North Sea Oil Revenue (Hansard, 20 March 1986)

§ Lord Dean of Beswick
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ Lord Young of Graffham
My Lords, the economy has taken the unprecedented collapse in the oil price in its stride—a tribute to its underlying strength and to seven years of sound and prudent financial and economic management.

§ Lord Dean of Beswick
My Lords, I am grateful for the Answer, but really, how can the Minister say that we have already adjusted to the decline in oil revenues when that has been taking place only over the past 25 weeks and there has been no cut in production as yet? Would the Minister like to say why the Chancellor has essayed a guess of 15 dollars a barrel—and it was only a guess—when the price of oil could go up to 20 dollars or, unfortunately, go down to 10 dollars a barrel? Will this not blow a hole in the Chancellor's calculations for the coming financial year?

§ Lord Young of Graffham
My Lords, when the Chancellor has to prepare a Budget he has to do that on the basis of certain assumptions about the levels of prices and other matters in the year to come. The past three months have been particularly difficult for the Chancellor and I think all your Lordships would wish to congratulate him on the skill and expertise he has shown in managing the economy in such a difficult time. The advice that the Chancellor has taken about the price of 15 dollars per barrel is his best assumption in the present circumstances. What will happen in the future is not known to anyone in your Lordships' House; nor even, I suspect, to Sheikh Yamani himself.

Lord Campbell of Croy
My Lords, does my noble friend agree that no British Government can count ahead upon any particular quantity of revenue from this source, as it is affected by both the world price of crude oil and the dollar exchange rate? But has not the Budget this week clearly demonstrated that government policies can be pursued, and indeed are being pursued, even when there is a large and unpredictable reduction in this revenue?

§ Lord Young of Graffham
My Lords, it demonstrates not only that government policies can be pursued and are being pursued but that they will be pursued in the face of future circumstances.

Viscount St. Davids
My Lords, does the noble Lord agree with the words used by the questioner who said that it was an unfortunate drop in prices? Is it not more true to say—and perhaps the noble Lord could advise us—that the drop in prices was of enormous advantage to this country, and indeed to the whole world?

§ Lord Young of Graffham
My Lords, I think that in the course of time circumstances will show us that that will be greatly to the advantage of Europe, and the United Kingdom is firmly part of Europe.

§ Lord Grimond
My Lords, may I ask the noble Lord the Minister whether he is aware that at least there should be congratulations for the Chancellor of the Exchequer on one point and that is on his strictures to the oil companies on their failure to reduce their prices in line with the reduction in the price of crude? Will the noble Lord assure us that it is the Government's view that lower oil prices actually give the economy great hope, can be a considerable boost to the economy and are not something to be deplored?

§ Lord Young of Graffham
My Lords, I agree with the second part of the noble Lord's question. As the months and years roll by, we shall see that the 1050 reduction in energy prices will constitute a great boost to our manufacturing industry and our export trade. The circumstances which the Chancellor of the Exchequer described when he gave evidence to your Lordships' Select Committee on Overseas Trade may well come about. So far as concerns the first part of the question the fact that two oil companies have decided to pass on the increase in costs may be confounded by other oil companies which might decide otherwise. In the end, the market will prevail.

§ Lord Williams of Elvel
My Lords, given the noble Lord's oft-repeated concern at the current rate of unemployment, which I shall accept as genuine (at least until I hear the answer to my question), and given that the Chancellor, after the fall in oil prices and by his own arithmetic has allocated £1 billion for tax cuts, does the noble Lord genuinely believe that the most effective use of those funds to reduce the unemployment level is to cut 1p off the basic rate of income tax?

§ Lord Young of Graffham
My Lords, that is another question; but to satisfy the noble Lord's curiosity about the shape of the Budget, may I merely say that the shape of the unemployment measures was all that I could have wished for.

