoted from the Manifesto was different from what the noble Lord, Lord Balogh, said this afternoon. It is a natural extension of it. What I am saying is that when he was in Opposition, in that enormous fund of speeches, he took the view that a further extension of nationalisation would not be in the interests of rapid exploration. It is that change of view to which I was referring, and I do not welcome it. I think the noble Lord will be an influence for the good in the Energy Department, and I do not wish, therefore, to carry on this element of the discussion. I wanted to draw attention to the fact that, however good or bad an organisation is, it is deeply—and I emphasise the word "deeply"—dependent on the calibre and experience of the people who man and serve these organisations, and there is a tremendous shortage in the world of people experienced in off-shore oil technology and in off-shore oil engineering. This is a basic fact, and any changes that are made must take this fact into consideration.

Now it has been proposed that we extend the Energy Department, which presumably means recruiting extra staff officers; and it has been proposed that we set up a Corporation to deal with these resources. It is proposed, presumably, under this Manifesto, to have some control organisation, and here again staff are needed. I ask myself—and I should like to draw this to the attention of the noble Lord who is going to reply to this debate—is it possible to attract the right calibre of experienced person within the grades, status and salaries of the Civil Service? I suggest that that is going to be a very difficult task indeed. That is why the maximum amount of action should be left outside the immediate control of the Civil Service. The maximum amount of effort should come from outside, rather than from within. Even B.P. (and they are not tied by Civil Service grades or rates of pay) are at this moment losing their skilled personnel to people who are seeking to recruit them, not only in this country but in other parts of the world as well, because everyone sees the potential of off-shore raw material exploration and development.

I wonder, too, whether it is necessary, because the Coal Board itself has an exploration department—and that is a nationalised industry—and the Gas Corporation has its own exploration department. Furthermore, B.P. itself, after all, is 48 per cent. owned by the Government. If, for dogma reasons and for reasons of honouring the Manifesto, the Government feel that they must proceed with further State ownership, why not buy another 3 per cent. of B.P.? Make it 51 per cent. rather than 48 per cent., and give themselves that measure of control, but also give themselves the liberty of manoeuvre, the liberty to pay the right rate for this particular job. Burmah Oil have a 22 per cent, holding in B.P. Perhaps they would be happy to dispose of a small percentage to give the Government control, without the onerous responsibility and the difficulty of recruiting.

Secondly, I wanted to turn to the question of tax. People will be attracted here provided they are not going to be "clobbered" by taxation to an extent not known in the countries from which they come. I have taken the view that successive Governments have tended to tax our leaders in industry too highly. We tax our people very much more highly than do any of our competitive industrial countries. The tax was 75 per cent. in this country before the last Finance Bill: now it is to be raised to 83 per cent. No one else taxes at that rate; and if you have some unearned income, or what I prefer to call savings income, the tax can be as high as 98 per cent. Do the Government really think that skilled men are going to stay and be taxed at that rate? I can assure them that they are not. They will go overseas, taking their families and their children with them to some place where they are not taxed at such a swingeing rate, and where they can use their energies and enthusiasm to greater effect.

Now this is to go further. Not only do I think that the tax rate for the pacesetters in our industry, particularly in our oil industry, is too high, but now we are to tax those people who we try to attract to our country (and I say that is largely American technology at the moment) on their global income. That is contained in the new Finance Bill. I ask the Government, and particularly the Energy Department, to think of the repercussions of this on the development of North Sea oil. Sir Stafford Cripps devised a formula, and, after all, he was a good socialist, a dedicated and very honourable man in every way. He saw the practical advantages of encouraging British people to live overseas and not to be taxed at the full rate at which they would be taxed if they were in this country. This encouraged from here consultants, scientists, engineers, technologists and the like to go overseas to the Persian Gulf, to West Africa, to many places with unpleasant climates (particularly in those days before air conditioning), to be separated from their families and their children, but to earn rewards and, incidentally, to earn very substantial orders for our country. Naturally a Britisher working overseas knows most about British capital equipment and tends to recommend it, and we get the export orders as a result, just as U.S.A. people very often recommend United States equipment because they know it and it is proved in their eyes. So, if this is to be done away with, there will be a drawing back and the "brain drain" will flow to other places where they are not so highly taxed.

This new increase in tax on global income which is upsetting the Sir Stafford Cripps' formula after a long period of success is I think stimulated by one or two glaring cases. Surely it is ridiculous to modify the whole tax system, particularly as it concerns these people, simply because one or two people may have tried to avoid paying tax. Then, further, it is going to discourage the multi-national companies from setting up their European headquarters in the United Kingdom. This is already beginning to happen, and I speak from personal experience in this connection. No multi-national companies are more important to this development than the oil companies. For language reasons and because they like to live here, many international countries have selected Britain as the country in which to manufacture and to make their European headquarters. Their children go to school here; their wives do not find difficulty with the language—and incidentally they bring considerable expertise to this country. We are often told that our management is not as efficient as it should be. If that is true, then it could be said that these people provide pacesetters in management techniques learned in the United States.

Surely it is stupid to drive these people out, and unless the Finance Bill is modified this is exactly what is going to happen. I know that plans are now being made to set up Euro-headquarters in France. Can this be in the best long-term interests of Britain? The French take a far more tolerant attitude about tax; one can negotiate tax arrangements and one knows that one is not going to be clobbered or have nine-tenths of one's earnings taken away by the State. So I earnestly ask the Government, in the context of oil, not to take a sledgehammer to crack a small nut but to stick to a principle established by Sir Stafford Cripps, which is wholly honourable and, I think, wholly beneficial. No part of the British economy is of a greater potential than North Sea oil. No part of it will be so frustrated and destroyed if the Government go ahead with their nationalisation and with this increase in taxation of those from overseas who are working here. Hitherto they have had favourable consideration and have brought their expertise willingly and enthusiastically to help our country.

6.42 p.m.

