HL Deb 16 December 1986 vol 483 cc121-6

4.4 p.m.

Second Reading debate resumed.

The Earl of Lauderdale

My Lords, returning to the matter the House had in hand about an hour ago, which was the Advance Petroleum Revenue Tax Bill, I must first declare a remote interest in that I am an oil company director. However, this is not a matter which I discussed with my company and it has not briefed me at all.

I should like to take up a point which has just been made by my noble friend Lord Bellwin in another connection. He said, "Let us look at this rates thing in perspective". I ask the House to do the same as regards this relatively short and uncomplicated Bill. We have this afternoon witnessed two rather dramatic reversals of role. My noble and dear friend Lord Gray of Contin was a party to the advance PRT arrangements. He was in government at the time and shared some of the responsibility. He is now—I do not say "with egg all over his face", because he is looking very well—but he is somewhat penitent and realises that whether it was wise then, it certainly is not very wise now. Perhaps I may remind him of the words of the poet: He blamed and protested, but joined in the plan. He shared in the plunder but pitied the man". We have also heard from my noble friend Lord Beaverbrook who is so welcome to the Front Bench and whose performance I have not hitherto witnessed. He is busy defending, on the government side, the damaged and threatened cash flow of companies which, three or four years ago, the Government were very happy to plunder. May I say that he reminds me of a poacher turned gamekeeper?

This is an extraordinary situation and, if I may say so with respect, does not really relate to tax. The fact is that this is no tax easement whatever. It relates to gun-point loans to the Government. They were made at gun-point and they were interest-free. The Government said to the companies, "Give us this money whether or not you like it". They rather remind me of the chap who once said, "One day I shall get married, but I shall take the wedding presents now and let you off when the time comes". The Government were really saying to the oil companies, "Give us the money now and if you pile up tax obligations against that, we shall offset the one against the other".

These were gun-point and interest-free loans—an extraordinary situation. The loans totalled much more than £300 million. That is only the amount being returned now, almost as a gesture of charity. It is being returned to those who were forced to surrender to the gunmen what the gunmen took—but not all of it. All this Bill does is to propose the restoration of about three-eighths of the stolen goods. This Bill proposes the return of £300 million-odd out of a total of more than £800 million. Remember, that money was stolen! May I also say that that money was extracted from an industry which has brought enormous advantages to the country. Everyone now bewails the fall in oil prices, not because they are sorry for the oil companies, but because they are sorry for the consequential unemployment. These moneys were stolen from companies creating employment. There is another £500 million still to come and still due to be returned to the languishing enforced lenders.

I am reminded of a German visitor who came to London in the 1780s. He said, "What a marvellous city to plunder!" That is how the Government treated the oil companies. They were marvellous to plunder, and the Government went about it. It was a brutal, uncivilised and, so far as I am aware, unprecedented piece of highway robbery to begin with. It was an interest-free forced loan three years ago. If we can suppose that the money would have been earning interest at, say, 15 per cent., which is modest enough nowadays, that would have meant an income to the industry of nearly £400 million over three years. It is proposed to return a mere three-eighths of the loot of a highway robbery.

I should like to stress to your Lordships that the employment implications are rather wider than those to which my noble friend Lord Gray of Contin referred. He described the effects on fabricating yards in Scotland. There is no need for me to dot any "i" or cross any "t" on that subject. He is more familiar with that aspect of the subject than anyone in this House, and it is also well known all over Scotland. However, it is not only a question of the fabricating yards. The ramification of oil company expenditure on, first of all, exploration and, later, on development, extends all over the country.

Eighteen months or two years ago, I did an exercise to discover where the orders relating to the development of the North Alwyn oil field, with which my company is concerned, went. I found that only a part of them, numerically, went to Scotland. It is true that the fabricating yards were in Scotland, but many of the bits and pieces that go on to a platform, ranging down to pumps, nuts and bolts, were made all over Britain. I found that about 50 or 60 constituencies up and down the country were involved in the employment benefits of our enterprise and would consequentially be involved in the unemployment disbenefits of any slowdown. If the Government wish, as I am sure they do, to ease the employment situation other than by measures which sometimes appear cosmetic, here is a simple one where they are only dipping the toe into the water. They propose to return three-eighths of a gunpoint piece of plunder.

