Sitting of 31 July 1985

Preamble
The House met at eleven of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Manchester): The LORD CHANCELLOR on the Woolsack.

Educational Standards: Action on Report
Lord Boyd-Carpenter: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they propose to take in the light of the report by the National Council for Educational Standards on the proportion of O-level passes in grammar and secondary modern schools on the one hand, and comprehensive schools on the other.
The Earl of Swinton: My Lords, the report confirms the strong statistical association between examination performance and social background, and also points to better examination results by pupils at secondary modern and grammar schools than by pupils at comprehensive schools. As the authors state, the findings are capable of a variety of interpretations, the issues are very complex and the inferences drawn tentative. The Government will be studying the report in more detail before reaching conclusions on the findings.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that very interesting reply. Is my noble friend aware that to many of us the good performance of the secondary modern schools is particularly interesting and significant in this context, and does my noble friend share the view that these figures generally indicate how unfortunate were the changes which were made by Mrs. Williams some years ago?
The Earl of Swinton: My Lords, this may well come out when the more detailed considerations take place. It could be possible.
Baroness David: My Lords, perhaps I may ask the Minister whether the DES considers that the premises and data on which the National Council for Educational Standards was working are entirely satisfactory. Will the noble Earl agree that a more direct comparison between the abilities of pupils going into a school and the qualifications that they leave with, as suggested by researchers at Lancaster and Sheffield Universities, would provide a fairer picture?
The Earl of Swinton: My Lords, the department's views on the first report were set out in a statement issued in November 1983. Among other things, this explained that the department had been reassured about earlier doubts as to whether the sampling of schools was representative, but said that the question of appropriate adjustments in respect of social and economic factors in work of this kind was a matter for debate. At the time my right honourable friend explained that, contrary to some press reports, the
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department does not regard the research as seriously flawed. I do not think that there is more to say on this matter, except that the authors of the report had taken these views into account when they produced this later report.
Lord Glenamara: My Lords, is the noble Earl aware that many of us believe that the comparison is not worth the paper on which it is written and certainly does not warrant the conclusion drawn by the noble Lord, Lord Boyd-Carpenter? Is the noble Earl further aware that comprehensive schools are never comprehensive; they never have the full range of ability because of the existence of so many independent schools and in some cases grammar schools? For example, in the City of Newcastle-upon-Tyne there are six independent schools. In those circumstances, the wonder is that the comprehensive schools do as well as they in fact do.
The Earl of Swinton: Yes, my Lords, in a way I agree with the noble Lord. The Government have no doctrinaire views about the various forms of secondary school organisation. Each has its strengths and its weaknesses. We take the view, which we set out in Circular No. 4/82, that no one pattern of secondary education has overriding advantages or disadvantages of principle, and that the form of secondary education chosen for an area should be that which is best suited to local circumstances and the preferences of parents.
Lord Beloff: My Lords, I should like to ask a question as a sponsor of the National Council for Educational Standards. Will my noble friend agree that the question asked and the remark made by the noble Lord, Lord Glenamara, that the comparison is not worth the paper upon which it is written suggest that it is extremely difficult to do serious research when those who do serious research are not argued with in terms of the problem but are subjected to prejudicial abuse?
The Earl of Swinton: My Lords, I thought that the first statement of the noble Lord, Lord Glenamara, that all comparisons are useless, was such a useless question that I did not bother to answer it.
Baroness Gaitskell: My Lords, why are we slandering comprehensive schools? Some are good, and there are some which are not so good. But why do we dismiss them in this kind of way? It is not a bit attractive.
The Earl of Swinton: My Lords, I think there must be an end-of-term feeling in the air, but if the noble Baroness reads my reply to an earlier supplementary question she will see that I was in no way attacking comprehensive schools.
The Lord Bishop of Norwich: My Lords, would the noble Earl be willing to answer a fairly broad supplementary question? I must declare an interest. As an elderly and approaching senile Prelate, I now have 11 grandchildren. Therefore, I am interested in future, long-term education. Without, I hope, in any sense name-dropping, the other day I was talking to the First Lord of the Treasury in another place and, therefore,

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I am encouraged to think that my supplementary question may be quite a good one. When the right honourable Lady was speaking to me about her desire for her third term—and I was interested in what she had to say—I was reminded that she was of course an education Minister. Therefore, my supplementary question is one that I hope will be received with warmth. I am coming to it, my Lords—I really am—because this is my ultimate question in your Lordships' House, although if the noble Baroness, Lady Trumpington, gives such an outrageous reply to the Question about Guy's Hospital, which trained both my wife and my daughter, I may find that this is my penultimate question.
My question is quite simply: will the Government keep as a twinkle in their eye direct grant schools, which have served us so well in the past and might yet serve us well in the future?
The Earl of Swinton: My Lords, perhaps I may congratulate the right reverend Prelate not only on the fact that he took so long to ask his last supplementary question, thus ensuring himself a good last record in Hansard, but on the state of his family, he having 11 grandchildren. The Government regret the last Labour Government's abolition of direct grant schools. As my right honourable friend the Prime Minister made clear, we are always looking for means of widening parental choice. Whether one way to do this would be by means of some kind of direct grant scheme is presently under consideration. If a scheme which was feasible and affordable could be worked out, it would be experimental and subject to full consultation.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that the right reverend Prelate—
Noble Lords: Order, order!
Lord Glenamara: My Lords, is the noble Earl aware that the remark of the noble Lord, Lord Beloff, comes ill from one of the co-authors of one of the most scurrilous series of documents in English educational literature, the "Black Papers"? Is the noble Earl further aware that what I am saying, and what those of us who disagree with this document are saying, is that it does not compare like with like, and that surely makes it a flawed, invalid document?
The Earl of Swinton: My Lords, I do not think that I am here either to defend the noble Lord, Lord Glenamara, against my noble friend Lord Beloff or vice versa. As the House will be up in about four hours, I am willing to second either of them if they wish to have a go on the Terrace! I do not think that I need say any more.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that the House is much indebted to the right reverend Prelate for giving my noble friend an opportunity to make the extremely satisfactory supplementary answer which he made, and which completely demolished the noble Lord, Lord Glenamara? Is my noble friend also aware that the
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House as a whole will greatly regret the departure of the right reverend Prelate, who has been a leading figure for so many years?
The Earl of Swinton: My Lords, I think this looks like being a three-cornered contest. However, perhaps we could complete the discussion on this rather long Question on a happy note. I am sure that all would welcome the last part of my noble friend's supplementary question.

Textile and Clothing Imports: Quotas
11.10 a.m.
Lord Bruce of Donington: My Lords, I beg leave to ask the Question standing in my name on the Order paper.
The Question was as follows:
To ask Her Majesty's Government what steps they propose to take in imposing restrictions on textile and clothing imports from Korea, Taiwan and Brazil to match the licensing provisions imposed by those countries on their imports from the United Kingdom.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, under the provisions of bilateral agreements, negotiated by the European Community under the multi-fibre arrangement, 50 quotas are in force in respect of the United Kingdom on the import of textiles and clothing products from the Republic of Korea, and 13 quotas on such imports from Brazil. Under autonomous arrangements, 48 quotas apply to such imports from Taiwan. Under a new multi-fibre arrangement, the Government will seek to provide above-average improvements in access levels for developing countries whose own trade barriers to British exports are low, and for those that open up their markets to our exports.
Lord Bruce of Donington: My Lords, is the noble Lord aware that my Question relates to three specific newly-industrialised countries and not to developing countries in general? Is he aware that the tariffs imposed by the United Kingdom on these textile and clothing imports from these countries are between 13 and 15 per cent., and that the tariff's imposed against our exports to these countries are, in the case of Korea, three times as high; in the case of Taiwan, seven times as high; and in the case of Brazil, eight or nine times as high? Does he think that that shows a satisfactory state of affairs concerning our textile exporters and our textile industries generally?
Lord Lucas of Chilworth: My Lords, I am aware of the figures. For the benefit of noble Lords, I remind the House that these are set out in Hansard of another place of 22nd July, at col. 353. I should remind the noble Lord opposite that when he mentions the United Kingdom tariffs he really means Community tariffs, since the Community negotiates on our behalf. In regard to our own industry, I am sure he will agree that the United Kingdom textile and clothing industry has done exceptionally well. In 1984 it increased its

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exports by over 15 per cent. over the previous year in value terms, and it has in the first quarter of 1985 increased its exports by 19 per cent. over the same period last year.
Viscount Massereene and Ferrard: My Lords, I understand that Brazil owes this country several thousand million pounds. It may not be as much as that, but anyway it is a lot of money. In view of that, does my noble friend agree that it seems wrong that they should have such high tariffs against the import of our textiles?
Lord Lucas of Chilworth: My Lords, the financial position of Brazil is broadly as my noble friend suggests, and they have in fact suspended the issue of all import licences for garments, fabrics, textiles and clothing because of that situation. Nevertheless, there is no good reason why we should act in the same discriminatory and protectionist way, which would not be to our long-term advantage.
Lord Bruce of Donington: My Lords, I take note of the fact that the noble Lord does not dispute the figures that I gave him. I should like to ask him whether he does not agree that the existing EC machinery, to which he has referred, has not yielded a satisfactory result so far as the United Kingdom is concerned? Is it not high time that Her Majesty's Government started looking after the United Kingdom?
Lord Lucas of Chilworth: My Lords, Her Majesty's Government look after the interests of United Kingdom manufacturers in every forum we attend. We shall be entering into negotiations over the next few months for a new MFA and we are in negotiation over a new GATT round, all considered to be in the interests of our country.
Baroness Seear: My Lords, may I ask the noble Lord what these countries are buying of our exports?
Lord Lucas of Chilworth: My Lords, of these three countries, Taiwan accepted £3.5 million worth of goods f.o.b.; Brazil, £1.6 million; and South Korea, £6.2 million.
Lord Cledwyn of Penrhos: My Lords, does the noble Lord agree with the current assessment of the CBI that the present value of the pound and the rate of interest will be extremely damaging to our export prospects? What are the Government going to do about that?
Lord Lucas of Chilworth: My Lords, the CBI survey is somewhat disappointing compared with the optimism shown in April. However, business is still experiencing growth, possibly at a somewhat slower rate. If one took the business confidence balance—that is, a balance between those who think the situation will improve and those who think it will not—the balance as on the last day of this month is zero compared to minus 3 last July twelvemonth.
Lord Beswick: My Lords, if one is talking about the different interpretations that one has from different people, does it not depend upon which base year they take? The noble Lord talks about an increase in the
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export of textiles over last year. If he took an earlier base year he would find that the balance was down. If he takes exports generally and compares them with the base year of 1979 he will find that they were down.
Lord Lucas of Chilworth: My Lords, of course figures are presented in a variety of ways, and I suppose that if we went back the previous 15 years we would find the position extremely healthy. The truth of the matter is that the textile and clothing industry has done rather well. When one considers that there is something approaching £10.5 billion worth of products consumed in this country, over 60 per cent. of it supplied by United Kingdom companies, that to me shows a good balance in the industry.
Lord Beswick: My Lords, is it not still true that the textile industry itself complains of the support that it is being given by Her Majesty's Government?
Lord Lucas of Chilworth: No, my Lords; that is not true. The textile industry has advanced a number of ideas to us whereby assistance can be given. On the last occasion when we had a round we found that the suggestions were not in conformity with our obligations under the treaty of Europe. Further suggestions have been made to us and we are considering whether we can adopt some of them, again within our obligations to the Community. The Government will support industry, and do support industry through a wide range of methods.
Lord Leatherland: My Lords, does the noble Lord remember that in his original Answer he used the expression "MFA"? As I want to understand him fully, what does "MFA" mean?
Lord Lucas of Chilworth: My Lords, my pronunciation must have been at fault. I said, the multi-fibre arrangement, and in my original Answer I did not use the initials at all. I spoke twice of the multi-fibre arrangement.
Lord Leatherland: Then, my Lords, the noble Lord's memory is at fault.

