Oil and Pipelines Bill

HL Deb 31 July 1985 vol 467 cc277-305

The Minister of State, Scottish Office (Lord Gray of Contin)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Gray of Contin.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clause 1 [The Agency]:

Lord Stoddart of Swindon moved Amendment No. 1: Page 1, line 10, leave out ("or part-time").

The noble Lord said: I beg to move the amendment standing in my name on the Marshalled List. Your Lordships will see that it seeks to leave out at line 10, page 1, the words "or part-time". The purpose of the amendment is to insist that the chairman of the agency should be a full-time appointment. As presently drafted, the Bill permits the appointment to be either full-time or part-time. Indeed, the Government have now announced that Mr. George Dunkerley is to be the part-time chairman of the agency.

If the chairman is part-time, there will be a tendency for the agency to become a rather small adjunct of the Department of Energy, and that really is not good enough. In our view, the agency should be seen as an important institution in relation to our oil supplies and their security. We really cannot understand why the Government have made clear their intention to appoint a part-timer to this agency.

What is more, I really do not think it is satisfactory that a person who is retired, however good he may be—and undoubtedly Mr. Dunkerley is a man of very high calibre—should be appointed. In these times and in the light of the importance of the agency, it is altogether reprehensible that a part-time retired person should be appointed as chairman. Undoubtedly the confidence of the public, of the oil companies and indeed of the staff themselves is bound to be undermined by appointments of this sort. I therefore trust that I shall get the support of your Lordships for this amendment to make the appointment a full-time one.

Lord Lloyd of Kilgerran

I put my name to this amendment because the Government said that what we are now dealing with is a major Bill. They have also said that we are dealing with an oil-operating agency which will be trading and operating in market conditions of great intricacy and complexity. It therefore seems to me, for the reasons so concisely put forward by the noble Lord, Lord Stoddart of Swindon, that this important agency, with consequences relating to the security of the nation, should have a full-time chairman. In putting my name to this amendment I was in no way intending anything personal in relation to the part-time retired gentleman who has already been appointed by the Government. There is nothing personal about this, but it seems to me fundamental to the agency's operation that it should have a full-time chairman.

11.45 a.m.

Lord Gray of Contin

I listened carefully to what the noble Lords, Lord Stoddart of Swindon and Lord Lloyd of Kilgerran, have said. However, I would point out that it would be unusual for legislation to provide that the chairman of a public body had to be a full-time appointment. Clause 1(2) of the Bill provides the Government with a desirable level of flexibility for finding the most suitable people to fill positions on the agency's board.

One such arrangement which it facilitates is the appointment of a part-time chairman and a full-time chief executive. This is a common pattern for public sector boards and it is currently used for the 10 regional water authorities, the National Bus Company, the Civil Aviation Authority, the British Waterways Board, the Forestry Commission, the Nature Conservancy Council and of course the British National Oil Corporation. All these are very substantial organisations, requiring considerable commitment from their chairmen and board members.

I must say I would be most surprised if any of the bodies I have mentioned would agree that their effectiveness was hindered in any way by having a part-time chairman; in fact the position is probably quite the reverse. It is even possible to recruit a chairman of higher calibre on a part-time basis than on a full-time basis. Thus it is with the Oil and Pipelines Agency, where the Government regard themselves as fortunate to have secured the services of Mr. George Dunkerley to be the agency's first chairman. The noble Lords have made it absolutely clear that they are not in any way questioning the selection made by the Government, and I am glad that Mr. Dunkerley will be able to start off in the knowledge that he has the full confidence of your Lordships.

The British National Oil Corporation, if I may take that as an example, has been most effectively served by the noble Lord, Lord Croham, as their part-time chairman over the past two and a half years. Perhaps I could take this opportunity to pay tribute to what he has achieved.

This amendment sits oddly with what has been the position at BNOC over recent years. In addition, going further back, it is useful to know that the Labour Government, when they were in office, did not think it desirable or appropriate for BNOC's chairman to be full-time when they introduced the Petroleum and Submarine Pipe-lines Act in 1975 and established BNOC. In the light of what I have said and for the reasons I have given, I hope the noble Lords might consider withdrawing their amendment.

Lord Stoddart of Swindon

I do not want to make too much of this but I hope the Minister will take on board what I have said about the need to ensure that this new agency is held in proper public esteem and that it also has the confidence of the staff. Certainly no criticism is implied of Mr. Dunkerley. We are aware that he is a man of very high calibre, and I have no doubt that he will perform the functions well. Nevertheless, in an agency of this sort, which has an important role to play now (and perhaps it will be even more important in the future) we believe it would have been wise to have appointed a full-time chairman. However, in the light of what the noble Lord has said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Stoddart of Swindon moved Amendment No. 2: Page I, line 12, leave out ("two") and insert ("three").

The noble Lord said: I beg to move Amendment No. 2, standing in my name and that of the noble Lord, Lord Lloyd of Kilgerran. This amendment seeks to increase the size of the agency and to substitute the word "three" for the word "two" in line 12 of page 1. I also seek to increase the number "four" to "five". Again, it seems to us that, having such a small number to constitute the agency tends to show that the Government give it little importance. If it consisted of only two people, or even if it consisted of four people and one was sick and another was away on business, when they met that would not constitute a meeting, it would merely constitute a conversation. I do not believe that that is the way in which public business should be carried on.

Furthermore, the composition of the agency should reflect the numerous interests in the oil pipelines industry itself. These will amount to no more than a minimum of two members as at present statutorily required. I think the noble Lord must agree that in an operation of this sort there is need for diversity on the board. I am sure that the noble Lord, in particular, and surely the Government, do not want the impression to go abroad that this is a sort of corner shop organisation, a corner shop arrangement, because this agency has very important work to do. I simply do not believe that it can do it properly, and in accordance with accepted practice, with so small a number of people as that being proposed in the Bill.

My amendment is very modest. Indeed, the noble Lord, Lord Lloyd, himself has another amendment which will perhaps be more appropriate. I certainly hope that the Government will give consideration to these amendments and will accept at least one or two of them.

Lord Boyd-Carpenter

I thought that the noble Lord, Lord Stoddart of Swindon, made a bad point when he suggested that the fairly restricted number of members of the agency proposed by the Bill indicated that the Government underrated the importance of the agency. I think that, to suggest that the more members one puts on the agency the more important one thinks it is, is a little too simplistic an argument. Surely what is material is the quality and calibre of the people appointed. That will be the best indication of the importance which the Government attach to the agency.

The other point is the purely working one. Those of us who have served with many organisations know that there are great advantages in bodies of this sort not being too large. Under the Bill as it stands, there will be a chairman and up to four members. That would seem to give ample cover if interests require to be represented—I am not at all sure about that—and gives ample numbers for their purpose. It also provides a small body to act quickly and easily. If your Lordships are concerned with efficiency, it is worth recalling that, for a large part of the War, the War Cabinet consisted of a Prime Minister and four other members.

Lord Lloyd of Kilgerran

I support this amendment, and while I do not want to make much of it, the intervention of the noble Lord, Lord Boyd-Carpenter, supports the attitude that we have adopted towards this matter. Perhaps we may consider just for a moment what could happen. Under subsection (2)(b) the two members could be two part-time members. Surely the noble Lord, Lord Boyd-Carpenter, is not suggesting by his analogy with war activities that the gentlemen concerned there were, in his submission, part-timers? It would be absurd from an industrial and commercial point of view that an important agency like this should be run by two part-time members, as this envisages.

Lord Boyd-Carpenter

And a chairman.

Lord Lloyd of Kilgerran

I suppose that the answer from the Minister will be that the Secretary of State would make sure that that position would not arise. But as I shall be speaking later, I shall suggest that the Secretary of State should not intervene so closely in the nominations for the board. It seems to me absurd to leave the clause as it is, where it is quite possible for this very important agency to be run by two part-time members.

The Earl of Lauderdale

The impression that one gets from what has been said from the opposite Benches is that this agency is to be run by the board. It will be run by the staff. The board is there to determine policy. Hopefully, one does not change policy once a week or even more frequently. One has a board meeting, say, once every fortnight or once a month. That is quite sufficient. The idea that this agency's activities will be run by the board is simply turning the whole thing upside down. There will be a staff; and that is the critical point at issue.

