Orders of the Day — Industry and Energy

Part of the debate – in the House of Commons at 12:00 am on 13th March 1974.

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Photo of Mr Eric Moonman Mr Eric Moonman , Basildon 12:00 am, 13th March 1974

Returning to the House, I have been impressed by both the serious tone of the debate today and the good common sense that has prevailed, and I think that the speech of the hon. Member for Dorset, South (Mr. King) was characteristic of both these things. It may well reflect that, although there are many occasions for Members on both sides of the House to engage in the knockabout of politics, when we discuss the areas of science and technology the tone of discussion is constructive, although the attendance is poor.

I think that the challenge is there for all of us to make sure that such issues as an energy policy should not be relegated to the off-days in the House of Commons. I have no doubt that, with the seriousness of the problems associated with energy, my right hon and hon. Friends will have much to do to make sure that it receives critical attention.

The other thing that strikes me about the House in returning is that we are all regionalists now. I say this with no disrespect to the Scottish National and Welsh National Members. Thus, I should like to make a claim for the interests of the Essex region. One of the disagreeable omissions from the Queen's Speech was that there was no specific reference to the scrapping of Maplin. I know that there have been leaks in the newspapers, but I am sufficiently cautious not to accept such reports as being correct. I hope that in the course of the next few weeks the appropriate Minister will implement what was very much in the minds of electors in Essex; namely, that this is a project we do not want.

The other important omission in the Queen's Speech relates to a specific pledge given by a senior Minister of the Government that the assets of the new towns should be transferred from the development corporation to the local council. I hope that this is just an oversight. I can assure the Deputy Speaker and those Ministers concerned that those of us who represent new towns will not allow the matter to rest for very long.

I should now like to come straight to the point of the debate today. I believe that one or two of the items that were raised by the right hon. Member for Worcester (Mr. Walker) are certainly worthy of further attention. I am referring in particular to the difficulties he stressed were inherent in the way in which energy has now been dealt with, particularly in regard to the splitting up of the Department of Trade and Industry, thus presenting problems to the appropriate civil servants.

I think there is a more fundamental issue at stake. What worries me about the constant restructuring of Government Departments is that we never fully explain the rationale for the splitting up. Apart from the confusion that it must present to civil servants, it is most unfair for people who need to use the Department of Trade and Industry. Hence, businessmen and trade unions have never had the rationale of restructuring explained. Indeed, if it is not clear to hon. Members we in turn cannot do justice to these matters when we are approached by constituents. I would urge my right hon. Friends that at some point before next Monday night, when this debate concludes, some explanation of the rationale behind these changes should be made to the House.

I believe that the major problem we face in a co-ordinated energy strategy for Britain is one of the most formidable tasks facing the Government. Certainly one can say that courage and imagina- tion will be needed as well as management confidence if we are to get the operational system right. Getting it right is the first priority. The failure of previous attempts to get a co-ordinated fuel policy can be attributed to three things: first, the fact that each industry wanted to go it alone; second, the availability of cheap oil; and, third, the fundamental failure by successive Governments to create a Government Department structurally capable of taking account of the demands and resources of industry. Those are the three critical factors which have presented problems to successive Governments since 1960.

The first of those factors would have been less important if the Government had had a co-ordinated energy strategy based on the realities of the situation. But successive reports of Select Committees have shown—I am speaking now in particular of the Committee on Science and Technology, but also of the Select Committee on the Nationalised Industries—that Government policy appears to have been conducted on a blow-hot, blow-cold basis, rotating among the different priorities of oil, coal, nuclear energy and gas, with unusually the oil and industrial lobbies breathing down their necks.

That would not have been so damaging if the Government had shown more skill in fact-finding, and forecasting correctly. But they were so often wrong that the respective chairmen of the coal, gas and electricity industries were driven to pressing their own claims. The result was a considerable battle among all of them.

But by far the most disastrous failure in Government forecasting was the assumption that cheap oil would be available for ever. It is my view that that assumption lies at the root of the unrealistic assessment of the potential of our North Sea oilfields, as the Public Accounts Committee has shown. I believe the Government were misled both as to the importance of the find and as to the relationship of exploration costs to potential profits, as well as about legal safeguards and taxation.

In the light of the new price of oil from the Middle East, the exploration and production costs of North Sea oil become much less important. Indeed, it was possible to tell as long ago as 1970, when, acting on American advice, the OECD surrendered to the first demand of the OPEC group, that higher prices were on the way.

It should have been realised then that the pursuit of a cheap energy policy was a fundamental error. Selling electricity below cost, selling the best power station coal at a lower price than its oil equivalent while at the same time subsidising the pits, yet not paying miners a sufficiently attractive wage to keep them at work, was totally absurd. We may yet live to thank the Arabs for showing us the error of our ways.