LORD POLWARTH

My Lords, this debate is drawing on but I must take time to congratulate and thank my noble friend Lord Strathcona for having given us the opportunity to-day to talk about this immensely important subject. I should also like to say that we have welcomed the experience of hearing the noble Lord, Lord Balogh, giving his first major contribution from the Dispatch Box. I do not think he is with us at the moment and therefore I shall not elaborate on the very interesting description of him given by my noble friend Lord Lauderdale. It is always interesting to see the performance of a poacher turned gamekeeper, and we shall continue to watch the noble Lord with great interest. I was glad that he admitted the difficulties that face Ministers when they find themselves in office. At the same time I think it was a little depressing that quite so much of his speech was devoted to questions of taxation, control and ownership, rather than to the measures needed to help the speedy development of this enormously important resource—for enormously important it is: we all recognise that. Also, so far as Scotland is concerned, it has an impact on almost every aspect of our life.

On this particular point I should like to say just a few things to-night. Something I realised early on in my job was the extraordinary ignorance in the South of the extent of the impact in Scotland, and of the extraordinary interest in the subject on the part of all sections of the community and all kinds of people at all levels. There is this intense and vast interest; one has only to read the Scottish Press, which I am afraid is done much too little here, to realise that—although I am glad to say that about the only paper to be got to-day has been the Glasgow Herald, so here you have your opportunity!

On the question of Government involvement and organisation I should like to say one word. I subscribe to the view that the role of Government is not to get involved in management and control on the operational side of oil production. It is to support and encourage those with the knowledge and experience to do the job to the best of their ability. We made our mistakes in the Government organisation, a fact of which we are indeed quite aware. For one thing, we left the control of this operation for far too long with that monstrous-sized Department, the Department of Trade and industry. However, we eventually moved it to the Department of Energy, which we created and which I believe we should have created at an earlier stage. Also, I think we should have included a Scottish Minister in it from the beginning. I welcome the inclusion by this Government of a Scottish Minister at that place.

Nevertheless, this still leaves us a little uncertain as to how the operation will be handled in Scotland. We now have two Ministers of State in the Scottish Office: a unique state of affairs, I think. I find it a little mystifying that we have a Secretary of State and two Ministers of State, but only one Parliamentary Under-Secretary. It is rather like having a regiment with a commanding officer, two seconds-in-command and only one company commander. Of course, there may be very good reasons for this, and there are various rumours as to why it is. We have come to regard the Minister of State for Scotland (nearly always a Member of this House) as the Scottish representative here, and as the holder of an honourable and dignified post. Therefore I think it is rather sad that we cannot refer to our good friend—as I am sure we might call him, even from this side—the noble Lord, Lord Hughes, as the "Minister of State for Scotland", because he is only a Minister: there is another one.

LORD HUGHES

My Lords, the noble Lord's memory is leading him astray. This is not a new situation. There were two Ministers of State in Scotland from 1969 to 1970, and I have returned therefore to the position which I held before, of being one-half of the establishment.

LORD POLWARTH

My Lords, I stand corrected. I would only say that I would much prefer the noble Lord to be a whole rather than a half.

LORD HUGHES

My Lords, if we are both good, is it not better to have two good ones instead of only one?

LORD POLWARTH

My Lords, I am far too modest to make any comment on that, having held the office myself immediately before the noble Lord.

VISCOUNT AMORY

My Lords, if I might, I should just like to ask the noble Lord, Lord Hughes, whether what he has said was on the analogy of the person who ordered a boiled egg for breakfast, and the waiter brought him two. When he asked the waiter why he had brought two eggs, the man said "I have brought two in case one is bad."

LORD HUGHES

My Lords, I hope not.

LORD POLWARTH

My Lords, more seriously, I think there is a problem here. The noble Lord, Lord Balfour of Inchrye, spoke about the need for a resi- dent Minister. I think he is on to a very real point here. When I held my special responsibilities for oil in Scotland at the Scottish Office, I found it was necessary to spend a great deal of time travelling around Scotland, meeting people of all kinds and at all levels in different organisations, because there is a very real need for communication on these matters. Many of the problems arise through misunderstanding. There is a real need for communication, for contact and for a readiness to visit operations and to meet all kinds of people on local authorities and so on. This is something which, as the noble Earl, Lord Cromartie, knows so well, I endeavoured to do. I just question whether a Minister in the other place can have the necessary time and freedom to carry out this duty. Therefore I would have preferred to see those responsibilities devolve on my noble friend (as I would wish to call him) Lord Hughes.

However, I think I can say that we bequeathed to him and his colleagues a sound organisation within the Scottish Office. We formed an Oil Development Council to advise Ministers on all aspects of oil development, and this Council brought together people from right across the board: the oil companies, local authorities, environmental bodies and all the others; and, again, created a much better understanding of the problems involved. We had a standing conference of local authorities to keep them in the picture as to what was happening. We had a committee covering the different environmental bodies, which performed a most useful function. Behind all that, I should like to say that we built up a first-rate supporting team within that much-maligned place, St. Andrew's House, to whose defence I must spring in view of the remarks made by the noble Lord on my left. I can assure him there was no lack of energy in the oil departments at the Scottish Office.

I have heard it suggested that the new Secretary of State is contemplating a partial streamlining of the organisation that has been set up. I would only ask him, in doing so, to bear in mind the importance of the communications functions and of bringing as many people as possible into the picture as to what is going on. It may well be a mistake to cut down too much these avenues of communications.

The two main functions in relation to oil within the Scottish Office are, first, the provision of infrastructure—not all of it, because some of it lies with other Departments—and secondly, the reconciling of the different interests covered by the planning machinery. There has been a certain amount of criticism on both these counts. By and large the last Government had a good record on these matters.

Regarding infrastructure, enormous progress was made in making our East coast ports suitable for servicing the oil operations. I believe that they are adequate for the present and foreseeable future. Despite my noble friend Lord Cromartie's remarks about roads, an immense amount of work was prepared. It takes years to create a road with the best will from the earliest stages. The A9 is to be virtually reconstructed, and physical work has begun on that operation. Airports and air services have been improved. I took a large part in the negotiation for the improvement of the airfield in Shetland for the vital services in support of the operations in the far Northern waters. BEA have been persuaded to acquire suitable aircraft for this service.

