§ 4.52 p.m.
§ House again in Committee on Clause 1.
§ Lord Stoddart of Swindon moved Amendment No. 3:
§
Page 2, line 7, leave out from ("1934") to end of line 10 and insert—
("
and consent for development does not include consent which is limited to the purpose of testing the characteristics of an oil-bearing area and does not relate to the erection or carrying out of permanent works.
§ The noble Lord said: In actual fact, I would have liked to ask many more questions on the last issue, but bearing in mind the Deputy Leader's strictures and the desire of the House to get on with this particular business I refrain from asking them. However, I shall be asking them at some future time. I will try to catch up a little time for the Government, and indeed for the Committee; I will not take too long in moving this particular amendment, which I now beg to move, Amendment No. 3, standing in my own name and that of my noble friend Lord Bishopston.
§
There can he no quarrel with the wording of this amendment, with the single exception that provides for royalty exemption to start from 1983 instead of April 1982. It seems that the only reason for back-dating is to embrace the Alwyn and Clyde fields, the latter being of course a field belonging to Britoil and fomerly to the British National Oil Corporation. The back-dating of relief is, in our view, a hardly disguised means of giving a handout to the Government's own creature, Britoil. There can be no doubt about our view of the back-dating provisions. The Minister of State, Mr. Buchanan-Smith, confirmed this during Committee in another place, when he said (in col. 65):
I turn to Amendment No. 7, which is concerned with the date. Its simple practical effect would be to exclude the two fields to which the honourable Member referred".
The honourable Member was my honourable friend Mr. Rowlands and he was referring precisely to Alwyn and Clyde. So we know that the Minister of State himself believes that special dispensation was given to those fields, Alwyn and Clyde.
§ I believe we are entitled to ask why the Government are seeking to hand out such largesse when it is 131 completely and absolutely unnecessary. There can be no claim in the case of Alwyn and Clyde that the oil companies involved needed additional incentives to persuade them to go ahead with the development of those fields. They had in fact decided to do so in December 1982. Indeed, the then Secretary of State for Energy, now the Chancellor of the Exchequer, Mr. Nigel Lawson, announced the fact with great pride and a great flourish on 13th December 1982. So there was no question that these two fields were going to be developed whatever happened, and indeed whatever happens in this particular Bill.
§ There was absolutely no reason why the Government should back-date the provisions to embrace two fields where the decision had already been taken to develop them, and indeed that decision was announced proudly by the then Secretary of State for Energy. There was no need at all for this gratuitous hand-out to persuade the oil companies concerned to develop those fields.
§ The proposal to back-date the royalty remission certainly has no friends in Parliament, outside the Conservative Party that is. This was shown quite clearly to be the case in Committee in another place when Mr. James Wallace, the Liberal Member for Orkney and Shetland, not only spoke against the back-dating provisions but voted against them on a Division. He was fully convinced by the arguments put against back-dating by my honourable friend Ted Rowlands, the Labour Member of Parliament for Merthyr Tydfil and Rhymney. He was quite unimpressed by the attempted defence of the proposals put by the Minister of State.
§ I want now to come back to the cost of these proposals. With regard to the proposals as a whole, the argument of the Government has been that a costing exercise of any worth was not possible because there were too many imponderables. That has been one of the arguments of the Government against giving information which we believe they ought to give to Parliament to enable them to come to a reasonable decision about the provisions of this Bill. But with regard to the back-dating provisions the arguments have changed. The Minister of State during the Committee stage in another place, in reply to requests to give an estimate of the cost of the back-dating provisions, took a different line. It is clear that the Government have sufficient information to give some sort of estimate, but the Minister of State declined to make that estimate on the grounds that to do so would involve information which for commercial purposes is confidential. So in actual fact the Government have the wherewithal, they have the information to make an estimate, but they will not make it available to Parliament.
§ So how are we to judge the measures before us? Parliament has to make a decision about the likely effects of the measures before us, and indeed to assess the potential loss of revenues to the Exchequer and to this nation. But we are being denied information which is fundamental to our being able to make a decision. How on earth are we to make judgments on this basis? How can noble Lords in this place, or honourable Members in another place, properly carry 132 out their duty to scrutinise legislation if proper and available information is witheld from them? We on this side of the Committee are of the opinion that, whatever else may be said for this Bill, there is no justification whatever for the back-dating provisions. I therefore, commend this amendment to the Committee and ask for your Lordships' approval.
