§ 4.28 p.m.
§ Debate resumed.
§ Viscount THURSO
My Lords, may I take your Lordships' thoughts back to oil. While perhaps not unrestrainedly welcoming the method of debate on this subject, as did the noble Lord, Lord Campbell of Croy, I am very grateful to the noble Lord, Lord Balogh, for his assurance that the affairs of North Sea and Continental Shelf oil are in the hands of a professional. Some of us were rather afraid that it would be put into the hands of a prophet, and we are therefore extremely glad to know that there will be a restraining professional hand upon the arm of the prophet, restraining him from excesses of prophetic zeal.
We on these Benches are surprised at this curious device of debating a Motion to take note of a decision which is in the process of passing through another place in the form of a Bill. We ask ourselves: why is this being done? What is the precedent for this curious procedure? What advantage do the Government hope to gain by taking the sense of your Lordships' House in this way when, before any decision can be valid or in any way binding, the Bill will have to complete its passage through another place and, in an amended form, come to your Lordships' House for full debate in all its stages? Can it be because there is such a pile-up of Parliamentary work that Her Majesty's Government are in some way hoping to regard this debate as a substitute for a Second Reading, or as a means of shortening a Second Reading debate? If so, this cannot be so far as we on these Benches are concerned. 359 If and when the Bill, having duly passed through all its stages in another place, comes to your Lordships' House, we certainly reserve our right to consider it in the form in which it then reaches this House and to give it full consideration in a Second Reading debate.
There is, of course, a more sinister rumour going about, which I hope Her Majesty's Government will be able to dispel and to deny, which is that there is a list of applicants for posts in the BNCC. It is suggested that, if we speak kindly about BNOC today, this will be taken as an indication that it is safe to go ahead and appoint people. I should be horrified if there were substance in this rumour, and I hope that we shall have a categorical denial that Her Majesty's Government have in any way "jumped the gun". There is much in these proposals which we on these Benches do not like. There is much which we consider foolish and spendthrift. There is much which we consider doctrinaire. There is even some which we consider utterly repugnant.
My Lords, we heartily dislike the retrospective nature of some of these proposals. Are the Government trying to earn again for this country the soubriquet of "Perfidious Albion"? Are they trying to show the world that we are just a bunch of mean-minded contract breakers?—because that is what is implied by certain aspects of these proposals. If these proposals are carried in their present form power is being given to break contracts freely entered into, without good reason. This strikes at the very roots of commercial ethics and, indeed, at the basis of civilisation itself. Those companies and countries which have adventured their resources in helping us to explore and develop our sector of the North Sea did so because, above all, they believed that Great Britain's word was her bond. The North Sea, as we are learning every day, is no easy plum ripe for the plucking. Pipe layers break down; divers die; some promising fields belie their promise. And all the time costs mount as we work at the limits of known technology. Why add to that the uncertainty of whether a contract is worth the paper it is written on? What further oil will that extract from the murky depths of the sea, or 360 what much-needed capital will that attract to help us search for, develop and exploit our dormant assets?
Much the most important problem facing the country today is inflation. That is the cause and the core of the crisis which threatens our jobs, our standard of living, and indeed our whole way of life. We have already mortgaged much of the return from North-Sea oil in our efforts to stay solvent. It is freely admitted that we look to the return from North Sea oil to help get us back on to our feet. But where are we to find the money to finance this doctrinaire exercise adumbrated in these measures we are discussing—from the Treasury? Then, why is the Treasury not be allowed to handle the revenue? Surely the revenue should be brought back into the Treasury because the Treasury will have to make the initial investment.
Has anyone considered what a short-term windfall BNOC will be to companies at present operating in the North Sea? They are suddenly to get back half their money and acquire a partner who will be committed to helping to find the vast amounts of money which the North Sea oil fields will greedily swallow as developments proceed. Estimates show that, to develop 18 billion barrels of oil by 1982, investment in the region of £84,000 million will be required. It is this magnitude of expenditure in which BNOC will be involving itself as to 51 per cent. Why do we involve ourselves at all? Why not attract the investment by giving firm, reliable leases, letting oil companies know where they stand, and then cream off the nation's share by royalties and by taxation?
For better or for worse, we are committed to seeking a certain level of return from the North Sea, but thereafter we must see to it that we try to conserve this asset and put it so far as we can to an optimum level of use. In so far as it is the Government's policy to do so, I applaud the Government But in the Bill which is being considered in another place these matters are being left far too much in the hands of the Secretary of State and his Department, without nearly enough accountability to Parliament. Nor, so far as I can see, is there any provision for giving Scotland's promised Assembly any say or control in these matters. This is a grave flaw.
361 This is a bad Bill for Scotland. There was an opportunity here to recognise Scotland's special role and the special risks which Scotland runs in the winning of North Sea oil. There is an obligation on Her Majesty's Government to see that the oil boom towns of today do not become the oil ghost towns of tomorrow. As I have said before in your Lordships' House, we should be working now for the wider development of the North-East of Scotland and of the Highlands, consolidating that development in these areas into a sound and broadly based economy which will be able to continue to flourish when the oil flow trickles to a stop Oil revenues should provide the money for this. It has always been Liberal policy that one should generate from the oil revenues a direct return to Scotland. The Secretary of State for Energy should be working now on a policy which will both maximise the life and usefulness of our oil fields and merge smoothly into the atomic age which is yet to come.
Therefore, my Lords, as the Government are asking us what we think of their policy, I would say that I do not greatly differ from my right honourable friend Mr. Grimond or the views which he has expressed in another place. While being not totally unsympathetic with Her Majesty's Government's purpose, I remain highly critical of the Bill which they have proposed and which they are moving in another place. Like my right honourable friend, I find it too big, too vague, too bureaucratic; and wonder why they do not drop the Bill in favour of trying to achieve their objectives through existing legislation, thereby saving themselves valuable political time and, even more, valuable money which they cannot afford to spend in this hour of crisis.
§ 4.38 p.m.
§ Lord TREVELYAN
My Lords, I personally agree with the noble Lord, Lord Campbell of Croy, in congratulating the noble Lord, Lord Balogh, on initiating this debate, because after hearing our views it will be easier for the Government to make changes in the more regrettable features of the Bill. I must first declare my interest as a director of the British Petroleum Company, though, of course, in accordance with the usual conduct of your Lordships' House, I speak for myself alone. It would be wholly inappropriate for me to comment in 362 anyway upon the matter relating to the chairman of the British Petroleum Company mentioned by the noble Lord, Lord Balogh. My concern is to consider the effect on the country's interests of the Government's aims as revealed in the Bill now being considered in another place, and in the manner of the creation of the British National Oil Corporation. I am concerned not with what the noble Lord, Lord Balogh, has called the controversies of the past, but with the necessities of the future. I have tried to consider the subject, so far as I understand its difficulties and complications, from a purely practical point of view and to avoid an emotive approach.
We all want to develop North Sea oil quickly and efficiently. Besides this, as I understand it, the Government have expressed three general aims of oil policy: first, to secure a proper financial return to the nation from North Sea oil, which is amply secured by the petroleum revenue tax and corporation tax. The Government have been ready to improve the Oil Taxation Bill in the light of their consultations with the industry, though some concern is still felt, which has also been expressed today in your Lordships' House, over its effect on the development of marginal fields.
Secondly, they seek, very properly, to ensure that the licensees do not act in such a way as seriously to prejudice the public interest. For this purpose, the Minister clearly requires some way of providing himself with information about the licensees' operations and of ensuring that his control of those operations is effective where such control is generally required in the public interest and is not unfair to the licensees. These functions would surely be best discharged by a separate regulatory commission such as exists in some other countries, rather than by the creation of a hybrid corporation, at the same time a commercial enterprise though exempt from the normal constraints of a commercial company, and so constituted as to appear to be placed in the position of monitoring its partners' actions on behalf of the Government.
Thirdly, for reasons which are at the least debatable, they seek to secure a public stake in North Sea oil. This is, it appears, to be achieved by direct financial participation by the State in the 363 companies' North Sea operations and will be subject to the Government's explicit undertakings that negotiations with the existing licensees will be really free and not conducted under duress, and that those licensees will not suffer financial disadvantages as a result of the Government's participation. In this matter, it is of the greatest importance that the Government do not, in effect, undertake retrospective legislation which will discourage the licensees from undertaking all the risks and difficulties which are inherent in the exploration and development of North Sea oil.
They must also be fully aware of the dangers that action tending to hamper overseas companies through unilateral Governmental action, particularly if it is retrospective in effect, will create strong pressure for retaliatory action against British companies operating abroad. That is a very sensitive and important point. I believe that the Government have recognised the importance of these points in stressing the genuinely voluntary nature of negotiations in respect of participation in existing licences. Unfortunately, the same cannot as yet be said with full conviction of their attitude in respect of the sweeping new powers taken to direct and control all aspects of licensees' operations.
British national interests require that the climate in which companies operate in the North Sea should be such as to encourage investment and to ensure a rapid and complete development of the North Sea oilfields, subject to the proper measures of conservation of these great national resources. Already there are signs that companies and their sources of finance do not see they way clear until they know and can assess the effect of British legislation upon their enterprises.
As a result of the Government's consultations with industry and the deliberations of the Committee on the Bill in another place, some improvements have been made, but they have not gone nearly far enough. I should like to give some examples of matters which still require some modifications in the Government's proposals. For this purpose I assume, without endorsing, the present framework of the Bill, including the creation of the British National Oil Corporation, though 364 I fear that as at present conceived it will be misshapen from birth.
I think it would strike anyone looking at this question for the first time that the nature of the Corporation has not been clearly thought out. It is to be commercial and not commercial; it is to act under its own commercial judgment and on the Minister's instructions. What is surely very clear is that the way it is to be constituted is a sovereign recipe for creating continuing confusion of purpose between the Government and the operating companies. The difficulties to be expected stem largely from the Corporation's exemption from the petroleum revenue tax, which has been referred to already in this debate, which will give it a different régime and a different commercial outlook from its partners.