Housing is perhaps the greatest single problem, and we are all aware of this. You cannot build houses overnight, but the local authorities have made a stalwart effort in this direction. I do not think all of the delays have been due to the red tape of St. Andrews House. The noble Earl sitting on my right referred to having paid a visit to study the use of prefabricated labour-saving methods of house construction. I urged him and his colleagues to do this about a year ago and I am glad that he has taken our advice. The Scottish Special Housing Association does a fine job backing up and filling in on the housing programme of the local authorities. We cannot have all that we want; there are acute shortages of resources, both in men and materials. We know that the construction industry is under great pressure, and we cannot work miracles whatever our political outlook. I am sure that noble Lords will agree that we can only do our best.

The other aspect is finance and, as we know well, there is a chronic shortage of that. There were indications from some quarters to-day that cuts were being made in capital programmes affecting the oil areas. While in office we resisted efforts to cut capital programmes directly affecting the oil operation, even at times when general cuts had to be made. I sincerely hope that the present Government will continue stoutly to resist efforts by the Treasury to reduce allocations where oil operations are concerned, or to suggest that money be found from other programmes. This is inexcusable in view of the size of the revenues which, whatever taxation system is adopted, will flow into the Treasury before long.

The other main responsibility of the Scottish Office is on the planning front, particularly the environmental issues, which clearly concerns a number of your Lordships. Here, of course, we are bound to have a conflict. We have a most precious heritage of countryside and coast, and because of the nature of the operation it so happens that certain developments must, inevitably, take place within these areas. No one is more fond of those areas, or more appreciative of them than I; and I venture to say that few of those concerned know them as intimately as I have the privilege of knowing them. I believe that so far we have managed to resolve most of these conflicts of development and the environment remarkably smoothly and satisfactorily. As we have heard, a number of platform building sites on the Eastern coast have been approved with little trouble, and the damage they have clone is minimal.

We hear calls from time to time for a national strategy for oil development on the coast. This sounds nice, but we are entitled to ask what the proponetns of this strategy really mean. The Scottish Office in the past year have produced a number of papers; they have issued guidelines to local authorities. They sent out a coastal survey with preferred zones for development and conservation. If, by national strategy, we are saying that developments will only go to one place or another, what about local authorities with statutory responsibilities? We would have howls of protest if we were to override the procedures and safeguards that are provided in that way.

Then there is the situation of providing for unknown developments. We are involved in a rapidly changing technology; it is extremely difficult to foresee what will be needed in the future. Who, two years ago, could have foreseen the need for deep-water concrete platforms, for example? A national strategy is not on; sensible forward planning and thinking is required to keep in step with what is taking place.

Then we come to the vexed question of Drumbuie, this cause celebre, which has been the subject of a mammoth public inquiry just recently. We have had a very detailed and special pleading from the noble Earl, Lord Wemyss and March. Nobody admires the work of the National Trust for Scotland more than I do, nor of their President, the noble Earl, Lord Wemyss and March. But I submit he and the Trust have been protesting overmuch. We are faced with a demand for a unique type of platform which can only be built—and this is I think agreed—in, or close to a particular spot because of physical circumstances.

We must be prepared to accept that there will be cases where a small amount of an enormously long, beautiful coastline must be turned to other uses. The total area involved in this case is extremely small. I am interested to see the arguments against such developments, which began on the scenic and natural beauty side, have now switched almost entirely to the social aspects. There is the cry that it is out of scale for the area and what is wanted are smaller industries and developments. There is not much evidence from the past that such developments have been forthcoming. One favourite phrase has been a "fragile social structure". I do not know from where that came, but it has been much used in evidence. If ever there was a "fragile social structure" is it not what we have at present? The population have been leaving for years and years because of lack of opportunity—

THE EARL OF CROMARTIE

My Lords, if I may interrupt my noble friend for a moment, that is not entirely correct. In the past few years a considerable amount of industry has been introduced into the Kyle of Lochalsh. There is no unemployment. There are a certain number of the usual unemployable people that one finds anywhere; but on the mainland of Ross and Cromartie there is no unemployment. There is in the Isle of Lewis, but that will probably be taken up with the new oil-related industry there in due course. But it is not true to say that there has been nothing done. My County Council have been very busy on this matter for a great number of years and there are many industries already in Kyle.

THE EARL OF WEMYSS AND MARCH

My Lords, if the noble Lord, Lord Polwarth, will permit me to follow the example of the noble Earl, Lord Cromartie, in interrupting, may I ask whether he would agree that even if an area is only 100 acres, 150 acres or half a mile of coastline, or whatever it might be, its influence is capable of extending far and wide?

LORD POLWARTH

Yes indeed, my Lords. But the influence may not solely be for ill; it may be for good as well—creating employment, for instance, for those in the Isle of Skye. When the present road programme runs down, I think a number will find themselves without employment. Of course, there are two sides to this question, but I would submit that here we have a case where something is wanted in the national need. I am afraid I am quite unrepentant about the decision which the last Government made to seek special powers to acquire sites, in exceptional circumstances only, for limited purposes only and subject to very close safeguards, for the vastly important business of getting the oil. With the greatest respect to the noble Earl, there was no pressure from the Department of Energy to introduce this, because at the time we started in the Scottish Office to prepare plans and legislation for this purpose the Department of Energy did not even exist. So I take full responsibility with the former Secretary of State and my colleagues in the Scottish Office.

I think it was the noble Lord, Lord Ashcombe, in his admirable maiden speech, who spoke of the difficulties of having your cake and eating it. I would only say that environment is fine but, as somebody else said, you cannot eat environment. That is a view that has been put to me by people in the area from Wester Ross, members of the local population and people from there who had been forced to move to Glasgow through lack of opportunity, and others who know the structure of the area. I hope it may prove possible—

LORD BARNBY

My Lords, if I may interrupt the noble Lord, would he agree that, in order to surmount the environmental objections properly put forward and to achieve a saving of time, special legislation might be necessary?

LORD POLWARTH

My Lords, that is exactly what I was coming to. We had intended to introduce special legislatior for that purpose. I hope that the noble Lord who is to reply will let us know whether the present Government feel that, as a result of not introducing legislation to acquire a site of this kind, there will not be a delay in getting oil ashore. Certainly it was our view when in Office that failure to have such a site for this kind of platform by the middle of this summer could prejudice to a considerable extent the arrival of the earlier substantial flow of oil. I think we are entitled to hear that.