Lord Gray of Contin

I am interested that this amendment has evoked such useful interventions from my noble friends Lord Boyd-Carpenter and Lord Lauderdale. I am bound to say that I am surprised that the noble Lord, Lord Stoddart, has attached as much importance to this as he appears to have done, because we must remember that central to all our thinking on these amendments must be a consideration of the size and the role of the new Oil and Pipelines Agency.

The Government have never sought to make any secret of the fact that they envisage the agency as a small successor to BNOC, with a much more restricted role. The British National Oil Corporation's principal activity was the trading of participation oil which has now been brought to an end. The functions which the agency will assume from BNOC will be limited to those which it is desirable to continue in the public sector.

I can understand that if the noble Lord, Lord Stoddart, does not agree with our policy, he might reasonably wish to puff up the agency into being a larger body than there is any necessity for it to be. But as far as his amendments are concerned, I cannot go along with him; nor can I accept his amendment. This Government are committed to the efficient and economical running of public business. We believe that a board of between three and five members will be appropriate and quite sufficient to control the agency's activities. The Government may appoint one further member in addition to the three who have already been announced. If so, this will be made known as soon as the appointment has been made.

I agree with many of the sentiments expressed by the noble Lord, Lord Lloyd, in his amendments, particu- larly about the importance of part-time members on the board. They often bring a much wider experience to bear on an organisation's business. The agency will certainly have at least two part-time members in Mr. Dunkerley and Mr. Heald. It will also not be short of expertise in international oil trading. I trust that the noble Lord will not seek to press his amendments because, although I agree with their sentiments, I hope he will agree that it would be unwise to build too many conditions into the statutory requirements on board members. The provisions currently in the Bill are in the usual form and are useful because of the flexibility which they allow. I hope similarly that noble Lords will accept my assurance that the size of the board proposed in the Bill is appropriate to the agency's limited range of functions and will not seek to press their amendments on the number of board members.

12 noon

Lord Stoddart of Swindon

I think perhaps I have been guilty of misleading the Committee to some degree, because what I should have said at the beginning was that perhaps it would be convenient to take Amendments Nos. 2, 3, 4, 5 and 6 together; indeed, that may very well be so. Amendment No. 3: Page 1, line 12, leave out ("four") and insert ("five"). Amendment No. 4: Page 1, line 12, leave out ("four") and insert ("six including at least two non-executive members"). Amendment No. 5: Page 1, line 12, leave out ("as the Secretary of State may from time to time determine."). Amendment No. 6: Page 1, line 13, at end insert— ("(c) at least one non-executive member who should have substantial experience of international oil trading and organisation in relation thereto."). In those circumstances, I am wondering whether, since this is Committee stage, it will be in order for the noble Lord, Lord Lloyd, to speak to his amendments, if he agrees that that is the correct course to take.

Lord Lloyd of Kilgerran

I am grateful to the noble Lord, Lord Stoddart, for it is only a minute ago that I had a paper indicating that certain amendments would be taken together. When I intervened earlier, I had not realised that somebody had decided that Amendments Nos. 2, 3, 4, 5 and 6, some of which are in my name, were to be taken together. If the leave of the Committee is required, may I ask for that leave in order to amplify my previous speech?

I do not want to take up time arguing about whether the number should be four or five, but I should like to direct attention once again to Amendment No. 5, which is to leave out the phrase, as the Secretary of State may from time to time determine. My view is that this agency is of such importance that it should be able to nominate directors which it considers are appropriate, without calling in the Secretary of State from time to time to determine the number.

As to Amendment No. 6, I think that the Minister has given an assurance in relation to that. My Amendment No. 6 is to introduce into the Bill a paragraph stating, at least one non-executive member who should have substantial experience of international oil trading and organisation in relation hereto. It seems to me to be absolutely essential, when contemplating the operation of this organisation dealing with complex trading matters internationally, that there should be somebody on the board with real experience of that intricate organisation. For instance, he should have experience of dealing with international energy agency matters; possibly with OPEC matters.

It is not unknown to many of your Lordships here that difficulties arose with BNOC and the operation of OPEC which may arise again. Therefore, it seems essential that one of the non-executive members should have this international experience. I am very grateful to Members of the Committee for allowing me to supplement my original remarks and I apologise for the fact that I was not, through the usual channels, supplied with the necessary information as to how we were to proceed.

The Earl of Lauderdale

Is it not the case that all the parties opposite love quangos and the bigger they are, the happier they are?—

Lord Lloyd of Kilgerran

May I add one small remark and say that, speaking from these Benches, I for my part disagree entirely with the introductory observation of the noble Earl, Lord Lauderdale.

The Earl of Lauderdale

I am delighted to hear that the noble Lord, Lord Lloyd of Kilgerran, is on his way towards these Benches. But the fact is that the parties opposite, apparently with one notable exception, love quangos, and the bigger they are, the better. On our Benches, we regard quangos as very tiresome objects, and we say: the smaller they are, the better. Therefore, the isssue is whether you have a magni-quango or a mini-quango. I am for a mini-quango.

Then questions are raised about whether in a mini-quango you can have sufficient expertise. Surely the story of BNOC is of people who began outside the oil industry learning very quickly. Mr. Ian Clark came to it having been county clerk of the Shetlands, and as county clerk he knew nothing about oil companies. Somebody asked him how he found out. He said: "I always saw two of them together". Unless I am mistaken, I think that the noble Lord, Lord Kearton, came to BNOC from the textiles industry and a brilliant success he made of his new job. So expertise can be acquired and learned, but the context should surely be a mini-quango and not a magni-quango. Therefore, I hope that the Government will resist these amendments.

Lord Gray of Contin

Perhaps I may briefly say a word or two about the contribution from the noble Lord, Lord Lloyd of Kilgerran. I apologise to him most sincerely if he was not given a list of the groupings beforehand. That was an oversight which we will ensure does not happen again. I am very sorry indeed. It is appropriate that we discuss these amendments together, as the noble Lord, Lord Stoddart, has suggested, and the real assurance which noble Lords on all sides seek from me concerns the dedication of those who will be appointed to this board.

Certainly, I think that the initial appointments show how serious a view the Government take on this matter. Both Mr. Dunkerley and Mr. Heald have considerable experience of the type of work which will be involved for the new organisation, and that is the standard which the Government will seek to maintain. So there is no question of there not being a positive commitment by the members of the board. Whether they are part-time or full-time, this is what the Government will seek.

My noble friend Lord Lauderdale has made a useful comment on the merit or demerit of the quango system. As he has said, the Government are not particularly keen on the idea of quangos and, indeed, to their credit they have already dispensed with the services of quite a number of them. But there are occasions when a quango is necessary, and I agree with my noble friend that when we need to have a quango it is preferable that it should not be over-cumbersome. In this case, as I explained a little earlier, our reason for keeping down the number of board members is that the activities of the new body will be very much less than those of the British National Oil Corporation which it succeeds. I trust that, in view of what I have said, the noble Lord will be prepared to withdraw his amendment.

Lord Stoddart of Swindon

I am not at all sure that Mr. Dunkerley will be very pleased to be told that he is heading a quango. Quangos have a very bad name. I thought that the agency was something other than a quango. Let me say to the noble Earl, Lord Lauderdale, that we in the Labour Party do not agree—and indeed the noble Lord, Lord Lloyd, concurs—that there should be more quangos than necessary. The Government and the noble Lord, Lord Gray, say that this Government have been trying to get rid of quangos. But I have to remind the noble Lord that we have only just passed a Bill which is now the Local Government Act, and which will set up a whole new range of real quangos. So please do not let the noble Earl, Lord Lauderdale, preach to me about quangos, when he went through the Lobbies in this House voting for them right and left during the whole of the summer.

The Earl of Lauderdale

Just right!