Some concessions have been made. Assurances have been given—though they are not yet expressed in the Bill itself—that it will be required to act commercially when in partnership with private sector companies and when operating downstream and to transfer crude oil to its downstream subsidiaries at market price. However, it is to me inconceivable that the Corporation should be exempt from the tax and at the same time act continually as if it were paying the tax. The processes of decision-making are bound to be distorted by the differences in the economic background between the partners. These may, for instance, arise in decisions on the delineation of oil bearing structures, or in the hire or purchase of major items of equipment. The Corporation will not care: the commercial companies will care very much. The Corporation may be required to act non-commercially when not in partnership, if the Minister considers it necessary to develop a non-commercial field in the national interest. Surely in this case, too, it would be much preferable that the Corporation should act always as a commercial company, receiving a subsidy where the national interest requires it to make a loss, and that its position under the Bill should reflect that.
I have also great doubts about the retention by the Minister in a National Oil Account of the very large sums which will be earned by the Corporation as a result of its exemption from petroleum revenue tax. I am not much comforted 365 by the assurance of a non-commercial audit which will be subject to Parliamentary scrutiny, or by the arrangement that the Minister should transfer funds, which he considers surplus in his National Oil Account to the Consolidated Fund. I doubt whether it is a happy idea to create a huge financial oil empire in the hands of a Department outside the Treasury. And where will the Government find the expert oil men to run the Corporation? As a non-executive director of the British Petroleum Company, I have watched with admiration how its exceedingly able and experienced managers conduct most complex and difficult operations in the international oil business, which is possible only as a result of the Government's wise policy of leaving the company to act commercially. It will be very difficult for the Government to find people of the right calibre and experience to manage the hybrid and confused creature which the British National Oil Corporation, as provided for in Part I of the Bill, seems likely to be.
Let me leave the Corporation and turn to the Government's relations with the licensees. Two principles should govern these relations; that the licensee should be able to act commerically, and that disputes with the Government should be settled by arbitration. Considerable improvements have been made in the Bill, although the basic objections in respect of retroactivity remain. The new clause on depletion policy is a distinct step in the right direction; disputes over the calculation of the amount of conveying and treating costs required for royalty purposes are to be arbitrable; a criterion of commerciality has been inserted into the provisions for forced exploration. However, there are many points which require further thought. For instance, the criterion of commerciality should relate also to compulsory development of new finds; revocation of a licence for non-development should be strictly related to the particular area in dispute, and not to the total licence area, as apparently at present contemplated; it should be admitted that there can be sound technical or commercial reasons for temporary deferment of development; a new partner, imposed on the owners of a pipeline, should pay them not only the cost of his intrusion, but an 366 equitable share of the total costs of the line. I am not sure whether that was understood by the noble Lord, Lord Balogh, in what he said about the owners having to be fully reimbursed.
These and other such points will have to be dealt with in Committee in your Lordships' House, if they have not been dealt with satisfactorily in the Report stage in another place. Without further substantial improvements in respect of the kind of matters I have mentioned, I fear that the Bill will cause everyone a great deal of trouble and fail to serve the purpose of us all—the national interest. Surely it would be best for the Government, in consultation with the industry in general, to think further before your Lordships get down to detailed discussion in Committee in the autumn—if it is to be the autumn. Can the Minister promise this?
§ 4.50 p.m.
§ Lord LEE of NEWTON
My Lords, as one who had the honour to be the Minister of Power at a time when the North Sea became so exciting to all of us, the thought of independence in energy supplies within a few years from now is extremely exciting; indeed, when one looks at the development we have seen in OPEC and their bearing upon our own economic position, the prospect becomes even more exciting. We still know that before we can become independent our supplies could be in danger as we see the takeover in the Middle East of Aramco and the imminent nationalisation by Kuwait of the BP and Gulf Oil: then these supply questions could affect us greatly. We all know that the sheer volume of finance that is necessary for exploration simply demands the presence of organisations possessed of adequate resources to continue the search, despite setbacks through the drilling of dry holes costing huge amounts.
I have listened to the speeches from both the Tory and the Liberal Benches and I fail to understand what it is they want us to do. Here we are, a great industrial nation—indeed, the first of the great industrial nations. We have now found these great oil and gas supplies on our shores, and it seems that because we have never before had experience of getting gas and oil the proposition we get from the Opposition Benches is that we 367 never should attempt to master the know-how in order that we can exploit our own resources.
§ Lord LEE of NEWTON
My Lords, it is no use the noble Lord, Lord Campbell of Croy, saying anything to the contrary; I listened very attentatively to him and that is precisely what he said.
Lord CAMPBELL of CROY
My Lords, I am most grateful to the noble Lord for giving way. He must have missed the part of my speech in which I said that we in Britain should increasingly play a part in the industrial engineering effort and in the supplies and services.
§ Lord LEE of NEWTON
How do we do this, my Lords? In those early days to which I referred, the only British company with the know-how was BP. True, we have certain interests in Shell, but the only completely British company with any know-how at all in the getting of offshore hydrocarbons was BP. I was more than happy when it first found gas and it became a great commercial success. Indeed, I remember going out to the old Sea Gem which was then doing the drilling but which unfortunately, afterwards, foundered with loss of life. I talked to the men on it. They had all worked with BP in the Gulf, and they described the Gulf in comparison with the North Sea as "a piece of cake". They were working right up against the extremes of technological know-how which even BP and its employees had never encountered. Of course it is essential that if we are to get a mastery of our own resources there must be a time when a breakthrough comes to enable a far greater British participation to take place.
One of the problems in my day was that the previous Conservative Government had put up the first checkerboard of squares and had received applications for squares. I followed, incidentally, with the second. When the noble Lord, Lord Campbell of Croy, tells us that the oil era began four years ago, I must point out that in those days we had no shortage of applicants from the oil companies and, if I may be facetious, if the Scottish Office did not know there was oil there these chaps knew long, long ago. I am 368 speaking of 9 or 10 years ago. They were under no illusion when they tendered for squares in the North Sea that they were by no means confining themselves to gas. All the symptoms were present, and indeed we in the Ministry of Power were absolutely convinced 10 years ago that there were huge deposits of oil under the North Sea.
I recall so well the frustration we felt at that time. We were receiving applications. Naturally, BP had their applications in and they were very welcome, as were Shell; but a number of the applications we were receiving from British companies quite frankly had nothing to do with finding gas or oil. They were simply to hold the squares and bump up the price. I was glad that my noble friend Lord Balogh mentioned that there is to be legislation to stop that kind of thing. I will not mention names at this stage but I can recall stopping it myself, many years ago. Therefore, unless there are British companies which can get gas and oil, it is not enough to say that one can increase the British contribution by giving more squares and facilities to British companies. This is what the question is all about. Therefore to me it seems slightly obscene that a great industrial nation like ours, with the gas and oil that we now have, can be satisfied to leave the exploitation of great resources mainly to foreign companies.
The noble Viscount, Lord Thurso, spoke rather as though there were something dishonourable about what the Government are suggesting. On reflection, I think he would agree that there is nothing dishonourable in our attempt to provide the vehicles which will enable us to take part in searches for our own raw materials, and if he wishes to look back on the whole industrial history—and I say this with no slur on anybody—of the way our own industries have conducted themselves as distinct from the way in which certain American companies have conducted themselves, we have nothing with which to reproach ourselves.
§ Viscount THURSO
My Lords, may I point out to the noble Lord that the only thing I said was dishonourable was to break a contract that had been entered into. I do not care whose language it is in; it is dishonourable to break a contract.
§ Lord LEE of NEWTON
My Lords, I am not arguing about the degree of honour or dishonour. One could time and again quote instances in the United States of America where British firms had practically got contracts as the lowest single tender and then they were refused by the American Government. I do not want to continue on that line because it looks as though one is hitting at the Americans, and I am not. I am merely answering the point made by the noble Viscount.
I was saying that one's own problems in those early days, when we knew that BP had struck a commercial proposition and that there would be others to follow, was how we could increase the British stake in it without merely giving squares to British firms who were not interested in getting gas or oil. I say quite frankly that had I had the opportunity I would have created something like the British National Oil Corporation which is now to be created. For one thing, one can never have sufficient resources. I how to those who are more technical than I am in regard to oil matters, but I think the ratio they work on is that they find one gets about nine dry holes to one wet one, and the colossal cost of £1 million a hole means that a company really must have enormous resources if it is going to stay in the exploitation business at all.
We had the advantage then of having the Gas Council which we made, as it were, the anchor man for the whole of the gas which was discovered. They were working well in getting themselves prepared for the receipt of gas. I had always hoped that there would be a partnership with BP, but before my time they went into partnership with Amoco, and BP went on alone. I had the difficulty, if that is the right word, of getting the first agreement as to price between BP and the Gas Council. One made it a rather high price, first, as a carrot to others, and, secondly, in order that my friend Sir Maurice Bridgeman, the chairman of BP, could order piping and get it into the North Sea during the summer months, in order to get the gas out far sooner than the experts predicted. I am glad to say we did it.
My Lords, I mentioned the fact that I visited Sea Gem about that time. I recall that then you had to go in a helicopter; you were pushed inside a 370 Mae West, you had earplugs, and Heaven knows what. When my helicopter touched down after a very bumpy session, I raised my thumb to some Press men there—and the shares in BP went up half a crown in after-hour dealings. I often wonder what would have happened if I had turned my thumb down because I felt a bit seasick. Probably BP would have gone out of existence. That shows how silly it was that we should be financing an enormous organisation of this type by that kind of nonsense.
I managed to get Amoco to agree to the Gas Council having a bigger share in their partnership than had been the case previously. They were very happy to accept this, and at the same time wanted to find other public organisations which could take part. Not without some difficulty, I induced the National Coal Board to take an interest in it. We arranged shares for them with other American companies and, of course, they have made a very good profit out of it. Surely, no matter what our domestic policies are, none of us is opposed to the nationalised industries making a profit out of this kind of venture. In doing so, one increases the stake of British firms very substantially indeed.