It is easy enough to try to make a case to say that this particular platform is virtually out of date or will not be required, as the noble Earl, Lord Wemyss and March, did. With the greatest respect to him, who are to be the arbiters in this matter? Are they to be people who have an anxiety to avoid this development's taking place, or are they to be the oil companies, their consultants and contractors, who will have to use this equipment in the conditions of the North Sea, who should make a judgment on what is technically suitable and what they want? We should be hesitant to criticise this until it is proved otherwise.

The only further point I would make is this. With all these extraordinarily complex developments, with all their ramifications, an enormous burden has fallen on local authorities, on many institutions and on Central Government Departments: it has been a load of work to which they have been totally unaccustomed in the past. They have done a remarkable job, as I found in visiting county councils and others, in tackling this unwonted load. Government Departments have done a remarkable job in a field in which in the past they have had little experience.

My Lords, I come to the view—I was becoming convinced of this while in Office—that we may well need some new form of organisation to cope with the situation. I will not be very precise. I am not totally convinced myself what is the right answer, whether it should be some form of development corporation or otherwise for perhaps the oil affected areas of the North—perhaps even for the whole of Scotland. I think it was the noble Lord, Lord Strathcona, who made a suggestion to that effect. We have the example of a remarkable body in the Highlands and Islands Development Board, a body on which we might consider building for this purpose, because skills are needed other than those of civil servants and local authority officials—business expertise and the skills of those with experience in this kind of field.

It may be that moving so far as this is too drastic. There will be much opposition to it, obviously, from existing interests. I wonder whether we might consider the example of the French who, in another field of regional development as a whole, have created a most effective organisation, known for short as DATAR, which literally translated is the Department for Management of the Territory and Regional Development. It is a trans-departmental body with power from the very top of Government, able to bang together the heads of different departments, their ministers and civil servants; and it has resources behind it. It is able to look at the entire problem as a whole and to bring in all those concerned. This is what I think we lack at present. We have so many different departments with their different aspects. Each one has an objection, inevitably, when a new proposition is made. All who have been in Government know that in the end, so often, as a result of the reserved positions of departments, we end up with the lowest common denominator. I commend that as one possible alternative thought: an organisation of the kind I have mentioned which can take a grip across departmental boundaries.

The other great need for any body is revenue. While I have abandoned my one time view that North Sea oil revenues should be directly hypothecated for Scottish or other regional development, I still believe that a substantial amount of them should be made available for these purposes in advance of their arrival. It is not very far in advance, after all, because here we are with a chance in Scotland to make a really major breakthrough in its development—probably the greatest chance it has ever had. At the moment, there is undoubtedly a feeling widely abroad that Scotland is not getting, and may not get, its fair share from these developments. I think it showed up in the size of the Nationalist vote in the last Election. That vote, I am sure, was not a reflection of a widespread desire for separation or for Scotland taking the oil entirely to itself; it reflected a feeling of frustration because Scottish needs are not fully understood. It is something to which we must respond. It is only in that way, if we do respond, that we shall make this breakthrough to prosperity; and only if we have confidence and courage as to our ability to tackle these problems, and do not try to pretend that they are insuperable and that we must hold back from tackling them, which attitude I am afraid one finds in many quarters.

Therefore, my Lords, I urge the Government to build on the sound foundations which we laid; to press on to ensure that we get the oil as soon as we can in sufficient quantity; and later is the time to think about controlling the pace of development. We shall succeed in this only if the Government treat the oil companies as partners and friends to be helped, supported and encouraged, rather than as adversaries to be taken advantage of and to have the maximum amount possible squeezed out of them.

7.9 p.m.

LORD HUGHES

My Lords, I should like to start my remarks, as so many other noble Lords have done, by thanking the noble Lord, Lord Strathcona and Mount Royal, for having initiated this debate to-day. A little while ago I intervened in the speech of the noble Lord, Lord Orr-Ewing, because I thought he was being rather unfair to my noble friend Lord Balogh. I still think he was accusing him of things which he did not do. But in so far as there was justification for Lord Orr-Ewing's criticism of my noble friend's change of style—not change of content; change of style—to a certain extent it was due to the way in which the noble Lord, Lord Strathcona, introduced this debate.

I hope that my noble friend, Lord Balogh, will not think that I am letting a cat out of the bag which ought to remain there when I say that he had two openings to his speech: first, the one upon which he had had guidance from his advisers on the basis that Lord Strathcona and Mount Royal would approach matters in the moderate, statesmanlike way in which we were accustomed to have him acting when he was on these Benches—the other one a real, fighting Balogh speech if Lord Strathcona had to be attacked. It was with regret he found that the statesman had survived the crossing of the Floor and that a modest, new approach was, therefore, the one which was desirable.

I think it is correct to say, therefore, that this is the way, with every speaker, at least in part of their remarks, in which the debate has gone and I think that from the point of view of the United Kingdom, from the point of view of Scotland and from the point of view of the Ministers who now have responsibility in these matters, the debate will have been helpful. Some of the suggestions which have been made will be ones which I know that my right honourable friends, both in Energy and in Scotland, will study with interest and with the desire of extracting from the debate anything which, at the end of the day, will be helpful to the best outcome of this wonderful opportunity that we have.

I think that perhaps the best way in which I might attempt to reply to the debate is to go through it in the way in which the noble Lords raised matters and to attempt, where possible, to join together the remarks of a number of noble Lords on the same subjects. At the very start, the noble Lord, Lord Strathcona, referred to the question of the infrastructure. This, of course, is the aspect in which the Scottish Office is particularly involved. The need to provide a supporting infrastructure for North Sea oil developments creates a very wide range of acute problems for the local authorities and for other public bodies concerned: problems of finance, of staff, of land, of building costs, of labour shortages, and, as I think the noble Earl, Lord Cromartie, would say, many others as well. The Government fully recognise these problems and, in full co-operation with the authorities, are tackling them. But, my Lords, with the best will in the world it is one thing to recognise a prob- lem and another thing in nine weeks to provide all the solutions. If I may say so, I think that the greatest compliment the Government have had, although he may not have intended it that way, was from the noble Earl, Lord Lauderdale, because when he and I from time to time were getting after the previous Government on these matters it is my recollection that the noble Earl was rather moderate in the way in which he pursued Ministers. About every three months or six months he returned to the task, as he had not had an answer before, and, according to his own records, he has been after this Government three times in nine weeks; so he obviously expects quicker results, if not necessarily better results, from this Government than from its predecessors.