§ Lord Barnett
My Lords, is the noble Lord aware that most people will accept that the Chancellor made a not unreasonable assumption of 15 dollars a barrel for 1986–87 and on the exchange rate that he had taken? On the other hand does he also accept that if it turns out that the Chancellor has been too pessimistic—which may well be the case—he will return to the House with a new Budget given that he has lost, on his assumption, £5.5 billion? Will the noble Lord on this occasion press his right honourable friend rather more than he did last time to ensure that he does something for the people for whom he has responsibility—namely, the unemployed—rather than for those on rather higher incomes?

§ Lord Young of Graffham
My Lords, I shall deal with the last part of that question, because it will be up to my right honourable friend to prepare his Budget in the normal way. I have no doubt at all that he will return to the other place in a year's time to deliver the next Budget, when everything will be going according to plan. I should like to break the linkage, which is shared by those opposite, that somehow unemployment and the expenditure of central government funds are inextricably linked. They are not. We have to look very closely at the quality of output and not the quantity of any input. I believe that the package we have and the improvements that we can make in our present expenditure on unemployment, which runs into many billions of pounds each year, will show that we can deal with unemployment. I know that it is a great temptation for your Lordships' House to deal with unemployment. It is the central issue of our day. This is the fifth Question in the past eight days, but the original Question was about oil.

§ Lord Tordoff
My Lords, do the Government accept that the reduction in oil prices should not be seen as a 1051 reason for reducing our efforts to save energy and introduce energy conservation measures both in industry and in the home in this country?

§ Lord Young of Graffham
My Lords, yes, I hope very much that those efforts will continue undiminished, because even with those price levels we will find that efforts to reduce energy consumption will pay for themselves in a very short time.

§ Lord Strabolgi
My Lords, arising out of the original Question and remembering that North Sea oil will last for only a few decades, may I ask the Government whether they have a systematic depletion policy which takes account of other energy sources, or is it all to be left in a spendthrift sort of way to market forces?

§ Lord Young of Graffham
My Lords, I do not think that market forces and being spendthrift can actually go together. It has seemed that the way governments have intervened in the past has resulted in policies more spendthrift than anything else.

§ Lord Molloy
My Lords, one of the things that follows from the reduction in oil prices—this may be a small matter but to millions of motorists it is important—is that there should be a reduction in the price of petrol at the pumps. The Chancellor has indicated that because of cheap oil he has added a few more pence to the price of petrol and that he was confident that the private companies which own the petrol stations would see that that was not passed on. It now appears that they have completely ignored the promise given by Britain's Chancellor of the Exchequer. Do the Government intend to do anything about it?

§ Lord Young of Graffham
My Lords, assuming that the price of oil does not change, I would invite the noble Lord to put down a Question in a few weeks' time to congratulate the Government on the then price of oil at the pumps.

§ Lord Molloy
My Lords, that was a very important question. Will the Minister make a big endeavour and really answer the question instead of dodging as usual?

§ Lord Dean of Beswick
My Lords, to get back to the price of oil, is the Minister not aware that due to the initiatives of the previous Labour Government, successive Conservative Governments have had the benefit of between £50 billion and £60 billion of financial assets from energy resources in the North Sea? Can he tell us what monument from the receipt of that money has been left us by this Government other than record unemployment and dole queues?

§ Lord Young of Graffham
My Lords, yes, gladly. In 1979, the net overseas investment of the United Kingdom was £12 billion. From the Chancellor's Statement, your Lordships' will realise that today it is £90 billion, the greatest amount of any industrial country in the world other than Japan. We are second. The dividends from those overseas investments will continue to flow long after the oil has run out.

§ Lord Rodney
My Lords, does my noble friend agree that the one thing the Budget has proved is that we are not an oil-dependent economy, as is contended so often by noble Lords opposite?

§ Lord Young of Graffham
My Lords, yes. I think that it will also show that we are entering a sixth successive year of growth, and it looks very much as if the seventh will also be in front of us.