Guy's Hospital: Job and Bed Reductions
11.18 a.m.
Lord Ennals: My Lords, I beg leave to ask the first Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the Secretary of State for Social Services has given his approval to the reduction of 300 jobs and 63 beds at Guy's Hospital, and what services will be lost as a result of this reduction.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington): My Lords, my right honourable friend the Secretary of State's approval is not required for job losses or temporary bed reductions. These are the responsibility of Lewisham and North Southwark

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Health Authority, which is under a duty to provide patient services within the resources allocated to it. It remains necessary to rationalise acute services within this authority, and these bed reductions are in line with the strategy of the authority and needed to be made at some stage.
Lord Ennals: My Lords, as former Member for Norwich North may I express the hope that the intervention we heard from the right reverend Prelate the Bishop of Norwich is not in fact the last, and that he may make another one? Is this not the most serious cut yet to any of the major London teaching hospitals? Is the Minister aware that the chairman of the board of governors of Guy's, Professor Cyril Chantier, has written to hospital staff saying that patients will suffer? Is she aware that he said in his letter:
"Everyone must feel anxious, miserable and angry about what is being planned",
and further, that the principal effect will be on general medicine and surgery, including chest and infectious diseases? Is this really the pattern for the future? Where do the Secretary of State's responsibilities start and stop?
Baroness Trumpington: My Lords, may I remind the noble Lord, Lord Ennals, that he was once my MP, but for a very short time? The need to save money in Lewisham and North Southwark district and in Guy's Hospital in particular does not relate primarily to RAWP reductions nor to the review body pay award, but to an overspending in the last two financial years of £2.3 million on multi-district services whose budgets are set by South-East Thames Regional Health Authority. The problems have arisen because the district health authority refused to take action to keep spending on these services within cash limits and it now faces the difficult task of repaying the deficit by March 1986.
Baroness Gardner of Parkes: My Lords, can my noble friend confirm that in this area there are two major hospitals Guy's and King's and that therefore the provision has been rather in excess of any other part of London, or possibly the whole country, and that the local health authorities must be the people able to decide? Can my noble friend explain also to whom the noble Lord, Lord Ennals, was referring when he referred to the "chairman of the board of governors"? As I understand it Guy's does not have a retained board of governors. Was he referring to the teaching hospital or the hospital itself, because surely that comes under the district?
Baroness Trumpington: My Lords, I thank my noble friend for her supplementary questions. I cannot answer for the noble Lord, Lord Ennals. But in answer to one of her supplementaries the South-East Thames Regional Health Authority's policies, which we support, are to move resources in line with the population movements of recent years. Districts like Medway have been relatively deprived of local health services for many years and need extra revenue. Lewisham and North Southwark Health Authority must reduce its acute beds in line with its future
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resources assumptions, develop priority services and the pattern of services there must change to meet today's needs.
Baroness Lane-Fox: My Lords, is my noble friend the Minister aware that St. Thomas's also comes within the South-East Thames area and that there is great worry and difficulty caused to the big London hospitals by the effects of RAWP? Does she not think that there should be some deflection or rearrangement to preserve this invaluable source of medical science and specialist treatment?
Baroness Trumpington: My Lords, in answer to my noble friend, special financial recognition is given to teaching hospitals within RAWP. The service increment for teaching is an allocation for the extra costs of medical teaching. The specialised supraregional and multidistrict services often provided by teaching hospitals receive protection from the redistribution of resources through RAWP. RAWP targets are adjusted for the costs of in-patients coming from outside the district.
Lord Bottomley: My Lords, does the noble Minister not agree that in view of the worldwide reputation of Guy's Hospital it is tragic that any cuts have to be made?
Baroness Trumpington: My Lords, although radical changes are now required because of the difficult problems that the DHA has caused for itself by not taking earlier management action, there is every reason to be confident about the future of Guy's Hospital, which at the end of the 10-year planning period will still be an 800–900 bed hospital providing excellent facilities for patient care and teaching well into the foreseeable future.
Lord Paget of Northampton: My Lords, can the noble Baroness give us any indication of what the waiting lists for Guy's are? I am thinking particularly of operations such as the hip operation which relieves so many cripples of an enormous amount of pain. Is not what we are really seeing a squabble between the Government and the GLC which is being taken out on those who are suffering?
Baroness Trumpington: My Lords, in answer to the noble Lord's final supplementary, no. In answer to his point about waiting lists, the total waiting list for Lewisham and North Southwark district on 31st March 1985 was 6,481. The district health authority has said that some doctors who have been opposed to what they regard as cuts have been over-zealous in identifying patients on waiting lists in order to inflate those figures.
Lord Wallace of Coslany: My Lords, is the noble Baroness aware that she used the phrase "the health authority has a duty to provide services within the resources available"? Is she further aware that this is a common factor in many areas? The Bexley Health District, for example, next year faces being on the verge of bankruptcy and a severe curtailment of services in an area where there is not an over-supply of hospital accommodation.
Baroness Trumpington: My Lords, may I ask the noble Lord whether he was referring to another hospital, because I did not catch what he said?
Lord Wallace of Coslany: My Lords, what I meant to say was that, quoting the Bexley Health District, we are not over-supplied with hospitals but in point of fact the group is on the verge of bankruptcy and services will have to be drastically curtailed in the not too distant future unless further financial provision is made.
Baroness Trumpington: My Lords, the noble Lord's question is a little wide of the Question on the Order Paper today.
Lord Collison: My Lords, the noble Baroness mentioned the long waiting list for the hip operation, which gives great relief to people who suffer—I know this because my next door neighbour suffered for years. Can the noble Baroness tell us on average how long people have to wait for this service at Guy's
Baroness Trumpington: No, my Lords, not without notice.
Baroness Macleod of Borve: My Lords, may I ask my noble friend the Minister whether in view of the statement she has made the Secretary of State is happy about the constitution and the membership of the DHA?
Baroness Trumpington: My Lords, I cannot answer for my right honourable friend, but I feel sure that he abides by the wishes of the regional health authorities with regard to membership of the district health authorities.
Lord Ennals: My Lords, may I put two concluding questions to the noble Baroness? Is she aware that the budget for diagnostic services—that is, laboratory tests—will be cut and that requests for tests will have to be reduced to avoid delay? The chairman of the management board—I apologise for referring to him as the chairman of the board of governors—has said that there may be "dire clinical consequences". My second question is: do I presume from what the noble Minister has said that the Secretary of State no longer retains any sense of responsibility or any degree of responsibility for our great centres of excellence, of which Guy's is only one of a number? Is this not a tragedy?
Baroness Trumpington: My Lords, I really do not know why the noble Lord, Lord Ennals, assumes anything like what he has just said from anything I have said. I have said nothing about the total responsibility of the Secretary of State.
In answer to his remarks about diagnostic services, it is not unreasonable for the DHA to try to ensure that all requests for tests an investigations are essential so that resources are used effectively. There should be no cause for any detriment to patient services at Guy's. The savings which the DHA could make by competitive tendering, but which it is forgoing, would dwarf any planned savings on diagnostic services.

Swindon Health Authority: Managerial Appointment
11.28 a.m.
Lord Ennals: My Lords, I beg leave to ask the second Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government why the Minister of State for Health has rejected the appointment of a general manager of the Swindon Health Authority unanimously submitted to him by the authority.
Baroness Trumpington: My Lords, it would be highly inappropriate for me to discuss the reasons why a specific individual was, or was not, appointed general manager in a particular district health authority. Matters relating to the appointment of staff in the National Health Service are confidential and advice to health authorities on their appointment of certain individual candidates to the post of general manager is, and should remain, confidential.
Lord Ennals: My Lords, is the noble Baroness aware that this decision is one of a number that are causing great concern within the National Health Service? May I ask the noble Baroness whether it is true that the Minister approved the short list which had been submitted by the Swindon Health Authority for the post of general manager and then when they unanimously recommended the appointment of Mr. Trevor Goodman he vetoed it? How can a Minister of Health possibly intervene in these local affairs? Is it not right that a local health authority, as she has said previously, normally knows best? Is this not a gross example of governmental central interference with the way in which the Health Service is run?
Baroness Trumpington: My Lords, I presume that the noble Lord, Lord Ennals, gets his information from articles in the local press—
Lord Ennals: No!
Baroness Trumpington:—and from the Health and Social Service Journal of which, I believe, the noble Lord is on the editoral advisory panel. It is most unfortunate that articles should have appeared giving details of this case. A number of people have been caused embarrassment in what should have been a confidential matter.
Lord Ennals: My Lords, if I may answer that—
Several noble Lords: Order!
Lord Ennals: My Lords, never mind! I shall come back to it later.
Lord Stoddart of Swindon: My Lords, is the noble Baroness aware that I was in Swindon last Friday and that what I found in Swindon was bitter anger at the Minister's decision to veto a properly-constituted appointment? Is she further aware that, as a result of the veto, the morale of the staff has been very badly

