HL Deb 15 October 1985 vol 467 cc487-503

3.45 p.m.

Report received.

Clause 2 [General functions of Agency.]

Lord Stoddart of Swindon moved Amendment No. 1: 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 be permitted to purchase, sell or exchange such oil as it considers necessary for the better performance of its duties with respect to the handling of royalty oil.").

The noble Lord said: My Lords, I beg to move Amendment No. 1. This amendment is similar to one which we moved at the Committee stage, Amendment No. 17, but, although similar, it is nevertheless different in a very important sense. If the noble Lord will recall, Amendment No. 17 mentioned the words "enhancing the performance of its duties", and because we thought that perhaps the word "enhancing" might offend the susceptibilities of the noble Lord as to the importance or otherwise of the new agency, we have decided that we should alter the word "enhancing" so that the amendment now reads: as it considers necessary for the better performance of its duties". I hope the noble Lord will agree that that perhaps constitutes a wording which will be more acceptable to him.

On behalf of the Government, the noble Lord rejected our original amendment at Committee stage for two reasons. First of all he said: Term arrangements for purchase of oil inevitably would involve the public sector in price formation".

He also said: the agency would face the possibility of unlimited exposure to loss by trading on its own account".—[Official Report 31/7/85; col. 302.] The noble Lord will be aware that we do not agree with his reading of the situation were this amendment passed. We believe—indeed, we know—that losses which were incurred by BNOC were incurred not as a result of the sort of trading we are talking about here, the sort of trading which will enable the agency better to perform its duties by making up from royalty oil viable cargoes by the purchase of oil on the spot market or elsewhere. The noble Lord knows perfectly well that BNOC incurred the losses because it was the then policy of the Government for BNOC to intervene on the oil markets of the world; in fact, it suited the Government's own particular desire and policies at that time to interfere with, in one way or another, the world oil price. So in actual fact we are talking about something quite different in this amendment. We are seeking to enable the agency to make arrangements and make purchases which will enable it better to carry out its functions. I should have thought that the Minister would welcome such an amendment because I feel quite sure that he wants the agency to be a success and, in fact, to be commercially and economically viable. Therefore, I hope that he will consider the amendment very seriously indeed.

In Committee the noble Lord admitted that a very small amount of spot trading might be helpful in support of the agency's handling of royalty in kind. At column 302—and I shall quote what he said in full so that the debate and what I say make sense—he said: 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 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."—[Official Report, 31/7/85; col. 302.]

In fact, that statement in itself makes the case for this amendment. The noble Lord has already agreed that it would be right and proper for the agency to do what we are suggesting it should be allowed to do but which, under the Bill, it will not be permitted to do without the consent of the Secretary of State.

In another debate in Committee the noble Lord also said that it would be wrong for the Government to interfere in a detailed way. In Column 299, he said: 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."—[Official Report, 31/7/85; col. 299.]

Yet, in relation to this particular function of the agency, the Government apparently want to subject the agency to detailed control which is neither necessary nor desirable. If the agency is known to be competent and if it is anticipated that the agency will have to deal in spot trading to a limited extent, as the noble Lord acknowledged in Committee, why should it be circumscribed by the dictate of the Secretary of State? The noble Lord argued that it is because of the impact on oil price formation and the potential exposure to loss, as I have already mentioned, but those would not be good reasons unless the amounts envisaged as necessary for the better performance of the agency's duties with respect to the handling of royalty oil were substantial.

I think I must say that if the amounts of oil acquired by spot trading are substantial then the Minister's reasons for not allowing the amendment may very well have some relevance; but this means that the agency will often be seeking the approval of the Secretary of State to spot trade if it is to alleviate the problem of operating what would evidently otherwise be a grossly inefficient system of transporting royalty oil. If the amounts of oil acquired by spot trading are not substantial, the Minister's reasons are not relevant and the agency should be permitted to spot trade on the ground that it will be necessary to a limited extent only since the system of handling royalty oil will be, on the whole, efficient.

The Minister cannot have it both ways, can he? He cannot be schizophrenic about this. Therefore, I hope that he has changed his mind and that he has recovered his health so that he will be able to tell me when he replies in a moment that he is able to consider and, I hope, accept the amendment. I have gone out of my way to meet him on this. I think he will agree that 1 went out of my way in Committee to try to help him with this Bill and to help him make the Bill more relevant and sensible. Therefore, I hope he will consider what I have said and accept the amendment. I beg to move.

Lord Ezra

My Lords, I rise to speak in place of my noble friend Lord Lloyd of Kilgerran, who spoke during the Committee stage of the Bill. I support the amendment now proposed by the noble Lord, Lord Stoddart. He has made a very telling point that in the establishment of this agency it should be provided with the capability of operating effectively.

I was very struck with the quotations which the noble Lord made from the Committee stage, wherein the noble Lord, Lord Gray of Contin, referred to circumstances in which a very small amount of spot trading might be necessary in order to build up or replace cargoes of royalty oil which were insufficient. Having had some experience of working in a public enterprise it would seem to me that it would be almost intolerable to have to go through the process of ministerial consent for such a very small operation. As far as I can see, and reading the Bill as it now stands, that would be covered by Clause 2(1)(d), which in turn is subject to the consent of the Secretary of State.