Lord Stoddart of Swindon

I do not intend to press the amendment, but I have to say that I do not think we have been unreasonable in proposing that the agency should consist of a maximum number of five members. There are a lot of interests and specialities in oil, and in the North Sea in particular, and it was our view—which is why we moved the amendment—that we should have an agency with sufficiently wide expertise to be able to look after the needs of the agency, the interests of the Government and, indeed, the interests of this nation. However, the noble Lord, together with several other noble Lords, has taken a different view. I think that on balance—and it is only on balance—we are right; but in the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 3 not moved.]

Lord Lloyd of Kilgerran had given notice of his intention to move Amendments Nos. 4, 5 and 6:

[Printed above.]

The noble Lord said: These amendments are in my name and I presume that I should intervene formally to say that, in view of the assurances given by the Minister, I shall not be pressing them. The Minister made it perfectly clear that there would be at least one member of the board with very good and intimate experience of international oil trading. I echo all that the noble Lord, Lord Stoddart, has said, and I shall not move the amendments.

[Amendments Nos. 4 to 6 not moved.]

Clause 1 agreed to.

Schedule 1 [The Agency]:

Lord Lloyd of Kilgerran moved Amendment No. 7: Page 6, line 10, at end insert ("provided that the total period of holding office shall not exceed five years").

The noble Lord said: The object of this amendment is to ensure that no member of the agency shall hold office for more than five years. It seems to me to be quite important that one should be able to introduce people with experience in this matter and that five years' tenure would be sufficient. I am sure that on this occasion and on this matter I shall have the full support of the noble Earl, Lord Lauderdale.

We know that we are dealing with intricate international marketing matters. We have been told that over the past three years there have been tremendous changes in the marketing arrangements. Therefore it seems quite reasonable that instead of, as is now in the Bill, enabling a man to have almost tenure for life as a member of the board, there should be a limitation put on the number of years for which he holds office. I beg to move.

Lord Boyd-Carpenter

This appears to me to be a most impracticable amendment, and an unfortunate one. Those of us who have had some administrative experience on these bodies realise that rigid time limits of this kind can cause the greatest practical awkwardness. They can enforce the departure of an experienced and an efficient member at just about the time when ill-health or another appointment is removing others. It is an inflexible provision and I should have thought a very inefficient one. I hope that my noble friend will reject it.

Lord Gray of Contin

I can straightaway assure my noble friend Lord Boyd-Carpenter that I shall have to reject this amendment. I can appreciate the concern which the noble Lord, Lord Lloyd, has expressed but I cannot accept the substance of his amendment. I must ask the Committee to give the Government the flexibility which they need to appoint and to reappoint the people who are most suitable. Certainly we shall always need fresh blood—of that there is no doubt—but there is nothing particularly desirable in a rapid turnover of board members. We shall need to retain members who have a proven record of good service to the agency and its employees, and long experience.

Perhaps I may give your Lordships' Committee one or two examples. This year Mr. Gavin Laird has reached his tenth year as a part-time member of BNOC. I am sure that the noble Lord, Lord Lloyd, would not suggest that we should have dispensed with his services, perhaps in 1980. He has been a very valuable member and he was reappointed. It has been to the benefit of the board of which he is a member that he should be there. Next year, if I may give another example, Sir Denis Rooke will have been chairman of British Gas for 10 years. Whether one always agrees with Sir Denis of whether one dues not, one certainly cannot suggest that he has been lacking in vigour in his pursuit of furthering the aims of his corporation. I take the point which the noble Lord rightly makes that when one is appointed to a board the impression should not be that that person is there for ever. That would be quite wrong. But to limit the ability of the Government to appoint to a period of five years would be a mistake and would not be to the benefit of the body which we are debating at this moment.

While I appreciate the point that the noble Lord makes about people not being on boards for too long, I suggest to him that his amendment would be positively damaging rather than helpful. I suggest to him that he might consider withdrawing it.

12.15 p.m.

Lord Lloyd of Kilgerran

I was very surprised to have a lecture on efficiency from the noble Lord, Lord Boyd-Carpenter, who has a great experience of industry. I should have thought that he would agree not only with many other organisations but certainly with the Prime Minister, that new blood into industry is of vital importance, and that one of the difficulties about management in some industries at the moment is that certain people in charge have been there for too long. Here we have an agency which is entering into difficult international marketing and trading, an area which is changing all the time. I believe that we should limit the number of years for which any individual can hold office. It is not a question of all of them having to retire at the same time because one can easily space the appointments in such a way as to ensure that there is continuity in management while other people are being appointed.

I must also express deep disappointment with the Minister. The noble Lord knows as well as I do that analogies are always wrong. For him to quote the names of persons such as Sir Denis Rooke in this context seems to me most inappropriate. I have known Sir Denis Rooke for many years. I have the greatest admiration for him. He had the presence of mind to marry a Welsh wife. Therefore, to say to this Committee that one of the reasons the Government are refusing my amendment is that they would have lost the services of Sir Denis Rooke, is no analogy whatsoever. I hope that Sir Denis Rooke will continue much longer in his splendid management of the British Gas Corporation.

The Minister, however, has been very positive. He has said that my amendment would be "positively damaging" to the functioning of the agency. In those circumstances, in view of that very positive statement made on behalf of the Government in relation to my amendment, I have, as members of the Committee will realise, no alternative but to withdraw what the Government say is a most damaging amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (The Earl of Listowel)

Before I call the next amendment I should point out to the Committee that, if it is agreed to, I cannot call Amendments Nos. 9 or 10.

Lord Lloyd of Kilgerran moved Amendment No. 8: Page 7, line 2, leave out ("(who may be the chairman or another member").

The noble Lord said: This amendment more or less pursues the same kind of theme that the noble Lord, Lord Stoddart, and I have been pursuing for a rather long time. I refer to the question of the efficiency of the organisation. The amendment speaks for itself. The amendment leaves out of page 7, line 2 of the Bill the words, who may be the chairman or another member".

Paragraph 4(1) of Schedule 1 would read: The Agency may appoint a person to act as chief executive of the Agency".

In other words, the chairman should not be the candidate for being the chief executive of the agency. It is as simple as that. It is a matter of simple administrative procedure. In the circumstances of the operation of the agency it would be better that the chief executive should not be the part-time chairman and should be another member. I beg to move.

Lord Stoddart of Swindon

I hope that the noble Lord, Lord Lloyd of Kilgerran, will agree that it might be convenient to take his amendment together with Amendments Nos. 9, 10, 11 and 12. Amendment No. 9: Page 7, line 2, after second ("may") insert ("not"). Amendment No. 10: Page 7, line 3, leave out ("or another member"). Amendment No. 11: Page 7, line 4, leave out from ("Agency") to end of line 6. Amendment No. 12: Page 7, line 6, at end insert— (" (1A) The functions of the Chief Executive shall be such as the Secretary of State and the Chairman acting jointly may from time to time determine."). My Amendments Nos. 9 and 10 are along the same lines as the noble Lord's amendments, and the reasoning behind them is exactly the same. The fact is that we do not believe that the agency's chairman should be provided with a ready-made and concentrated empire. This goes back to our previous amendments in relation to the smallness of the agency. If the agency consists, as it could do at any particular moment, of two people only, then the chairman would be in an overpowerful position. Frankly, we do not think that would be wise.

However, the Government have already announced their intention to appoint a separate chairman and chief executive, so perhaps these amendments are not so urgent as we thought. The Government are taking a sensible line in making the appointment separate and I sincerely hope that they will not at some future date seek to merge the appointments into one. In the light of the smallness of the numbers of people serving on the agency, I still believe that these amendments would be useful. I should like to hear—as, I am sure, would the noble Lord, Lord Lloyd of Kilgerran—what the Minister has to say.

Lord Lloyd of Kilgerran

Perhaps I may apologise for the fact that I failed to notice that, in accordance with the way in which the amendments were to be taken, Amendment No. 12, in my name, should also have been spoken to. Therefore I did not fully adumbrate my views as to the scope of Amendment No. 12.

Amendment No. 12 relates to the functions of the chief executive. It states that: The functions of the Chief Executive shall be such as the Secretary of State and the Chairman acting jointly may from time to time determine".