My Lords, one had to get legislation through Parliament to enable the National Coal Board to take part in the search for gas and oil in the North Sea. We managed to do that. The point I am trying to make is that, on the British scene, there are no companies other than BP and part of British Shell with the necessary know-how, or really able financially, to take an adequate part in the great task of bringing independence on energy matters to this nation, unless we create them to do it. If noble Lords in any part of the House can show me another combination of companies which can do it, with the exception of that proposed by Her Majesty's Government, then I will apologise for what I have said.
But as I see it, the Government are now asking that the great resources we have shall come within our own capacity to produce. These resources may as well not be present in the North Sea unless we can get the right to exploit them. Therefore, I do not understand the attitude of either the Tories or the Liberals in these matters. We have been discussing the Industry Bill for the last two or three 371 days. We have been discussing how we can get new life into British industry, how we can create new ventures in order to surmount the worldwide turmoil being produced by the recession. We cannot do it merely by going on building on old and decadent industries; we have too many now, as the first industrial nation in the world. Our task is to create the new industries of the scientific revolution. We have the means at our disposal. For Heaven's sake, let us produce the machinery that will achieve them!
§ 5.5 p.m.
§ The Earl of LAUDERDALE
My Lords, we hear the former Minister of Power too seldom in this House. I, for one, was very glad to see his name on the list of speakers, and to listen to him in full flight. He would not expect me to agree with everything he has said, but I think he will recall, having been in charge, as I remember, of the second round of licensing, that that was one which was curiously unsuccessful relative to others before and since. This was partly—not only, but partly—because of a strong incentive in that round for the prospective licencees to show a measure of public sector participation. It was not the only reason, but one of them.
My Lords, when the noble Lord, Lord Lee of Newton, asks, "What would the other side do? What would the Opposition do?", I can think of nothing better than the speech we heard just now from the noble Viscount, Lord Thurso. Surely, we want to create a climate of business confidence in which private enterprise companies can and will invest. As a matter of fact, one of the consequences of the recent development of exploration in the North Sea has been that British oilmen, trained by American and other companies all over the world, have been returning. They have been returning under the aegis of foreign companies, mainly American but also French and Dutch, in the hope that they would find the opportunity to work here in British companies. New British companies have been formed and have taken part in the new consortia. They have been forming themselves together to learn to "sponge up" the know-how available through the very ready co-operation of American experts. If the noble Lord asks, "What else would you do?", I say: drop the 372 Bill, secure the same purposes of control, control over take-out, control over depletion, by the exercise of taxation and licensing powers; but whatever you do, do not attempt to create a grand new oil company by interrupting what is already going on: and do not imagine that the men in Whitehall know best.
My entry into this debate is reluctant and, I may say, begins on a note of sadness and personal disappointment. I must tread warily. I do not want to intrude upon the private griefs or struggles of conscience of the noble Lord, Lord Balogh, for whom, as he knows, I have very great personal respect and affection. But it will be within his recollection, and certainly that of others, that in February 1974 he was quoted as saying:The Civil Service has in no way shown itself competent to supervise the admirably-run multi-nationals.He went on:I shudder to think what might he the result if they took over the running of the operationA little later, in the Banker, to which he has always been an interesting contributor, he added:I hope the Labour Party's programme will be speedily and drastically reconsidered.As the acclaimed author of that Party's earliest, most extravagant proposals, I hoped, indeed I thought, there were signs of genuine, if slow and agonising, conversion so we could finish up by making an honest woman of him! Yet here he is today, inciting us to luxury and indulgence, to the crime of dishonouring solemn contracts. It reminds me of a sign outside a London church which said, "If you are tired of sin, come in here"; and someone had written underneath, "If you are not, phone 219 3142".
My Lords, the noble Lord spoke of the new situation. What is new about it? Inflation. What is new about the context of this debate? Inflation. What is new about the crowds of people who queue up to come and lock at your Lordships, or at our friends down the corridor in the other place? It is a sense of crisis; it is inflation. This was crystalised, in some respects quite well, in the White Paper The Attack on Inflation. The White Paper called for production; it called for investment in production; it called for a switch to opportunities of assisting the balance of payments. It all reminds me 373 of Westbrook Pegler's phrase, "Here is the era of wonderful nonsense."
This Bill promises to increase, not to diminish, inflation, and it promises to do so in three ways. It offers the Department of Energy some £900 million of fresh borrowing powers. Fancy increasing borrowing powers when the Chancellor of the Exchequer is struggling hard to cut down the borrowing requirement! Not only does it propose in effect to increase the borrowing requirement; fancy imagining that you can buy 51 per cent. of the oil industry, expected to produce in the early 1980s 100 million tonnes of oil, for £900 million! If the calculation is based on a capital cost per barrel a day at peak production, of about 8,000 dollars, you get a figure for 51 per cent. of that capacity of about £3,600 million. Let noble Lords say, as some will, that this is not going to be paid for in cash, but is going to be provided by way of guarantees for loans that the oil companies, needy beggars that they are, need to raise on the market and from their banks: but those would still be contingent liabilities for the Government and in themselves inflationary.
Then the point about the BNOCs exemption from petroleum revenue tax has already, of course, been adequately explored by others, but surely there are several consequences. One is that the Exchequer's own revenues are diminished correspondingly, and the second is that if the BNOC is that much more competitive in the market than the private enterprise company, surely that is going to have the effect of cutting the revenue that it earns, and therefore the royalties and the PRT it pays to the Treasury, and that in turn will indirectly have an inflationary effect. Then again, this Bill as it stands, contains the proposal to set about the retrospective renegotiation of contracts. If that does not discourage foreign oil investment in Britain at a time when the OPEC countries' hot money is a matter of great anxiety to our balance of payments, I do not know what will, nor can I imagine anything more inflationary on that side.
§ Lord BALOGH
My Lords, the noble Earl will forgive me if we resume our little private dialogue across the table. The noble Earl just complained that our borrowing power for developing the oilfields 374 is inflationary. Yet two minutes ago he also complained that our horrible steps are decreasing the willingness of the oil companies to borrow and spend. If—as I do not agree at all—the oil companies are decreasing their activities, either our activity would be a good thing, because it would speed up development rather than retard it, or not, but he cannot have it both ways. He cannot say, just like that, that it is sinful for us to borrow the same amount of money for the same purpose, which is so very virtuous on the part of the oil companies. I have detected the whole afternoon, a tendency for both sides of the Opposition to laud whatever the foreign companies are doing and to deprecate the British behaviour. I must confess I am shocked.
§ The Earl of LAUDERDALE
My Lords, I hoped that I would bring my noble friend to his feet before long; I thought almost certainly that I would. I also felt quite certain that by exposing my economic flank to an economist, I should be shot down in flames. But is there not a difference between the Government borrowing, which in effect means printing money, and private enterprise raising capital on the market? I may be wrong, but I got only a Third in Modern Greats, and had the noble Lord conducted my viva voce examination, I should not have got even a Fourth.
§ Lord BALOGH
My Lords, if the noble Earl has admitted his deficiencies in public economics, not private economics, I will not insist.
§ The Earl of LAUDERDALE
My Lords, I am greatly obliged for my noble friend's indulgence. May I go on now to a matter to which he referred obliquely; namely, the oilfield situation. There are three negative factors at large. The first two are worldwide. There is the recession, which is worldwide, and there is inflation, which is worldwide in varying degrees, though it hits some countries worse than others; we are very badly hit. But there is a third factor. I believe, and I hear it again and again from those within the industry whose judgment I respect, that the recession, and the effects of the recession and of inflation, upon the oil industry, are enormously enhanced—if that is the word; their damage is enormously increased by the new but major fiscal 375 disincentives, matched by Britain's virtual suicide in its reputation for probity in this business of trying to renegotiate retrospectively. My Lords, voluntary negotiations? It reminds me of the first day I appeared on parade at school and I heard—this was about volunteers for the school cadet corps—"Fall out those who will not volunteer". That is what we were told to do. I have heard it put differently in another context: All that is not compulsory is forbidden.
I was much interested a day or two ago to receive from the United States a copy of the Oil and Gas Journal of 30th June; its arrival in this country was in fact delayed by a strike. This is treated in the industry as a serious publication: it is not a propagandist publication. The article from which I am quoting was put together by the news editor after an interview with my noble friend's colleague in his Department, Mr. John Smith. I quote only two extracts; but these are serious extracts from a serious, reputable journal:The economics of prospective North Sea oil production are crumbling at an alarming pace under the weight of soaring costs, added taxes and slowly declining world crude prices.How important that last factor is, I do not know. The quotation goes on:'Don't blame oil for the slowdown in the North Sea', says an executive of one large firm, 'It is government that is causing it; it has been throwing up roadblock after roadblock. Oilmen can fight the foul weather and sea conditions, the geology, and technology problems, but damned if we can handle government and the uncertainties it keeps on causing'.My Lords, the situation in the North Sea has already been described by others. But let us sec where we are: Something like 27 rigs at the moment, as against 31 last March, and a forecast some two years ago that this year would see around 40. The SEDCO 702 rig, which was specially designed for use in the North Sea, has in fact now gone to Petrobraz, the Brazilian State Oil Company, on contract for three years. That rig, specially designed for North Sea operations, has been lost to them. At least one British consortium, with which I have personal but not professional or business contacts, which contracted for three rigs for the North Sea, ordered in Scandinavia, is now urgently seeking foreign participation, because the North Sea demand for those 376 rigs is not to hand and grave financial difficulties are at hand. There are empty platform construction sites. Portavadie has no order. There are four others with planning permission in Scotland which have no orders either. Ardyne Point has no new orders.
What is happening elsewhere? Men's judgment sways on that side fortune leads. While we create difficulties for the oil companies, others are not slow to attract them. Denmark has just issued 46 licences off Greenland, and there are all our old friends taking up licences over there—BP, Mobil, Gulf, Chevron, Amoco, Total, Utlramar, all names we have been familiar with over here preparing to be as busy as bees off Greenland. Fire has issued licences. France has started issuing licences off Brittany. These are attracting attention just when we are making it harder for those who wanted to come and work in the North Sea.