The range and the severity of the problems varies very much from one area to another. My colleagues have been visiting the areas concerned. This touches on the point that the noble Lord, Lord Polwarth, put about the advisability of Ministers moving about, of having communication. In that period, the areas concerned have been visited by my honourable friend, Mr. Millan, who has been to the North-East and to Shetland, by my honourable friend, Dr. Strang, and by myself. I spoke about going up the road. The reason I went up the road was because I was going up to the Aberdeenshire area to discuss the infrastructure problems with the authority there, and my own long experience in local government persuaded me, when I was last at the Scottish Office—and I have had no reason to change my mind in the last nine weeks—that the best way of getting good co-operation between local authorities is by maintaining the closest contact with them.

Upon each of the occasions when it has been necessary for me to have discussions of major problems with local authorities I have chosen the method, which I applied over a number of years previously, of going to see the local authorities rather than asking the local authorities to come to St. Andrew's House. One must accent that Parliament has a prior call upon the time of Ministers. Given that, I would wish to do so. Apart from anything else, it is more economical. There are fewer of us who go from St. Andrew's House up to the areas concerned than descend upon us from the local authorities. It is easier to send myself and four or five civil servants than to have 20 or 30 members of local authorities descending upon St. Andrew's House. After all, the Government pay the bulk of the local authority expenditure at the end of the day, so it is a fair saving.

In addition to the substantial on-going problems of infrastructure which the local authorities themselves are undertaking, a substantial direct Government contribution is continuing by way of investment, in trunk roads, and housing by the Scottish Special Housing Association. There is also large-scale Government and public authority involvement, in port and harbour developments to which the noble Lord, Lord Polwarth, has just referred, and airport and air service improvements to which he also referred. The last instalment of that was the announcement which my honourable friend the Minister of State was able to make when he was in Shetland very recently.

The local authority, central Government and other public sector infrastructure programme is being carried out and paid for. We must remember this when we talk about hypothecating. It is being paid for before any oil revenue is received. It is a great deal easier to allocate part of the resources that you have got. It is a lot more difficult to allocate them before you have got them. This is the problem which we are having to face—and, I think, are facing—with a reasonable measure of fairness to the authorities concerned.

On the question of public expenditure the noble Lord, Lord Polwarth, said he hoped that we would be able to resist the pressures of the Treasury in these matters. The previous Administration, when announcing cuts in expenditure last December, stated their intention that infrastructure for off-shore oil developments would not be affected by the cuts: The present Government intend to consider expenditure arising from these developments separately from other programmes. This will ensure that exploitation of oil and gas discoveries will not be held up by financial limitations". I think I ought to add that the previous Administration did not make a clear and unequivocal statement that they accepted the principle that other Scottish programmes would not be allowed to suffer as a result of the priority they rightly gave to North Sea oil infrastructure. I want to say quite definitely that by excluding this infrastructure from the Scottish Office programmes for housing, roads, water, sewerage, education, health and social work, and considering it separately, we shall ensure that these other Scottish programmes do not suffer by having to make do with the crumbs that are left over from oil.

LORD POLWARTH

My Lords, perhaps we failed to make the position sufficiently clear. I do not think that what the noble Lord has announced as this Government's intention is in any way different from what, in fact, we endeavoured to do in practice.

LORD HUGHES

My Lords, I can assure the noble Lord, Lord Polwarth, that he definitely did not make it clear, because it is one of the things which has been emphasised to us by local authorities. That is why it has been said in another place, and I am repeating it here in order to make it absolutely crystal clear, that we have said to individual authorities that the oil expenditure is being considered separately from the rest of the Scottish programme and that such cuts as are being made in Scottish matters other than oil are not being made because of anything which is done in regard to oil expenditure.

THE EARL OF CROMARTIE

My Lords, I am sorry to interrupt the noble Lord the Minister, but does that mean that the list of roads in Wester Ross which were put back will now be reinstated? I can go back and say, "All right, those roads are now going to be built"?

LORD HUGHES

My Lords, the noble Earl knows better than that. If he can prove to my Department or to me that the roads that he wants in Wester Ross are related to oil development he will get them; but in so far as they are not related to oil development the point is that they are not going to be cut because of oil and they will not be cut any more than any others. The noble Earl wants 100 per cent.—or 110 per cent.—on oil and 100 per cent. on everything else: somebody spoke about the oil as being manna from heaven, but it does not work quite in that way.

On the question of the infrastructure expenditure, there are two items in particular on which I wish to comment: one is housing and the other is roads. I will take the one which has been most frequently in the news recently, and particularly in Eastern Scotland—it was referred to by the noble Earl, Lord Cromartie, and the noble Earl, Lord Lauderdale—the A9. Recently I had occasion to write to a number of Members of Parliament who had taken up this question, and I altered the letter which was drafted for me—the noble Lord, Lord Polwarth knows the way these things are done in the Scottish Office—because I wanted to add a paragraph making it perfectly clear that I did not in any way retreat from the view which I have expressed both inside and outside this House: that what is desirable on this road is dual carriageway throughout. I added that to the letter, but I said that on examination of the situation as it now exists and in the light of the present financial position I had reluctantly to accept that we could not plan immediately for it to be dual carriageway throughout.

For some extraordinary reason which I do not understand—and I have re-read my letter to find out whether there was anything in it that I was not aware of, or whether there was something that I had misunderstood in reading my own letter—two statements have been made: one that the Government were cutting back the expenditure proposed by the previous Administration; and secondly, that the A.9 might be single carriageway throughout its entire length. I said neither one nor the other in my letter, and the reason why I said neither is because it would have been totally untrue. In the first instance the expenditure on the A.9—and it was quoted in your Lordships' House—was to be of the order of £60 million. The expenditure to which we have committed ourselves, partly because of increased costs, partly because we have improved on what our predecessors proposed to do in the light of the examinations which go on continuously—and I want to be completely fair and say that they might have done exactly the same thing—is an improvement on what was suggested previously. The cost is not to be £60 million because far from cutting it, the cost has now worked out—and these are the figures for costs taken in February of this year—at £110 million. This is the extent to which this oil programme presents real problems, both for the Scottish Office and for the Department of Energy.