I took that wording from an earlier Act. I forget which Act it was in the whole jungle of legislation dealing with oil, pipelines and petrol, but that is the way in which one Act,—and I apologise again for not being able to provide the reference—describes how the functions of the chief executive should be determined; by co-operation between the Secretary of State and the chairman acting jointly as may be necessary from time to time.

Lord Gray of Contin

I am grateful to the noble Lords, Lord Lloyd of Kilgerran and Lord Stoddart of Swindon, for moving their amendments succinctly and for explaining what they have in mind. I will first deal with the amendments of the noble Lord, Lord Stoddart. If they were accepted, it would not be possible for the posts of chairman and chief executive of the agency to be occupied by the same person. The Government's flexibility for choosing an appropriate board structure for the agency would therefore be considerably reduced. I can satisfy the substance of the noble Lord's point because the Government do not, as he suggested, intend to combine the posts of chairman and chief executive when the agency is first established. As I have explained, we intend to appoint Mr. George Dunkerley as chairman and Mr. Kenneth Vaughan as chief executive.

Some concern has been expressed that it would be undesirable to combine the two posts when the agency will have a small board. Much of this concern is, I believe, unfounded. Under Clause 1 of the Bill, the agency's board will have to consist of at least three people, whether or not the posts of chairman and chief executive are combined. I am certain that the agency will be able to make appropriate arrangements for its quorum at board meetings whether it has three, four or five members.

In any event, I am not persuaded that the combination of these two posts is necessarily undesirable in principle. A number of successful precedents come to mind, and I am sure that other noble Lords can suggest more. I would just mention the following: Archie Forster, known to many in this House when he was at Esso; Sir John Sainsbury at Sainsbury's; Graham Day at British Shipbuilders; and Con Allday at British Nuclear Fuels. I call in aid also the last Labour Government, who certainly did not accept the principle which the noble Lord opposite is now putting forward, for not only does the Petroleum and Submarine Pipe-lines Act allow those roles to be combined in the British National Oil Corporation, but the noble Lord, Lord Kearton—who I am sorry has had to leave us—held the post of chairman and chief executive when the corporation was first established. He carried out that joint function with a great degree of acceptability to those who had to deal with him. Indeed, his contribution to the achievements of BNOC was very distinguished. I hope therefore that the noble Lord, Lord Stoddart of Swindon, will consider withdrawing his amendments.

I recognise that the amendments of the noble Lord, Lord Lloyd, about the post of chief executive propose a different procedure for the appointment from that currently in the Bill. But to be frank, I cannot follow how the noble Lord's proposal is preferable. Given that over so much of its field of operation the agency will be working on behalf of the Secretary of State, it must be that he should be involved in selecting the chief executive. On the other hand, there is no need for him to be involved in every minor change to the chief executive's functions. I hope that the noble Lord, Lord Lloyd of Kilgerran, will, on reflection, agree; and I hope also that both noble Lords will withdraw their amendments.

Lord Lloyd of Kilgerran

In view of what the Minister has said, I do not propose to press the amendments standing in my name, exept to say this. The Minister has pleaded for flexibility. In starting this agency, the Government have decided that the chairman and the chief executive should be separate persons. However, in his answer the noble Lord quoted precedents of chairmen and chief executives being the same persons. Of course one knows of the great success which has occurred in many companies, but when the Minister presses for flexibility, and starts by separating the jobs of chairman and chief executive, he is not constituting a precedent but a kind of code of arrangements in the agency which he would like to pursue.

I cannot see what harm there is in the Minister agreeing that in this particular case the jobs of chairman and chief executive will be separated. Therefore in view of what the Minister has said I reserve the right to raise this matter again at a later stage. I am sure the Minister will think about this point again before then. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 9 to 12 not moved.]

Lord Stoddart of Swindon moved Amendment No. 13: Page 7, line 8, at end insert— (" ( ) The Agency shall offer appointments and employment to all suitable persons at present employed by the British National Oil Corporation; and if either the Agency or the person or persons cooncemed are unable to agree terms of appointment or employment the person or persons shall receive the same terms of severance and redundancy as others appointed to and employed by the British National Oil Corporation.").

The noble Lord said: The purpose of this amendment is to protect the staff of BNOC, especially in regard to those who are offered terms of employment which are unsatisfactory but the offering of which precludes the rights to severance and redundancy payments. This matter was discussed in another place, and members of the Standing Committee in another place were possibly misled by a statement that was made by Mr. Goodlad on Second Reading, in which he said this: As, fortunately, the Socialist state has not yet dawned in this country the Government have neither means nor intention of forcing BNOC staff to transfer".—[Official Report, Commons, 14/5/85; col. 253.1]

That was taken to mean, and was taken as an assurance, that people employed by BNOC who were not satisfied with the conditions under which they would have to transfer or with the conditions of the jobs offered to them would then be entitled, if they refuse those conditions, to the terms of severance and redundancy pay which would otherwise have been available had they been made redundant.

12.30 p.m.

That appears not to be the case. We believe that to be most unfortunate. Certainly in many other industries this does not apply. In many industries, some of them nationalised, where posts are to be made redundant and the holders of them are not satisfied with the terms of their transference to another job or to another place, they are entitled, and have been made entitled, to accept and take the redundancy and severance terms on offer as agreed between the parties.

It seems that the staff of BNOC are to be put in a totally different position. They are to be told, if my reading of the situation is right, "You either accept the alternative jobs which are offered under the terms and conditions offered, and where they are to be offered, or you leave"—they get the sack, in other words—"without any compensation by means of redundancy and severance pay". That is most unfortunate, especially bearing in mind the circumstances.

Frankly, the employees of BNOC are not being disbanded because they have been inefficient, because they have not done their job properly or because the organisation did not work as well as was to be expected. BNOC worked extremely well in the public interest over a very long time and the employees are the victims of Government dogma. The redundancies will arise because of Government policy on privatisation and hiving-off, not because BNOC, even in its original form, was not needed and not efficient. It is due entirely to the fact that the Government, in pursuing their political line, have decided to reduce BNOC from the great organisation it was to a mere agency. Therefore this is an important amendment.

There was no give by the Minister in another place, but we on this side of the Committee believe that there should be proper protection for the employees of BNOC. We do not see why they should be put in this position when so many other people in other jobs in other organisations, including nationalised industries, are not put in that position. Therefore I hope—again, especially bearing in mind the whole uncertainty of the business at present—that the noble Lord will be able to say today that he appreciates and accepts the points we are making and is prepared to do something about them. I beg to move.

Lord Lloyd of Kilgerran

At this stage of the Session I do not want to enter into any discussions on the political aspects of privatisation as against nationalisation. I am taking the position on the setting up of this agency as it stands at present.

What rather amazed me about the arrangements for the staff was that they received such short notice. As the noble Lord explained so fairly at Second Reading, the Minister appears to have changed his mind rather rapidly about the functions of BNOC. I understand that it came as a very great surprise to the employees of BNOC to have their careers interrupted so suddenly. Therefore I am sure that the Government will give assurances that steps will be taken to safeguard their position. For those reasons I support the amendment.

Lord Gray of Contin

I hope that I shall be able to satisfy noble Lords opposite with what I have to say. The Government recognise the legitimate concerns of those who have been affected by the proposed abolition of BNOC. The Minister of State for Energy made clear to Parliament as long ago as 1 st April that it was the responsibility of the corporation's management to make any arrangements about redundancies. I understand that the corporation has taken this important task very seriously. By early May the board of BNOC had proposed a package of terms to be available to those staff being made redundant. I believe that these terms are in line with those available from oil companies when other redundancies have been necessary in the industry.

The principle about eligibility for redundancy terms should be made quite clear. Compensation should be offered only to those who are in fact made redundant or to whom continued employment would be available only if the employee were ready to accept a reduction in job content of such a nature that compensation might be justified on the grounds that he had in substance lost his job. It would be quite wrong if those staff to whom firm offers were made of continued employment with the agency in the same job were also offered redundancy payments as an alternative. Moreover, such offers would be unfair to those staff in BNOC for whom continued employment in the same job was not available. I have no reason to suppose that the corporation has acted except on this principle. This does not force people into the agency. If they do not wish to be employed by the agency they have the option of resigning. It would be absurd to pay them for exercising that option.

