Offshore Oil Industry: Jobs (Hansard, 1 December 1999)

§ Lord Sainsbury of Turville
My Lords, the Government have already taken action to support the industry by forming the Oil and Gas Task Force which carried out an unparalleled consultation exercise involving all parts of the industry, union and government, and reported recently. Already many recommendations have been implemented, including capital gains rollover relief on asset transfers. All of this is aimed at making the United Kingdom 813 Continental Shelf an attractive place for investment, which is the only way to secure long-term UK employment.

§ The Earl of Caithness
My Lords, given that many of us recall the fuss made by the Labour Party in opposition when the smelter at Invergordon was closed, demanding that the Conservative government take their responsibilities seriously—as they did—will the present Government take their responsibilities seriously in relation to what are far greater job losses and do more than simply set up a task force? The Government are now presiding over the biggest ever clearance of workers in the Highlands.

§ Lord Sainsbury of Turville
My Lords, it should be understood that there is more involved than the setting up of a task force. The task force has worked very closely with the industry and has produced a whole series of recommendations. Those recommendations include work on supply chain management, which may lead to savings of as much as £1 billion a year; help in improving exports; a new website to promote licensed trading; and a change to the tax regime. Those are very substantial measures which go to the heart of the problem; namely, that if this industry is to maintain its current level of operation it must do two things—deliver cost-effective facilities for smaller fields and look at overseas markets and build on its success in areas like exports. Last year it exported nearly 30 per cent of its output.

§ Lord Hardy of Wath
My Lords, while recognising that the task force can be extremely helpful, does my noble friend consider that the increase in oil prices in recent months may well stimulate the level of extraction that is required if the fields are to be properly harvested? Does my noble friend believe that the increase in prices together with the task force may lead the oil companies to reconsider their investment policies?

§ Lord Sainsbury of Turville
My Lords, obviously lower oil prices had a very adverse effect on investment plans. It is greatly to be hoped that with increased oil prices we shall see a return of confidence in the industry. It will take time for that confidence to return, but we hope that together with the oil price the measures we have taken will help.

Lord Campbell of Croy
My Lords, does the noble Lord agree that these yards have served well both the offshore industry and Scotland? I was the Secretary of State who in the early 1970s assisted in their creation by enabling accelerated planning permission to be given. That meant that the Forties field, the first in the British sector, was not delayed as might otherwise have been the case. Since then there have been lean periods with few orders but governments have been able to help. Will the present Government make a special effort now?

§ Lord Sainsbury of Turville
My Lords. I hope I have made clear that the Government are taking all sensible steps to help the industry, which has been a great success story. The fact remains that as the North Sea matures geologically with the discovery of far fewer large fields, the industry will have to accept reduced demand for larger platforms, and action must be taken both to improve cost-effectiveness for smaller fields and to look for exports. That is the basic strategic thrust of what the industry must do. We shall give the industry all possible help to achieve that. I hope that I have indicated some of the many ways whereby, through working closely with the industry—a central part of the strategy—we seek to help the process.

§ Lord Taylor of Gryfe
My Lords, is the Minister aware that there has been a good deal of criticism about the expansion of the North Sea oil industry from so-called environmental lobbies, including Greenpeace? Does he accept that any restrictions that may be imposed from that source will severely damage the facilities we are now discussing?

§ Lord Sainsbury of Turville
My Lords, the court case initiated by Greenpeace means that there will be some delay while we consider the implications. That will not be helpful to the industry. However, we are looking at matters as speedily as we can.

§ Lord Lang of Monkton
My Lords, does the Minister agree that the industry, particularly the construction sector, needs long-term stability, given the cycle of the offshore oil business? In that context, does he also agree that the protracted, and ultimately inconclusive, review of the tax regime undertaken by his right honourable friend the Chancellor has had an unsettling effect on the industry? It is a highly competitive industry with other parts of the world very keen to attract the construction sector and oil companies equally interested in investing, given the difficulties in the North Sea and west of Shetland. Against that background, will the noble Lord seek to persuade his colleagues in government to desist from interfering in the industry's long-term interests?

§ Lord Sainsbury of Turville
My Lords, as the tax review was undertaken at the express request of the industry, and, so far as I know, in a perfectly sensible time frame, with some changes made to the benefit of the industry, it is not entirely fair to say that the problems of the industry can be attributed to that. The problems can he attributed to a fundamentally changing situation to which the industry has to adapt. We have looked, I think very fairly, to see whether we can do anything as regards the tax situation to help the industry. We have made one significant change on the roll-over relief on licences which is of great importance to the industry.