Secondly, we have increased considerably the amount of mileage which in the first instance will be dual carriageway. The mileage which will now definitely be dual carriageway is 25 per cent. of the total between Perth and Inverness. There are a few more miles which will probably be constructed as dual carriageway, so in fact about one-third of the mileage will be dual carriageway. That is nearly three times the mileage which was spoken of when the figure of £60 million was presented.

As I said before, it is possible that the previous Administration might also have reached those figures. I do not think that matters in the slightest: what matters is that approximately one-third of the roadway will be dual carriageway in the initial period. I emphasise the words "in the initial period", because as was stated before, and as I have repeated, where it is not dual carriageway it is being constructed in such a way that it can be expanded to dual carriageway when the need arises. I am told that the improved single carriageway that is being provided is capable of carrying traffic very much in excess of anything which can be expected in the immediately foreseeable future. I do not rest too much on that, because experience in the past has shown that estimates of road users, made with the best information available and with the best intentions in the world, can sometimes prove far too soon to have been wrong.

LORD POLWARTH

My Lords, that is most welcome news, and of course we always had intended that provision should be made for a second carriageway to be able to be added. My only thought is that money is not the only requirement, and I hope that the dualling of so much more of the road will not make such a call on resources in the construction industry as to delay the completion of a good new single carriageway.

LORD HUGHES

No, my Lords; because one of the reasons why I was persuaded that it was right to accept single carriageway was because the first requisite is that a good road throughout its entire length, a usable road for the traffic which might be reasonably foreseen and something beyond that, should be provided as quickly as possible. If in fact we had gone for dual carriageway it would have meant that for a considerable period of time the traffic would have been part of the way using first-class dual carriageway and for much longer than necessary going on with the existing inadequate road.

On the question of housing and the Scottish Special Housing Association, as your Lordships know, Where the demand for housing for incoming workers is beyond the resources of any authority, it is there that the S.S.H.A. is brought in by the Secretary of State to assist. The Association has already been authorised to build about 4,300 houses in areas affected by oil development and this will be increased as needs emerge. This programme represents an investment of nearly £40 million and is a measure of the Government's resolve that houses for industry must be provided as urgently as possible. A visit which I made to the County of Aberdeen recently accounts for £3 million of that figure, because I made an additional allocation of S.S.H.A. houses to them on the basis of information which emerged as a result of that meeting.

Much of the industrial expansion associated with North Sea oil is taking place, as has been said, in areas where the existing population is relatively small and the only way in which an adequate labour force can be found for the new industries is by attracting labour into the area. A population inflow of about 20,000—I do not know where the noble Earl, Lord Lauderdale, got his figure of 50,000 from, although it may turn out that he is right—is expected in the Moray Firth area over the next few years, and this will produce a more rapid growth than has been experienced even in the new towns.

THE EARL OF LAUDERDALE

My Lords, if the noble Lord will allow me, I should like to ask—because I should like to get the figure right, and I am not quite certain myself where my figure came from—whether he is referring to both the Cromartie Firth and the Moray Firth areas or just the Cromartie Firth?

LORD HUGHES

The Moray Firth area is the one to which I have referred. Incidentally, I think someone later on quoted, and quoted wrongly, the noble Earl, Lord Lauderdale, as talking of an influx of 50,000 workers. The noble Earl spoke of an increase of 50,000 in population which represents, of course, a good deal less than that in workers. Shall we say, therefore, that if my figures relate to the Moray Firth area, the whole area involved obviously will be something greater than a population increase of 20,000. But I doubt whether it would approach the higher figure mentioned by the noble Earl.

My Lords, in addition to the substantial house building programme which the authorities already have in hand, I should like to refer to what I found in Aberdeen. The county council there are doing a magnificent job, a realistic job. It is not one of these cases where they have picked a figure out of the air and said, "This is what we should like to do". The figure to which they are working is one I am satisfied they are capable of carrying out. The same can be said of the other county authorities in the area, given the difficulties of shortage of land and, of course, more than anything, shortage of building labour.

The Moray Firth Working Party have set up joint housing programmes in the Inverness, Nairn and Easter Ross areas, the aim being to complete a total of 4,000 houses in that area by the end of 1975. The joint (local authorities S.S.H.A.) programmes have been placed so as to attract major national building contractors to the area with the prospect of a continuing programme of work. In this sense, as the noble Lord, Lord Polwarth, said, we are continuing to build on the foundations laid by the previous Administration. Many of these contractors will be using non-traditional building systems. For example—and this is what the noble Earl referred to—Ross and Cromarty are undertaking a programme of 500 prefabricated timber houses planned to be completed during 1974–75. The noble Earl said that they could put them up in two weeks. My notes are more cautious than that. They say that these houses can be put up in two to three weeks. However, his main programme is the acquisition of land and the provision of the necessary services and under-building.

I may say that I saw at an exhibition in Glasgow earlier in the year the Norwegian-type house which I think the local authority are putting up. I was very much impressed by it and I said, in opening that exhibition, that when we talked about putting up prefabricated houses, one advantage of going for the Swedish and Norwegian type is that we were not putting up things for experiments. We would be putting up a type of house which had proved completely satisfactory over many years there, and this is a decided advantage.

My Lords, the noble Lord, Lord Ashcombe, made his maiden speech, and I join with other noble Lords in congratulating him on it. I think it must be modesty that has compelled the noble Lord to go away and not be present to receive all these congratulations, because he did not exactly rush into making his maiden speech, if he is the Lord Ashcombe that I looked up in Dod's. I hope he does not wait so long to make his second speech as he has required us to wait for his first. The noble Lord succeeded in being non-controversial, and certainly was very brief. But he raised one point which I think I ought to refer to; that is, the review of licensing policy. I can be very brief in reply and say that all aspects of licensing policy are at present under review, as the noble Lord, Lord Balogh, made clear. Proposals will be announced to Parliament as soon as possible. The intention will be to fulfil our expressed policy of increased Government take and public control.