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injured and the re-organisation which the district health authority wants to undertake in accordance with Griffiths is being delayed, and that it is no use her coming along here and making excuses for the Minister not giving reasons when in fact, I now understand, he is prepared to give reasons?
Baroness Trumpington: My Lords, I am not aware of the travels of the noble Lord. A Minister's only concern in looking at all proposals for appointing general managers is to ensure that the selection process has produced the best possible candidate for the job. That person therefore should be acceptable to the district and region concerned and to Ministers.
Lord Ennals: My Lords, if this person who was recommended unanimously was thought to be unsuitable, why did the Minister accept him as a member of the short list? Surely, if there was an objection, it should be stated then. Is not this central interference inimical to good management? Is she not aware that Sir Maurice Dorman, a very distinguished public servant, who is chairman of the health authority is himself extremely angry about this interference? May I also ask if her reference to me gave any implication that I have some pecuniary advantage out of giving editorial advice to the Journal? And let me say in answer to the noble Baroness that I did not get my information from the journal.
Baroness Trumpington: My Lords, I still think that the noble Lord is getting his information from hearsay, I said earlier that I understand he was on the editorial advisory panel so I presume that from that he has no financial gain and I certainly did not imply otherwise. I think that I have really answered the questions in so far as I am able, in so far as this is a confidential matter and in so far as I believe that the noble Lord must be going on hearsay—and I wish him a very happy holiday!
Lord Wallace of Coslany: My Lords, is the noble Baroness aware that I also wish her a very happy holiday? She deserves it because she has been a maid of all work in this House for many months. Is she further aware that I should like to say "Farewell!" to the right reverend Prelate the Bishop of Norwich; and that he has my personal invitation to join the Canaries! As far as my supplementary question is concerned, I should like to support the noble Lord, Lord Ennals; but, on the other hand, is she aware that what the noble Lord, Lord Ennals, is complaining about is happening all over the country? It happened in Norwich, it is happening in my health district where good, first-class administrators—
Several noble Lords: Speech!
Lord Wallace of Coslany: Is she aware that first-class administrators are being by-passed by the appointment of outside people and that you cannot run a national health service like Marks and Spencer? In my case, in my district—
Several noble Lords: Order, Order!
Lord Wallace of Coslany:—a retired colonel has been appointed. Is the noble Baroness aware that I am furious at the way the Health Service is being mismanaged and treated as a second-hand grocer's shop?
Baroness Trumpington: My Lords, of the 180 district general managers appointed to date, by far the greatest proportion are former district administrators. We must ensure that the appointment process has identified the best person available for these new posts from the widest possible field, whether from inside the Health Service or outside. The National Health Service has many outstanding people but it does not have a monopoly.
Lord Mishcon: My Lords, may I revert to the original Question? May I ask the noble Baroness to answer specifically whether it is right or wrong that the person who is the subject matter of this Question was on a short list? Was that short list approved by the Secretary of State; and, if somebody is approved on a short list, would she kindly say why that person is not now deemed to be suitable for the appointment?
Baroness Trumpington: My Lords, the gentleman concerned was on a short list. I believe that my right honourable friend in another place did not agree with the short list and asked that they should look again.
Lord Mishcon: My Lords, I am sorry to persist, but I must revert, if I may, to the clear question that I put. Was the short list with that gentleman's name on it approved or not by the Secretary of State?
Baroness Trumpington: My Lords, the Minister does not have to accept the short list.

Private Notice Question
11.37 a.m.
Lord Hatch of Lusby: My Lords, may I ask the noble Viscount the Leader of the House a Question of which I have given him notice? The Soviet Union has unilaterally declared a moratorium—
Several noble Lords: Order, order!
The Lord President of the Council (Viscount Whitelaw): My Lords, I think I am entitled, since the noble Lord, I understand, wishes to question the ruling that I gave, to say to him that I do not think it is quite fair to the House that he should immediately launch out on the matter of the Private Notice Question. I considered that it was the duty placed upon me by the House to decide whether this Question put down by the noble Lord as a Private Notice Question was of sufficient urgency. I notice that it was based on a short report in The Times of yesterday. I therefore concluded that it was not of sufficient urgency, as is the duty placed upon me. If the noble Lord wishes to question my ruling, I think that the House would say that is perfectly fair and within his rights. I do not think it is within his rights to use the objection to further his own Private Notice Question.
Lord Hatch of Lusby: My Lords, I was not using the objection. I was simply trying to question the noble Viscount's ruling on the basis of the reason for my putting down the Private Notice Question. As I say, the Soviet Union had unilaterally declared a moratorium on testing. I awaited yesterday a Statement from Her Majesty's Government in response to that. It did not come, so last night I submitted a Private Notice Question in order to enable the Government to respond to that move before the House rose.
As this is the week marking the 40th anniversary of the Nagasaki tragedy, surely it is a reasonable request to ask the Government whether they will respond before the House rises to this matter of peace and death that concerns all of us and the rest of the world.
Viscount Whitelaw: My Lords, naturally, I looked very carefully at the noble Lord's request. I read the article very carefully and I did not conclude that it was a matter of such urgency as would permit me in the name of the House to decide that a Private Notice Question should be allowed. That was my decision. I understand the noble Lord's anxieties. He is right; but I have to say that in doing my duty to this House I concluded that it was not a question which should be a Private Notice Question. That is the duty placed upon me by the House. I took that decision and I have to tell the noble Lord that I feel I must stand by it.

Transport Bill
11.39 a.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the amendments for the Report stage be marshalled and considered in the following order:

Clause 1,

Schedule 1,

Clauses 2 and 3,

Schedule 2,

Clauses 4 to 57,

Schedule 3,

Clauses 58 to 111,

Schedule 4,

Clauses 112 to 131,

Schedules 5 to 7,

Clause 132.

—(Lord Belstead.)

On Question, Motion agreed to.

Oil and Pipelines Bill
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 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.

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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 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

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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-
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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."

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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.
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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 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 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.
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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

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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 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
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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

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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 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
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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.
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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 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

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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
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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 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
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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

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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
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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

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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 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

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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
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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.

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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.
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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 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—

SCHEDULE PROVISIONS TO BE INCLUDED IN MODEL PARTICIPATION AGREEMENTS
The Agency's rights to crude oil and natural gas liquids The Agency's Entitlement
1. In respect of each Commercial Oil Field (COF) the Agency shall, in each election period, be entitled to such proportions as expressed as a percentage not to exceed 51 per cent. of crude oil and natural gas liquids (NGLS) after taking into account the quantity of any crude oil and natural gas liquids required to be delivered during such election periods to the Secretary of State as royalty in kind.
Election notice for crude oil
2. An election notice, given by the Agency in respect of crude oil shall be served on seller and on the operator not less than 30 days before the commencement of the election period to which the election notice relates.
Exercise of the Agency's rights to natural gas liquids
3. An election notice given by the Agency in respect of any stream, namely—

(a) a stream of ethane

(b) a stream of propane

(c) a stream of butane

(d) a stream of crude oil

(e) a stream of methane

(f) a mixed stream, being a stream of other than the entire unseparated natural NGLS stream combining in mixed form two or more substances which together constitute the entire unseparated NGLS streams

shall be served on seller and operator not less than 6 months before the commencement of the election period to which the election notice relates.
Lifting Arrangements
4. The seller shall use its best endeavours to procure that the arrangements and agreements relating to the offtake, lifting and transportation of petroleum from or attributable to an interest in any COF (including the lifting by or delivery to the Agency and including (without limitation) any pipeline or terminal agreement for the use of any facilities up or at any actual or prospective point of delivery or point of unloading) shall be negotiated and agreed between the seller, the Agency and any other relevant parties in the case of COFs not in commercial production as at the date hereof, before the relevant date of commencement of commercial production and in the case of COFs which are in commercial production as at the date hereof, as soon as practicable. Such arrangements and agreements shall be fair and reasonable to the Agency, the seller and other licensees and shall be compatible with the operational requirements of any relevant operating agreement or amended operating agreement. To the extent that the consent of third parties is required in order to implement the provisions of such arrangements and agreements, the seller shall use its best endeavours to obtain such consent. Where such arrangements or agreements are to be concluded between seller and the Agency alone, the seller and the Agency shall negotiate in good faith in order to conclude such arrangements or agreements. In the case of COF not in commercial production as at the date hereof, the seller shall not agree to such arrangements or
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agreements unless the Agency agrees to the same. If there is more than one delivery system and each licensee may determine the proportion of petroleum attributable to its participating interest which may be taken via each such delivery system then the Agency shall have a like right in respect of petroleum to which it is entitled by virtue of an election notice. The seller shall use its best endeavours to ensure that such arrangements or agreements shall provide for the Agency to have the right to aggregate the petroleum which the Agency is entitled to lift pursuant to these arrangements with any petroleum to which it may otherwise become entitled and shall ensure recognition by the relevant third parties that petroleum in respect of which the Agency serves an election notice hereunder shall be treated in the same manner as all petroleum from, or attributable to, the COF governed by such arrangements or agreements.
Access to Information
5.—(1) The Agency shall have full access to all information relating to the COF in the same manner as each of the other parties, or, if relevant, sole risk parties, to the relevant operating agreement, amending operating agreement, offtake, lifting, terminal or pipeline arrangements or agreement applicable to that COF.
(2) The Agency shall have the right at all meetings, whether of Operating Committees, other sub-committees or otherwise, established under or pursuant to the relevant operating agreement, amended operating agreement and offtake, lifting, terminal and pipeline arrangements or agreements applicable to that COF.
(3) Without prejudice to the generality of the above such information shall include all such production profils, such data relating to actual and estimated production, estimated reserves, quantities, qualities, anticipated delays or interruptions in production, storage, and transport systems, timing and dates of lifting and delivery and of tanker movements, and such Agency papers and other documents applicable to meetings of the relevant operating committee, and any sub-committees thereof").
Lord Lloyd of Kilgerran: It would save time if we adopted that course.
Lord Stoddart of Swindon: Therefore I shall speak to my Amendment No. 24 and to Amendment No. 34 which constitutes a new schedule. Amendment No. 24 paves the way for the relevant schedule on participation agreements. The purpose of the amendment is to ensure that we have good participation agreements which can be activated when necessary. Participation agreements have developed, as noble Lords know, in an ad hoc manner, and the amendment attempts to create a model agreement. I hope it will be the sort of model agreement which will be acceptable to the noble Lord, Lord Lloyd, who has spoken about such agreements.
First, it is beneficial to have consistent agreements. Indeed, in the past when interest in a licence has been transferred to a new owner the rights of the corporation have not been affected. As I have said, Amendment No. 24 paves the way for Amendment No. 34 and one of the prime provisions is that the schedule requires a period of 30 days before the commencement of the election period to which an election notice applies. This gives the agency the opportunity to trigger participation agreements faster than at present. In my view it is absurd of the Government to claim, as they have, that the present position (where it takes 6 or 12 months to activate an agreement) is satisfactory in times of crisis. As I said on Second Reading, a crisis would have come and gone while the Minister was fiddling with the activation of participation agreements. That simply is not satisfactory.