§ 5 p.m.
§ The Earl of AvonAs the noble Lord explained, the effect of the amendment is simple. It would exclude from royalty relief the two fields approved between 1st April 1982 and 1st April 1983. All members of the UKOOA would have been aware from the summer of 1982 of the review we were undertaking in close consultation with that association. It was appropriate, therefore, to include the two fields which were approved after the review had begun: Alwyn North in October and Clyde in December. It would also have been reasonable for the participants to expect that any changes to the fiscal regime taken as a result of that review would apply to their fields. I can assure the Committee that no secret assurances were given to the participants in those two fields that they would receive special treatment.
It is true that the decision to develop the two fields was taken while the review that led to the package was still being undertaken. The licensees of those fields could justifiably have cried "Foul!" if their welcome decision to seek approval for development at that time had resulted in their exclusion from the benefits to which the discussions with industry could reasonably have been expected to lead.
It would be wrong of me to quantify the effect of this Bill on the Exchequer's take, even from those two fields. Any estimate would be based on information about production profiles given in the strictest commercial confidence. That is why in another place my right honourable friend the Secretary of State chose a hypothetical field, which the noble Lord quoted.
What Ministers did make clear was that in their judgment these incentives will increase the flow of oil, and so of revenue, and, by no means incidentally, employment in North Sea-related United Kingdom industries. During the Second Reading debate in this House I referred to estimating the effect of this Bill as a crystal-gazing operation. The noble Lord, Lord Stoddart of Swindon, has looked into his crystal ball and sees only a loss. However, it is the Government's belief that the cost of the incentive, in percentage of take in such fields as would have gone ahead even under the old regime, will be substantially outweighed by receipts in PRT and corporation tax on fields which simply would not have been developed. This belief is based on the detailed review last winter of the profitability of respective developments and is confirmed by the very positive response of the industry since the package, including this Bill, was announced in March. I would prefer that the Committee should not accept the amendment.
§ Lord TordoffI must begin by informing your Lordships that I am a beneficiary from a pension fund of a large oil company; which I suspect has little bearing on what I have to say but I say it just the same. 133 I did not intervene on the previous amendment, but the truth is that we would not have supported the amendment had it been put to the vote, although it perhaps has some marginal merit. Basically we are supporting the Bill in general terms. I waited to hear what the Government had to say on Amendment No. 3 because I wondered whether there was anything I had missed in reading it. However, I find the Government's explanation on why it contains this retrospective element very thin indeed. I am grateful to the noble Lord, Lord Stoddart of Swindon, for the "commercial break" telling your Lordships what a good chap the new Member of Parliament for Orkney and Shetland is, and certainly it is true to say that he supported this amendment in another place.
I can see no excuse, in a Bill which rightly purports to encourage the oil companies to develop smaller and marginal fields—I am sure that will be the effect of the Bill—nor any reason why there should be a retrospective element on fields where the decision has already been taken. That simply does not hang together with the logic and philosophy behind the Bill. Certainly I shall advise my colleagues to go into the Lobbies with the mover of the amendment and I hope he will press it to a Division.
§ Lord BishopstonIn the previous amendment there was an attempt to prevent, in effect, a subsidy or grant being given to those who did not necessarily need it. I say "did not necessarily need it" because the Government could not, or preferred not to, give any figures to estimate the loss of potential royalty. The North Sea is an asset of vital importance to the nation. Its income is enough to finance the 3 million or more unemployed and who are jobless as a deliberate result of the Government's economic policy. Therefore, the income from the North Sea which the nation so essentially needs for the redevelopment of our industry is being used to finance 3 million people for whom the Government have no need.
We do not know much about the royalty cuts and how much they would have contributed, for instance, to the financing of the vast sum necessary to sustain the number of unemployed. We have no idea of how much it would have contributed to other areas of public spending or what cuts could have been avoided had such money been available. We have no idea of that sum. The Government are not saying.
