HL Deb 25 July 1979 vol 401 cc1917-9

2.37 p.m.

The Earl of LAUDERDALE

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

The Question was as follows:

To ask Her Majesty's Government whether they will now revert to the practice which followed the first four rounds of offshore exploration licensing whereby royalties were determined on the wellhead value of production.

The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie)

My Lords, the basis of calculating royalty for fifth and sixth round licences was determined before applications were invited: it is the landed value used for tax purposes of the petroleum produced. As to future licences, no decision has yet been made.

The Earl of LAUDERDALE

My Lords, in thanking my noble friend for the assurance that no decision has yet been made regarding future licences, may I ask whether he would agree that any disincentive to profit is in turn a disincentive to production and in turn to exploration, and therefore any disincentive to profit would be counter to the purposes of Her Majesty's Government's policy?

The Earl of GOWRIE

My Lords, I am not in any disagreement with the philosophy as expressed by my noble friend, but the Government do not consider that the present fiscal package is acting as a disincentive to new explorational development. Higher oil prices should stimulate exploration for new reserves, and the North Sea fiscal régime already contains features to assist the exploration of marginal fields.

Lord STRABOLGI

My Lords, may I ask the noble Earl to confirm that the Government will retain the Labour Government's ring fence on North Sea profits made by the multinationals?

The Earl of GOWRIE

My Lords, the noble Lord, Lord Strabolgi, is always asking me to confirm matters which are still under review. I will confirm them to him the moment I am able to do so.

Lord BALOGH

My Lords, does the noble Earl realise that intervention from the Benches opposite in this matter of the North Sea almost invariably implies an increase in private profit and a decrease in national advantage?

The Earl of GOWRIE

My Lords, I see no connection between high levels of profitability and national disadvantage.

The Earl of LAUDERDALE

My Lords, will my noble friend not accept that all over the world the wellhead price is the normal practice in determining royalties and that here the landed price is the exceptional practice, for which the last Government were responsible, and which has really done damage, not good?

The Earl of GOWRIE

My Lords, I will take into account what my noble friend says as we make our review.

Lord BALOGH

My Lords, does the noble Earl realise that his previous reply was totally misleading, as a very large part of the profit accrues to foreigners?

The Earl of GOWRIE

My Lords, as the noble Lord is well aware, oil is an international affair, and we gain considerably by our position internationally.

Lord STRABOLGI

My Lords, will the noble Earl not confirm that during the fourth round without the ring fence £1,000 million annually would have been lost to the balance of payments?

The Earl of GOWRIE

My Lords, I think that the ring fence was created in conditions different from those which obtained during the early rounds of explorations.

Lord HARMAR-NICHOLLS

My Lords, will my noble friend not allow the prejudices of the Benches opposite against profits to interfere with the successful exploitation and production of oil from within our boundaries?

The Earl of GOWRIE

My Lords, I am grateful to my noble friend; I have absolutely no intention of doing so.