All the North Sea companies are reappraising their investment programmes, and I can think of one in particular, Occidental, who were the operating company in the consortium finding the Piper and Claymore fields. They have said quite openly that so far as the Claymore field is concerned their parent company in the United States will have to balance the alternatives as between investment in producing in the North Sea under these fiscal disincentives, and putting that investment into United States coal. Perhaps the Minister when he winds up will be able to tell us something in answer to this question. Have any of the operators sought royalty remissions in respect of the oilfields which they have found? I am thinking primarily of Claymore and Hutton.
The British National Oil Corporation is to be the Department of Energy's tamed beast: no nonsense with figures like Dick Marsh of British Rail who will stand up to the Government, and who is quite prepared to tell the public what he thinks about Government interference: no nonsense with men of the calibre of Sir Monty Finniston of the British Steel Corporation, ever ready to do the same. No, my Lords, this BNOC is to be directly subject to the Secretary of State with only the most limited recourse to Parliament. The company is to be completely integrated in Whitehall. It will be wholly 377 controlled and at least partially staffed with persons from the Department of Energy whom some of us meet—who are splendid and kindly people but whom we have come to identify as "so-called experts", which is their own term for themselves.
One reason why the BNOC is to be a much tighter proposition than Statoil in Norway is because Statoil is showing considerable independence and has even had an effect in moulding Government policy there. That is not what is proposed here. We cannot allow that kind of thing if we are targeting for 1984. And, of course, the Government have been curiously silent of late about the lessons to be learned from another prototype which has been cited so often; that is, Petro-Canada. Government experience there has been much mellowed by participation—mellowed as one is by marriage; indeed, so mellowed that the latest budget has cut the allocation to Petro-Canada and has created great new fiscal incentives for the oil companies.
My Lords, it is common parlance in the oil business that the costs of exploration and production in the North Sea scale up exponentially with the depth of water. I believe that this country's difficulties threaten to scale up exponentially as the Government flounder in ever greater confusion in the deepening waters of policy.
The noble Lord, Lord Balogh, showed great optimism about the 1980s. But at the current decelerating rate of exploration in the North Sea, and the current advance of competitive opportunities elsewhere, success could well be delayed to manana. And as they say in the North-West of Scotland, manana, that puts a real rush on you.
§ 5.25 p.m.
§ Lord RITCHIE-CALDER
My Lords, I welcome the proposal by the Government to establish the British National Oil Corporation, and nothing I have heard from the two Opposition Benches has qualified that approval. I regard it as undertaking a commitment, which I believe we have—and I think many of your Lordships will seriously share—not only to create a profit-making concern but to be the trustees of the Continental Shelf and to secure the interests of the people and, I hope, of posterity.
378 I must confess that, like Mr. Justice Douglas of the U.S. Supreme Court, I have felt the national jurisdiction of the coastal State should end at the low-water mark. If we had got down to that years ago, we should be making more sense today. The oceans beyond that—the seven-tenths of the earth's surface—should be a common heritage of all mankind, and its wealth should be the common property of all people, including the landlocked peoples as well. That simplistic, if, I maintain, morally justified approach was irreversibly changed by President Truman's doctrine that the Continental Shelf of the United States was the submerged extension of the land of the Federal Republic. That doctrine was avidly adopted by the coastal States in the Third Law of the Sea Conference in 1964, which extended sovereignty over the Shelf to a depth of 200 metres. Practically the entire North Sea is Continental Shelf by that definition, and the property claimed by the countries around it. But I hope that Britain, in incorporating the ocean bed and deriving the economic benefits, will resolutely regard herself as the steward of the oceans which are not confined or fenced off in any sense by the definition of the "North Sea", and ensure the adequate protection of the ocean environment which reckless exploitation could irreparably destroy.
The White Paper on UK Offshore Oil and Gas Policy refers to Scotland and the regions elsewhere, within which the older Industrial Revolution industries were developed and which have suffered from the decline of those industries. I divide the world into three kinds of countries: highly-developed, underdeveloped and dis-developed. My own country, and the noble Earl's, Lord Lauderdale's country, Scotland, I classify as dis-developed. In the first Industrial Revolution, throughout the nineteenth century and the first quarter of this century, Scotland gave of its all. Scotland is like an exhausted mother after having 20 children, or like an undernourished mother who gives the calcium from her own skeleton to nourish her suckling infant. With all my reservations about the "common heritage", I find a poetic justice in the metaphor of the oil in the North Sea being siphoned into the derelict coalmines of Scotland.
379 But we know from bitter experience, and the whole experience of the dis-developed countries, the reckless use of our natural resources and the destruction of amenities and gracious living. I have, like many others, grave misgivings about the effects of the new developments and the new industries which we are generating. We have already had the battles over the siting of platform construction, of shore-based installations, of pipelines and refineries, and so on. We have seen in a very brief spell—and I have listened this afternoon with great interest to what people are saying about what has happened or has not happened in the last four years—the bench-marks of all kinds of problems which we will ignore at our peril. We have seen in that brief spell how some of those developments are subject to expediency, how workers have migrated to centres of platform construction and have found that the needs—whatever the noble Earl's justification or criticism may be—have changed and orders have been curtailed.
There is no question that my noble friend the Minister will not disagree that the North Sea potential is not unlimited. We have a foreseeable future and a limited future, and the question of what is to happen after the depletion of that great capital resource which we have been handed is a matter which we should now be considering. One can foresee ghost towns of the oil boom and the scars of oil development. I hope—and, indeed, we should insist on this—that the British National Oil Corporation and the Scottish and Welsh Development Agencies will be charged with the responsibility for seeing that the effects with which I am concerned are minimised and the damage restored. I do not know how that can be done, except by a publicly responsible body. I want to see it take part in all the activities.
In the oil bonanza between now and the 1980s, about which we are talking, this should be foreseen. I should like to see that part of all these profits for which we are calculating will from the start, and inalienably, go into a rehabilitation fund. I believe that we should be providing for the effective restoration of the damage which in the interim we will be creating. The restoration of the slag heaps in our country, however much we landscape them and so on, is putting a burden on 380 another generation for the sins of the previous one. This is something which we should foresee and should provide for.
There is no question in my mind that one of the great lessons which is quoted here as a discouraging lesson, where there has been some drag on the development of the North Sea, means that we are learning the hard way. It is not a question of how much money or how many people are at risk. There is a great deal more at risk than either money or people. With all due deference to the oil companies, technology is not yet at the stage where we can be guaranteed against the kind of thing which I foresee. Therefore, I hope that in terms of the British National Oil Corporation, and all the other provisions which we will write into the law in the shape of the protection of these resources, we will see that the risks are not exaggerated by past inexperience. We are trying on a macro-scale things which have not even been established on a micro-scale. We are doing it adventurously, but it has enormous potential risk. I know of no way in which you can guarantee that sonic oil well or some pipeline will not be disrupted. I hope that the Government are writing adequate provisions into all pipeline activities.
I know that there are all kinds of backstops. But I was at Santa Barbara, California, when we had the oil spill and beyond all doubt it was the sheer reckless avarice of the oil companies which produced that situation. They were doing something which they were not entitled by law to do, something of which they had no practical experience, and they were doing it against the scientific knowledge about that channel. Who is to be the master and the supervisor of this kind of risk? Like everyone here, I hope that the product of the North Sea and the Celtic Sea will come to our rescue in our economic embarrassment. The one thing which I say with all the force I can muster is that this must not be done by risk to either this generation or the next. The risk to this generation I saw in a most grotesque form in the Santa Barbara incident. We cannot see the shores of Wales or Scotland or elsewhere being polluted in the way that happened at that time. No amount of recovery redeems that original trauma. This is something that we have to consider.
381 We talk disrespectfully—as do many of my noble friends and Members opposite who have been concerned with Government—about the bureaucrats, but the bureaucrat at one remove from political pressure is our steward. With all our stupidity we have some kind of limitation of what we call glorious enterprise, but which is, in fact, brashness, in taking risks beyond the technical or scientific knowledge at our disposal. There is only one way to do it—as has been pointed out other countries have done it—and that is to build in safeguards. You may call it restraint or discouragement or disincentive, but I call it necessary precaution; and one of the necessary precautions is to ensure that what is produced from all these resources is in some way directed to the people themselves and to their greater benefit, and not to the destruction of the amenities which we must try to safeguard for posterity.
This is an expendable resource. We will have the empty oilfields of the North Sea just as we have the empty pits. We are talking now about an environment which is highly vulnerable. People are largely unaware of the vulnerability of the oceans. The oceans are obviously our last resource. More than that, the oceans are a factor which control the future of mankind, climatically and otherwise. If we are reckless in allowing our present stupidity or our greed and our avarice to create conditions which will destroy the eco-system of the sea, we are asking for trouble and asking for the condemnation of all future generations.
§ 5.38 p.m.
§ Lord ORR-EWING
My Lords, I am always pleased to follow the noble Lord, Lord Richie-Calder. I succeeded him as chairman of the Metrication Board and I was pleased to hear him quoting depths of 200 metres, as correctly he should, and I am glad to be speaking after him. I must confess that I thought he slightly overpainted the exhaustion of Scotland. I have a minor connection with Aberdeen and I go up sometimes to ski there. I find in industry their engineering expertise and drive is tremendous and the youth, energy and enthusiasm of their young people in recreation, in climbing and skiing, quite outstanding. Nor did I really find that their rugger team was very effete when they beat the Welsh this 382 year and chased the English up and down the field.
§ Lord RITCHIE-CALDER
If the noble Lord will forgive me I was talking not about my people the noble Lord's opinion of whom I share. I was talking about our national resources.
§ Lord ORR-EWING
My Lords, I think that the national resources of Scotland are built into the people and their courage and brains and education of which they are quite justly proud. I hope that the noble Lord, Lord Ritchie-Calder, will not mind my also saying that I hope that he, as a scientist, and trained as one, like myself think it is slightly irresponsible to talk of a bonanza from the North Sea oil between now and 1980. There will be very much more money and effort going out between now and 1980 than there is money coming back. Maybe later on there will be a bonanza, and I will develop this theory later in my speech.