The other advantage to the Government following from the oil crisis is the loss by the multinational oil companies of their traditional control. It was said earlier that my right hon. Friend the Secretary of State for Industry tends to exaggerate the dangers and hazards of the multinational companies. I do not overstate these risks but I do say that we are right to look at some of the actions that have been taken by the multinational companies in this country. They have certainly presented some problems to Government.

My approach to this matter is that we should not make the job potential of such companies and their investment impossible. We need to develop a system which enables them to work in this country to their interest and technical competence as well as to the advantage of the nation. Nevertheless, we have to understand that we no longer deal on equal terms with producer countries, and it is clear that the multinational companies cannot be left free to decide whom they will supply with oil, and from where.

Turning to the future, some things may seem straightforward and obvious. But they are crucial, and it will be the great responsibility of my right hon. Friend the Secretary of State for Energy to try to give practical reality to some of these ideas. First, we must have a long-term energy policy that will make maximum use of home-produced fuels. We must use fuel efficiently and reduce waste. This means that from now on the Government must decide what fuel should be used by power stations.

Secondly, help must be given to reviving the coal industry and accelerating new investment. Thirdly, oil must be treated as a reserve fuel for electricity production. How we finally resolve the question of which nuclear reactors to install is a matter for the Minister. I accept what was said by the hon. Member for Dorset, South with regard to the need to maintain British nuclear reactors. Whatever the decision is to be, I hope that it will not mean the end of British nuclear research. Energy research has never been more important. That is one area that needs much greater support and weight than in the past, not only in order to maintain our living standards, but to give it the priority that is needed. A critical report published by the United States Government in the past 48 hours shows that not only do they expect to spend a much greater figure than at any other time in the past, but they have encouraged industry to make a massive contribution.

The figures are interesting. I quote: One area where it is expected that industry will contribute more than the federal government is energy R and D. During the next five years, the Administration … —in the United States— plans to commit about $10,000 million, and the corresponding industrial contribution is estimated to be around $12,500 million. Not surprisingly the bulk of the industrial contribution will be on projects which are most likely to produce useful results in the short and the medium terms. The short point is that there is a marriage of interest between Government and the companies concerned. I hope that one of the tasks of my right hon. Friend the Secretary of State for Energy will be to do just that here. The figures on energy R and D in this country are appallingly low.

In trying to utilise this new raw material, we have to make sure that we get the manpower, particularly the high-level manpower. Some people have said that, should there be a State involvement or State interest or a fifty-fifty interest in North Sea oil and gas, many of the senior executives who now work for the oil companies would disappear—a view which I do not necessarily share. If this is a risk, then I would urge my right hon. Friend to consider the possibility of getting together some of our leading selection consultancy firms to examine leading executives throughout the world to establish rates for the job and ensure we have the competence and skill in which to build the new industry. We should not be prepared to accept second-raters or men who are not able to provide the competence and performance needed to run the industry.

Let us look for a moment at the practical implications of North Sea oil and gas. Our first and most urgent task is to get the North Sea oil and gas into production as well as ensuring that the benefits accrue to Britain. There are various ways of doing this. We can use the posted price device—in other words, by acquiring participation, especially if it is done on the Norwegian principle of participation, in production but not in exploration and by fixing a royalty. This royalty—again following the Norwegian example—should be the subject of special agreements related to the size of individual fields. I am not considering the taxation aspects, which I am sure the Chancellor has in mind.

The Norwegian example of State control was mentioned during the course of the election campaign. I hope that my right hon. Friend, in winding up this debate, will indicate whether he favours this method of control. In some respects the reference to energy in the debate has been a little unreal. Perhaps this will be taken into account in the winding-up speech.

Norway's experience demonstrates that the oil companies will not be frightened off by the determination of Government to safeguard national interest, but they may well be frightened off by Government incompetence. This is the crux of the matter. No one should apologise or worry about the extent to which we operate a State interest in North Sea oil and gas. My point—which I hope will be taken up by other hon. Members on both sides of the House—is that the job must not be tackled in an inept way. We want a really competent and efficient industry.

Finally, I come to the way in which decisions have been made concerning Civil Service incompetence over North Sea oil. Had I time, I would refer to an interesting report in this month's The Banker by one of our new Ministers, Lord Balogh, in which he makes a good point. He shows, with some considerable evidence, the way in which the British Government were misled about the importance of the oil and gas find, about the degree of risk, and about legal safeguards of the nation's interests regarding likely profits. In fact, we got so many of our sums wrong that it is remarkable that we have anything like an industry at all to exploit.

I hope that hon. Members representing the Scottish National Party will understand if I seem less sensitive to their particular concern and natural anxiety about the utilisation of the industry for Scotland. There is an even bigger problem at the moment, which is to get this industry effective, working, and operational.