§ Lord Hughes of Woodside
My Lords, is the Minister aware that when the noble Earl, Lord Caithness, asked the Question, and the noble Lord, Lord Campbell of Croy, asked a supplementary question, we thought we would have to congratulate the Conservative Party on 815 its conversion to caring about those who work in the industry? Following the question of the noble Lord, Lord Lang, it appears that it has reverted to type in blaming everything on taxation and trying to find ways for their friends to avoid paying tax.

§ Lord Sainsbury of Turville
My Lords, I can only refer back to the fundamental situation—a change in the nature of the challenge that the industry faces. It is up to the Government to work with the industry to help it as much as possible. As I clearly indicated, that is what we are doing.

§ Lord Forsyth of Drumlean
My Lords, is this not a catastrophe for the Highlands? The workers who will lose their jobs will not be inspired by the establishment of a web site. Is my noble friend's point not correct? It is the failure of the Chancellor of the Exchequer to spell out precisely the long-term tax regime and the liabilities on the industry, both prospective and retrospective, which are leading to the lack of investment which results in these people losing their jobs. Will the Government take some responsibility for that and set out a programme to help secure future work in the North Sea for Scotland, or will they simply ignore the plight of people in the Highlands?

§ Lord Sainsbury of Turville
My Lords, I shall deal, first, with the website. That was undertaken in conjunction with the industry. It is to enable the trading of licences, which is of great interest and importance to the industry. The production of a web site is not a negligible matter to be swept aside. It is a key part of licence trading which is important to the industry.
The Chancellor of the Exchequer spelt out clearly the tax position as regards the industry. That has been established. We have made some changes to it. The situation is not to do with the tax regime. The industry—it faces a changing environment—has cut back on investment at this stage.

§ Lord Razzall
My Lords, would the Minister care to comment on the apparent conversion of the Tory Opposition to interventionist economic policies which they did not practise in office, with devastating consequences to these people?

§ Lord Sainsbury of Turville
My Lords, I was recently provoked by another noble Lord on the Liberal Democrat Benches to comment on the Opposition's policies. I can only say on this occasion that I should be interested to know what they are suggesting and whether it might come into the category of a subsidy.

§ Lord Monro of Langholm
My Lords, the Minister does not seem to realise the urgency of the situation. The long-term policy of oil and the ideas he has floated in the Chamber today will not help 3,000 men and women who will be out of work in the very near future. Can the noble Lord make clear who is responsible? Is it the Scottish Executive, the Scottish Office in London, the alleged Cabinet committee looking after 816 Scotland, or the Department of Trade and Industry? There seem to be many wheels in the cog and none is turning correctly.

§ Lord Sainsbury of Turville
My Lords, the situation is quite the reverse of what has been suggested. The problem has been known for some time. Far from having to be pushed into taking action, as I have clearly stated we have already taken action to a considerable extent. The DTI has a responsibility which it is exercising very properly.

§ Lord Mackay of Ardbrecknish
My Lords, is the Minister aware that people in the Highlands will notice in his contribution a considerable lack of urgency? They will also note that the Liberal Democrats do not seem to care very much despite the fact that their leader is the Member of Parliament for the constituency in which many of the jobs will go. Can the Minister not take on board that the Government should look urgently at how, whether by a new tax regime or other means, they can encourage new development in the new fields to the west of Shetland and in that way bring some work to these yards? If we do not gain a sense of urgency, I can tell the noble Lord that the yards will never build another item for the North Sea.

§ Lord Sainsbury of Turville
My Lords, these exchanges demonstrate that we are the party which cares about what is going on in the industry and which has already taken considerable action and that the other side is coming very late in the day without clear proposals. No proposals have been put forward. Many statements have been made about wanting to help. We have already taken steps which include a new and clear regime of bringing new exploration online.

§ The Earl of Caithness
My Lords, notwithstanding what the Minister has told us, does he agree that a forecast in September of this year stated that the loss of 3,000 jobs was the mere start to the loss of a further 7,000 jobs—that a total of 10,000 jobs would go? That is a quarter of the workforce.

§ Lord Sainsbury of Turville
My Lords, we never sought to hide that if the industry is unable to take action to reorientate itself to the new demands upon it in terms of cost-effective facilities for smaller fields and overseas work, it will lead for certain to a loss of jobs. There is no denying that. Those are the economic facts. The industry, with the help of the Government, has to find new markets for its products. In the long term that is the only way that jobs can be kept secure.