I recognise that the main concern of noble Lords lies in the availability of redundancy payments. But there are further reasons why this amendment should not be accepted. Its first provision could require the agency to offer to take on far more staff than it will need—probably less than 50. Since the contracts of employment of the staff it will require will be transferred by the operation of Clause 3 and Schedule 2, paragraph 2, the effect of this amendment would place the agency under an obligation to employ additional staff who would immediately be surplus to its requirements. It must be for the future management of the agency to decide which of BNOC's present staff it will need to perform its functions effectively, and for BNOC to co-ordinate with the future management of the agency to handle the redundancy arrangements.

Noble Lords will know, and the noble Lord, Lord Stoddart, mentioned, that this amendment was originally tabled nearly two months ago. I hope that the noble Lord is also aware of what has happened during that time. It is now much clearer which of BNOC's staff will continue to be required by the agency. Some employees will be given greater responsibilities in the future and they will be rewarded appropriately. I am pleased to say that much of the uncertainty which existed when the abolition of BNOC was first announced has now been resolved. I hope that in the light of what I have been able to tell your Lordships the noble Lord opposite will consider withdrawing the amendment.

Lord Stoddart of Swindon

I am most obliged to the noble Lord for the way in which he has dealt with this amendment. He has dealt with it in a reasonable and sensitive manner. I am also grateful for the information which he has given to the House about the developments over the past two months, of which I have to confess I was unaware. I should very much like to look at what he has said because I think it was very important indeed, and I should therefore like to withdraw the amendment so that I can consider what he has said in the light of cold print and in the light of the time which we shall now have available between this and the next stage of the Bill.

Amendment, by leave, withdrawn.

Lord Lloyd of Kilgerran moved Amendment No. 14: Page 7, line 25, leave out ("one") and insert ("two").

The noble Lord said: The object of this amendment is to ensure that any committee of this very important agency should consist not merely of one person. I am sure that the noble Lord, Lord Boyd-Carpenter, would agree with me that the chairman of a troublesome committee sometimes feels that it would be a very good thing to have a committee of only one. But paragraph 5(2) of Schedule 1 says that the arrangements for this very important body: may provide for the exercise or performance, under the general directions of the Agency, of any of the Agency's functions by a committee or by one".

I anticipate that there will be very important committees set up by this agency which will be dealing with international matters in this intricate field of marketing that they will be entering into, but it says that all the functions could be dealt with "by one"—and although it then says "or more of the members", it could be one.

But who would constitute this committee? It would not only be members of the board, but officers or even employees of the agency. So you could have an important committee with a junior employee on it having powers under this clause to exercise fully the task of performing the functions of the agency. In practice this would possibly not occur, but it could happen. It could happen with an agency which the Minister requires to be small in numbers both of the board and staff. Therefore my suggestion is that instead of having a committee of one as a possibility, it should be reasonable, as a matter of commercial efficiency, to say that the minimum should be two. I hope that the noble Lord will be sympathetic to this one, simple, practical point about the running of any kind of organisation and particularly an organisation of such importance as this one. I beg to move.

Lord Stoddart of Swindon

I wonder whether the noble Lord, Lord Lloyd of Kilgerran, will agree that it will be convenient to take my Amendment No. 15 with his Amendment No. 14.

Lord Lloyd of Kilgerran

Certainly. I saw the name of the noble Lord on that amendment and I purposely left out any reference to it, knowing that he would be speaking about it.

12.45 p.m.

Lord Stoddart of Swindon

I wish to speak only briefly to Amendment No. 15: Amendment No. 15: Page 7, line 28, leave out ("or by any defect in the appointment of a member"). I really want to know what this "defect" is likely to be. Is the member likely to be "defective" because he beats his wife or because he gets drunk, or what? The answers so far have not been exactly satisfactory and I hope that the Minister will be able to give us some information about the kind of defect which could arise in the appointment of a member.

I should also like to support the noble Lord, Lord Lloyd of Kilgerran, in his amendment, because I believe that it is probably wrong to give to one person the exercise of what could be very great powers. I spent a great deal of my life (18 years to be precise) in local government, and of course we had lots of committees. We had lots of very important functions, including education, health, and so on; but we never delegated authority to the chairman—oh, indeed, no! We devised a system which was called the "urgency member system" which comprised three people and safeguarded the interests of the authority as a whole. Bearing that experience in mind, I think that the Minister should give very careful consideration to the amendment moved by the noble Lord, Lord Lloyd of Kilgerran, which I support.

Lord Gray of Contin

I think I understand the concern of the noble Lord, Lord Lloyd of Kilgerran, that the agency might delegate a major chunk of its responsibilities to a single person, but I do not think that that would be likely to happen for the simple reason that I do not believe that the agency's board would allow it to happen.

Where the powers in paragraph 5(2) as presently drafted could be useful is in allowing the agency to send one of its members or employees to be its representative at an oilfield operating committee, for example. Though the agency would expect major decisions to be referred back to it from such a committee, it might well be appropriate for the representative to take more minor decisions on his own initiative. I hope that the noble Lord, Lord Lloyd of Kilgerran, will acknowledge that his amendment will produce what would really be an unhelpful impediment to the agency in such circumstances, and that he will consider withdrawing it.

Turning to Amendment No. 15, which is the amendment moved by the noble Lord, Lord Stoddart of Swindon, it may be helpful if I explain briefly, as the noble Lord requested me to do, why paragraph 6 of Schedule l has been included in the Bill. It will allow the agency to continue conducting its business in the usual way if two particular sets of circumstances were to arise. The first is that a vacancy occurred among the members, perhaps because of death or resignation, so that the number of members remaining dropped below the statutory minimum. The second possibility is that a defect in the appointment of a member could be discovered and thus the number of validly appointed members would be brought below the minimum. There are many precedents in legislation for provisions similar to that contained in paragraph 6, which this amendment seeks to delete: paragraph 7 of Schedule 1 to the Petroleum and Submarine Pipelines Act 1975; and Section 1(5) of the Gas Act 1972 are two examples.

I see no justification for failing to follow these precedents and in particular for bringing the business of the agency to a halt because of a technical defect. With that explanation, I trust that the noble Lords will be prepared to withdraw their amendments.

Lord Stoddart of Swindon

I am still not clear what sort of technicality this could be. Can the Minister enlarge on that a little? What is the kind of technical defect? Is the member's name left out of the deed or whatever it is called?

Lord Gray of Contin

Perhaps I may give just two examples to the noble Lord: for instance, a substantial mistake in the name of an appointee; or, an appointment made by somebody who was not authorised to make such an appointment. Those are two examples which come to mind.

Lord Lloyd of Kilgerran

So far as my amendment is concerned, as regards paragraph 5(2), where I am trying to avoid a position arising when a committee of one, possibly a junior employee, could operate the functions of the agency, I fully realise that in the instance given by the Minister, it could possibly be useful for the agency to send an employee, operating under the directions of the agency, to visit some other institution or oil rig or something like that, in order to deal with certain problems. But I wondered whether the Minister will consider limiting the scope of the functions which an employee can perform in those circumstances. Subsection (2) says that any of the agency's functions can be operated by a committee of one. Is not the word "functions" perhaps a little too broad? Certainly, "any… functions", is. Is the Minister prepared to consider modifying the word "functions" in some way, or deleting the phrase, "employees of the Agency"?

Perhaps again this matter can be dealt with and the Minister may think about it again at or before Report. I beg leave to withdraw the amendment.

Lord Gray of Contin

My initial reaction is that this is a matter for the board to determine, and it would perhaps be less than helpful to tie its hands too much beforehand. I give the noble Lord the assurance that I shall discuss this with my officials and get their reactions to what he has suggested, without any commitment. It is a valid point, and I am perfectly prepared to look at it.

Lord Lloyd of Kilgerran

I am grateful to the noble Lord for that assurance.

Amendment, by leave, withdrawn.

