HL Deb 14 February 1979 vol 398 cc1247-9

2.52 p.m.

The Earl of LAUDERDALE

My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether they will now complete their incomplete reply to the Question tabled in his name for Written Answer on 14th December (Hansard16th January, col. 932) about their willingness to forego royalties on otherwise unprofitable off shore oilfields, by stating—

  1. (i) how they would determine their stated criterion, namely "the balance between the cost of the refund and the benefit to the nation"; and
  2. (ii) when royalties would be refunded in cases where a refund is agreed.

Lord STRABOLGI

My Lords, in determining the balance between the cost of a royalty refund and the benefit to the nation from granting it, we would consider all relevant factors. These would include as well as the amount of the refund, the contribution of the develop- ment concerned to national income, the timing of that contribution and the estimated cost of the development.

Any refund granted would be the subject of an agreement between the Secretary of State and the applicant and the refund would be paid in accordance with the terms of that agreement. The terms would include provisions on the timing of refund payments.

The Earl of LAUDERDALE

My Lords, I thank the noble Lord for that Answer to what I agree is a complicated Question. May I, however, ask him this further question: Would he not agree that a company which wants to seek a refund of royalties, if it is going to enter upon an activity which is on a relatively unprofitable scale, will wish first to convince its financial backers that this is going to happen? Therefore, what I think I must call the elegant rigmarole read out by the noble Lord is not going to be very helpful in that situation. Does not the noble Lord realise that the statement which he made just now was of a rather general nature?

Lord STRABOLGI

My Lords, the advantage to a company of a refund rather than a remission of royalties is that the refund is free of PRT and corporation tax. That is why the 1975 Act was worded in this way and approved by Parliament, in its wisdom.

The Earl of LAUDERDALE

My Lords, I thank the noble Lord for that further answer. Since he has referred to PRT, may I also ask him whether or not it might be possible to allow the latest submission on PRT, which has been made to the Treasury by the United Kingdom Offshore Operators' Association, to be published? Would not the noble Lord agree that this would now be worth while?

Lord STRABOLGI

Yes, my Lords, Ministers and officials have discussed royalty refunds with a number of companies during the consultations on the proposed PRT charges. These consultations, which are confidential, are continuing. The Government have no objection to the Association publishing their submission and making the best of their case publicly, as they see it.

The Earl of LAUDERDALE

My Lords, if I may ask the noble Lord for one further piece of information, going back to the refund of royalties and estimating all the relative facts, could he say whether the Government give greater weight to the benefit to the balance of payments or whether greater weight is given by them to the production of energy for our national use?

Lord STRABOLGI

My Lords, the contribution to the national income would be the increase in Government tax and royalty receipts and also in the profits of United Kingdom companies. I may say, though—I want to be helpful to the oil companies because we value the importance of their work—that we are ready to enter into agreements to refund royalties in time to enable licensees to rely upon receiving a refund, subject to any agreed conditions, before they undertake a major investment.