My understanding of the amendment proposed by the noble Lord, Lord Stoddart, and my reason for supporting it very strongly is that the intention is to enable the agency to operate effectively and to enable the agency not to have to go through the process of obtaining the approval of the Secretary of State on every single small occasion when it must make a commercial decision. If that were to be necessary, the whole purpose of having an agency seems to disappear. Why is this not done simply by a branch of the Ministry? That would at least eliminate this process of permanent consultation and enable things to be done precisely as the Secretary of State wishes. Therefore, I strongly support the very moderate proposal for the greater efficiency of the agency put forward by the noble Lord, Lord Stoddart.

4 p.m.

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

My Lords, the noble Lord, Lord Stoddart, explained his intentions in Committee, and I think there is little between us on this matter. As he then explained—and, indeed, he has given us further reasons today for his beliefs—his concern is that the agency should not be prevented from doing an effective job of marketing royalty oil by a strait-jacket of bureaucratic controls. That is what the noble Lord, Lord Ezra, also suggested. We welcome the noble Lord, Lord Ezra, to this debate, and we are sorry that his noble friend Lord Lloyd of Kilgerran is not able to be with us. He made an important contribution during the Committee stage. In particular, they take the view that the agency should be able to buy part cargoes to ensure that full cargoes can be lifted at the end of chargeable periods.

The noble Lord, Lord Stoddart, also made clear that he did not intend by his amendment to enable the agency to buy and sell oil freely. I share his concern and his intention in so far as purchasing additional oil may enhance the agency's performance of its functions in disposing of royalty oil. I believe that both objectives can be met perfectly adequately within the existing framework of the Bill. The question is, who is to set the framework for any such supplementary trading?

In the Government's view that must he the responsibility of the Secretary of State since he is the principal accountable to Parliament. He is accountable for the proceeds of royalty sales and, as the Bill clearly states, the agency is his agent. The agency will have to exercise its commercial acumen in making the best of any individual deals which may be permitted within the framework of consents given under Clause 2(2), but that framework must be set by the Secretary of State, who doubtless will consult the agency closely about it.

There really is little more that I can say which has not been said during our discussion on the similar amendment at Committee stage. I do not think that there is a great issue involved in this, and indeed what the noble Lord, Lord Stoddart, has said rather confirms that fact. As I indicated earlier, it is purely a matter of deciding who is to set the framework for any supplementary trading, and in the view of the Government it has to be the Secretary of State who is accountable to Parliament. For those reasons I am afraid that, though I have some sympathy with what the noble Lord, Lord Stoddart, has said, I must ask him to withdraw his amendment.

Lord Taylor of Gryfe

My Lords, would the Minister clarify whether we are discussing the Minister setting the framework for these commercial transactions, or whether we are talking about the Minister approving individual commercial transactions? That seems to me to be the point at issue.

Lord Gray of Contin

My Lords, as I see it, the question which we are discussing is what 1 have already spelled out. The question is, who is to set the framework for any such supplementary trading, and, in the view of the Government, that must be the responsibility of the Secretary of State, because he is the person who is accountable to Parliament. However sympathetic one might be to what the noble Lord suggests, I do not see that one can reasonably get round that point. This must be the responsibility of the Secretary of State, and the Secretary of State is the person who is accountable to Parliament.

Lord Stoddart of Swindon

My Lords, I find what the noble Lord has said very interesting. Is he really telling us that once this Bill is passed the Secretary of State will set down the framework in which the agency operates in respect of buying this type of oil to make up cargoes? Is he saying that the Secretary of State will set the framework once and for all and thereafter the agency will be free, on a day to day, month to month and year by year basis, to operate as it thinks fits? Is that what the noble Lord is telling us?

Lord Gray of Contin

No, my Lords. I think perhaps it would help the noble Lord if I just reiterate what I said a little earlier, which is that the agency will have to exercise its commercial acumen in making the best of any individual deals which may be permitted within the framework of consents given under Clause 2(2). A consent can be given in terms which would not necessitate the constant supervision, if I may put it that way, of the Secretary of State, but the Secretary of State will have an overall supervision. Obviously, he will not be involved in every individual case, but he will have an overall supervision, and he will rely on the agency—which, after all, is his agent—to use its commercial acumen. I hope I have clarified that point for the noble Lord.

Lord Stoddart of Swindon

My Lords, I do not know that the noble Lord has clarified it. In fact what he has done is to confirm that the best way to act would be by accepting the amendment which is before the House. That, in fact, would achieve in a very easy and understandable way the objectives which apparently he seeks to achieve. But as I understand it, as the Bill reads at the present time, there will always be the power of the Secretary of State—indeed, the necessity for the Secretary of State—to have his finger in every relevant pie, and I am sure that this is not what the House wants. Apparently it is not what the noble Lord intends, but as the Bill stands at the present time that is what will happen. We are offering a way out to the noble Lord, to do what apparently he wants to do, what I want to do, what the noble Lord, Lord Ezra, wants to do, and what the noble Lord, Lord Taylor, wants to do. Why on earth will he not accept the amendment?