The noble Viscount, Lord Thurso, mentioned the difficulties that arise from planning procedures which are prolonged, and gave as an example the site at Dunnet Bay, which he said had been abandoned because of planning delay. I do not think the noble Viscount has been correctly informed on that point. The applicants were C.B.I. Constructors Limited. They applied in January, 1973, for planning permission to build oil-related production platforms at Dunnet Bay. Following a public inquiry the Secretary of State on October 15, 1973, issued a direction allowing Caithness County Council to grant planning permission fog the development. The Company announced in January, 1974, that for geo- physical reasons they preferred the site they had acquired in Ireland, and did not intend to proceed with the plans for Dunnet Bay. Planning difficulties, therefore, were not given as a reason for the decision.

VISCOUNT THURSO

My Lords, even though planning decisions were not given as the reason, I know that they were the cause of the company finding the alternative site, being offered better conditions, with less restrictive clauses, and choosing to go to County Mayo.

LORD HUGHES

Well, my Lords, the Irish problems are sometimes different from our own! On the subject of the depletion policy, another point raised by the noble Viscount, Lord Thurso, I would remind him that no oil has yet been produced, and it will not be until 1976–77 before it makes a significant impact. I think everyone supports our intention to build up supplies to a high level as soon as possible. The best rate of extraction in the longer term depends on a number of imponderables such as the supply and demand situation and the extent of discoveries, and so can only be decided in the light of the circumstances at the time.

Having said that, I am not certain that I can completely agree with the terms of the Motion put forward by the noble Lord, Lord Strathcona and Mount Royal, which is to develop the oil as fully and as speedily as possible. We want to get oil flowing ashore as speedily as we can; we want it in large quantities. But where we differ, and where there are undoubtedly differing views, is as to what is meant by "as fully as possible". That does not necessarily mean getting every possible barrel that it is physically possible to get out in a given time. It must be fully interpreted in relation to what is in the best interests of the country, and that might, at the end of the day or in a fairly short time, be determined as spreading resources over a longer period rather than depleting them in the fastest possible time. These are considerations which I can assure noble Lords are very much in the minds of both Secretaries of State concerned.

My Lords, now I come to the multiplicity of questions put by the noble Earl, Lord Lauderdale. I have already spoken for 28 minutes, but turning to safety controls—

THE EARL OF LAUDERDALE

There are only eight questions. If the noble Lord, Lord Hughes, cares to drop one or two—

LORD HUGHES

My Lords, let us see how we get on. I have dealt with the roadway. On the matter of safety controls, the offshore industry in general is very safety conscious and its representatives have taken a highly reasonable attitude in the course of the Department's consultations with them throughout the preparation of the regulations. The Government attach great importance to the making of all the regulations, and work proceeds apace. Notwithstanding what the noble Lord, Lord Balfour of Inchrye, said about St. Andrew's House not being a dynamo of energy, I can assure him that Government Departments, St. Andrew's House included, are working fast on these matters at present. While I am speaking of the phrase, "dynamo of energy", may I say that I disagree with the noble Lord entirely—the speed with which they manage to accumulate papers on my desk every morning certainly shows they have energy in one direction!

My Lords, the noble Earl, Lord Lauderdale, and my noble friend Lady White raised the question of financial aids for research and development. We attach a great deal of importance to technological development in the sphere of off-shore technology. As my right honourable friend the Secretary of State for Energy has already said, the Government are reviewing what more they can do over the whole range of off-shore activities. This obviously includes helping to promote technological projects. At this stage of the Government's consideration I cannot give any particular figure for future Government expenditure in this area, but we have taken due note of the view expressed by the Ship and Marine Technology Requirements Board of the Department of Industry that the funds available to it for this area of activity should be substantially increased. Now, of course, I know that the noble Earl would be very much happier if I were able to say that, "substantially" meant £X-million. I am sorry I cannot say that, so he will have to rest content on "substantially". It at least gives him the opportunity, perhaps in another three days or so, of asking how we interpret "sub- stantially", or if he extends the same courtesy to me that he gave to Lord Drumalbyn he will wait three months.

With regard to pipeline policy, the Government are aware of the question relating to pipelines referred to by the noble Earl, Lord Lauderdale. All aspects of pipeline development are being looked at as part of the current review of licensing policy. This reminds me of the point raised by the noble Viscount, Lord Thurso, which I think was taken up, about the small fields which might not be developed. Of course, they may not be developed if everybody is going to make his own pipeline arrangements; but if there is to be a common carriage policy in relation to pipelines this factor does not arise. I should not like to predict that legislation along these lines might be very easy to get through Parliament in its present state, but we are aware of its desirability and this is one of the aspects which is being considered.

One point which I do not think I could overlook, because it was raised again both by my noble friend Lady White and by the noble Earl, Lord Lauderdale, is the question of refinery policy and the reference to the fact that there are five applications in Scotland at the present time. If there is one field of public activity which bears a faint relationship to that of refineries, it is the position which the local authority finds itself in when it wants to put up a public convenience. Everybody recognises how absolutely essential it is provided it is put on somebody else's doorstep. This is undoubtedly the position with refineries. They do not produce a tremendous number of jobs. The capital involved is very large. The biggest employment is in the construction period. Refineries are not the most pleasant of neighbours.

Therefore, the two Departments, the Department of Energy and the Scottish Office, are now engaged in an examination of policy to make the most rapid decision possible regarding the extent to which it is necessary to increase refinery capacity in this country. After all, if we are going to refine oil produced in this country presumably we are to some extent refining oil which hitherto came from somewhere else. But I must point out one thing to which my attention has been directed, that not all the refineries we have at the present time are of the most up to date kind. The most modern types of refinery can alter very considerably the end product from the crude oil. So this is one aspect, obviously, which has to be taken into account. I personally would certainly hope—and I am not now making a statement of Government policy—that we do not get another five refineries in Scotland.

THE EARL OF LAUDERDALE

My Lords, I am very much obliged to the noble Lord for the points he has made and for the answers he has been good enough to give. There is one aspect that he has not referred to which he might like to pass on to the Department. If in fact we are likely in the coming years to get out of the North Sea more crude oil than we need for our own purposes, there is a market for products on the East coast of the United States, where there is a shortfall in refinery capacity of 120 million tons a year. It is with an eye to that market, exports to it and the consequential assistance to our balance of payments, that this matter has in general been raised. I would thank the noble Lord, and draw his attention to that point, which no doubt can be looked at in due time.