[Amendment No. 15 not moved.]

Schedule 1 agreed to.

Clause 2 [General functions of Agency]:

Lord Lloyd of Kilgerran moved Amendment No. 16: Page 2, line 9, at end insert ("after such consultation with and the approval of the Secretary of State for Defence and the Secretary of State for Energy as he deems desirable")

The noble Lord said: We are now coming back to a main clause of the Bill which deals with the general functions of the agency. Paragraph (a) enables the agency: to enter into agreements for the carrying out on behalf of the Crown of activities with respect to petroleum, pipelines and storage installations held by or on behalf of the Crown".

In the circumstances of the Bill, that is a very wide power indeed. As the Minister indicated, particularly in the other place there were long discussions about national security. It seems to me appropriate therefore that such an amendment should be introduced to limit the power of the Minister to enter into the agreement, first, by his having such consultations with the Secretaries of State for Defence and Energy as he deems desirable. It would not limit extensively the power of the Secretary of State dealing with the Bill. I am sure that he would find it helpful to have such discussions as he thinks desirable with the Secretary of State for Defence on some problems, particularly in relation to pipelines, which affect the security of the nation. I beg to move.

I again notice that this amendment is linked with Amendments Nos. 18 and 19. As they are in the name of the noble Lord, Lord Stoddart of Swindon, I shall leave him to present them to your Lordships' Committee.

Lord Stoddart of Swindon

My amendments, Nos. 18 and 19, cover a similar point. The Amendment No. 18 states: provided that with respect to any agreements entered into on behalf of the Crown relating to pipelines and storage installations the Agency shall consult and receive the approval of the Secretary of State for Defence and the Secretary of State for Energy before entering any such agreements". Amendment No. 19 states: provided that in carrying out on behalf of the Crown activities with respect to pipelines and storage installations the Agency shall prepare and publish separate accounts for these activities". Obviously there is a strategic purpose for the pipeline and storage system. Having such a strategic function precludes it from being a reasonable subject for a privatisation scheme. For that reason, the strategic system, and particularly the storage system, is not perhaps entirely safe in the hands of the Department of Energy.

Again this matter was discussed in another place. Frankly I am most concerned, as I hope other noble Lords will be, that the strategic installation should not be privatised. I hope that we shall have assurances from the noble Lord this afternoon. We feel that the Government would like to hand them over to private owners. In their blind antagonism to public ownership and their Gadarene rush to privatise anything that they can lay their hands on, we suspect that they are on occasions even prepared to subordinate Britain's security to their outdated dogma. That might seem a bit strong, but their history so far and the experience that we have had makes us rather afraid of their future intentions.

We believe that the only reason why they stepped back from privatising the storage and pipeline facility was pressure from our armed forces, and perhaps even from the United States Air Force. I wonder, can the Minister tell us about that? Was it that pressure which prevented the Government from going ahead with privatisation, or what is the reason?

I think that we are also entitled to know the comparative usage of the system and the comparative costs. That is why we propose that separate accounts should be kept, so that we shall have better information as to exactly how the installations are used. I hope that the noble Lord can tell us a little more about the Government's intentions, views and attitude towards the pipelines and storage system. I shall certainly be interested to have new information from him about those intentions.

1 p.m.

Lord Boyd-Carpenter

It is for my noble friend the Minister to reply to the request which the noble Lord has just made about the Government's intentions on privatisation. But from these Benches I must say at once that I very much resent the suggestion that the Government would be prepared to prejudice this country's safety in pursuit of policies of privatisation or any other sort. I am bound to say that that particular gibe comes exceedingly ill from the official representative of a party whose official policy is to strip this country of its nuclear weapons. However, I am sure that my noble friend can deal fully with the other and more parliamentary suggestion which the noble Lord made and answer his questions.

I want to deal with the amendment in the name of the noble Lord, Lord Lloyd of Kilgerran. It seems to me not to show very much understanding of the way in which government actually works. The idea that the Secretary of State for Energy could take action—(international action, at that)—affecting other departments, without the normal consultations of government, is of course an absurd one. Government does not work in that way and any Cabinet Minister who behaved himself in that way would very soon cease to be such.

Therefore to put in formal provisions as to consultation seems to be unnecessary. Still more does it seem to be unnecessary when the consultation is only what the Secretary of State himself deems desirable. It is not really a provision at all because, as I read the amendment, it would be perfectly open to the Secretary of State to say, "Well, I did not consult because it did not seem to me desirable", and as the provision is as seems to him desirable, it would be very difficult to challenge that.

Moreover, if one is going to bring up the whole question of consultation, one cannot just stop at the Secretary of State for Defence. These international matters are of concern, obviously, to the Prime Minister; they are obviously of concern to the Chancellor of the Exchequer; they are obviously of concern to the Secretary of State for Trade and Industry, and they are obviously of concern to the Secretary of State for Foreign and Commonwealth Affairs. Therefore, if one is really going to try to introduce compulsory ministerial consultation, the noble Lord has not really gone far enough. In other words, I hope I have satisfied the noble Lord that his amendment is not a very helpful one.

Lord Morris

I, too, am concerned about the necessity for this amendment because, as I understand the nature of the agency, it is in effect a Crown servant and it has to enter into any agreement on behalf of the Crown. I should have thought that it would be unthinkable for the agency in any way to jeopardise the defence of the realm or any other national interest without having proper consultation with the relevant departments.

I am certain that in the agency's design of its own day-to-day operations, it will write into them the kind of detailed consultation with the relevant departments of state as and when matters arise. However, I doubt very much the necessity for placing in the Bill an amendment which demands consultation and approval, as the noble Lord, Lord Boyd-Carpenter, so rightly said, and then limits that consultation and approval to when the Secretary of State deems it desirable. I am concerned for those two reasons.

Lord Lloyd of Kilgerran

May I intervene again, to deal with the objections raised by the two noble Lords who have just sat down? Of course I agree largely with what the noble Lord, Lord Boyd-Carpenter, has said from his great experience of these matters. However, he will agree with me that matters relating to defence and to energy have changed so greatly, even, if I may say so, since the days when he was such an eminent person in the administration of great Ministries and departments of state.

We are dealing with questions of defence—most intricate matters indeed. When one looks at the composition of this agency, with its small number of part-time persons, and whether you can have a committee of one to represent it—as the Minister said, in some circumstances it would be useful to have a committee of one—it seems to me that in the circumstances of this Bill, in the circumstances of the operation of this agency in the modern world, there should be included in the Bill a reference to the fundamental desirability that the Secretaries of State for Defence, for Industry and for Energy should be brought in.

As is usual in the very eloquent speeches made by the noble Lord, Lord Boyd-Carpenter, he tried to deride my references to other Ministries of State. I agree with him that other Ministers of State, other departments, will have to be consulted. But in the circumstances of the way this Bill is to be operated, in the circumstances of national defence in these days, the operation of international energy agencies and the question of energy, I thought that this amendment could be useful as at any rate drawing attention to the agency, in that the Secretary of State for Defence and the Secretary of State for Energy should be consulted sometimes, as the Secretary of State operating this Bill should decide. I suppose it is really, as we say in legal terms, ex abundanti cautelâ It is in order to be perfectly certain that there is no mistake that I put forward this simple amendment.

Lord Gray of Contin

I think we have had a very useful debate on this group of amendments. I should say right away that I am most grateful to my noble friend Lord Boyd-Carpenter for dealing so effectively with the highly political points which were raised by the noble Lord, Lord Stoddart of Swindon. Indeed, he dealt with them so effectively that I shall be able to deal with the substance of the amendments without touching on the political points which the noble Lord raised.

I think there is a genuine desire for information among members of the Committee on these amendments. I hope that I shall be able to satisfy the noble Lord, Lord Stoddart, the noble Lord, Lord Lloyd, and my noble friend Lord Morris with what I have to say. I shall deal with these amendments at rather greater length than some of the others because I should like to explain exactly how the system works and how we intend that it shall continue to work.