Lord Ezra

My Lords, perhaps I may add to the point that the noble Lord, Lord Stoddart, has made. It seems to me that if the amendment were accepted, we should still be leaving in and not wishing in any way to emend the overall powers reserved to the Minister under subsection (2). We are simply saying that we consider that the disposal of royalty oil requires some degree of flexibility in the operations of the agency. This can be done in one of two ways. I agree with the noble Lord, Lord Stoddart, that it can best be done by the acceptance of his amendment, but if the noble Lord the Minister feels that he cannot accept the amendment, then could he state quite categorically, so that it can go into the record of this debate, that in fact that is precisely what the Secretary of State intends to do in practice?

Lord Gray of Contin

No, my Lords. I have tried to explain this several times, and I am not terribly convinced that noble Lords opposite really want to understand my explanation. They are hooked on this amendment, which they are trying to persuade me to accept, but I must make it absolutely clear to them that the Government believe that what they seek to do can be met within the existing framework of the Bill and that their amendment is unnecessary.

I shall repeat the two salient points. The question is, who is to set the framework for any such supplementary trading? The Government take the view, and there has been no disagreement on that, that it must be the responsibility of the Secretary of State. There is also no argument over the fact that the Secretary of State is the principal accountable to Parliament for the proceeds of royalty sales. These two points are established.

The noble Lord, Lord Stoddart, asked me whether I could guarantee that the Secretary of State would not be involved in every single transaction. What I said to him, and I say it again, is that the agency will have to exercise its own commercial acumen in making the best of any individual deals which may be permitted within the framework of consents given under Clause 2(2), and it is the Secretary of State who gives those consents. So in fact the Secretary of State will not be involved in every individual transaction, but he will have overall responsibility for giving the consents. I do not think that I can make the position clearer than that. I do not believe that the amendment of the noble Lord would in any way improve the legislation. I believe that we can take care of the concerns of the noble Lord within the framework of the Bill, and for that reason I am not on this occasion able to accept the amendment.

Lord Stoddart of Swindon

My Lords, this really has been quite an intriguing little debate. I must confess that earlier on I thought it was going to be a dialogue between the Minister and myself, and I am most grateful to the other noble Lords who have spoken in the debate. It really has been quite intriguing and I think we shall have to read very carefully what the Minister has said.

As I understand it, he has just said that the Secretary of State must exercise his commercial judgment. I really am confused now. I thought that the agency had been set up to exercise commercial judgment on behalf of the Government. Now we have the Secretary of State exercising commercial judgment and the agency apparently exercising its commercial judgment as well. Frankly, that is a recipe for absolute chaos in the operation of the Government's oil policy. However, they will have to pay for that and other mistakes they have made over the past six years at the next general election. In those circumstances, I shall withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Stoddart of Swindon moved Amendment No. 2: Page 2, line 16, at end insert— ("( ) to enter into agreements on behalf of the Crown and at the request of the Secretary of State to secure the supply of petroleum and petroleum products; and")

The noble Lord said: My Lords, again at Committee stage we had a significant debate on this matter which involves the security of our oil supplies. There was a Division and the Committee rejected the detailed amendment which we put forward. In the light of that it would have been quite wrong of me to bring forward a further detailed amendment. Nevertheless, we remain unhappy about the present informal arrangements with which the Government are apparently content in the event of an oil crisis.

We know that in the event of an oil crisis it will take the Government some six months to activate proper arrangements to deal with it. Again as I noted at Committee stage, by that time the crisis will have come and, hopefully and almost inevitably, will have gone, so the arrangements to which the Government are adhering at the present time are completely irrelevant to the security of supply.

The Government are relying on the good will and, if one likes, the patriotism of individual private oil companies. I believe that they are wrong to do so not only in the national interest but also because it is unfair to those companies. It is not their business to look after the national interest; that is the business of the Government.

The business of an oil company is not to look for and make preparations for any crisis which may arise. Its job is to operate commercially for the good of itself, its customers, its work-force and its shareholders. To superimpose upon the oil companies the burden of protecting this country in an oil crisis is completely unfair and utterly irrelevant to what is needed. We believe that it is the Government's paramount duty to protect our oil supplies in the event of a crisis. Any Government who do not do so are not only failing in their duty but will come to a bad end when the results of their neglect are seen by the electorate.

As I have said, this amendment is a simplified version of Amendment No. 30 which we put down at the Committee stage. The noble Lord criticised the specific requirements in the original amendment, so this amendment which is drawn up in general terms has been tabled in its stead. Its purpose is to lay a burden of responsibility on the agency in conjunction with the department to ensure that there is adequate and formal security of supply in the event of a crisis.

4.15 p.m.