Equally, I am of course as enthusiastic as he is to see the environment protected. But one must look back and realise that one can overdo this; for example, the Alaskan pipeline was held up for almost a decade because it was thought that the elks would not be able to jump it, as a result of which the Western world is in a deeper economic crisis because oil is not coming from that area, and BP are now busy building the pipeline at probably ten times the cost that would have been incurred many years ago. In other words, there is no point in keeping every blade of our environment correct if we are to live only on the begging bowls which we will need if we cannot feed half our population. We must, therefore, find a balance between the environment and the need for new and prosperous industry.
I was interested in the way in which the noble Lord, Lord Balogh, gave numbers of reasons in a very thoughtful speech for the position we have now reached, as did my noble friend Lord Lauderdale, who is temporarily absent because he is reading his speech prior to it appearing in the Official Report—not that it will need correcting. The noble Lord, Lord Balogh, must fully appreciate what my Front Bench has been emphasising—how important it is for this country to get on with this challenge and get on with the game of getting the oil flowing from the North Sea. I thought the noble Lord 383 was going a little far—indeed, I might describe it as effrontery—when he said, "Our labours are bearing fruit for the nation". My instincts—I will quote the sources from which they derive—are that the manifestations of the Labour Government are not bearing fruit at the moment; they are sowing uncertainty, not only in this country but among investors overseas and among people who can bring their expertise to this oil development, and thus they are delaying and this delay is desperately expensive.
The noble Lord may have read the article in last Sunday's Sunday Times which was headed:North Sea Oil—the time for excuses is over.I did not get that message from the noble Lord's speech today. It said in the course of that article:Today's main stumbling block for many bankers and oil companies is the problem of agreement with the Government over the 51 per cent. State participation.The noble Lord mentioned that some companies had come to an agreement, but there are still a great many companies and consortia which have not come to such an agreement.
I still feel—my noble friend Lord Lauderdale expressed this sentiment, too—that the Government seem dedicated in this, as in so many other fields, to driving on with this proposal when there really is no need, and I can only believe that it is being done because, even today, they are continuing to appease the Left Wing's demand for nationalisation. In the White Paper it was called "full public ownership", but in the Manifesto it was called "nationalisation". It is now called "participation". One always seems to go round the words as they begin to get a bad connotation, like the Social Contract, which was very much eulogised and written up in two General Elections and which has now become a "voluntary incomes policy". No one talks about the Mark 2 Social Contract. They always seem to be able to find a new name for it, but I cannot help feeling that nationalisation and 51 per cent. represent nothing different; the control is there and it is nationalisation, and in my view it is a mistake.
Ed Monteith, the banker and oil engineer, and President of the International 384 Energy Bank, said recently that the date for United Kingdom self-sufficiency is slipping; it was hoped to be 1980—though I noticed in the course of his speech that the noble Lord, Lord Balogh, referred not to 1980 but to "the 1980s"; and he has now forecast that it will be somewhere between 1981 and 1985. The cost of this slippage is considerable. Do I note a puzzled frown on the face of the noble Lord, Lord Balogh? If so, he will find all these figures quoted in the Sunday Times. He may care to look up the details; I am sure that his advisers will supply him with a copy of the article. The article goes on to explain, and I think this is right, why the consortia have lost some of their drive and enthusiasm. It is because of the continuous political and financial uncertainties which now prevail.
I agree wholeheartedly with so many other speakers who have said that while inflation in the United Kingdom, which is now running at a rate of 26 per cent. per annum, is escalating prices and making all the work cost very much more, the result is that all these developments are taking longer and longer to come to fruition. Despite this, the Government seem hell bent on going on trying to catch somebody who is making more profit than, accordingly to their interpretation, should be made. I entirely agree with the view of my noble friend Lord Campbell of Croy that the excess profits duty seems the simplest solution. It was Mr. Lever, with all his knowledge as a Minister attached to the Treasury, who said:The British people's fair share of the profits will be secured by taxation and existing royalties".—[Official Report, Commons, 19/2/75; c. 1338.]It is that solution, and I abide by that Minister's judgment and knowledge, and I only wish that this Government would stick to it. We are told that 51 per cent. is not nationalisation, but surely noble Lords will agree that, according to the City Codes, several of which have been mentioned while we were debating the Industry Bill—
§ Lord BALOGH
My Lords, perhaps the noble Lord will allow me to intervene at this stage, to correct an impression he might have given when he was referring to my use of the term "1980s." I said that throughout the 1980s we should be capable of producing 100 million to 385 150 million tons a year. I said that at the beginning of my speech. Later I said that enough oil had now been discovered to take us to self-sufficiency in 1980 and beyond. It is important to have this clear.
§ Lord ORR-EWING
My Lords, I am glad that the noble Lord has taken this opportunity to clarify the position and I apologise to him; it is sometimes difficult to hear every word, especially the difference between "1980" and "1980s". That probably explains my error. However, that still does not detract from my accusation that other people—and the noble Lord classed himself as the main professional in his Department—with great knowledge of the subject are now saying—and I will quote one of them:Unless some problems are solved fast, I can see the date when Britain becomes self-sufficient in oil slipping back from the Government target of 1980 to anywhere between 1980 and 1985.Those are the words of Ed Monteith, the banker, so it was his estimate I was quoting, and I am glad to have the view of the noble Lord, Lord Balogh, that it has not slipped. I notice that the Manifesto promised nationalisation, and at that time the noble Lord, Lord Balogh, wrote an article in The Banker of March 1974—I expect he wrote the article before he became Minister; the delay was probably accounted for by the fact that it took some time to print—in which he said firmly:I do hope that the Labour Party's programme in this field will be speedily and drastically reconsidered.I am sure that the noble Lord has done his best to persuade the Cabinet and others of his colleagues of the rightness of his views—and, of course, of the rightness of our views—in this direction.
§ Lord BALOGH
My Lords, I hope that the noble Lord will allow me to correct him. I wanted an oil company. What I did not want was the sort of interference which the board as proposed by Mr. Patrick Jenkin would have caused.
§ Lord ORR-EWING
My Lords, I am delighted to have that point made clear, too, because I fear that the noble Lord is going to have great difficulty in swallowing this Bill, which I think gives no independence at all under the new régime which is being proposed. I will come to 386 that later in my speech. First, let me deal with the Bill—The Petroleum and Submarine Pipeline Bill—which runs to 148 pages. It is extremely complicated and it goes much further than even the Industry Bill in giving powers to the Government of the day to do almost anything; and those of us who are worried about Mr. Wedgwood Benn and his particular policies, and about those who are allied with him, deplore the fact that he has moved from one Ministry to another and has taken charge of this Bill.
With the Secretary of State's permission—and the Treasury's permission where money is concerned—but not with Parliamentary approval or affirmation, the Government may explore for and produce oil, not just in United Kingdom waters or on the Continental Shelf, but anywhere in the world. They may set up refineries and marketing outlets; they may borrow or lend money—again not with the acquiescence of Parliament. Unlike all other nationalised industries, the BNOC is to be integrated, it is explained, as part of Whitehall. It is not to pay some company taxes. It is not to pay petroleum revenue tax. It is not to pay stamp duty. It is to use the £600 million—or £900 million if extended by Order—as the Secretary of State thinks fit. My Lords, this is a passport to complete freedom, without any sort of Parliamentary control.
We were told by the noble Lord, Lord Beswick, when considering the Industry Bill—which we shall be dealing with again tomorrow—that the National Enterprise Board would acquire only when firms wanted voluntarily to have Government participation. He offered us two minor exceptions. It was a voluntary, and not a compulsory, takeover. But this Bill goes much further than that. We have also been reassured, on the other Bill, that there was to be fair competition. But how can we possibly have fair competition from this new organisation which is to be set up, and which is to be a partner and a competitor? It is to have 51 per cent. in all these companies and it is allowed to go into competition with the same oil consortia. Therefore there is no pretence of fair competition in this Bill.
There is a figure of £600 million to start with, which can go up, by Order, to £900 million. But is this enough? The present estimate is that £8,700 387 million is needed for the development of existing reserves. The Brown Book, published by the Department of Energy, and the assessment of the Banker—a very responsible paper—estimate that by 1977 £3,000 million is needed; and 51 per cent. of that is £1,500 million. Therefore are the Government being realistic in allotting £600 million initially? Will £600 million buy 51 per cent. of these immense undertakings'? My submission is that they just want to get it through; it sounds a reasonable figure, and once it is through and on the Statute Book they will "up" the price.
Frankly, I think that this Bill is not in a digested state. It is full of loopholes. I was glad to hear the noble Lord refer to one or two Amendments made during the Committee stage in another place. I hope that we shall have proper time to consider this Bill, and that it is not to be steamrollered through this House in the hot days of August when many people have commitments to their families or to package holidays, which they cannot break. We want proper consideration of the Bill, because it is of extreme importance, and at present it is ill-digested and ill-considered, and has not yet even appeared for our consideration.
I shall not embarrass the noble Lord. I was going to produce the same quotation about the Civil Service as that used by the noble Earl, Lord Lauderdale. The noble Lord referred, a little ungraciously I thought, to all the people who were advising us, as amateurs. I am the greatest admirer of the Civil Service. Anyone who has been a Minister for seven years knows how well and how conscientiously we are served. But I always have worried that it is the manpower which will wreck all these nationalisation proposals. I do not believe that the expertise and trained and experienced manpower is there for recruiting on the scale which the noble Lord believes he needs.
Finally, our task now is to sow confidence, not just in this country but all over the world, for people who have the expertise we need to carry on with the development of the North Sea. I personally believe we should stop these long, lengthy negotiations, this threatened nationalisation, this setting up of all these corporations. We should exercise control 388 over depletion, as my noble friend has said, through the excess profits levy and taxes of that sort, so that we give the maximum initiative to those companies which are doing their best to develop our mineral wealth.