On speaking to the previous amendment I said that no other aspect of public spending had experienced such generosity. Local government, education, housing, transport, regional grants, publicly run industry, private enterprise, agriculture—all have the task of proving need when any concessions are sought from the Government. One makes no complaint about that, but in this case there is no requirement whatever on these oilfields, which bring in very desirable vast sums of money to help the public purse, to prove need. Otherwise, of course, the 1975 Act to which I referred on the previous amendment would have sufficed to give such help as was necessary. Other sectors have had to demonstrate need to the Government in order to obtain that largesse.
134 Not content with giving a subsidy in the future of unknown financial dimension, the Government's generosity to the profitable oil-producing sector goes back into the past. The Government's case for reduced royalties rested on possible need to encourage future development. That is a case which one can accept. Future development would be difficult and we do not want to put off people when they are hesitating as to whether to invest the manpower, money, materials and in other ways in a development of enormous size. But, by backdating, the Government are exposed on their claim that the industry needs help in an uncertain future.
The Government must have some figures which give an estimate of how much pay-back there will be in this period. In this concession the Government should naturally tell us how much is involved. There is no justification based on potential risk, because the risks have been taken. The production has been put into barrels and sold and one presumes that the royalties have been paid. If they have, they will have to be paid back and there must be some figure as to the extent of that. The past developers knew what was expected when they took on the development and they were prepared to accept it. The Minister has given no argument or any reason why this money should be paid back, even though, as I said, we can see justification to some extent—an extent we would not accept—on the future risks. But there is no justification for this concession.
We are grateful for the support of the Liberal Party. In the words of the noble Lord, Lord Tordoff, no case has been made out. As he suggests, the matter should be tested in the Lobbies.
§ The Earl of AvonThe noble Lord, Lord Bishopston, ranged widely on this particular point, which is only about two oilfields. If I may take him up on his wide exercise. I believe that the incentives which this royalty Bill will produce will give the Chancellor more revenue than the old system.
§ Lord BishopstonI was making the point that the last change was a big concession and this one is even less justified on top of that. The Minister has not given the figures which justify the point that he has just made.
§ Lord TordoffI wonder whether I might distance myself from the more general remarks made by the noble Lord, Lord Bishopston. Quite clearly, noble Lords on these Benches do not regard the oil companies as being rogues and vagabonds tucking away vast sums of money untaxed. But on the narrow point of this amendment, which is what I thought we were speaking to, we will support it.
§ Lord BishopstonI certainly in no way ascribe to those concerned with oil production the description mentioned by the noble Lord, Lord Tordoff. I believe that the industry has a great record, but I feel that the moves that we have been discussing this afternoon cannot be justified.
§ 5.11 p.m.
§ On Question, Whether the said amendment (No. 3) shall be agreed to?
§ Their Lordships divided: Contents, 83; Not-Contents, 124.
136| DIVISION NO. 2 | |
| CONTENTS | |
| Airedale, L. | Kilmarnock, L. |
| Ardwick, L. | Kirkhill, L. |
| Attlee, E. | Leatherland, L. |
| Aylestone, L. | Lee of Newton, L. |