The Government pipeline and storage system was discussed extensively in another place. No doubt noble Lords have read the debates which took place there. It may be helpful if I explain briefly about the current uses of the system, the first parts of which were constructed just before the Second World War for strategic purposes. Now the system is extensive and considerable use is made of its facilities for transporting and storing petroleum products by both military and civilian organisations.

The system is owned by the Crown and the Department of Energy is responsible for it. It is financed on the department's vote. BNOC manages the system on a day-to-day basis, under an agency agreement with the department. That function will be taken over by the new agency. The actual operation of the system is carried out by private sector companies, principally the British Pipeline Agency Limited, which is owned by BP and Shell. In recent years the Government have considered whether the system should be privatised. Given the probable need for legislation and the undesirability of subjecting the staff of BNOC to the threat of another dislocation after the abolition of the corporation, the Government decided not to pursue that option for the time being. Instead the agency will be asked to consider carefully what improvements could be made to the efficiency with which the system is operated, and whether the revenues from commercial users could be increased further.

Let us turn now to the amendments before us. It is important to bear in mind that the duties of BNOC in relation to the pipelines system are defined in an agency agreement in which BNOC is the agent and the Department of Energy, on behalf of the Crown, is the principal. The agency will inherit that agreement, perhaps with some amendments, pending the negotiation of a new agreement pursuant to Clause 2. In the light of that, the amendments proposed are either redundant or technically deficient. In the case of Amendments Nos. 16 and 18, for instance, I suspect that the noble Lords were referring to the agreements such as those with commercial customers who use the system or with the operating agents such as the British Pipeline Agency. BNOC may negotiate agreements with operating agents on behalf of the department but it has no power to enter into them; it is the department which is the signatory. Of course the department consults other interested departments, of which the Ministry of Defence is the most involved, and that is appropriate. I suspect, in fact, that the practice is, and always has been, that which is sought through these proposed amendments.

As I have explained, the agreements with commercial users of the system are negotiated by BNOC in the context of the Government's desire to see the maximum commercial use of the system for sound economic reasons. The Government have neither the desire nor the expertise to perform this function and it makes no sense, therefore, to subject the agency to specific control and approval in this area. There is also a host of minor agreements which the agency and other agents involved in the system would have to enter into—such as agreements with contractors to make repairs or whatever. It would be a totally unwieldy bureaucratic burden if all those agreements were also subject to the approval of the Secretaries of State for Defence and Energy.

Turning now to Amendment No. 19, which deals with the preparation and publication of separate accounts for the function of managing the system, it may be helpful if I explain to the Committee how the accounting procedures for this function will be operated. The Secretary of State for Energy is accountable to Parliament for the business of running the system. The Department of Energy is of course open to scrutiny by the National Audit Office, so that the Comptroller and Auditor General could report any concern he had about this business to the Public Accounts Committee.

Noble Lords seek the publication of further information about the finances of this system. However, I fear it would be inappropriate to agree to that request, both on the grounds of national security, and because the information which is currently made available fully accords with the proper practice of Government accounting through the Estimates and Votes procedures.

The agency's accounts relating to the system will therefore include simply the amount of the agency fee which it receives from the department, and the direct costs which it incurs, such as the salaries of the staff which it employs to undertake this activity. These accounts will be totally straightforward, and there can be no justification for going to the additional expense of having them prepared and published separately. In any case, a detailed accounting provision of the sort requested by this amendment would not be appropriate for a Bill which, rightly in my view, steers clear of prescribing the form and content of accounts in detail.

In the light of our discussions, and in view of what I have said and tried to explain to your Lordships' Committee, I hope that the noble Lords concerned will be prepared to withdraw their amendments.

Lord Lloyd of Kilgerran

I am grateful to the noble Lord for the very full statement that he has made. In the circumstances, I shall consider what he has said, and I beg leave to withdraw Amendment No. 16.

Amendment, by leave, withdrawn.

1.15 p.m.

Lord Stoddart of Swindon moved Amendment No. 17: Page 2, line 9, at end insert ("provided that in carrying out activities on behalf of the Crown in relation to petroleum the Agency shall, where it considers it desirable and consistent with and capable of enhancing the performance of its duties to handle royalty oil, purchase additional oil and sell or exchange it as desirable.").

The noble Lord said: I beg to move Amendment No. 17. The purpose of this modest amendment, if I may so call it, is to enable the agency to buy additional oil if it made more efficient the management of royalty oil. As noble Lords will know, BNOC dealt with both royalty and participation oil. For the purpose of handling, the two were combined and so BNOC was able to aggregate enough oil to build up cargoes of the most efficient quantity. The agency will be dealing in smaller quantities. Therefore to avoid inefficiency in handling the agency should be permitted to deal with other operators so as to give it the flexibility presently afforded to BNOC.

There is the problem that, because of the smaller quantities involved, the agency may default on the collection of royalty oil due to the six-month chargeable period; that is, collection has to be within six months or the royalty will be paid in cash. In fact, so far as I know there are no roll-over provisions.

Without participation oil there will not be sufficient royalty oil in six months to fill a tanker, which is about 60,000 or 70,000 tonnes; and I think that that would be unfortunate. As I see it, the agency would not be able to carry out its function of dealing and disposing of royalty oil. The amendment does not suggest that the agency should go out into the market and buy oil freely. The only suggestion is that it should be able to buy sufficient to make its operations viable and efficient. I hope that the noble Lord will give this amendment favourable consideration, and I look forward to his reply. I beg to move.

Lord Lloyd of Kilgerran

My name is down to this amendment, to which the noble Lord, Lord Stoddart, has spoken, and I am enjoined by the powers-that-be that my Amendment No. 22 should also be considered. With the leave of the Committee, I shall speak to that amendment. Amendment No. 22: Page 2, line 18, at end insert ("and in particular shall buy petroleum from the smaller independent companies"). Amendment No. 22 deals with the present position of small independent companies. In the past, BNOC has made arrangements with independent companies to ensure that they receive a reasonable price. I shall not weary your Lordships by giving the details of the operation of BNOC in this matter, but it has assisted independent companies.

I now understand that many of these independent companies are worried that once they do not have the support of BNOC, if that is the correct word, or of this new agency, they will be left to the mercy of the big companies and therefore may not receive a realistic price because they are such weak negotiators in this market. The very fact that they are weak negotiators may also have international repercussions and the Minister, with his great experience in energy matters relating to oil, will know the problems that may arise if there is a weak negotiator in the market alongside these big companies.

Therefore the object of this amendment is to support small independent companies. In talking about "small" in the oil business, I shall not try to define those companies by the number of barrels, because I am told that that would be a difficult way of assessing whether or not a company is small. I am told that one can better assess it having regard to their capital structure. We are talking about independent companies with capital of £25 million. Therefore we are dealing with what, in other fields of industry, can be considered large companies. However, these are small companies operating in these fields which have capital of between £25 million and perhaps £50 million.

I was surprised at the Minister's attitude on Second Reading when I raised the matter of the smaller companies, because he said that in the past, before BNOC was formed, these companies operated alongside the large companies. However, as the Government have indicated, trading habits and standards have changed so rapidly that in the circumstances, I do not think that was an adequate answer.

Even at this stage I should have thought that the Government would like to state how they intend to assist these small companies. That would be in keeping with the general theme of their policy, and particularly with the Prime Minister's policy, to assist small firms wherever possible. I believe that this is an opportunity for the Government to say whether they intend to allow these small independent companies to go to the wall and be put out of existence because of the marketing habits of the larger companies, or whether they intend to take some small step, as I indicate in my amendment, so that in certain circumstances this new agency will buy petroleum from those small companies. I beg to move.

Lord Gray of Contin

Perhaps I may deal with Amendment No. 22, which the noble Lord, Lord Lloyd of Kilgerran, spoke to first of all, because there are some points he raised on which I think I can help him and set his mind at ease. When I was Minister of State at the Department of Energy I took a particularly close interest in the welfare of these small companies. I have certainly not forgotten that concern today. Over four months ago, when the abolition of BNOC was first announced, it was perhaps not surprising that some of those small companies to which the noble Lord referred were rather apprehensive about what the future might hold for them. They were a bit afraid that they were perhaps going to have difficulty in finding a market.