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We also seek in the new schedule to add methane to the LPG rights. We have done so because most participation agreements covering LPG include special arrangements because British Gas was the sole purchaser. But, as noble Lords know, it is the intention of the Government to privatise the British Gas Corporation. A Bill is to come forward in the next Session of Parliament, I understand. The question is whether we should allow an arrangement between two state corporations to continue unamended so as to give the privatised gas industry special privileges. Surely we should not and the agency should have the right to serve a notice on everyone, and that includes privatised gas.
Paragraph 4 of the schedule sets out the arrangements that will have to be in place for proper and effective activation in times of crisis for lifting arrangements and to ensure that the agency is not obstructed in its task. I am sure the noble Lord will agree with that sentiment and will want to facilitate it. Finally, in paragraph 5 of the schedule provision is made for the agency to have full access to information to enable it to carry out its role. It also lays down that agency representatives should have the right to participate fully in meetings to safeguard the agency's and the nation's interest in every regard.
Frankly, I cannot see how the noble Lord can take exception to these amendments. After all, I can remind him that it was he who in another place in 1982 defended participation agreements night after night—long, grinding night after long, grinding night. Indeed, it was he who then said that participation agreements constituted the best safeguard for security of supply. That was when the Government were setting up Enterprise Oil, but in fact they were taking away exploration and production from BNOC. It was the noble Lord himself, he will remember (because it must have been a very difficult period for him; it was a hard-fought Bill) and will confirm to the Committee, I am sure, who in 1982 defended the participation agreements, and did it so effectively. Therefore, I hope that he will come with us today and support us in these amendments or, at least, tell us why he has changed his mind in the intervening period.
Lord Lloyd of Kilgerran: Now that the noble Lord, Lord Stoddart, has amplified his position in regard to Amendment No. 34, where there is set out a model for these participation agreements, may I refer the Committee to Amendment No. 28, to which I had not referred in opening as I had wished to hear what the noble Lord, Lord Stoddart, would say about the other amendments which I had posited with my amendments.
In Amendment No. 28 I have suggested that in order that these agreements can be activated quickly and also that the government can have full powers in the interests of national security, one of the conditions in the model clauses should ensure early activation of all participation agreements. What that means is left purposely a little vague, and it may be that the noble Lord the Minister will be able to indicate from his experience how early activation or participation agreements can take place. There is some anxiety that in a crisis it will be difficult to activate some of these
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participation agreements, even the agreements with the International Energy Association (the IEA) also in other crises. It may be difficult to activate them suitably quickly.
The next thing is that, when the agreements have been activated, I am advised that the Government ought to be able to have access to (which in effect means have control of) 80 per cent. of the crude oil produced in the United Kingdom continental shelf. In the usual participation agreements, I think the figure is 51 per cent.; but it would seem to me and to the persons who have approached me on these matters that a greater percentage of the crude oil should be available for access by the Government in moments of crisis.
Lord Gray of Contin: Perhaps I could start my reply to this series of amendments by dealing with the point about which my noble friend Lord Lauderdale asked me and which was touched upon by the noble Lord, Lord Stoddart, who quoted from some of the long and laborious speeches which I made through the middle of the night in the Committee stage of another Bill. I can assure the noble Lord, Lord Stoddart, that what I said about participation agreements at that time still stands today, and I can assure my noble friend Lord Lauderdale that we expect only minor changes as far as participation agreements are concerned. These would relate, for example, to assignments of licences and the fact that participation oil will not normally be lifted in future.
Minor changes may also have to be made from time to time to cater for changed circumstances and licensees' requests. But we certainly see no major change in the principle of the participation agreements. Indeed, I can say that one participation agreement is now time expired and needs to be renewed by a new one, and negotiations have been proceeding in order to achieve this new participation agreement for some time; but there are no major problems envisaged.
Perhaps I could remind your Lordships that participation is an extremely complex subject. I know this, I can assure your Lordships, after four years as Minister of State for Energy. But I shall be happy to respond to some of the points of principle which have been raised. Unfortunately, my response will also have to be somewhat technical on occasion because it is a very technical subject.
1.45 p.m.
The first positive point to make is that an important function of the new new agency will be to maintain the framework of participation as it exists already. Although we have had to learn that there are no advantages and several serious disadvantages in trading participation oil when supplies are plentiful, we recognise that participation oil could still be able to make a contribution to security of supply in a time of shortage. The Government and the agency will therefore continue to negotiate new participation agreements when oil fields in the future reach the development stage. It may reassure your Lordships to hear that BNOC and the Department of Energy are currently in active negotiation over participation terms with a group of licensees. I would suggest,

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however, that noble Lords opposite perhaps place too much emphasis on the contribution which participation could make to the security of supply. It is but one of a number of elements. The others—assurances from United Kingdom refiners, stocks, our understandings with other IEA member countries and our Energy Act powers—are very much more important. Indeed, when participation was in full flow in 1978–79 it was able to make precious little contribution to our supplies when these became short.
Amendments Nos. 20, 24 and 34 envisage that certain standard requirements will be included in participation agreements entered into by the agency. In fact, future participation will be either by petroleum option deeds, in respect of offshore licences issued from the seventh round onwards, or else by agreements negotiated with licensees holding first round to fourth round licences. Where agreements have to be negotiated from scratch with the licensees as new developments come forward—that is, with respect to the first round to fourth round licences—I suspect that the noble Lord has perhaps forgotten the experience of his colleagues when in Government. They, after due thought, concluded that participation must be achieved by voluntary negotiations with the licensees on a basis that should leave licensees neither better nor worse off. This principle has correctly remained central to the approach of successive Governments of both persuasions.
I must say that I found it a little difficult to understand how the noble Lord could expect the agency to be able to negotiate voluntary participation agreements if their hands were to be tied behind their backs because this Bill insists that certain provisions must be included in these agreements. We also need flexibility in negotiating participation agreements to take account of the differences between licensees: for example, if they are integrated companies or not; the differences between fields; offshore loading or pipeline fields; and, of course, changing circumstances in the world oil market.
I shall now comment briefly on each amendment in turn.
The Earl of Lauderdale: Before my noble friend goes on, may I ask him one question? He said that participation agreements will continue to be negotiated when fields reach the development stage. Does that mean that they will be negotiated at the time of the Annexe B applications or when theAnnexe B is granted; or are they quite separate from that?
Lord Gray of Contin: Yes, the participation agreement is something which we have always found in the past to be something which is not negotiated quickly. Such agreements normally take quite some time to negotiate and the Annexe B application time would be the start of that negotiation: it might then take some time to be concluded.
Amendment No. 20 envisages that the model clauses in new participation agreements will be published. In fact since the passage of the Participation Agreements Act 1978, a summary of each new participation agreement which identifies the parties to the agreement has been laid in the Libraries of both Houses. That meets the substance of this amendment,
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which I hope will not be pressed because it contains a number of drafting deficiencies, and it would also make the negotiating of agreements very much more difficult.
Amendment No. 21 would delete three lines from Clause 2(1)(c). It would remove the agency's power to give effect to all the participation agreements which have been entered into by BNOC and whose rights and obligations will be transferred to the agency. It would thus render the agency unable to maintain the framework of participation agreements, as we intend. I am sure that is not what the noble Lord had in mind, but that would be the effect of the amendment. In view of what I have said about Clause 2(1)(c), I trust he will not pursue this amendment.
Amendment No. 28, I fear, gives me some real difficulty. I understand the noble Lord's concern to maintain participation vigorously, but I hope that he has not perhaps become mesmerised by the percentages. I would be appalled if his amendment meant that every existing participation agreement had to be renegotiated, so that not some 57 per cent. but some 80 per cent. of production had to be available to the public sector. May I perhaps suggest that the noble Lord directs his attention more towards the assurances that we have obtained from the refiners? It is petroleum products rather than crude oil which our consumers will demand in a crisis. Again, Amendment No. 28 has a number of technical difficulties within it and I hope that the noble Lord will not pursue it.
Amendments Nos. 24 and 34 are somewhat intriguing. The word "seller" which occurs in what is intended to be Model Provision No. 4 (that is, lifting arrangements) in the schedule seems an odd one in this context. My advisers suggest that it is not very usual in participation agreements. Indeed, they think it is unique in that context to a particular agreement. Perhaps the noble Lord could tell me why he chose that term, because it is a most interesting coincidence. I believe that one arrangement which uses that term has a provision, as envisaged in the proposed amendment, for confidentiality which is binding both on the licensee and on BNOC.
I have explained how these amendments would prove impracticable in their present form. In fact much of what the noble Lords opposite are seeking will be negotiated in future participation agreements. I do not take issue with them for having put down their amendments in the form in which they have, because I realise they are trying to protect the future negotiation of these participation agreements. However, I think that when they consider carefully what I have said they will appreciate that much of what they seek to do will in fact be achieved by the arrangements we have prepared. On that understanding, I hope that these amendments might be withdrawn.
Lord Stoddart of Swindon: I have listened very, very carefully to what the noble Lord has said and I should like to thank him for his full explanation. I am glad to hear that the framework of participation oil will be retained and that, in the light of the need to renew some participation agreements, negotiations are already going on; but of course what we are concerned