The scaling down of the functions of BNOC to the residual functions of the agency has the consequence of a concommitant scaling down of the amount of participation oil contracted by the agency compared to BNOC. In the event of a crisis, as I have already said, there will be an interim period of about six months before the re-activation of participation agreements. During that period security of supply will be dependent upon informal agreements about which the Government will say little for fear of breaching commercial confidence.

Again I argued at Committee stage that that was not good enough. It simply is not good enough merely to have a letter or perhaps a word over a telephone from an oil company or companies as to what they would do in the event of a crisis. That is not the way that the Government should operate. Anyway, they should not use the excuse of commercial confidence in order not to come clean and tell us what sort of arrangements they are making. That is unfair to Parliament, to the companies and to the people of this nation.

At Committee stage the noble Lord argued that our original amendment was unsatisfactory on the ground that producers should not be forced by statute to enter into security of supply agreements. There could be argument about that when the national interest is at stake. He said: What we require is a flexible understanding with United Kingdom refiners to the effect that, whatever happens, they will do their best within the law to continue supplying their customers in this country".

In other words, informal voluntary arrangements are preferable for the sake of flexibility. He concluded: What is required here is a loose-fitting garment and not a straitjacket".—[Official Report, 31/7/85; col. 320–321.]

Those are nice-sounding words. But the trouble with a loose-fitting jacket, dress or other garment is that people are able to slip out of it very quickly indeed. Although one would not wish to impose a straitjacket on anybody, in the matter of the security of our oil supply we want people to be contained and constrained to a certain degree for the benefit of the nation.

I believe that the Government and the Opposition agree that security of supply is of pre-eminent importance. I do not think that is in dispute. But the difference between us is the Opposition's concern that the Government are willing to entrust the welfare of the country at a time of economic crisis to the strength of informal assurances about which we have little or no information.

The amendment requires the agency in co-operation with the department to give some shape to these amorphous, informal arrangements, since formality does not inhibit flexibility. It simply affords more definite security; and it is more definite security that the Opposition are after. That is why we move the amendment and hope that it will be supported. I beg to move.

Lord Ezra

My Lords, in supporting this amendment, I believe that the noble Lord. Lord Stoddart, has raised a very important issue which has of course been discussed at earlier stages. The issue is this important one of security. We have, in the past 12 years or so, been through two major oil crises, and it is conceivable that at any time in the future we could go through further crises. It is very proper, in a debate of this kind on the Bill, for us on these Benches to ask the noble Lord the Minister to indicate to us more precisely than has been done so far how the Government would propose dealing with such a crisis.

Here, an agency is being set up which could be entrusted with this task subject to the decision of the Secretary of State at the time. The proposed amendment would give the Secretary of State that authority and that capability. If he did not seek to use that authority in the particular circumstances, it would be absolutely up to him not to use it. But it would seem to be missing an opportunity to add to the armoury at the disposal of this country to deal with some future oil crisis not to be in a position to make use of the agency and its existence and to add this to the other purposes for which it operates.

Lord Gray of Contin

My Lords, I believe that I can be reasonably brief on this point because the underlying issues were fully discussed during the Committee stage of the Bill. This amendment would enable Government to use the agency as a vehicle for agreements of some kind to ensure security of supply of oil products. Quite simply, I have to say that the Government are as always most grateful for the offer of additional weapons for their armoury. But, quite frankly, I see no need of, or use for, this one.

Security of supply to consumers is a matter of oil products, not crude oil. The supply of these products to consumers is in the hands of many private sector companies, both small and large, and only they are in a position to ensure security of these supplies. In so far as individual refiners may find difficulty in obtaining crude supplies in a crisis, the participation agreements and the oil directly available to Government—I mean royalty oil—may have roles to play. But the primary responsibility for supplying products to customers lies with the industry, and the Government's efforts to ensure that security of supply is maintained must focus on those involved—that is, the industry.

The agency can play no useful role in this, as it has no involvement in marketing products. It would be quite impractical and counter-productive to propose that, in times of shortage, the agency should suddenly take over that involvement from the private industry. It was certainly not a role ever thought appropriate to BNOC. It is for Government, and not an agent of Government, to ensure that the supplying companies recognise their responsibilities to their British customers, and of course for those customers themselves.

The agency may be able to contribute to the refiners' crude supplies through the participation agreements and the marketing of royalty oil. But to put the onus for supplying petroleum and petroleum products on the agency will remove the responsibility for supply from where it properly belongs: the oil companies marketing in this country and their customers. For these reasons, I am afraid that I cannot accept the amendment. I trust that the noble Lord may be prepared to withdraw it.

Lord Stoddart of Swindon

My Lords, so far as I am concerned that reply is completely unsatisfactory. There is a deep division between the noble Lord and myself on this matter. It is quite clear that he is prepared to rely entirely on the commercial operations of the oil companies to safeguard our oil supplies. We believe that the Government need an arm with which to ensure security of supplies. Because we believe that this is absolutely vital to the nation's economic survival even and to the interests of our people, I feel obliged to press this amendment to a Division.

4.25 p.m.

On Question, Whether the said Amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 75; Not-Contents, 117.