As the months have gone by, however, the companies involved have quietly got on with arranging alternative purchasers for their supplies. Many new arrangements are already in place. Plans for setting up a co-operative to market the oil of small producers were well publicised, and the fact that insufficient volumes were committed by those small producers to that scheme for it to go forward really itself testifies to the availability of attractive alternative purchasers.

I am fully sympathetic to the support of the noble Lord, Lord Lloyd, for the small producers. Many of our small British companies started off in this way and many of them are, even now, making progress. Therefore it would be quite wrong if we did not have concern for them. But the potential problem which these producers thought they might have to face in March with the abolition of BNOC's marketing role have not arisen to any degree. I can say to the noble Lord that I feel perfectly confident that the situation so far as those small producers are concerned is one about which we need not worry because there are a number of alternatives available to them. I hope that in view of what I have told the noble Lord he will consider not moving his amendment.

I now turn to Amendment No. 17. This amendment is one on which we could quite easily have a greatly involved political argument—I am glad that we have not embarked on such a course—because it comes down to the heart of the creation originally in 1975 or 1976 of the British National Oil Corporation and its career, and the situation in which we are now. where we are reducing substantially the trading role which remained with it after the privatisation of Britoil. I am glad that the noble Lord did not embark on one of our political arguments on that, and therefore I shall try to deal with the merits of the amendment and explain how the Government see it.

There is a special reason for not involving the public sector in regard to oil trading. Term arrangements for purchase inevitably would involve the public sector in price formation. That would once again get us into the position of setting what would be regarded by other oil-producing countries and the market as official prices. We would once again be at risk that any change to those prices which might be required by market circumstances would threaten the stability of the world oil market.

However, a very small amount of spot trading might be helpful in support of the agency's handling of royalty in kind. Let me give two examples. First, a cargo of royalty in kind, quite properly sold several weeks in advance in accordance with oil industry practice, might fail to accrue due to an unforeseen technical difficulty. Then it would be helpful for the agency to buy a cargo from the market on its own account to fulfil the commitment it had entered into to deliver one. Alternatively, it might be useful for the agency to be able to purchase a part cargo of oil which could be aggregated with a part cargo of royalty in kind, so that a whole cargo could be lifted before the end of a royalty chargeable period.

Let me explain a further and related difficulty which the Government have with this group of amendments. If they were accepted, the agency would face the possibility of unlimited exposure to loss by trading on its own account. I do not think that that could possibly be justified. Indeed, the financial structure which the Bill proposed for the agency would not allow it either. I hope it will assist the Committee if I explain how the Bill does provide for the agency to trade on its own account.

Clause 2(1)(d) confers on the agency a power to buy or otherwise deal in petroleum on its own account, and such trading does not have to be in furtherance of the disposal of royalty in kind, but can be for any purpose. What clause 2(2)(b) requires, however, is the Secretary of State's consent to own-account trading. This allows the Secretary of State to take a wider view of the national interest in deciding the extent to which own-account trading and exposure to possible loss should be allowed. In particular, he may take a different view if ever the agency should again take participation oil than when it is merely selling royalty oil.

I hope therefore that the noble Lords who tabled these amendments will appreciate that the Bill goes some way towards meeting their concerns. On Amendment No. 17, powers will exist in the Bill for the agency to trade in furtherance of its duties in the handling of royalty oil.

Lord Stoddart of Swindon

I am not at all sure whether the Minister was giving me assurances or whether he was not. As I understand it, despite Clause 2(2)(b) the position is that the agency will not be able to trade in oil to make up cargoes. Is that right?

Lord Gray of Contin

Certainly not without the Secretary of State's authority.

Lord Stoddart of Swindon

Frankly, that is what worries me. The noble Lord talks about the agency making losses on trading on its own account. On the other hand, of course, it could make profits on trading on its own account. It is not the law of the Medes and Persians that the agency would make losses. It may well be that BNOC made a few losses at the behest of the Government over the past 18 months, but the fact is—and I am sure that the Minister must agree—that to make the agency really viable it needs to have some opportunity to trade in order that it can make up these cargoes.

It is surely not on that every time when it is in the interests of the agency and of the Government that they trade in oil, they have to go and ask for the permission of the Secretary of State. That seems completely and unduly bureaucratic. I am sure that the noble Earl, Lord Lauderdale, who was talking earlier about these quangos, really does not believe that the new agency should be put under such bureaucratic restriction in carrying out its duties. Therefore I am not really satisfied with what the noble Lord has had to say today.

However, time is getting on. I am sure we all want to get away.

The Earl of Lauderdale

No; not at all!

Lord Stoddart of Swindon

Obviously the noble Earl does not. He likes it here so much that he is prepared to stay throughout the Recess, but I have some things to do at home. Nevertheless, I should like to study closely what the Minister has said. I remain unhappy about this probe, and so does the Opposition. I shall need to consider this matter during our Recess, which is rather shorter than the Recess in another place. We ought to put that on record. We are the workers now.

Perhaps I shall bring forward another amendment at Report stage. In the meantime, I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn

[Amendments Nos. 18 and 19 not moved.]

1.30 p.m.

Lord Lloyd of Kilgerran moved Amendment No. 20: Page 2, line 11, at end insert ("and to publish model clauses in relation thereto and the names of participants")

The noble Lord said: We are now back to the general functions of the agency, and under Clause 2(1)(b) the agency has power to enter into such particiation agreements as the Secretary of State may determine".

The object of Amendment No. 20 is to add to that power the power for the agency to publish model clauses in relation thereto and the names of the participants to these participation agreements.

There is a great mystery about many of these participation agreements. At Second Reading the Minister was very careful not to disclose who the participants were, but to assure us that the participation agreements were above reproach and exactly as the Department required for national security and other kinds of reasons. The original act setting up the BNOC, the Petroleum and Submarine Pipelines Act 1975, contains pages and pages of model clauses in relation to the agreements which can be set up within the industry. There are dozens of them in very full detail. In Amendment No. 20 I am asking the Department whether it will publish model clauses so that the people in the industry could know something about the kind of participation agreements that the Secretary of State requires and this should also include the name of the participants.

With the leave of the Committee I should also like to speak to Amendment No. 21: Page 2, line 14, leave out from ("above") to end of line 16.

Amendment No. 21 is a probing amendment. It seeks to remove some words from Clause 2(1)(c), which gives the power to the agency to do anything that is required for the purpose of giving effect to participation agreements. But it refers not only to participation agreements which one would expect that power to cover, but also to such participation agreements entered into by persons other than the Agency as the Secretary of State may determine".

My amendment seeks to delete those few lines. It is probably my fault, but I do not understand what is intended to be covered by those words. What are participation agreements entered into by persons other than the Agency? Who are these persons other than the agency over which the agency has power, with the approval of the Secretary of State? Amendment No. 21 is proposed because I do not understand what these words mean. Perhaps the Minister can explain what meaning they are intended to convey. Otherwise I ask leave to have them removed. I beg to move.

The Earl of Lauderdale

May I ask my noble friend to say something about participation agreements? Is it envisaged that in the future they shall be any different from those that exist at present?

Lord Stoddart of Swindon

I wonder whether it would be convenient if, together with Amendments Nos. 20 and 21, we also take Amendments Nos. 24, 28 and 34; Amendment No. 24: Page 2, line 18, at end insert— ("( ) Participation agreements entered into under subsection 1(b) above shall include provisions for the exercise of the Agency's rights to crude oil, natural gas liquids and other matters relating to petroleum in general, lifting arrangements, development and operating costs and other liabilities, access to information, protection of the Agency's rights, assignment, confidentiality and the determination of the price of crude oil and natural gas liquids, and such agreements shall specifically include provisions laid down in Schedule (Provisions to be included in model participation agreements)."). Amendment No. 28: Page 2, line 27, at end insert ("but always including conditions to ensure early activation of all participation agreements and when necessary access to at least 80 per cent. of the crude oil produced on the United Kingdom Continental shelf"). Amendment No. 34: After Schedule 2 insert the following new Schedule—