§ 5.54 p.m.
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, the noble Lord, Lord Balogh, has this afternoon been attempting the daunting task of convincing the House and the country at large that the Government's intention—they call it a proposal, but it is really an intention—to establish the BNOC and related proposals will help to,meet the urgent need for efficient and continuing development of the United Kingdom's petroleum resources.The noble Lord will not be surprised—he will have realised that he has not succeeded in convincing very many of us on this side of the House. Unfortunately, we believe that the Government have contributed to delays which have already taken place, they are contributing to delays, and the contribution to those delays should be diminished. We also believe that part of the reason is that Government interference has increased, is increasing, and should be diminished.
On previous occasions the noble Lord has talked about reacting when he is provoked. I intend to try very hard not to provoke him; I have no wish to do so. But it is fair to say that we feel that the far-reaching proposals made in this Bill to restructure the industry represent an initiative by the Government which is provoking us. I have previously said in this House that I regard this issue as far too important for it to be a desirable field for political confrontation. The noble Lord agreed that getting these decisions right was admittedly extremely difficult, and that it was perhaps a task of the most fundamental importance to this country. It is unfortunate that this is a highly technical field which sometimes does not command a great deal of support by noble Lords in this House because of its nature. But there is no doubt that the rapid exploitation of the North Sea offers us our one, and perhaps our only, hope of rectifying the alarming deficit in our balance of trade, and the means of emancipating ourselves from the potential impact of external political 389 pressures which can be exercised through threats to the continuity of energy supplies which are vital to the life of the country.
The noble Lord moved his Motion, if I may say, in his most emollient and persuasive style. My whole training and my instinct, when faced with a disagreement, is to try to establish the facts and to seek the common ground. I can never remember who produced the famous quotation,Comment is free, but facts are sacred.Was it Voltaire? I think it may have been.
§ Lord STRATHCONA and MOUNT ROYAL
Thank you, my Lords. I am dismayed, in considering our debate this afternoon, to find that the common ground is perhaps no bigger than the famous man's hand. But I am even more dismayed at the thread of unreality on the side of the Government which seems to me to have permeated the whole debate. Before we get down to discussion of the BNOC I should like to look for a moment at the background against which we are judging it. I see two particularly disturbing features in the Government's attitude. The first is the almost pathological mistrust of the oil companies, which always seems to burst forth whenever we have questions or debates on this subject.
The noble Lord on one occasion referred to dealings with the oil companies as being "bargaining in the souks." This attitude between a responsible Government and a responsible industry is bad enough in itself, but it leads to something even worse. When the industry claims that the pace of development has slowed, it is dismissed by Ministers as,normal propaganda which an industry threatened with new taxes might be expected to emit.That is a quotation from Mr. John Smith, the Minister in another place; not, I hasten to add, from the noble Lord who joined us this afternoon. This is what he is quoted as saying in a recent article in newspapers which have already been quoted from here this afternoon.
The great danger about this attitude is that it enables the Government to turn either a blind eye or a deaf ear to the evidence adduced by the people working 390 in the industry. There is nothing more dangerous than to have the experience which one of my relatives had, when the doctors start saying, "There is nothing wrong with this person, it is all in the mind. Any physical symptoms of which they may be complaining are purely mental." Then you can excuse anything. The danger is that once the Government start believing that any facts adduced by the oil companies are a smoke screen to strengthen their bargaining position, we are getting into a dangerous situation indeed. It is difficult enough to get any hard evidence.
Here I must allude to the extraordinary circumstances which I find obtain in this game. The benign countenance of the noble Lord, Lord Balogh, seems to belie a strange effect that we find. He seems to have all the great oil companies cowed into total submission. They are terrified to make any attributable comments about what they really believe for fear that this will prejudice their position in the negotiations which are going on with his Ministry about participation. When you look at that smiling face it is extraordinary that he should have this effect on these high-powered people. But I assure noble Lords that that is the reality we face.
My Lords, I hope the Government do not expect to be taken seriously when they answer the sort of allegations we are making about the slowing down by saying that there is more activity now in the North Sea than there was a year ago. Of course there is! Here you are dealing with an industry at the point of take-off, at the point of rapid expansion, on a very massive scale. We are discussing commitments which were made years ahead for enormous investments. The question is this. Are we now forging ahead as fast as we had planned two years ago and what is the situation going to look like in two years' time? Above all, what happens in the 'eighties when perhaps the really big fields have already passed their peak?
I am sure that the noble Lord and his Ministry are well aware of the genuine feelings of the oil companies. We have talked about various quotations from the newspapers. There are very many cuttings from which you could quote. There is no doubt at all that there is a general feeling that the pace of development in 391 the North Sea has checked. Here is the Daily Telegraph:Ten of 14 North Sea fields originally declared commercial have now sunk into the marginal category. Orders for drilling and production platforms have slowed down and so have orders for other equipment.The Oil and Gas Journal says:The day rate weakness for rigs stems from a developing surplus of heavy semis. The exploratory pace in the sea is holding up well; but it is not and apparently will not increase much as was expected some time back. Off the United Kingdom only about 30 mobile rigs were at work early this year as against 32 earlier. This compares with some estimates in late '73 of 55 by mid-1975 and more than 80 by 1950. In April as many as 7 semi rigs were reported looking for work and a number of rigs are leaving the North Sea for other theatres.This was alluded to by several noble Lords. I recently heard a case of a large semi-submersible where the partners in the operating company have declined to go ahead drilling the step out wells from next June. The operators of that rig have contacted 35 or 40 other operators and not one of those companies is planning a further drilling programme beyond that to which they are already committed for the next 18 months. I do not think that it should be necessary for us to labour this point and produce other examples. There is no doubt at all that the threats of forced participation and the swingeing taxation when this Government came in 18 months ago were already casting a baleful shadow ahead of the actuality. We were talking about—and do not let us forget this—the production of oil which is inherently something of the order of 50 times as expensive as Middle East crude. The concept of participation and the potential regulatory and, in many cases, retrospective controls which it is proposed to introduce have had a disastrous effect on the banking system's recognised way of raising finance for oil in the ground.
I am not trying to develop a case for saying that the whole of the decline in the pace of development is the responsibility of the Government—far from it! I would accept, and I think most noble Lords here would accept, that rapid escalation in costs has been the principal problem. What I would claim is that it has been aggravated by the nature 392 of PRT and the method of its application, and the threat of the unknown nature of particpation. So as far as the petroleum revenue tax is concerned several noble Lords this afternoon have said that they would have preferred the excess profits tax approach. Why invest in betting on a horse when you can simply cream off some of the winnings?—as someone expressed it to me.
It is worth repeating that one of the other fears is that the tax is favourable enough for the big fields or, (shall we say?) the mammoth fields like Ninian, Forties, Brent and perhaps Piper. The danger is that these 1,000-million barrel fields may have distorted the Government's perspective on this picture. It is worth remembering that there are probably only 15 fields of this sort in the USA. The great preponderance of the output in that country has always come from fields in the 50-million to 300-million barrel range. Here the economies begin to look very much less attractive.
It is all very well for the Minister to say to the oil companies, "Rely on us! We do not want to sec you not making profits. We have power to forgo the royalties if you can explain that you are losing money." But what industry being invited to invest on the scale that the oil industry is trying to invest can accept relying on the whims of politicians? When the particular politician turns out to be the present Secretary of State for Energy, I can only think that if the Government thought that this was to reassure the oil companies I am reminded of what we used to say when we were complaining how unwise it was to send homosexuals to prison. We used to say that it was like sending an alcoholic to a brewery. That certainly seems to me to be about the logic of putting Mr. Benn into the Ministry of Energy to reassure the industry.
We will get an opportunity later to comment at length on the BNOC, the Bill for which, as many have said, has still to have its Report stage in the Commons. The Bill has been greatly improved, and many of its worst features were mitigated when it was so brutally guillotined before a number of Amendments had been considered, which means that we shall have a lot of work to do on it when we get to the Committee stage.
393 Nevertheless, we can see a clear pattern which shows this proposal to be both deplorable and damaging. I will quote two examples, to which reference has already been made. To make retrospective unilateral changes in a contract is regrettable; but such changes can sometimes be made bearable by negotiation and compensation. Given the scale of investment in the type of operations with which we are dealing in the North Sea, even a minor cut back in production plans can play havoc with the economics of the operation. If compensation is not to be paid for steps which both alter the economics and the capital value of a licence, it is bound to prejudice the future confidence of the industry. If the Government change the rules in the middle of the game on this occasion, what guarantee have we that they will not change them if it suits them later on? We have said all along that we believe the control functions could be fully and adequately discharged by an independent regulatory commission. This was advanced most persuasively by the noble Lord whose name for the moment escapes me—
§ Lord STRATHCONA and MOUNT ROYAL
—who should have been sitting on these Benches when he made his speech. He said the BNOC would be mis-shapen from birth. It was Mr. Baxendell of Shell who said publicly on one occasion that he could not see that BNOC could do anything else but cause delay to the industry. Surely this is borne out when we talk of the people in BNOC learning their business by association with the oil companies. Do they not imagine that is to be a distraction for the people who are trying to get on with the job? The Whitehall machine, with all its many good points, is not exactly noted for its speed of decision.
We have also talked about the financial aspects of participation. I have been totally unable to discover what is meant by this enigmatic "no-loss/no-gain" formula, and the Government are very coy about explaining in detail what it is they mean by it. My impression is that it will not put any money into the industry, which would make it more understandable if this was of assistance to some of the smaller companies which are bound to find it difficult to raise finance, 394 particularly in view of the kind of uncertainties which have been largely created by the Government. This kind of uncertainty is highly corrosive of confidence in an international industry of this sort. The noble Lord, Lord Balogh, talking about participation, said that the Government are willing to pay for it. I hope this means that they are willing to put up their share of the capital. If that is the situation, where is the money to come from?