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about is the nature of the agreements that will be arrived at and whether they will be sufficient to safeguard the country's oil supplies. What we are getting at in this amendment, and in another one which is to come, is the security of supply.
The noble Lord says that participation oil is not significant. I think some people would disagree with him there. I think participation oil at the present time amounts to something like 600,000 tonnes. In my view that is a significant amount; certainly it is about three times as much as is involved in royalty oil. So I am not at all sure that I agree with him when he says that participation oil is not significant.
He also said that when my colleagues were in Government, they and the Department of Energy agreed that licence arrangements should be freely negotiated. Of course that was in order that encouragement should be given to oil firms to explore and in order that they would not delay exploration. I believe those were the reasons. And, of course, the situation then was entirely different, was it not? We did have BNOC, with all its powers. Therefore the interests of the nation in regard to security of supply were being safeguarded by the state organisation, BNOC. We are now in a different situation, where BNOC is to disappear and we are to have a small agency taking its place. That is why we believe it is necessary to have in force the kind of model agreement that we are proposing, so that agreements are properly negotiated in accordance with the nation's interests and the interests of security of supply.
I really would like to think for a few more minutes about Amendment No. 24 and as to whether I should pursue that when we come to it. It is still before us, so I cannot indicate at this stage whether I shall move it, but certainly I shall be considering what the noble Lord has said before we come to it and then I will come to a decision as to whether or not to proceed with it.
Lord Lloyd of Kilgerran: I too, should like to thank the noble Lord for his very clear and concise explanation of matters relating to these five amendments. Two of the amendments are solely in my name and I should like to press the Minister a little further with regard to Amendment No. 28, which is concerned with the vital matter of security, which might arise in a crisis and with the Government's position in such circumstances. Is the noble Lord able to assure the Committee that the participation agreements which have been concluded can be activated at a very early date in order to deal with any crisis which might arise? I mentioned this in my speech in support of these amendments. So I wonder whether the noble Lord is able to comment on how early these agreements could be activated. If he cannot answer because of security reasons I shall quite understand and would welcome any reply that he can give on the matter.
As regards crude oil and the access to it, which my amendment takes as being 80 per cent., the noble Lord's answer to that seemed to be that 57 per cent. under present participation arrangements was adequate. Is he satisfied that 57 per cent. access to this crude is adequate in all circumstances? He said that it would be a difficult matter to renegotiate all these
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participation agreements; but if the national security is at stake it is not a very high price to pay. Can the noble Lord help me briefly about these matters?
2 p.m.
Lord Gray of Contin: What I can do is simply to remind the noble Lord that the participation agreements which have been negotiated have been negotiated freely by successive Governments of both political persuasions; and that they have been found to be satisfactory both to Government and to the companies concerned. As far as the implementation of their provisions is concerned, we see no difficulty in this.
As far as security of supply is concerned, I have tried to explain that participation oil is but one factor in a wide range of considerations which have to be taken into account as far as national security is concerned. We are satisfied that the requirements of national security are fully met under the arrangements which presently exist. More than that, I do not think I can add to what I have already said to the noble Lord.
Lord Lloyd of Kilgerran: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 21 and 22 not moved.]
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment
No. 23:
Page 2, line 18, at end insert—
("(e) in the event of the privatisation of the British Gas Corporation to accept responsibility for such mechanism as may be deemed appropriate to handle the sale of royalty gas taken as royalty in kind on behalf of the Secretary of State.").
The noble Lord said: This amendment deals with a position that may arise when the British Gas Corporation is privatised. If that happens, there is bound to be considerable disequilibrium in energy resources available and no doubt the privatisation will be followed by a greater commercial interest in gas in this country and in North Europe. Therefore, the amendment is to the effect that in the event of privatisation the agency accepts responsibility for such mechanism as may be deemed appropriate to handle the sale of royalty gas, taken as royalty in kind on behalf of the Secretary of State.
The Minister, with his great experience in these energy matters, will understand the form of that kind of formula without my having to try to explain it. But there is great anxiety among large producers of oil that once royalty in cash is available as a result of privatisation that may lead in some circumstances to a disastrous effect upon the oil producers. It may discourage their exploitation practices at the present time, and so forth.
The Petroleum and Submarine Pipe-lines Act 1975 specifically has a section which deals with this question of co-operation with the Gas Corporation. I am referring to Section 12 of the Petroleum and Submarine Pipe-lines Act 1975, which is intituled,
"Co-ordination of activities of corporation"—
that is, the BNOC—
—"and British Gas Corporation and their subsidiaries".
As I read the present Bill, that section has now been deliberately deleted. Therefore, the Government must

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have had in mind some consequence of the privatisation of the British Gas Corporation in the context of this Bill and the marketing position in relation to oil thereafter. I beg to move.
Lord Gray of Contin: Perhaps the noble Lord, Lord Lloyd, will forgive me if, before I deal with his amendment, I amplify what I said to him when he asked me about participation agreements being reactivated. I have been advised that there is something more which I should add. Participation agreements can be reactivated generally at between six and 12 months' notice. However, United Kingdom stocks are ample to cover that lead-in time in minor crises. And in major crises we can of course use our Energy Act powers. Perhaps I could deal with the amendment which the noble Lord has just moved. I think the noble Lord quite reasonably asked me at Second Reading—
Lord Stoddart of Swindon: Will the noble Lord give way? I was listening to what he said. Did he say that stocks of oil in this country would be and are adequate to deal with any difficulty in the lead-in time to activate a six months' notice?
Lord Gray of Contin: Yes, I did.
Lord Stoddart of Swindon: That is 180 days.
Lord Gray of Contin: The stocks available for a minor crisis are perfectly adequate. And if the crisis were to be more than a minor one, we then have the powers of the Energy Act which we can use to take whatever steps we require.
Lord Airedale: A crisis is surely something so severe that it seems a pity that one has to talk about "minor crises".
Lord Gray of Contin: I am afraid that this is something which frequently occurs within the terminology of the oil industry. The reason for referring to a "minor crisis" as opposed to a "major crisis" is that there are certain levels of crises which trigger various mechanisms, such as the International Energy Agency mechanism, or the mechanism of the Energy Act. Therefore, what we describe as "minor crisis" is one which is a situation of shortage, but not of acute shortage.
Lord Lloyd of Kilgerran: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 24 and 25 not moved.]
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 26:
Page 2, line 18, at end insert—
("( ) In managing petroleum on behalf of the Crown and in trading petroleum under any participation agreement the Agency shall seek to serve, to the maximum possible, refining facilities in the United Kingdom.").
The noble Lord said: I beg to move the amendment standing in my name. The purpose of Amendment No. 26 is to promote British refineries which, as noble Lords know, have experienced decline in recent years.
Indeed, between 1975 and 1985 the United Kingdom refinery capacity fell from 143 million tonnes to 90 million tonnes, while production of crude oil grew from nothing to 120 million tonnes. That seems very odd indeed. It is even odder that only 37 per cent. of North Sea oil is refined in the United Kingdom and, bearing in mind the redundancies which have occurred in the refining industry of late, it is altogether reprehensible. Indeed, of 870,000 barrels of oil net after sale-back that were traded by BNOC itself in 1984, only 294,000 barrels went into the United Kingdom market, mostly into refineries. So BNOC has not performed as well as I should have expected.
What is more, the position is even more serious because, so far as I can gather, the EC wants an even further reduction in United Kingdom refining capacity of 12½ million tonnes a year. That is in keeping with the absurd suggestions that it so often comes out with. A further reduction of 12½ million tonnes in refining capacity by 1990 would hurt our refining industry very badly indeed. Only recently, we have heard of losses in refinery jobs. Llandarcy Refinery, near Swansea, is to be turned into a specialist refinery concentrating on the production of lubricants and other special products. This will involve the loss of 750 jobs out of a total workforce of 1,100 jobs—a very serious matter indeed.
The noble Lord will also know of the intention announced by Shell that, as a result, they say, of fierce competition and poor profitability, manpower at Stanlow will need to be reduced by 30 per cent. over the next two years. Since Shell employ 3,300 people at Stanlow, that means that the number will fall by 1,000. So that is a further 1,000 jobs that will be lost in British refineries. If that were not bad enough, Shell also plan to close the Teesside refinery. Indeed, they have probably ceased refining anything at Teesside by now.
As I said, the purpose of this amendment is to use and develop refining capacity in the United Kingdom to the greatest extent possible. I should really like to hear the noble Lord's views on this matter. I feel sure that he and the Government must be concerned about the continuing loss of refining capacity and the loss of jobs in the United Kingdom that goes with that. I am wondering whether he and the Government will have anything to announce this afternoon, or in the future, to ensure a greater amount of refining in this country and the protection of our own capacity and of jobs. After all, it is in refineries that the value is added, and I should have thought it was against the Government's general interest, and certainly against the nation's interest in balance of payments and balance of trade terms, to allow our refining capacity to continue to run down. I shall be very interested to hear the noble Lord's remarks. I beg to move.
Lord Gray of Contin: I can appreciate the concern of noble Lords in seeking to discuss the problems of the United Kingdom refinery industry, Naturally, the Government keep a close watch on developments in our refinery industry. United Kingdom refinery capacity continues to exceed normal demand by some 20 per cent. It is, of course, desirable that capacity in the United Kingdom should be sufficient to meet our own demands, but at the same time economic