DIVISION NO. 1
CONTENTS
Airedale, L. Elwyn-Jones, L.
Attlee, E. Ezra, L.
Aylestone, L. Fisher of Rednal, B.
Bacon, B. Gallacher, L.
Beaumont of Whitley, L. Galpern, L.
Blyton, L. Gladwyn, L.
Boston of Faversham, L. Grey, E.
Bottomley, L. Hanworth, V.
Brockway, L. Hatch of Lusby, L.
Carmichael of Kelvingrove, L. Hooson, L.
Chitnis, L. Hughes, L.
Cledwyn of Penrhos, L. Irving of Dartford, L.
Collison, L. Jenkins of Putney, L.
Crawshaw of Aintree, L. John-Mackie, L.
David, B. [Teller.] Kagan, L.
Davies of Penrhys, L. Kearton, L.
Diamond, L. Kirkhill, L.
Donaldson of Kingsbridge, L. Leatherland, L.
Listowel, E. Simon, V.
McIntosh of Haringey, L. Stallard, L.
McNair, L. Stedman, B.
Mellish, L. Stewart of Fulham, L.
Morton of Shuna, L. Stoddart of Swindon, L.
Nicol, B. Strabolgi, L.
Paget of Northampton, L. Taylor of Blackburn, L.
Phillips, B. Taylor of Gryfe, L.
Ponsonby of Shulbrede, L. [Teller.] Taylor of Mansfield, L.
TordofF, L.
Prys-Davies, L. Turner of Camden, B.
Ritchie of Dundee, L. Underhill, L.
Roberthall, L. Wallace of Coslany, L.
Rochester, L. Walston, L.
Ross of Marnock, L. Wells-Pestell, L.
Sainsbury, L. Whaddon, L.
Scanion, L. White, B.
Sefton of Garston, L. Willis, L.
Shackleton, L. Wilson of Langside, L.
Shepherd, L. Winstanley, L.
NOT-CONTENTS
Aldington, L. Kaberry of Adel, L.
Alexander of Tunis, E. Killeam, L.
Ampthill, L. Kintore, E.
Auckland, L. Lane-Fox, B.
Belhaven and Stenton, L. Lawrence, L.
Beloff, L. Lloyd of Hampstead, L.
Belstead, L. Long, V.
Bessborough, E. McAlpine of West Green, L.
Boyd-Carpenter, L. McFadzean, L.
Brabazon of Tara, L. Macleod of Borve, B.
Brougham and Vaux, L. Mancroft, L.
Broxbourne, L. Margadale, L.
Butterworth, L. Marley, L.
Caithness, E. Marshall of Leeds, L.
Cameron of Lochbroom, L. Merrivale, L.
Campbell of Alloway, L. Mersey, V.
Campbell of Croy, L. Milverton, L.
Coleraine, L. Morris, L.
ColvilleofCulross, V. Mottistone, L.
Cottesloe, L. Mowbray and Stourton, L.
Cowley, E. Munster, E.
Cullen of Ashbourne, L. Murton of Lindisfarne, L.
Daventry, V. Norfolk, D.
Davidson, V. Northesk, E.
De L'Isle, V. Nugent of Guildford, L.
Denham, L. [Teller.] O'Brien of Lothbury, L.
Dilhorne, V. Orr-Ewing, L.
Drumalbyn, L. Peyton of Yeovil, L.
Duncan-Sandys, L. Portland, D.
Dundonald, E. Radnor, E.
Ebbisham, L. Reay, L.
Elliot of Harwood, B. Renton, L.
Elliott of Morpeth, L. Rodney, L.
Elton, L. Rugby, L.
Faithfull, B. St. Davids, V.
Fanshawe of Richmond, L. Sandys, L.
Ferner, L. Selkirk, E.
Fortescue, E. Sharpies, B.
Fraser of Kilmorack, L. Skelmersdale, L.
Gibson-Watt, L. Somers, L.
Glanusk, L. Stamp, L.
Glenarthur, L. Sudeley, L.
Gray of Contin, L. Suffield, L.
Gridley, L. Swinton, E. [Teller.]
Hailsham of Saint Marylebone, L. Teviot, L.
Thomas of Swynnerton, L.
Halsbury, E. Thorneycroft, L.
Harmar-Nicholls, L. Torrington, V.
Harvey of Prestbury, L. Tranmire, L.
Harvington, L. Trenchard, V.
Henley, L. Trumpington, B.
Hives, L. Vaux of Harrowden, L.
Holderness, L. Vickers, B.
Hooper, B. Vivian, L.
Hunter of Newington, L. Westbury, L.
Hylton-Foster, B. Whitelaw, V.
Inglewood, L. Wynford, L.
Ironside, L. Young, B.
Jessel, L. Ypres, E.

Resolved in the negative, and amendment disagreed to accordingly.

4.34 p.m.

Lord Stoddart of Swindon moved Amendment No. 3: Page 2, line 27, at end insert— ("( ) In the event of the Secretary of State refusing his consent under subsection (2) above, he shall as soon as possible after such a refusal make a statement to Parliament saying that his consent had been so withheld.").