BNOC is a curious animal indeed. It will have a potentially unfair advantage over commercial companies, in that it will not pay PRT and other taxes. Yet, on the other side, apparently its revenues are all to be syphoned off into the national oil account, which would seem to restrict very greatly its financial freedom of action. It begins to sound like some privileged eunuch rushing around in the harem trying to force a lot of reluctant brides into marriage. That is no way to produce a healthy family. The noble Lord, Lord Campbell of Croy, and the noble Viscount, Lord Thurso, referred to the apparent contradiction of having the BNOC, on the one hand, as a partner whose objectives are bound to be totally different because of the financial set up proposed for the company, and yet, at the same time, having the company as a competitor. Will it be a fair competitor? That was a point made by my noble friend Lord Orr-Ewing.
I said at the outset that I had tried to find a common cause with the noble Lord. Towards the end of my speech, I can at least thank him for the three important concessions which have been made during the long discussions which have taken place in the other House. They have at least removed some of the warts from this mis-shapen child. I hone we can still turn the BNOC into something more like the kind of animal we should have liked to see.
My Lords, I am sorry if I have made a gloomy and critical speech; I do so unwillingly and with great sadness. I sincerely believe that it would be perfectly possible to establish a fundamentally bipartisan approach to many of the major issues affecting the exploitation of our petroleum resources. But the more I study the question, the more convinced I become that the Government have allowed political pressures, happily mostly from outside this 395 House, to warp the judgment of the wiser statesmen in the Administration. I believe that the attitudes and actions of some of the Ministers in the Department of Energy over the past 18 months have undermined the confidence of industry and that the long-term development has already possibly been put back as much as two years. BNOC will be bipartisan, inequitable and impractical and will slow the process further. I very much fear that, in agreeing to this Motion this evening, this House will do little to enhance its reputation for sanity, good sense, and sound judgment.
§ Lord STRANGE
My Lords, as a Cross-Bencher I am allowed to say one word at the end of the debate. I do not know whether that is altogether customary, but in this debate it is. I have listened with great respect to the philosophy which has been expounded. I am too stupid to understand it; it is a form of "Malice in Blunderland"! I trust this Bill will not go any further than it possibly can to make us the laughing stock of Europe.
§ 6.20 p.m.
§ The MINISTER of STATE, SCOTTISH OFFICE (Lord Hughes)
My Lords, if the last comment was slightly away from the ordinary traditions of the House, I can assure the noble Lord, Lord Strange, that there is no danger of his desires being fulfilled. I should like to begin by referring to some of the things which have been said by the noble Lord, Lord Strathcona and Mount Royal. Almost in his opening words, he said that my noble friend Lord Balogh had not succeeded in convincing noble Lords opposite by the speech which he had made. I do not think I am in any way misinterpreting the intentions of my noble friend when I say he is not one regularly to attempt the impossible. What he sought to do was to explain the Government's views on these matters; and if one is explaining views of this kind to people who hold fundamentally different views, it is folly to believe that even someone as convincing or as benevolent in appearance as my noble friend can lure them away from points of view which they have no desire to abandon.
The noble Lord, Lord Strathcona, said—although he could not identify the 396 author and then got help from all parts of the House—that "comment is free but fact is sacred". I wish that he had followed it instead of just quoting it, because some of the things he said in condemnation of the Government's attitude assumed to be facts things which were not only comment but, in some cases, wholly irrelevant and untrue comment. He attributed the Government's actions on these matters to what he said was their "almost pathological distrust of the oil companies". I think that is as exaggerated a view of the Government's relations with the oil companies as if I were to say that noble Lords on the Benches opposite regard the oil companies as a collection of benevolent philanthropists, interested only in the wellbeing of this country. The second statement would be as far from the truth as the first one. The way in which both of us work, I think, is that despite starting off with a different idea of the best way to do things, we are attempting to arrive at the same end, of getting the best results for our people from the exploitation of the oil in the North Sea, and such other fields as may be discovered.
I should like to refer briefly to the contributions made by my noble friends Lord Lee of Newton and Lord Ritchie-Calder. I thought that, as a former Minister of Power, my noble friend Lord Lee did a service in taking us back a little further into the origins of this matter. I thought it was particularly useful that he was able to say to us that he would have liked to be able in earlier days to do what the Government now propose to do in the matter of the British National Oil Corporation. To my noble friend Lord Ritchie-Calder, I would say that in the Scottish Office in particular, and in the Government in general, we are well aware of the dangers which the exploitation of oil can create in areas of natural beauty and we are very much seized of the need to preserve national resources and natural beauty and to protect the environment. When he reads of some of the things which are being done and realises what powers are being taken in this Bill, allied to the powers which already exist, he will see that considerable safeguards are being sought regarding the matters to which he referred.
I turn now to comments which have been made from the other side of the House. First, following the example of 397 the noble Lord, Lord Strathcona, in seeking to find common ground—though I must say he did not strain himself unduly in the search—the noble Lord, Lord Campbell of Croy, said that extraction should proceed as fast as possible until 1980. That we accept. That is a common objective which has not been departed from, and I was rather glad that my noble friend was able to reassure the noble Lord, Lord Orr-Ewing, that 1980 had not suddenly become, in the Government's view, "the 1980s". I think that the noble Lord, in recollecting what my noble friend had said, perhaps confused the reference to a continuous production of from 100 million to 150 million tons per annum in the 1980s with his reference to "reaching self-sufficiency in 1980". So on that, at least, we agree as to what the first major target is.
I do not wish to follow the noble Lord, Lord Campbell, once again on the merits of the way in which he would have done the business, on his planning ideas and on the way that we did it earlier in the year. I do not think I should be serving your Lordships particularly well by arguing the reasons why we see the BNOC as a better way of dealing with things than noble Lords opposite would have chosen. We must accept that in matters of this kind we are never going to agree. But there are some points which have been raised by a number of your Lordships, and the first of these was raised by the noble Lord, Lord Campbell of Croy. This concerned the long delay which he attributed to the Government in coming forward with their proposals and the effect that this was having on operations.
I should like to follow my noble friend Lord Lee of Newton in going back a little. The previous Government started a review of the licensing policies after the last licensing round in March 1972. When they left Office in March 1974, two years later, they had announced no conclusions whatsoever. Therefore, there were two years of uncertainty, because of the absence of information from the then Government of what they proposed to do. May I contrast that with the "delay" of the present Government? We had produced our White Paper on North Sea policies within four months of taking Office; and we have now passed the Oil Taxation Act and introduced the 398 Petroleum Bill, together with Bills to set up the Scottish and Welsh Development Agencies, all within a period of 17 months. So even if this is delay—and, obviously, if one expects results overnight it is—in comparison with people who produced nothing at all in two years, it is certainly not regarded as a justifiable criticism so far as we are concerned.
Lord CAMPBELL of CROY
My Lords, would the noble Lord give way at this point? The point is that the Party opposite introduced completely new proposals with threats to the operations that were going on, and it was that which caused the uncertainty; whereas at least all the operations were able to carry on at full speed under the previous Administration.
§ Lord HUGHES
My Lords, if the noble Lord, Lord Campbell of Croy, is arguing that to do nothing for two years and to give no indication at the end of two years that anything is going to happen—
§ Lord HUGHES
My Lords, it must have been the assumption that the oil companies might have made then, that the Conservative Government were not going to do anything at any time which was going to give them cause for any concern. But that aspect was not borne out by some later things which were said by Mr. Jenkin, and which have been repeated recently. I shall return to that point at a later stage. The noble Earl, Lord Lauderdale, as usual gave us a most entertaining speech, not diminished in any way by the fact that his economics teacher demolished the greater part of his argument. One thing the noble Earl shares with my noble friend, though for a different reason—in his case because of the magnificence of his phraseology—is the fact that one appreciates both speeches better when one reads them the following day than at the time one is listening to them.
But he was one of those who raised seriously the question of the level of activity and the reference to the number of rigs, the reference to the number of platforms, and so on. Let us look at the evidence to support the contention that activity is declining. First there are 399 mobile drilling rigs. Last year an average of 24½ rigs were operating at any one time—I am not suggesting there was half a rig going about, but that is the figure it works out at. The Government's forecast was 25. This year the average so far has been just below 30. The Government forecast was 30.
§ The Earl of LAUDERDALE
My Lords, I am much obliged to the noble Lord for giving way. Is it not the case that two years ago the Gcvernment anticipated a much larger number of rigs operating in the British section of the North Sea, something like 40, and in the last nine months of this year—whatever the average in operation, which is of course a clever economic cheat—the fact is that the number of rigs in the North Sea has declined in the British sector and risen in the Norwegian?
§ Lord HUGHES
My Lords, perhaps the noble Earl would do better if he let me finish. It was said that the number three weeks ago was 26. That is correct. Today it is 29. That does not mean there has been a sudden tremendous increase in activity, or that there was a sudden fall in activities three weeks ago. The number fluctuates. That is why the only relevant factor to take into account is the average in use over a period. That average is almost identical with the forecast.
The noble Earl may be perfectly correct in saying that two years ago it was something else. But everyone has emphasised the terribly difficult nature of these operations. As my noble friend Lord Balogh has said, there is nothing less fruitful than making long-term predictions in this field. He might have added that the risk is only diminished when one makes short-term predictions. So I cannot attach any particular importance to the number quoted at any given time. Last year's estimate forecast of the numbers and this year's estimate of the numbers are closely matched up by what are there. I would hope that this is the way in which we can continue. As we see the situation reasonably near ahead, we can say what we expect it to be and then be disappointed if it fails. In these two years that has not been the situation.
On platforms, the fact is that the technology has advance since the forecasts 400 of last year. The Government expect to make a Statement very shortly and I will not anticipate trat. But what has hoppened is that the companies have changed their views about the number of platforms for discovery—this note must have been written to Lord Beswick; I interpret it for Lord Beswick not because it was written in Gaelic but because I also am a bad writer and I can read other people's bad writing—which are required to extract all the oil. I think that noble Lords opposite would not wish to see the companies adding more to these huge and costly structures than is necessary to meet developments and production platforms. Sometimes I shall be quoting information which I have been given. I can assure your Lordships that I did not invent it, and did not know it until it was given to me. One part of the information was given to me by my noble friend Lord Balogh. It is that one will now drill 36 wells as against 24 contemplated a comparatively short time ago. So a given number of platforms will do 50 per cent. more drilling than was contemplated that short time ago.