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considerations must be taken into account. As I understand it, the amendment seeks to require the agency in trading or disposing of petroleum to try to ensure that United Kingdom refineries are given preference over any other potential purchasers. If this amendment were accepted, the agency would, therefore, be required to disregard any commercial and technical considerations, such as price or delivery arrangements, if the terms which a potential purchaser from abroad offered were preferable to those available on the domestic market; this would have a direct effect on Government revenues as the proceeds from royalty in kind would not be maximised.
2.15 p.m.
I accept that adequate refining capacity in the United Kingdom contributes to overall security. But requiring the oil handled by the agency to be sold only to United Kingdom refiners would not add to this. The Labour Government recognised this when Mr. Eric Varley as Secretary of State for Energy said in December 1974 that he did not wish to meet all United Kingdom demand from North Sea oil. He also did not stipulate that all United Kingdom continental shelf oil should be refined in the United Kingdom, but said instead that he might reasonably expect up to two-thirds of North Sea oil to be refined in the United Kingdom, depending on the level of production. Now, in normal circumstances, more oil products are produced by United Kingdom refineries than are needed to satisfy United Kingdom demand.
In fact in 1983 61 per cent. of United Kingdom continental shelf crude oil production, or 67 million tonnes, was exported, and our refining industry imported 34 per cent. of its crude requirements—that is, 23 million tonnes. The reason is quite simple. North Sea oil is high quality and therefore fetches a premium on the world market. The needs of the United Kingdom market can be met more cheaply by importing lower quality crudes to meet part of our refining requirements. What would happen if the agency were to sell royalty in kind only to United Kingdom refineries? Either of two things; or a combination. The royalty in kind oil would substitute for some of the imported crude. In that case either the agency would get for it only the lower price of the imported crude and we should forgo the North Sea premium; or prices of oil products in Britain would increase to cover the additional costs of the North Sea premium; or it would substitute for companies' own sources of United Kingdom continental shelf crude. I just do not see what the advantage of that would be. One thing it would not do is to lead to an increase of product exports. If such exports were profitable, they would be taking place anyway.
The noble Lord suggested that we might have further reductions in our refinery capacity as a result of EC pressure. All I can tell him on that is that we have had absolutely no requests from the EC for any further reductions in our refinery capacity. There was a criticism some years ago that we were taking a greater share of the captive refining capacity than some of our EC partners. My information now is that our partners in the EC, with one notable exception, have
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caught up with us. The reduction in refining capacity has evened out as a result.
As I said on Second Reading, we already have informal assurances from the oil companies in relation to oil products. These give us far greater comfort for our overall supply security than any straitjacket arrangement which might be proposed. It would anyway be an ineffective straitjacket without the goodwill of the oil companies themselves, who could merely reduce their acquisition of other crude by the same amount as the royalty in kind supplied to them. I hope that, in view of my explanation and the comments I have made, noble Lords may be prepared to withdraw their amendments.
Lord Stoddart of Swindon: I have listened very carefully to what the noble Lord has said. This is a complicated issue and I accept that it is a complicated issue. On the other hand, it is in the interests of the United Kingdom to have a refining capacity as high as possible on many counts; not only from the point of view of the security of the United Kingdom but because of the issue of jobs. It is all very well to talk about the premium on North Sea oil and the premium we get when we sell it abroad, but if by doing so we kill more and more jobs in Britain then part of that benefit is not available.
I should like to read what the noble Lord has said. It is an important issue and we may wish to return to it at greater length at Report stage. But, in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran had given notice of his intention to move Amendment No. 27:
Page 2, line 19, after ("State") insert ("which shall not be unreasonably withheld save in respect of matters affecting national security, safety and agreements entered into with the International Energy Agency.").
The noble Lord said: When I put down this amendment, which was to limit the scope of the consent of the Secretary of State, I had not seen Amendment No. 29 put down by the noble Lord, Lord Stoddart of Swindon. In these circumstances, I do not propose to move my Amendment No. 27.
[Amendment No. 27 not moved.]
[Amendment No. 28 not moved.]
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 29:
Page 2, line 27, at end insert—
("( ) In the event of the Secretary of State refusing his consent under subsection (2) above he shall make, as soon as possible after such refusal, a statement to Parliament explaining his reasons for doing so.").
The noble Lord said: The object of this amendment is to ensure that the Secretary of State, if he refuses his consent under Clause 2 to the agency to buy, sell or otherwise deal in petroleum on its own account, or to do what is permitted in Clause 2(2), shall report his reasons to Parliament.
The reason for this amendment is that the Secretary of State would have been bound before refusing his consent to have had a request from the agency. The agency—especially bearing in mind what the Committee has been told this afternoon about the high

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calibre of the agency's chairman and its other members—would not make such a request lightly. Therefore, for the Secretary of State to refuse consent would mean tht he was overriding the judgment of the chairman and members of the agency itself. In my view, that would be a serious matter. It is therefore a matter in which Parliament should have some interest.
We think the least interest that Parliament should have is an explanation or reason from the Secretary of State as to why he had refused a request from the agency to embark upon the activities mentioned in Clause 2.I hope that the Minister will consider this to be a reasonable and sensible amendment and that he will not resist it. I beg to move.
Lord Lloyd of Kilgerran: In the circumstances of Clause 2 of this Bill the refusal of consent by the Secretary of State is an important matter. It is a matter of considerable public interest. I would endorse what the noble Lord, Lord Stoddart, has said. Surely this is a matter that should be brought to the notice of Parliament. When a consent is refused, a statement to that effect, giving the reasons, should be made to Parliament.
Lord Gray of Contin: By comparison with some of the amendments we have been discussing recently, Amendment No. 29 is reasonably light. Successive governments have found that productive and frank discussions between them and the nationalised industries have been best served if they were not conducted in the full glare of publicity. Successive Oppositions have, for their part, always expressed the wish that public sector business should be conducted completely in public. That was no doubt done so that they could take full political advantage of any disagreements between the Government and the nationalised industries. At least, that would seem the logical reason for such a line. I can therefore appreciate why noble Lords have tabled Amendment No. 29.
I fear that there is a further good reason for my being unable to accept this amendment. It is that any trading by the agency inevitably involves third parties. Any disclosure of a lack of consent for such trading could breach the commercial confidence of those third parties. It would also breach the agency's commercial confidence and make it less easy to obtain the best price for royalty oil. All governments have rightly been very wary of betraying commercial confidences to third parties and I am sure that, on reflection, noble Lords will see the dangers involved. In those circumstances, I ask them to consider not pressing the amendment.
Lord Stoddart of Swindon: I have listened very carefully to what the noble Lord said and I understand some of the difficulties. However, I should like to reconsider this matter and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 30:
After Clause 2, insert the following new clause:
("Security of supply agreement.
.—(1) The Agency shall have the power 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.
(2) Such agreements shall include the provision that—

(a) any company with production from the United Kingdom continental shelf shall continue to supply United Kingdom customers with crude oil and petroleum products with at least the quantities supplied over the previous year or contracted to supply over the coming year, and shall increase the supply where possible and still use its transportation and distribution system for this purpose; and

(b) any such company shall make supplies at the prices ruling at the time of the request (or as otherwise determined by law and regulations).").

The noble Lord said: I move this amendment which stands in my name and that of the noble Lord. Lord Lloyd of Kilgerran.
This of course is an important amendment involving a new clause. This afternoon we have spoken briefly about security of supply. Indeed, it is the most important issue to arise from the proposals to abolish BNOC. The amendment was moved on Report in another place but, unfortunately, not carried. It is an amendment to which I attach a great deal of importance.
The purpose of the amendment is to ensure that the agency is given specific power to secure the supply of petroleum and petroleum products. Supply is secured, in part, by participation agreements but under the Bill these cannot be activated until between six and 12 months. Again, we spoke about this earlier but I was not satisfied with the assurances given by the noble Lord about the scale of supplies which are available. The interim is covered only by informal assurances by the major oil companies. Little is known about these assurances but their informality suggests that it would be preferable to convert them into something more binding.
I mentioned previously that there will be a loss of 600,000 barrels of participation oil and, whatever the Minister might think, I continue to believe that that is a powerful weapon in times of crisis or shortage. Indeed, it is not right—and I said this at Second Reading and I repeat it now—that at times of crisis the nation's oil supplies should be at the mercy of the big oil companies. It is the job of Government, not of private institutions, to safeguard the country's oil supplies in an emergency or crisis. No matter how public spirited the oil companies may be, their duty is to provide profit for their shareholders and it is the Government's duty to look after the nation's interests—and that interest in oil is the security of supply.
It is no good the Government protesting that participation agreements can be reactivated in time. I repeat, it needs six to 12 months' notice and that makes that route quite useless in times of crisis. At Second Reading, and in another place, we heard that there had been assurances from the oil companies, but we do not know what sort of assurances these are. We do not know whether they are oral or in writing, or whether they are enforceable; so what sort of agreements are they?
2.30 p.m.
We have had no information from the Minister in another place, nor indeed did we have proper information from the noble Lord on Second Reading. Of course we heard about the letter from BP. We still do not know the status of that letter. It was a letter from one bureaucrat to another. It was not at ministerial level. We do not know how binding that letter will be. We do not know how many other such letters exist. We have no idea whether or not the Government intend to have formal agreements with all the major oil companies. Indeed, the people and Parliament are being kept in the dark on the spurious pretext of commercial confidentiality, and frankly neither I nor the Opposition can accept that.
The nation's oil supplies are vital. They are vital to the nation's economic life. They may be vital to the very survival of the nation. It is simply not acceptable that the security of our oil supplies should be dependent upon either oral assurances or scraps of paper written to the Government by the big oil companies.
I think I have said enough to impress on the noble Lord that I was not convinced by what he told me at Second Reading and that I have not been convinced by anything that he has said yet this afternoon about security of supply, which is absolutely vital. The Opposition believes that it has to be properly secured. I believe that the amendment will go a long way to bridging the gap between the Opposition and the Government. Indeed, if the Government accept the amendment, it will give them the opportunity to show to the Opposition, to Parliament and to the nation that they are serious about securing our oil supplies in a proper manner. I hope that the noble Lord will accept the amendment. I fear that if he does not accept it, in this case I may very well feel that I shall want to test the opinion of the Committee.
Lord Lloyd of Kilgerran: In view of the very full and positive way in which the noble Lord, Lord Stoddart of Swindon, has expressed views with which I entirely agree, I shall not make a long speech about this matter. I raised it at Second Reading and asked the Minister what kind of agreement and assurances he had received. In the other place they were referred to as informal assurances. As a lawyer, I refer to them as gentlemen's agreements; and as practising lawyers we all know that, in the case of a dispute, gentlemen's agreements can cause endless trouble. I ask the noble Lord the Minister, who has great experience of the other place and in industry, to give some assurance in reply to the noble Lord, Lord Stoddart of Swindon, as to whether we are really relying only on informal agreements in the question of security, which is of such importance.
Lord Gray of Contin: This is by no means the first time that I have been involved in this argument. We have argued the question of security of supply over and over again in another place. It was one of the principal arguments throughout the debates which we had on the Petroleum and Submarine Pipelines Bill, which later became an Act in 1975, and it has featured in
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every piece of legislation which has had any bearing upon the oil industry.
Noble Lords opposite, quite properly, share the Government's objective to promote the security of our oil supplies, and I acknowledge that they have proposed this new clause with the intention of furthering this objective. However, I am not by any means persuaded that it would have the effect that they desire. I take that view for several reasons which I shall seek to explain.
First, any new system of security of supply agreements entered into by the agency would clearly be intended to replace the existing assurances which my department has obtained from United Kingdom refiners. I do not believe that noble Lords opposite are suggesting that United Kingdom continental shelf producers should be forced by statute to enter into security of supply agreements; merely, that they should be encouraged to do so voluntarily—and if we are talking about voluntary agreements, I should have thought that the Department of Energy could be expected to be more successful in obtaining voluntary co-operation than the agency. I believe that responsibility for security of supply initiatives should continue to rest with the department, and not be shifted to the agency.
I have been pressed to give further information about the informal assurances which the Government have received from the oil companies. As I explained at Second Reading, it would be quite wrong for Ministers to breach the confidence of a commercial organisation by making any comment whatever on the press speculation about the nature of any confidential security assurances which BP may have given to the Government. Equally fundamental is the question of whether we should seek informal assurances or formal agreements on security of supply. What we are concerned about is obtaining supplies at a time of shortage. We can be sure of only one thing: that it will be impossible to predict accurately in advance how any shortage may occur and develop, and what will become our priority needs at any time during the shortage. 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.
The approach of the proposed new clause is quite different. Although the provisions which the new clause proposes might at first glance appear to be appropriate, considerable difficulties would be encountered if it was sought to put them into practice, since the requirement that agreements contain the provision specified might well prove to be out of step with the commercial facts. For example, the new clause proposed by the noble Lord speaks of United Kingdom continental shelf producers continuing to supply customers with at least the quantities supplied over the previous year. How could this apply to a licensee with an interest in only one producing field which had already passed its production peak? Who are the customers at a petrol station; how are the quantities supplied to them over the previous year known? Would there be an obligation to supply someone who had recently changed to another supplier?