Other points have been mentioned by the noble Lord, Lord Bruce of Donington. They come from the United Kingdom Offshore Operators Association and concern various matters that the industry would like to see. As my noble friend Lord Gray of Contin said, they have been on the table for a long time. I refer to the remission of royalty, extending PRT exemption to exploration and appraisal costs and design and engineering expenditure. Whatever may be the other items that the industry thinks it needs and which those of us involved in the industry believe would be good for employment in the country, a situation such as the one we witnessed when the Government simply stole this money from perfectly law-abiding companies doing a great deal for the development of our country and its economy should never arise again. The Government should wash the whole slate clean now. I remind them of the words of the poet Shenstone, who said: Let me that plunder forbear She'll say t'was a barbarous deed". It was a barbarous deed and I hope that it may never be repeated. But let us be thankful for small mercies; getting back three-eighths of the loot is after all better than getting nothing at all.

Lord Bruce of Donington

Before the noble Earl sits down, he has spoken in strong terms about Her Majesty's Government and has described as "plunder" the taxation measures introduced in the Finance Act 1982. He has spoken of stealing. These are very strong terms. It is not normally my function to protect Her Majesty's Government from such accusations made by such prominent supporters, but before the noble Earl sits down, will he give some indication as to whether he agrees or disagrees with the estimates of the Chancellor of the Exchequer made in 1982 when he said that the industry was making very large profits indeed and could well sustain the measures that he was proposing to lay before the House? Will he say also whether he has researched the proceedings in another place to ascertain whether, from his own Benches in another place, there was any loud protest about APRT aside from those who had declared an interest in the oil industry itself?

The Earl of Lauderdale

My Lords, it is always a pleasure to bring the noble Lord to his feet even when he has spent 20 or 30 minutes on them already. There was a good deal of protest in another place about this matter at the time. A great deal of it was conducted between the industry and the Government. When the noble Lord asks if I object to large profits being plundered, the answer is yes, I do. Profits are to be enjoyed by those who make them; and therefore, just because profits are large, that is no reason why the Government of the day should pinch them.

4.14 p.m.

Lord Beaverbrook

My Lords, perhaps I may intervene in this interesting exchange. I am most grateful to noble Lords who have spoken this afternoon. As I said earlier, the Government received many representations from the oil and offshore supply industries calling for some measure to ease company cash flow difficulties in the light of the fall in oil prices. The provisions of this Bill are aimed at taking prompt action to alleviate these present difficulties by providing qualifying companies with cash to help finance their existing and future developments. The benefits of the repayments under this Bill should thus flow through to the United Kingdom offshore oil industry.

Noble Lords raised several points. The noble Lord, Lord Bruce of Donington, commented that since the abolition of the British National Oil Corporation the Government had less, or indeed very little, control over the oil industry in the North Sea. The Government take the view that production levels are a matter for the companies. Apart from setting technical limits it is not for the Government to interfere. To break from this consistent approach would needlessly damage the confidence of investing companies and threaten future prospects for the United Kingdom oil sector.

I was glad to hear the noble Lord, Lord Bruce, agree with me when he argued that it was sensible to encourage investment in the future of the industry by some fiscal adjustment. Despite current difficulties the industry has a long-term future ahead. There are still significant oil and gas resources to be developed on the United Kingdom continental shelf.

The noble Lord, Lord Bruce, also asked what other fiscal measures could be forthcoming. The Government have noted all the points raised by the industry so far. I obviously cannot anticipate anything that might come through next spring in the Budget of my right honourable friend the Chancellor of the Exchequer. The noble Lord also asked me why the Government are returning £300 million to the oil industry when there are a number of other areas where expenditure is restricted. Not only will the oil companies benefit but the supply industry will as well. The oil price fall has imposed particularly sharp adjustment problems for both oil and supply industries and some help with the process of adjustment is needed. But in any case the early APRT repayment is not a Government handout but merely advances the return of money due to the companies.