| Banks, L. | Llewelyn-Davies of Hastoe, B |
| Barnett, L. | Lloyd of Kilgerran, L. |
| Beaumont of Whitley, L. | Lockwood, B. |
| Beswick, L. | Lovell-Davis, L. |
| Bishopston, L. | Mackie of Benshie, L. |
| Blyton, L. | McNair, L. |
| Boston of Faversham, L. | Mayhew, L. |
| Bowden, L. | Milford, L. |
| Brockway, L. | Mishcon, L. |
| Brooks of Tremorfa, L. | Molloy, L. |
| Byers, L. | Nicol, B. [Teller.] |
| Carmichael of Kelvingrove, L. | Northfield, L. |
| Cledwyn of Penrhos, L. | Oram, L. |
| Collison, L. | Phillips, B. |
| David, B. | Ponsonby of Shulbrede, L. [Teller.] |
| Davies of Penrhys, L. | |
| Diamond, L. | Prys-Davies, L. |
| Donnet of Balgay, L. | Rhodes, L. |
| Elwyn-Jones, L. | Rochester, L. |
| Ewart-Biggs, B. | Seear, B. |
| Fitt, L. | Segal, L. |
| Gaitskell, B. | Simon, V. |
| Galpem, L. | Stallard, L. |
| Glenamara, L. | Stedman, B. |
| Graham of Edmonton, L. | Stewart of Alvechurch, B. |
| Hale, L. | Stewart of Fulham, L. |
| Hanworth, V. | Stoddart of Swindon, L. |
| Harris of Greenwich, L. | Taylor of Gryfe, L. |
| Heycock, L. | Taylor of Mansfield, L. |
| Houghton of Sowerby, L. | Tordoff, L. |
| Hughes, L. | Underhill, L. |
| Irving of Dartford, L. | Wallace of Coslany, L. |
| Jacques, L. | Walston, L. |
| Jeger, B. | Wells-Pestell, L. |
| Jenkins of Putney, L. | White, B. |
| John-Mackie, L. | Wigoder, L. |
| Kaldor, L. | Winterbottom, L. |
| Kilbracken, L. | Wootton of Abinger, B. |
| NOT-CONTENTS | |
| Airey of Abingdon, B. | Dilhorne, V. |
| Allerton, L. | Dormer, L. |
| Alport, L. | Dundee, E. |
| Ampthill, L. | Eccles, V. |
| Auckland, L. | Effingham, E. |
| Avon, E. | Elton, L. |
| Bauer, L. | Faithfull, B. |
| Belstead, L. | Fanshawe of Richmond, L. |
| Bessborough, E. | Fortescue, E. |
| Boyd-Carpenter, L. | Fraser of Kilmorack, L. |
| Caccia, L. | Gainford, L. |
| Caithness, E. | Gisborough, L. |
| Campbell of Alloway, L. | Glanusk, L. |
| Carnegy of Lour, B. | Glenkinglas, L. |
| Cathcart, E. | Greenway, L. |
| Cockfield, L. | Grimston of Westbury, L. |
| Cottesloe, L. | Hailsham of Saint Marylebone, L. |
| Craigavon, V. | |
| Dacre of Glanton, L. | Hawke, L. |
| Daventry, V. | Henley, L. |
| Davidson, V. | Hives, L. |
| De Freyne, L. | Holderness, L. |
| Denham, L. [Teller.] | Home of the Hirsel, L. |
| Devonport, V. | Hornsby-Smith, B. |
| Hylton-Foster, B. | Porritt, L. |
| Inglewood, L. | Portman, V. |
| Ironside, L. | Rankeillour, L. |
| Kilmany, L. | Reay, L. |
| Kinnoull, E. | Redesdale, L. |
| Lauderdale, E. | Renton, L. |
| Lindsey and Abingdon, E. | Ridley, V. |
| Lloyd, L. | Rochdale, V. |
| Long, V. | Rodney, L. |
| Lucas of Chilworth, L. | Romney, E. |
| Luke, L. | Rugby, L. |
| Lyell, L. | St. Aldwyn, E. |
| McAlpine of Moffat, L. | St. Davids, V. |
| Mackay of Clashfern, L. | Salisbury, M. |
| Macleod of Borve, B. | Sandford, L. |
| Mancroft, L. | Savile, L. |
| Mansfield, E. | Selkirk, E. |
| Margadale, L. | Shaughnessy, L. |
| Marley, L. | Skelmersdale, L. |
| Masham of Ilton, B. | Spens, L. |
| Maude of Stratford-upon-Avon, L. | Stanley of Alderley, L. |
| Strathclyde, L. | |
| Merrivale, L. | Strathcona and Mount Royal, L. |
| Mersey, V. | |
| Middleton. L. | Strathspey, L. |
| Molson, L. | Suffield, L. |
| Monk Bretton, L. | Swinton, E. [Teller.] |
| Morris, L. | Terrington, L. |
| Mottistone, L. | Tranmire, L. |
| Moyne, L. | Trenchard, V. |
| Murton of Lindisfarne, L. | Tryon, L. |
| Newall, L. | Tweeddale, M. |
| Norfolk, D. | Vaux of Harrowden, L. |
| Nugent of Guildford, L. | Vivian, L. |
| O'Neill of the Maine, L. | Waldegrave, E. |
| Onslow, E. | Windlesham, L. |
| Orkney, E. | Wise, L. |
| Pender, L. | Wynford, L. |
| Penrhyn, L. | Young, B. |
| Plummer of St. Marylebone, L. |
§ Resolved in the negative, and amendment disagreed to accordingly.
§ Clause 1 agreed to.
§ Remaining clause agreed to.
§ House resumed: Bill reported without amendment: Report received.