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The new clause also assumes a rather simpler pattern of trading for our continental shelf crude than currently occurs. With the larger volumes of UKCS crude now traded on the spot market, cargoes of crude are frequently not sold direct by a producer to a United Kingdom refiner. Indeed, cargoes of crude can sometimes be bought and sold 10 or 20 times before being delivered. It would be quite ludicrous if the agreements entered into between the agency and producers appeared to require that cargoes of crude in a period of shortage should be bought and sold by long chains in the same order as previous cargoes had been during the preceding year. In short, a system of contractual provisions of the sort envisaged by this new clause would entail considerable loss of flexibilty. What is required here is a loose-fitting garment and not a straitjacket.
For these reasons, I believe that we should be better served as a nation by the Department of Energy's obtaining informal assurances from United Kingdom refiners than by the agency's attempting to enter into formal agreements with UKCS producers. It has been suggested that formal agreements would be preferable because the oil companies would be contractually bound to comply with their obligations under such agreements and would not be bound in the same way if they had given informal assurances.
I can understand the frustration of noble Lords in being told that they cannot have detailed information about the assurances because these are commercially confidential. However, I would not expect the difference between what is legally binding and what is a commitment freely made by an oil company to the Government to be of any commercial significance. Perhaps noble Lords should be a little more trusting.
As I have already explained, if the oil companies became legally bound to honour certain commitments which were so inflexible that in a shortage they failed to serve the purposes for which they were intended, the national interest would have been better served if no such legal commitments had ever been made. In the event, since the agency would suffer no loss itself as the result of a breach of a supply contract, it would only be able to enforce its contract by seeking to obtain an injunction—a discretionary remedy whose availability could therefore not be guaranteed, particularly in a world oil market in which trading conditions were such that force majeure provisions in contracts might apply.
The new clause lays down conditions about the price of any crude oil and products which are delivered under the security of supply agreements. It is not clear what effect the condition stated in the new clause would have if it were to be included in any security of supply agreement. I doubt if any United Kingdom continental shelf producer would agree to a pricing condition other than one which allowed him to receive the market price prevailing at the time of delivery—and for good reason. Indeed, this was the principle accepted by the last Labour Government when they introduced participation agreements on the basis that BNOC's transactions should be at no gain and no loss to the corporation or to producers. Any other approach would not be in the national interest.
I explained at Second Reading the mess which the Labour Government got into in 1978–79 by imposing
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price controls during the last period of supply shortages. Price control would create widespread uncertainty and chaos; the only likely beneficiaries would be speculators and unscrupulous traders. It would remove from the United Kingdom all supplies of crude other than those covered by the agreements envisaged; thus it would stand to cost Britain both money and oil supplies. Except at a cost of a fortress Britain it would not be possible to sustain a policy of pricing United Kingdom continental shelf crude at lower levels than those prevailing on the world market, should we mistakenly seek to do so. Even if we were to succeed in keeping United Kingdom prices low, we could not insulate ourselves from the effects on the world economy of increased oil prices, and by the policies advocated by noble Lords opposite we would have added to those increases. I freely admit the immense damage caused by very sharp price rises, but the solution to that problem has to be sought internationally and not nationally.
I cannot accept this proposal. I think it would be damaging and dangerous. I hope that when the noble Lord has considered what I have said, he will agree to withdraw his proposal.
Lord Lloyd of Kilgerran: The noble Lord, Lord Stoddart of Swindon, and the noble Lord the Minister, informed the Committee that they had been participants in this arena of energy conflict for many years in the other place. Now it appears that we have a head-on confrontation again in this Committee.
As a new participant (if that is the correct word) in this arena, on a kind of maiden voyage, may I ask the Minister whether he does not agree—and I think he does—that security of supply is fundamental? He has very severely criticised the terms of this amendment. Will he not now consider it in the national interest that he should go away and reconsider the position that he has taken up, and whether a new formulation can be put forward at Report which covers this fundamental question of how security of supply can be ensured?
I am trying to be helpful. There is this conflict between one side of the Committee and the Government on this matter. There is no conflict that security of supply should be maintained. I therefore wonder whether the noble Lord the Minister can make some gesture, perhaps on the basis that this amendment is not adequately worded, to deal with this fundamental question.
2.45 p.m.
Lord Gray of Contin: I am grateful to the noble Lord, Lord Lloyd of Kilgerran. Although the noble Lord may be new to our energy debates, I am sure that the contributions which he has made during our deliberations today have been constructive and very welcomed by all of us. He has put me in rather a difficult position. I have made the Government's position perfectly clear. I certainly could not go along with what has been proposed this afternoon, but that does not mean that he and the noble Lord, Lord Stoddart, could not withdraw their amendment, think about it again and at a later stage bring back something which, after consideration, they believe is a little more appropriate.

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I must be perfectly frank with the noble Lord. I cannot say that I am prepared to take this amendment back and look at it again from the Government's point of view because the Government's position is absolutely clear. On the other hand, if a completely new proposal were to be submitted at the Report stage, obviously I would look at it afresh and see whether it was likely to be any more acceptable than that which is being suggested this afternoon. However, I would not wish to deceive the noble Lords by suggesting that I could take this amendment away and bring back something better, because the Government's position on this issue is perfectly clear.
Lord Lloyd of Kilgerran: When I participate in the negotiation of agreements and this stage is reached I usually have to say to the other side, "I do not want to waste your time, and I certainly do not want to waste my time". What the noble Lord the Minister has said is no concession; it is no help at all. He has said to the noble Lord, Lord Stoddart, and I: "Go away, bring forward something else and the Government will consider it". However, if anything arises on Report, it will be considered by the Government. But if the Government are to maintain the same stolid position as enunciated by the noble Lord the Minister, we are wasting our time, and I do not want to waste my time in such a way.
Lord Airedale: Is not the difficulty about relying upon confidential secret assurances from the oil companies that the nation simply does not know whether or not such assurances are forthcoming? The nation must simply have blind faith that the Government have succeeded in obtaining confidential assurances from the oil companies. That is not a very satisfactory position for the nation to be in.
Lord Stoddart of Swindon: There is at least one matter on which the noble Lord and I can agree this afternoon, and that concerns the notable contributions which the noble Lord, Lord Lloyd of Kilgerran, has made to our deliberations. They have been excellent and helpful, and the Committee is very grateful to him for his participation.
I could spend a long time rebutting what the noble Lord the Minister has said, but it is quite obvious that the Government are completely inflexible on this issue. There is no meeting of minds at all; there is no give whatever to the very legitimate worries which have been expressed here this afternoon. In those circumstances, I fear that I cannot withdraw this amendment. Indeed, I must press it to a Division.
2.49 p.m.
On Question, Whether the said amendment (No. 30) shall be agreed to?
Their Lordships divided: Contents, 33; Not-Contents, 63.

DIVISION NO 1

CONTENTS

Airedale, L.

David, B.

Carmichael of Kelvingrove, L.

Dean of Beswick, L.

Collison, L.

Diamond, L.

Crawshaw of Aintree, L.

Elwyn-Jones, L.

324

Ewart-Biggs, B.

McIntosh of Haringey, L.

Fitt, L.

Milverton, L.

Gallacher, L.

Morton of Shuna, L.

Graham of Edmonton, L.

Nicol, B.

Harris of Greenwich, L.

Pitt of Hampstead, L.

Hatch of Lusby, L.

Ponsonby of Shulbrede, L. [Teller.]

Hunt, L.

Jenkins of Putney, L.

Stoddart of Swindon, L.

John-Mackie, L.

Underbill, L.

Kagan, L.

Whaddon, L.

Kirkhill, L.

Wigoder, L.

Lloyd of Kilgerran, L. [Teller.]

Winstanley, L.

Winterbottom, L.

Longford, E.

NOT-CONTENTS

Airey of Abingdon, B.

Hooper, B.

Alexander of Tunis, E.

Ilchester, E.

Alport, L.

Ingrow, L.

Ampthill, L.

Killearn, L.

Auckland, L.

Lauderdale, E.

Belstead, L.

Lawrence, L.

Boothby, L.

Long, V.

Boyd-Carpenter, L.

Lucas of Chilworth, L.

Brabazon of Tara, L.

McFadzean, L.

Brougham and Vaux, L.

Mancroft, L.

Broxbourne, L.

Marley, L.

Caithness, E.

Marshall of Leeds, L.

Campbell of Alloway, L.

Merrivale, L.

Campbell of Croy, L.

Mottistone, L.

Cowley, E.

Mountevans, L.

Cox, B.

Mountgarret, V.

Craigavon, V.

Nugent of Guildford, L.

Cullen of Ashbourne, L.

Pender, L.

Denham, L. [Teller.]

Rochdale, V.

Drumalbyn, L.

Rodney, L.

Effingham, E.

St. Davids, V.

Ellenborough, L.

Saltoun of Abernethy, Ly.

Elles, B.

Shannon, E.

Elliott of Morpeth, L.

Somers, L.

Elton, L.

Swinton, E. [Teller.]

Enniskillen, E.

Teviot, L.

Glanusk, L.

Thorneycroft, L.

Glenarthur, L.

Trumpington, B.

Gray of Contin, L.

Vivian, L.

Hailsham of Saint Marylebone, L.

Wise, L.

Ypres, E.

Henley, L.

Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.
Clause 3 [Transfer to Agency of property etc. of Corporation]:
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 31:
Page 2, line 30, at end insert ("but excluding for all purposes of this Act intellectual property rights and liabilities or obligations relating thereto.").
The noble Lord said: I was surprised earlier this morning to have descending upon me a note indicating how the clauses were to be dealt with. To me it rather muddled up my speeches in my approach to these matters. It is now a great surprise to me that the last two amendments allotted to me on this list relate to my own expertise; namely, intellectual property rights which have dominated my career for so long. To console members of the Committee, the fact that it has come into my own area of expertise means that I can be brief.
With leave of the Committee, I should like to speak also to Amendment No. 33.
Amendment No. 33: Schedule 2, page 9, line 45, at end insert—
("(6) All intellectual property rights and liabilities or obligations, if any, of the Corporation shall be transferred to the Secretary of State or any body which he in his sole discretion considers appropriate.").
I wish to discover from the Government whether in the clause transferring all rights and liabilities from the BNOC to the new agency any intellectual property rights arise. The Minister may be able to say briefly that there are no such things as intellectual property rights arising and therefore we can dispose of this matter as simply as that. I should find it strange for two reasons if there are no intellectual property rights associated with BNOC. It has been trading extensively in this field and I know from my own experience that other traders in oil, the large companies, are surrounded by patents, trade marks and registered designs and have complicated agreements about transfer of energy rights. Therefore I should assume prima facie that there were some intellectual property rights roaming around, as it were. I usually find in commercial practice that when large organisations transfer their rights and liabilities they usually forget intellectual property rights which causes a great deal of trouble and large income for practising lawyers in that field.
The other reason I have been wondering whether intellectual property matters have been considered by the Government is that in the Oil and Gas (Enterprise) Act 1982 in Schedule 3 at paragraph 39 on page 65 is a reference to the Patents Act 1977. As far as my researches go there has not been a repeal of that part of the Oil and Gas (Enterprise) Act 1982. It may be that that section should be removed. The reference is to a curious section in the Patents Act which gives powers to the Government or whomsoever that in dealing with patent rights any activities outside the United Kingdom fall within the scope of the Act. Therefore, under Section 132 of the Act it is specifically stated that the patents Act 1977 would apply to territorial waters and to exploration underneath them; and also, what is more, that the Act will apply when an order is issued under the Continental Shelf Act 1964, and therefore the Patents Act will apply to that area.
I do not know whether BNOC were concerned with the exploration under any conventions or any orders under the Continental Shelf Act 1964 and I do not know whether in the jungle of Acts relating to pipelines, oil and petroleum any references to the Patents Act neutralise the reference to which I have referred. In those circumstances, perhaps the Minister may not wish to answer straightaway today on this matter because I did not give him any notice that I was referring to this particular section of the Patents Act. I beg to move.
3 p.m.
Lord Gray of Contin: In most circumstances I should feel greatly inhibited in replying to the noble Lord, Lord Lloyd of Kilgerran, on a subject in which he is a renowned expert, but I can, I am happy to say, tell him that BNOC's position as far as intellectual property is concerned is straightforward. When this Bill was being prepared, the Department of Energy asked BNOC what intellectual property it expected to possess at the transfer date. The corporation had a number of research agreements prior to the Britoil split but all of these were subsequently vested in Britoil.
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The noble Lord's amendment proposed an alternative method for handling BNOC's intellectual property. Obviously, I should not wish to criticise the thinking behind what he has proposed. Indeed, if the corporation's rights to intellectual property had been inappropriate for transfer to the agency, his approach might well have been preferable. But, as the position is so straightforward, I can see no reason why the Bill should not transfer BNOC's trade mark to the agency, along with all the corporation's other property rights and liabilities. It will then be for the agency to decide on any steps which need be taken to protect the trade mark against its unauthorised use by others. I am grateful to the noble Lord for giving us the opportunity to discuss this point. I hope that what I have said will be acceptable to him.
Lord Lloyd of Kilgerran: I thank the noble Lord for that very concise statement. He has said that this intellectual property matter is absolutely straightforward. I will tell my friends who have asked me to raise this subject that it is not much good pursuing matters of this kind because if they are straightforward then patent lawyers are not usually very interested. In these circumstances I ask leave of the Committee—as a kind of epilogue to this wonderful debate, for which I am so grateful to the noble Lord the Minister for his tolerance and his kind words about me, and to the noble Lord, Lord Stoddart, for his kind words about me—to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 32 not moved.]
Clause 3 agreed to.
[Amendment No. 33 not moved.]
Schedule 2 agreed to.
[Amendment No. 34 not moved.]
Clauses 4 and 5 agreed to.
Schedule 3 agreed to.
Remaining clauses agreed to.
Remaining schedule agreed to.
House resumed: Bill reported without amendment.

Adjournment
Lord Denham: My Lords, I must apologise for my breathlessness, because I was rather taken by surprise. It is traditional at this time of the year to say a few words and to wish Members of your Lordship's House a happy and restful holiday. I think we all probably need it more on this occasion than we did in previous years. From these Benches, I should like to wish all noble Lords in all parts of the House a very happy and restful Recess.
I think I speak for the whole House when I say that this year, even more than in earlier years, we have been well looked after by the staff in all parts of the House. They have made what has been a rather tiring Session that much easier by their continual kindness and help.
Noble Lords: Hear, hear!
Lord Ponsonby of Shulbrede: My Lords, slightly less out of breath than the noble Lord the Chief Whip, I

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should like very much to join with him in wishing noble Lords in all parts of the House a happy and restful holiday. I am sure that is something to which we have all been looking forward for some considerable period now.
I should also like to join with him in extending from this side of the House thanks to all the staff who have looked after us so well: the attendants, the security staff, the restaurant staff and those who work in the bars round the House. We have all appreciated very much their ministrations to us at late hours of the night.
Of course this is a time of year when members of the staff are retiring on reaching retirement age, and I should like to extend a particular vote of thanks and good wishes to those members of the staff who are retiring at this time.
Noble Lords: Hear, hear!
Lord Ponsonby of Shulbrede: My Lords, I can assure the noble Lord, the Chief Whip that when we return on 14th October—one week before another place, dare I say?—we shall be fighting strongly to see that the Transport Bill is transformed during that first week; and that he should be prepared, I regret to say, for another long and hard-fought Session. With those remarks, I wish all your Lordships a restful and happy Recess.
Lord Tordoff: My Lords, this is the first occasion on which I have had the opportunity to join in this little ceremony, and I am very grateful to do so. I personally have been thrown in at the deep end in a year in which there has been so much activity. I am grateful, therefore, for the support of both my leader and the former Chief Whip, who are beside me at the moment, and for the help that they have given me at this time.
It was suggested by one of them—and I shall not say which; your Lordships may be able to guess—that this is probably the only Motion that the noble Lord the Chief Whip has moved this year with a reasonable chance of success. I think that we are grateful to him for, among other things, introducing so many new faces into this House.
I certainly join with the remarks which have been made so far as the staff are concerned. We have had a very busy time. It has been hard work. It has been very trying. But certainly for the staff it has been even more hard work. We have asked them to do many things beyond the call of duty; and we are extremely grateful to them. Perhaps I may mention, as a symbol of that, our new Black Rod, who has moved into position extremely smoothly. We are all grateful to him for both his own efforts and those of his staff.
Like the noble Lord, Lord Ponsonby, we look forward to the battles to come on the Transport Bill which we certainly have not yet finished with. Perhaps noble Lords on the other side had better return from their holidays sooner than they normally do!
Let us not finish on an acrimonious note. It has been an interesting—and I think important—Session for your Lordships' House. It has been the first year with television. I think that the House has aquitted itself well there. The public outside certainly has an
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enhanced opinion of what goes on in this place. I think that that is to the credit of all noble Lords; and indeed all the staff. Let me join in the good wishes for a calm, restful and rejuvenating Summer Recess.
Lord Denham: My Lords, I beg to move that this House do now adjourn.

Insolvency Bill [H.L.]
Bill ordered to be printed as amended by the Commons.
House adjourned for the Summer Recess at eleven minutes past three o'clock until Monday, 14th October next.

  DIRECT BROADCASTING BY SATELLITE
  DIRECT BROADCASTING BY SATELLITE
  INDEPENDENT TELEVISION: REGIONAL CHARACTER
  INDEPENDENT TELEVISION: REGIONAL CHARACTER
  CONVEYANCING STANDING COMMITTEE
  CONVEYANCING STANDING COMMITTEE
  WILDLIFE AND COUNTRYSIDE ACT: MANAGEMENT AGREEMENTS
  WILDLIFE AND COUNTRYSIDE ACT: MANAGEMENT AGREEMENTS
  WILD BIRDS' HABITATS
  WILD BIRDS' HABITATS
  "RUSWROE" SEWER RENOVATION SYSTEM
  "RUSWROE" SEWER RENOVATION SYSTEM
  SOVIET CONFISCATION OF POSTAL PACKAGE
  SOVIET CONFISCATION OF POSTAL PACKAGE
  COPYRIGHT AMENDMENT ACTS: EXTENSIONS
  COPYRIGHT AMENDMENT ACTS: EXTENSIONS
  TOP PEOPLE'S INCREASED SALARIES AND PENSION RIGHTS
  TOP PEOPLE'S INCREASED SALARIES AND PENSION RIGHTS
  NON-PROLIFERATION TREATY REVIEW CONFERENCE
  NON-PROLIFERATION TREATY REVIEW CONFERENCE
  URANIUM: ISRAEL AND BRITISH EXPORT TO LUXEMBOURG
  URANIUM: ISRAEL AND BRITISH EXPORT TO LUXEMBOURG
  NUCLEAR WEAPONS: NON-PROLIFERATION TREATY
  NUCLEAR WEAPONS: NON-PROLIFERATION TREATY
  US STRATEGIC DEFENCE INITIATIVE RESEARCH
  US STRATEGIC DEFENCE INITIATIVE RESEARCH
  US THREAT OF ECONOMIC SANCTIONS
  US THREAT OF ECONOMIC SANCTIONS
  PENSIONS OF UK PENSIONERS IN CANADA
  PENSIONS OF UK PENSIONERS IN CANADA
  INDEXATION OF UK PENSIONS IN CANADA
  INDEXATION OF UK PENSIONS IN CANADA
  OPTICAL APPLIANCES: WRITTEN PRESCRIPTIONS
  OPTICAL APPLIANCES: WRITTEN PRESCRIPTIONS
  HEALTH AUTHORITIES AND PROPERTY SALES
  HEALTH AUTHORITIES AND PROPERTY SALES
  TYRA HENRY'S DEATH: SOCIAL SERVICES INQUIRY
  TYRA HENRY'S DEATH: SOCIAL SERVICES INQUIRY
  SOCIAL SECURITY EXPENDITURE
  SOCIAL SECURITY EXPENDITURE
  CORRECTION
  CORRECTION