The noble Lord said: My Lords, during the course of the Committee stage of the Bill an amendment was debated requiring the Secretary of State to report to Parliament his reasons in the event of his refusing consent to the agent to buy, sell or otherwise deal in petroleum on its own account as permitted under Clause 2. The noble Lord objected to that amendment on the grounds that any disclosure of lack of consent for such trading would breach commercial confidence of the third party involved in the agency's proposals. He also objected to embarking upon commercial discussions in the full glare of publicity. The noble Lord noted that Governments did not like the negotiations being performed in the full glare of publicity, but said that he could quite understand that Oppositions like such discussions to be given the utmost publicity.

We believe, whether in Government or in Opposition, that the public—on whose behalf the Government is after all acting; the Government are the servants and not the masters of the people—should have the utmost information made available to them. It is not good enough to suggest that it is wrong to have discussions in public. The public are entitled to know. I think that it is also wrong and reprehensible to hide behind the cloak of a breach of commercial confidence. By informing Parliament that one has done something, one does not in fact breach commercial confidence. The Government make far too much use of this very convenient phrase. Of course commercial confidence is a relevant consideration—we all agree about that—but at times it seems all too convenient a way of blocking the view of those who wish to scrutinise the actions of the Government a little.

The amendment presently before the House concedes the point that commercial confidence is important but retains a firm grip on the principle that Parliament should be informed about the relationship between the agency and the Secretary of State. All I am asking is that Parliament should be kept informed of those occasions on which the Secretary of State does not agree to a request by the agency. Is that really too much to ask? We are not asking for any detailed consideration by Parliament of the reasons why the Government have refused their consent. All we are asking is that Parliament should be informed that the Secretary of State has refused consent. Surely that is only a small thing to ask; and it would be inconceivable for the noble Lord this afternoon to reject this amendment. If he rejects it, what he is in fact saying is that Parliament is not a deserving creature to be told what the Government are doing in any respect. Frankly, I think that that would show a contempt for Parliament and the parliamentary process which I know the noble Lord does not feel. I know that he has the utmost respect for Parliament, its procedures and our system of Government. I would hope therefore that he could bring himself to say this afternoon. 'Yes, this is a reasonable amendment, Parliament is entitled to know that we have refused our consent, and I will therefore accept the amendment with great pleasure." I am sure that he will not say that. It is a great pity but nevertheless I urge him to do so.

Lord Ezra

My Lords, in the debate we had a few minutes ago upon the first amendment it seemed that the Government were minded to lay down a framework under which the agency would operate. Presumably that framework for the purchases of oil outside the royalty arrangements would be such as would be agreed between the two parties. If there were cases where the Government withheld their consent in spite of that framework, it would seem to me not unreasonable that those probably quite exceptional cases should be divulged to Parliament. Indeed. in the case of the nationalised industries it was written into the statutes that, where the Ministers concerned overrode the views of the nationalised industries in particular respects, that should be made public. We are therefore used to that sort of legislation. It is difficult to see why, if the Secretary of State were to divulge his refusal in broad terms, any commercial problems should arise. Therefore, I urge the Government to accept this very modest amendment which would help us to understand more clearly at parliamentary level how the system will operate.

Lord Gray of Contin

My Lords, the noble Lord, Lord Stoddart, has a knack of suggesting to the House that I really mean a certain thing, when that is not really what I mean at all. Therefore, I shall try, if I possibly can, to explain precisely what I do mean in answering the noble Lord's proposal that we accept his amendment. I am sure that it will be a source of sadness to him to learn even at this early stage that I am unable to accept his amendment.

I do not think that I can gloss over the fundamental difference in approach between noble Lords opposite and the Government on the role of the public sector. In my view, the amendment really highlights that situation. In our view the commercial activities of the public sector should be limited only to those that cannot be carried out by the private sector. In the case of the Oil and Pipelines Agency, that approach is reinforced because oil trading is essentially a speculative activity. In the last 12 months we have learnt only too well how the commercial activites in the oil market of a nationalised industry can be misinterpreted as acts of Government and develop a potential for destabilising the oil market. Accordingly, the exceptional act which, it could be argued, ought to be reported to Parliament, is not the refusal of a consent but the granting of a consent to the agency to exercise participation options or to trade in oil. I do not, however, want to encourage any of your Lordship's to put down an amendment in the latter sense since the problems of confidentiality which I mentioned in Committee would, I am afraid, prohibit me from recommending its acceptance.

However, I am always anxious to help noble Lords, as far as I am able and here I can give some explanation of the intentions of my right honourable friend the Secretary of State for Energy in the matter of granting consent. There are two different activities covered by Clause 2 for the carrying out of which the Secretary of State's consent would be required. The first of these is the exercise of options to take participation oil. That activity is related to security of supply. As I explained on Second Reading, consent to exercise these options will be given only if such exercise is justified by an existing or imminent threat to the security of the nation's oil supplies. It must be not for the agency, but for Government to judge whether that situation exists as both the information and the responsibility lie with Government. Doubtless, of course, Parliament will also take a keen interest in the matter and it is not improbable that any future Secretary of State would wish to give it some indication of any precautionary measures taken in such a situation, such as the exercise of participating options.