§ The Earl of LAUDERDALE
My Lords, I am again much obliged to the noble Lord for giving way. I hope his explanation is in fact accurate. The 36-well, capacity was one that was well established by designers 18 months ago. I was wondering whether he would tell us that the figure had gone up from 36 to 42. I do not want to make trouble on a silly point, but if it is really his point that the capacity of platforms has increased designwise in the past year to a significant extent, that is a very interesting and instructive explanation for the shortfall in platform orders.
§ Lord HUGHES
My Lords, my nobh.: friend has classified himself as the expert on this matter. Who am I to disagree with him? I think this is the last of the points of the noble Earl, Lord Lauderdale, to which I wish to refer—just in case he wants to jump up again, we will have all his interventions at the one time. He referred to the fact that companies were going to Greenland, and gave this as an indication that the Government are frightening them away from our part of the North Sea. But Denmark has offered very tough berms for Greenland, with 50 per cent. Government participation and a 401 total Government take of 80 per cent. The terms are in fact tougher than ours, in an area even more risky than that in which they are operating in our part of the North Sea. So if what we are doing in this sphere is pandering to the Left Wing of our Party, they had better not read some of the statistics I am giving your Lordships, otherwise they will say that what we are doing is pandering to noble Lords opposite.
§ The Earl of LAUDERDALE
My Lords, I am so grateful to the noble Lords; this is the last time I shall jump up. I have a bit of a slipped disc and am in some discomfort. But surely the point is that the new Danish licences, though tougher as licences for exploration, have not threatened anything like the taxation levels for production that we have imposed in the North Sea. That is the critical distinction.
§ Lord HUGHES
My Lords, there is always difficulty in quoting other people's statistics, but it seems to me that if there is to be a Government take of 80 per cent., that will be the take of what comes out; it is not pie in the sky. I do not see how the noble Earl can say that that is more attractive to the companies than what we are offering.
A number of points were raised by various noble Lords and I should like to take them now because we have other business to do. I think this is the point at which I should refer to the remarks of the noble Viscount, Lord Thurso. I always look forward to his remarks because he is almost as unpredictable as the North Sea itself. That is, perhaps, reasonable because he is the one in your Lordships' House nearest to it. I never know before he rises whether he is to be an ally with me against the Tory Front Bench, or to be with them and against me. He could have stood very comfortably at that Bench when he made his speech today. If he does not watch himself, he will be receiving the same invitation from the noble Lord, Lord Strathcona and Mount Royal, as the noble Lord. Lord Trevelyan, received when he was temporarily out of the House. I would tell Lord Trevelyan that Lord Strathcona said he was sitting in the wrong place and ought to be on these Benches. I do not disagree with that comment at all.
402 The noble Viscount, Lord Thurso, asked why we were taking this procedure. Because of the stage we have reached in the Session, it was felt that this was a procedure which would enable us to have a longer Second Reading debate on the Bill than otherwise would be the circumstance. It becomes an extra. But having said that, I must say that it will not deprive the House of the opportunity of speaking on the Second Reading of the Bill. What I would hope is that no noble Lord, this Bench included, will find it necessary on Second Reading to say all over again the things which we have said today. At least, if the procedure does not do anything to cut down the number of speeches on the next occasion, it ought at any rate to cut down their length. There is nothing sinister about it. A number of points were raised by various speakers. The first point is the rate of depletion.
For the first time the Bill gives power to the nation to control the rate of depletion of one of its most vital natural resources. This is essential, but at the same time we recognise the industry's legitimate need for a degree of certainty about the exercise of this control, particularly in the context of financing development. Accordingly, I wish to say that the Secretary of State for Energy, Mr. Varley, announced on 6th December that, first, no delays would be imposed on the development of finds made up to the end of 1975 and that there would be full consultation before any delay was imposed on developments of finds made after that date; secondly, no cuts would be made in production from finds made before the end of 1975 until 1982 or four years after the start of production, whichever is the later; thirdly, no cuts would be made in production from finds made after 1975 under existing licences until 150 per cent. of the investment had been recovered.
By an Amendment for the depletion power in the Bill, the Government have now provided that a licensee will know from the time he begins to develop the field the maximum extent of the cut-back which he can at any time be required to make. We come now to the arguments about the exemption of the BNOC from petroleum revenue tax.
§ Lord ORR-EWING
My Lords, I do not disagree in any way with those reservations; in fact, they are entirely helpful to the spirit of co-operation. But would it not be better to write those reservations into the Bill rather than have them as part of a Government Statement? Governments and Ministers change, and Government Statements can more easily be changed than if they are written into the Bill. Perhaps the noble Lord will consider the matter. I do not ask for an immediate answer.
§ Lord HUGHES
My Lords, it is not a matter for me, but I will certainly draw my right honourable friend's attention to it. May I remind the noble Lord that he has already complained about the length of the Bill. On the subject of the petroleum revenue tax, the BNOC will not be in quite the same position as a conventional nationalised industry. Through the operation of the national oil account, all its revenues will be payable gross to the Government. Nor is petroleum revenue tax a tax of general application. It is a tax which is confined to the upstream operations of the oil industry and has the specific purpose of securing for the nation a greater "take" from the exploitation of our offshore petroleum resources. In these circumstances, it makes no sense at all to switch the Government "take" from one pocket to another of the same suit. The money which the BNOC pays in petroleum revenue tax will come direct to the Government from the national oil account.
Noble Lords may say, "In that case, why is the Corporation to pay corporation tax?" The taxes are quite different. Corporation tax is a tax of general application to all aspects of the oil business and to industry in general. It is not a new tax, and there is no need to isolate the Corporation from corporation tax. Apart from anything else, corporation tax is payable in the ordinary way on those parts of its activities to which the petroleum revenue tax has no reference whatsoever.
I come to the question of retrospection and the suggestion that there may be compensation. It is regrettable that powers have had to be taken unilaterally to alter existing licences, but this stems from the unfortunate but manifest inadequacy of the existing terms. This is not an example of retrospective legislation in 404 the commonly accepted sense. Nothing in the Bill makes anything illegal which at the time it was done was legal. The new controls apply to existing licences, but only in respect of future actions carried out under them. It is objected that the new terms could have a serious effect on profitability and so diminish the value of the licences and that compensation should therefore be paid. This would be a very dangerous doctrine for the Government to accept.
In administering the controls, the Government will have regard to their effects on licensees, but the case for compensation does not stand up, even if some diminution of profit is sustained. Governments of all Parties frequently legislate in ways which result in financial burdens being placed on sections of the community. In these cases no question of compensation arises. Taxation is the obvious example, but there are many others: exchange control rules, legislation on safety, legislation on planning, legislation on advertising standards. These are all decisions which Governments may make which diminish the profitability of the companies that have to adhere to the new legislation. But when we do so we never include in the legislation any provision for compensating people for the lower profit which they may earn as a result of having to comply with the new conditions.
The subject of participation was also raised. I cannot understand why noble Lords opposite are always looking for sinister reasons for language. The noble Lord, Lord Orr-Ewing, gave the various ways in which he assumed that we were proceeding from nationalisation through something else and finishing up with participation—that it was all a plot hatched out by the people in Newham as part of the activities to get out Mr. Prentice. But if participation is such a nasty Left-Wing device, why did Mr. Jenkin say that the Conservative Government were considering having a degree of participation? If that is correct, the only difference between us is not that there is participation, but the level at which participation should take place.
If the Government take 25 per cent., that is good Conservative philosophy. If the Government take 35 per cent., it is still good Conservative philosophy. If the Government take 49 per cent., we may 405 get some support from the Conservative Benches. We may get the support of Mrs. Thatcher, but we may get the support of somebody else of older vintage. But as soon as we pass the 50 per cent. mark, this is the point at which they dig in their heels and it becomes nasty. I am glad that my interpretation of Conservative philosophy is better than my knowledge of the economics of the noble Lord, Lord Balogh, but I know that I would rather have his economics than Conservative philosophy any day.
I have covered most of the points, and have given myself a time limit of 30 minutes.
Lord CAMPBELL of CROY
My Lords, I hope that the noble Lord will not leave to the next debate which he mentioned his answer to my question as to whether lie could confirm the report in a recent edition of the Economist that the post of chairman of the British National Oil Corporation had been offered to a large number of people who had refused it.
§ Lord HUGHES
My Lords, as my noble friend Lord Beswick said earlier this afternoon, it is no part of a Minister's duty to confirm or deny rumours in the Press. The noble Lord, Lord Campbell of Croy, put that question. On the other hand, the noble Lord, Lord Orr-Ewing, informed us that there is a queue of people waiting for appointment and asked whether they were all lined up and were—
§ Lord ORR-EWING
My Lords, I asked where these great experts and professionals were to come from. I was regretting the fact that in addition to all the operating companies there were not sufficient people with this knowledge to form an entirely new Civil Service. I made the reverse point.
§ Lord HUGHES
My Lord, if the noble thinks that, he had better make certain that that is the way Hansard have reported it because that is not what he said. You are allowed to take out a "not" if it is not supposed to be there, or you can put it in if it has 406 been omitted. Anyway, the one must be ignored in exactly the same way as the other. In due course all will be revealed.
My Lords, I come to my final point. The noble Lord, Lord Orr-Ewing, expressed the hope that this Bill was not going to be steam-rollered through in the hot days of August. I hope, if anything else is wrong in his forecast, it is not his weather forecast. I cannot say exactly when this will be done, but I can assure the noble Lord that we do not at present anticipate that the Bill wilt be taken through all its stages before we rise for the Summer Recess. In fact, I may be in grave difficulties with my noble friend Lord Balogh, who was too afraid to anticipate. But the Government frequently attempt the difficult; we do not launch ourselves, on the eve of the Summer Recess, into the impossible.
§ On Question, Motion agreed to.