My noble friend Lord Gray of Contin asked me why we do not accelerate the repayment of APRT to include another £500 million. Full repayment would have been very costly with much of the additional benefit going to companies that are not obviously in need of a cash flow boost in order to press ahead with the development of other North Sea operations. I was also asked why the ceiling is to be £15 million. Exchequer resources, as noble Lords will all be aware, are not unlimited. We want any money spent to be productively spent. Hence the need for targeting on companies which might otherwise face difficulty in pushing ahead with North Sea developments. The £15 million limit together with the pay-back qualification are designed to achieve this target.

My noble friends Lord Lauderdale and Lord Gray of Contin specifically mentioned the offshore supply industry. We recognise that this industry is going through a difficult time and we sympathise with those affected. However, we are now discussing a measure which will improve the situation in that industry.

My noble friend Lord Lauderdale spoke of gunpoint measures and referred to this return of APRT as "a gesture of charity". Some of the outstanding APRT would anyway be offset against PRT liabilities that will accrue. The rest will be repaid over the next three financial years. The North Sea fiscal regime was designed not to plunder the oil industry but to ensure that the nation obtained its fair share of economic rent from its natural resources. My noble friend should note that it is very unlikely that fields that come under development in future will pay any petroleum revenue tax.

The repayments of advance petroleum revenue tax will be carefully targeted on those companies and developments most in need of help. Over three-quarters of the total benefit will go to those independent, medium-sized and smaller companies which have been among the worst hit by the oil price fall. Many of these are companies involved in developments which in some sense hold the key to the prospects for the off-shore supply industry. We all recognise that it is a particularly difficult time for that industry.

I should like further to stress the importance of getting repayments to the companies as soon as possible in order to reduce the risk of key developments in the North Sea being delayed by cash constraints. The fall in the oil price and the possibility of a reduction in North Sea activity are matters of grave concern for the nation as a whole. It is therefore vital that the Bill, which will provide much needed finance early next year, is implemented without delay in order to boost the industry's cash flow and encourage further investment in the North Sea over the coming year.

Both the oil and off-shore supply industries have recognised the importance of this Bill and are anxious to see it implemented as soon as possible. As I have already said, the Bill has been well received in another place and was approved there without amendment. I hope that your Lordships will support me when I say that we likewise should allow this Bill to proceed today.

Lord Bruce of Donington

My Lords, before the noble Lord concludes will he answer one question? He spoke about the targeting of the reliefs afforded by this Bill to various companies. The noble Lord will know quite well that in the normal way in taxation you do not target reliefs to specific, identified companies. They have to comply either with the income tax Acts or with the regulations. Matters are then determined by the appropriate taxation authorities according to a strict legal entitlement.

While speaking about targeting the relief to specific companies, I am sure the noble Lord will agree that it is desirable that in due course particulars are given as to exactly the amount received by each company. That will give greater transparency to how the reliefs are given. They are not covered in detail in the way that applies to ordinary taxpayers in relation to the contents of the income tax Acts and the contents of the specific provisions in Finance Acts. Can the noble Lord answer the point?

Lord Beaverbrook

My Lords, I think it is untrue to say that taxation is never otherwise targeted. There are many aspects of taxation that are designed to achieve specific ends. The aim of this particular measure is to help the companies in the North Sea that are most in need of help in developing the fields and the projects that are the future of the North Sea oil industry. I do not accept that targeting is alien to our tax regime.

Viscount Trenchard

My Lords, may I ask my noble friend—

Noble Lords


On Question, Bill read a second time; Committee negatived.

Then, Standing Order No. 44 having been suspended (pursuant to Resolution of 15th December), Bill read a third time, and passed.