The second activity is trading in oil on the agency's own account. Again I explained on Second Reading that consent to that activity will be given only as necessary to maximise the proceeds from the sale of royalty oil taken in kind. In Committee I gave examples of when such trading might be necessary. I very much hope that we shall be able to frame any consent in such a way as to specify the kind of activity and the limits to trading which the agency may undertake and thus avoid the need for specific consents for individual transactions. This approach would enable the agency to make appropriate use of the judgment and skills of its staff and its officers, within an overall framework defined by my right honourable friend. This seems to us an appropriate separation of the responsibilities.

The Government have therefore already made quite clear to Parliament their intentions in regard to consents under this subsection should the Bill be enacted. I trust that noble Lords will accept that there is no need to require for the notifications on the refusal or granting of consent particularly since such notification could, as already mentioned, raise problems of commercial confidentiality and put the agency at a disadvantage in its dealings in the market.

4.45 p.m.

I believe that the noble Lord, Lord Stoddart,—although I know that he did not mean to do so—glossed over the question of commercial confidentiality rather too easily. Commercial confidentiality is something which must be respected very much indeed by Government. It is of extreme importance. The legal implications of not having regard to commercial confidentiality can be very serious. In my view it is vitally important that such undertakings as are given and such agreements as are made between Government and the private sector are considered (where both sides feel that this is necessary) as commercially confidential. I am sure that it was not the noble Lord's intention to dilute the implication of commercial confidentiality, but I reiterate that we put very high store on it.

I having made those comments on the amendment proposed by the noble Lord and having given my reasons for not being able to accept it, perhaps the noble Lord will consider withdrawing it.

Lord Stoddart of Swindon

My Lords, I should like to thank the noble Lord for the further information which he has given to us, I think that we shall find it most useful when we read it in Hansard and I thank him for giving it. However, I am rather surprised that the noble Lord should say that I glossed over the issue of commercial confidentiality. Indeed, I recognised it. I stated that the amendment which is at present before the House concedes the point that commercial confidence is important. What more can I do than that? I conceded the point that commercial confidentiality was an important issue and that we did not wish to undermine it. I also understand what the noble Lord said about undue publicity having an effect on markets, prices, movements and what have you.

However, let us just consider what the amendment actually says. It says: In the event of the Secretary of State refusing his consent under subsection (2) above, he shall as soon as possible after such a refusal make a statement to Parliament saying that his consent had been so withheld". All of the cards are left in the Secretary of State's hands. He decides when is "as soon as possible". Therefore, in fact he may very well be telling Parliament after any danger of an announcement having an adverse effect on oil movement. He would decide to make a statement after that particular period had passed.

Therefore, we are accepting and recognising commercial confidentiality and we are also recognising that undue publicity at the wrong time may have an adverse effect. All we are asking is for the Minister to accept this very simple amendment which would be a little gesture towards Parliament and at least keeping Parliament informed. However, the noble Lord the Minister has decided that he will not accept the amendment. I think that his reply will look rather perverse in Hansard; his refusal will not look very good. Nevertheless, it is his decision, and in those circumstances I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 [The Agency]:

Lord Stoddart of Swindon moved Amendment No. 4: Page 7, line 8, at end insert— ("( ) The Agency shall offer appointments and employment to suitable persons at present employed by the British National Oil Corporation; and if the Agency is unable to offer terms of appointment or employment to the person or persons concerned which are no less favourable than the terms of appointment or employment which were applicable to that person or those persons when employed by the British National Oil Corporation, then 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: My Lords, again, we moved an amendment along these lines at Committee stage. But I should be less than honest if I did not say to the House that I have received no representation from the employees of BNOC about this matter. Nevertheless, I think it is right and proper that the Opposition should be absolutely reassured about the fears they have for the staff, their conditions of service and what will happen to them, especially in regard to their severance payments, should they refuse to accept a job which gives them salaries and conditions of service less than they believed was their due. It is right and proper that the Opposition should raise this matter again.

During the Committee stage the noble Lord assured the House that he had gone a long way to satisfying all the fears and difficulties that might then arise. He said that two months had elapsed since an amendment had been moved in the House of Commons, that a lot of water had flowed under the bridge since then and many misunderstandings had perhaps been removed. Since 31st July a further 10 or 11 weeks have elapsed, so that hopefully the noble Lord the Minister will be able to tell me that all the possible difficulties have now been ironed out, that there is no possible way in which staff could be put at a disadvantage, and that we can have the assurance from him that the whole of the staff affected are completely and utterly satisfied with the arrangements which the Government propose. Naturally if he can give me such assurances I should not wish to proceed further with this amendment.

Lord Gray of Contin

My Lords, I can probably satisfy the noble Lord in what he seeks in this amendment. The position of those affected by the proposed abolition of BNOC has been fully discussed both in the other place and in our debate at Committee stage. I made clear then the principles on which it was right for redundancy compensation to be payable and the circumstances in which such payments would be unacceptable.