LORD HUGHES

My Lords, that is one of the matters to be looked at in the light of the depletion policy to which I referred. We will have to decide whether it is in our best interests to extract more oil than we need and to export it, or to work on the basis that it is not going to go away and it might be worth a lot more 10 years hence than it is now. These are not decisions with which we have to concern ourselves in the year 1974.

The noble Earl, Lord Wemyss, raised points which he will know I cannot deal with. The noble Lord, Lord Polwarth, was better placed than I am. In due course I will have to read an awful lot of what the noble Earl said this afternoon, when the report of the Inquiry lands on my desk, because of course he was repeating a great deal of what had been said at the Inquiry. It would be quite improper if I expressed any opinion on that because the Inquiry has not been completed. The hearings have concluded, but the rest of the deliberation goes on. All I can say is that everybody con- cerned, the Reporter, the Department, the Ministers, are anxious that a decision on that Inquiry should be made without any avoidable delay.

I would remind your Lordships of what the noble Viscount, Lord Thurso, said, that we wanted to speed up planning but we wanted everybody to have their say. This is the difficulty about procedure. You cannot speed it up to the extent desired by the applicants, and let everybody have their say at the same time. So we are putting in a considerable amount of work, with the co-operation of various bodies concerned, into finding ways of expediting procedure. I mentioned this in reply to a Question by Lord Barnby the other week. The best contribution we can make here is to speed up the procedures by simplifying them, cutting out perhaps the undue reliance on qualified legal advice, the complete following of court procedures and so on, making it easier for the simplest of individuals who has a real grievance to go to the Inquiry, state his case and come away feeling that he has been listened to and that his point of view will be taken into account. Everybody concerned has agreed to co-operate in this process, but it will not be an easy task. We are trying to narrow the gap between the two, speeding yet not sacrificing the interests of any people concerned.

The noble Lord, Lord Polwarth—and this must be my final point—said on the subject of us not going ahead with the special legislation, that we did not consider it desirable or necessary to go ahead with that legislation until the Inquiry at Drumbuie had been completed. I personally think it would have been totally wrong to do anything other than wait for that decision. It may be that one result of waiting for the Inquiry decision will be that it may not in fact be possible, even assuming that the Inquiry goes in favour of the applicants, for the Condeep structures to be provided in the time that the applicants would have wanted. The danger against which we have to safeguard the country is that if the delays go on too long these structures will be made elsewhere and we lose this off-shore work. It is important that we should not lose any of that work. What we will not, of course, lose is the oil, because it will not go away; it will still be waiting there a year or two or three years later. But of course our policy is to start getting it ashore as quickly as possible.

I am sorry that I am not in the position that the noble Earl, Lord Wemyss, took, of making a decision on what is the right type of structure for these operations. I wish that it was as easy as a Minister to make snap decisions on what is the best type of structure as the noble Earl found it possible to do. I must at least pay some regard to the fact that the oil companies are presumably spending all this money on what they think is the best operation to enable them to carry out their task. If the noble Earl is right that Condeep is already out of date even before the first of the platforms have been completed, then that surprises me very much, because there is no doubt that both the fabricators of these platforms and the oil companies wishing to use them are desperately anxious that they should be put into manufacture.

I cannot express, as he has done, any opinion on the desirability of one or the other. All I can say is that this is a completely new field for everybody concerned. It is under constant examination, and the one point that I think I can mention without contradiction is that if the oil companies can be satisfied that there is an alternative which can be obtained more quickly, from easier sites, and at a cheaper price, they will be the first to come along and suggest an alternative. It will be they who will be the first to abandon something like Condeep, and they will not need any persuasion from a Government Department to do so.

LORD POLWARTH

My Lords, may I just say how delighted I am to hear that the Government intend to pursue this inquiry into streamlining the planning procedures which, as the noble Lord knows, we initiated when we were still in Office. May I make the suggestion that one measure that would lead to the greatest time-saving would be the banning of the use of legal representation at the inquiries?

LORD HUGHES

My Lords, I have a strong feeling that many of the noble Lord's honourable and right honourable friends in another place would not agree with that at all. Personally I see nothing wrong with the suggestion, but again I am not stating Government policy, as I have no doubt the noble Lord, Lord Polwarth, is not stating Opposition policy.

LORD POLWARTH

No, my Lords, purely personal.

LORD HUGHES

My Lords, I have already spoken much too long. I always do this when I am replying to a debate because I do not like to send too many people away disappointed. The noble Lord, Lord Orr-Ewing, will forgive me, therefore, if I do not return to the attack. I thought that he was terribly unfair to my noble friend Lord Balogh. When he reads what my noble friend has said previously and what he said to-day, he will see that there is no difference in content, but a difference in style perhaps forced on him by occupancy of the Front Bench. I am not competent to offer an opinion on the subject of salaries and the tax deductions from them. However, I shall make certain that my right honourable friends in another place have their attention specially directed to what the noble Lord, Lord On-Ewing, has said.

7.53 p.m.

LORD STRATHCONA AND MOUNT ROYAL

My Lords, may I begin by thanking the noble Lord, Lord Hughes, for his kind personal comments at the start of his most helpful and informative speech. I assure him that in view of Lord Balogh's awsome reputation, I was motivated probably more by cowardice than wisdom. We have this afternoon enjoyed a series of very well-informed speeches on an exceptionally complicated subject, and I thank all noble Lords who have taken part. In particular we have enjoyed an outstanding maiden speech from the noble Lord, Lord Ashcombe, whose family name is of course associated with the construction industry, and so we might have expected him to know what he was talking about. We also had a predictably distinguished contribution from the noble Lord, Lord Trevelyan, who I think was speaking for the first time in this House since he was distinguished by being made a Knight of the Garter.

Looking on the bright side of what we have talked about at some length this afternoon, I am astonished by the measure of agreement that seems to have been established. All sides agree that we had to have some kind of what is now known as the "windfall tax". There is a certain amount of disagreement on the distinction, or lack of distinction, between "participation" and "nationalisation". This is something that we will obviously argue about further later on. The most important point to emerge is the universal acceptance on all sides that the real priority is the proper provision of the supporting facilities, with suitable environmental safeguards. On the whole, I found the speech of the noble Lord, Lord Hughes, reassuring when he declared the Government's intention to press ahead with these matters as fast as possible. Therefore, I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.