I recognise that the amendment attempts to implement those principles. However, there are two reasons I believe that I should not accept it. First, it suffers from the same defect as Amendment No. 13 which the noble Lord tabled in Committee in that its first provision could require the agency to take on many more staff than it would need. Secondly, for all practical purposes the amendment, if adopted, would itself, so to speak, be redundant. From what the noble Lord has said obviously he does not intend to press this amendment. I am glad that the situation which now exists would make that unnecessary, anyway.

I understand that apart from those whose jobs will transfer unchanged to the agency, all those BNOC staff whom the agency would wish to continue to employ but on different terms of employment have been given the opportunity to say whether they would be prepared to accept the terms offered. As I indicated in Committee, I have no reason to suppose that in handling these matters BNOC and the future management of the agency have acted otherwise than on the principles regarding the payment of compensation which the noble Lord is concerned to protect. Obviously the noble Lord would not wish me to involve myself in specific cases, but I can give him the assurance in general which he seeks.

Since therefore all questions relating to which BNOC staff will transfer to the OPA and which will qualify for the redundancy terms offered by BNOC have already been resolved, I hope that the noble Lord will agree to withdraw his amendment.

Lord Stoddart of Swindon

My Lords, I am most obliged to the noble Lord for that information and his reassurance. In the light of those assurances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Stoddart of Swindon moved Amendment No. 5: Page 7, line 25, leave out ("one") and insert ("two").

The noble Lord said: My Lords, again, noble Lords will be aware that this amendment was moved by the noble Lord, Lord Lloyd of Kilgerran, during the Committee stage. I have retabled it at this stage to elicit a response from the noble Lord, Lord Gray, who, as he will remember, said at the end of the Committee stage debate: 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".—[Official Report, 31/7/85; col. 294.]

The purpose of the amendment is to ensure that responsibility for the performance of any of the agency's functions cannot be devolved to fewer than two members, officers or employees of the agency. As Schedule I (5)(2) stands, the minimum is one and this is not an adequate precaution against important functions being delegated to one, possibly junior, employee. I understand the safeguard that such devolution of responsibility has to be under the general directions of the agency. Nonetheless, the agency will be performing crucial functions with a small staff For these reasons it seems sensible that any of the agency's functions should be performed by the co-operation of at least two members, officers or employees.

Before I say any more on this matter I should like to hear the noble Lord's reply and, in particular. the results of the discussions which he has had with his officials. I feel sure that he has had discussions and therefore I hope he will be able to reassure us on this point. Perhaps he has come to the conclusion that the best way of resolving the problem is to accept my amendment. I beg to move.

Lord Gray of Contin

My Lords, as the noble Lord, Lord Stoddart, has rightly pointed out, in Committee the amendment was moved by the noble Lord, Lord Lloyd of Kilgerran. I undertook to consider, without commitment, and that is exactly what I have done. What I undertook to do was consider the suggestion made by the noble Lord that this paragraph, 5(2), might be amended to limit the scope to which the functions of the agency could be delegated to its employees.

I fully understand the point which concerns noble Lords opposite. However, with the greatest respect to their views I believe that their worries are unfounded. I remain of the view that any amendment would be unhelpful to the agency.

Paragraph 5 provides that the agency may delegate to any of its members, officers and employees the discharge of its functions. A decision of the agency will be required before arrangements permitting delegation are made and the fact that any delegation will remain, under the general directions of the Agency", itself imposes a limit on any authority delegated to the agency's management and staff. As with any business entity, most of the agency's activities will be carried out by individual members of staff acting either alone—I mentioned in Committee one possible situation where this might be appropriate, but there are many others—or in concert with their colleagues.

In Committee, the noble Lord, Lord Lloyd of Kilgerran, suggested that while some functions might be properly delegated to a single employee, others might not. He wondered therefore whether I might consider limiting the scope of the functions which an employee could be delegated to perform. I entirely agree with him in principle. But in the real world the definition of what can be properly delegated is liable to change either as circumstances change or as individuals concerned change or develop. It would not be right to have to resort to primary legislation whenever we found that the definition had to be changed. The board of the agency should properly be responsible for defining the limits of delegation; and I find it inconceivable that the board would allow decisions to be taken by an individual who was not qualified so to do.

I hope therefore noble Lords will accept that although technically the point which has been raised has some validity—and I do not argue that—in practice the power simply allows the agency to conduct its affairs on normal business lines. In view of that, I trust that the noble Lord may be prepared to withdraw his amendment.

Lord Stoddart of Swindon

My Lords, I will withdraw the amendment, but I must say that I still remain a little unhappy. I do not think the noble Lord has been able to completely reassure me on the point, and I am not at all sure that the noble Lord, Lord Lloyd of Kilgerran, will be reassured when he reads the noble Lord's remarks in Hansard. However, I think we shall leave it there for the time being. We may wish to come back to the matter on Third Reading. We shall read very closely what the noble Lord has said, but in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.