Orders of the Day — Petroleum and Submarine Pipe-Lines Bill

– in the House of Commons at 12:00 am on 30th April 1975.

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Order for Second Reading read.

3.56 p.m.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I beg to move, That the Bill be now read a Second time.

This is a historic week for Britain and the British people.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

This is the week which will see the start of the passage through Parliament of measures which will place in the hands of the British people control of the last two basic resources the use and deployment of which are not answerable to the British people and their Parliament.

In a speech at Oxford in the October General Election last year, my right hon. Friend the Prime Minister spoke about these two resources: God gave the land to the people, he gave the seas to the people and the treasures beneath the seas. There is no record that when God made the firmament and the seas he ordained that the profits from the wealth beneath the seas should accrue in full to private investors or rich multinational oil companies. Yesterday, the House gave a Second Reading to the Community Land Bill which deals with the first of these resources. Today, we ask the House to give a Second Reading to this Bill, one of the most important ever to be brought before Parliament—

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

It is a Bill which helps to fulfil our manifesto pledge—

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I hope that I shall not be the object of continual barracking, particularly by the hon. Member for Bedford (Mr. Skeet). I like him a great deal, but such barracking gets a little tiring. I hope to speak for about half an hour, so I hope that he will wait to express his abuse until he makes his own speech.

The Bill helps to fulfil our manifesto pledge to Take majority participation in all future oil licences and negotiate to achieve majority State participation in existing licences. Set up a British National Oil Corporation … Take new powers to control the pace of depletion, pipelines, exploration and development". The discovery of oil in quantity on our Continental Shelf is one of the most important events in our economic life since the Industrial Revolution. By 1980 the annual saving to our balance of payments, and the annual increase in Exchequer revenue, will both be running at thousands of millions of pounds a year. There will be unprecedented new opportunities for our offshore supplying industry. Our production in the 1980s will be 100 million to 150 million tons of oil a year.

At this level of production we shall be producing all the oil we need for our own use. We shall be producing it on the same scale as the present production of Kuwait, Libya, Iraq and Nigeria. We shall become one of the world's leading producers.

But the arrangements we inherited from the Tory Government gave the British people totally inadequate control of their oil, and a totally inadequate share of the benefits flowing from it. The purpose of the Bill is to ensure that the British people will exercise their due rights over their oil in a proper and mutually acceptable relationship with the oil companies.

The first offshore licences were issued in 1964. The first discovery of gas was made in 1965, and during the following few years further big discoveries were made. These finds were all of gas.

All gas for use as a fuel had to be offered for sale to the nationalised gas industry at reasonable prices. In this way we could ensure that a fair share of the profits came to the nation.

In 1969 the Ekofisk oilfield in the Norwegian sector was discovered, and in 1970 Forties was discovered in the British sector.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

I am grateful to the right hon. Gentleman for giving way so early in his speech. When he said that the arrangements for gas were devised to ensure that the British nation benefited properly, it would have been fair to add that the arrangements were made under legislation passed by a Conservative Government.

Mr. Farley:

I acknowledge that. In those circumstances I know that when I come to the more controversial section about the British National Oil Corporation and participation, the right hon. Gentleman will agree with it, because some of those proposals are comparable to what was done under the Conservatives.

As I was saying, the first oil was the Forties oil, discovered in the British sector in 1970. It was clear at that time that the North Sea was a major oil province. But what happened then? In 1971–72, the Tory Government issued a big new round of licences. The emphasis in this round was on the areas in the northern North Sea which had recently been shown to have oil potential, and most of them were in fact licensed in this round.

But in this new round of licences there was no change in the terms on which the licences were offered. They were virtually the same as those fixed when the North Sea was an unproven area, generally thought to contain only gas.

This was first brought to light by the Public Accounts Committee in 1972. Much of the credit for the fine report of that Committee belongs to my right hon. Friend the Chancellor of the Duchy of Lancaster and my right hon. Friend the Paymaster-General. I am sure that both my right hon. Friends acknowledge, as I do that my noble Friend the Minister of State for Energy is not without credit himself in this context. As the Public Accounts Committee showed, not only were the terms unchanged but the Tory Government did not even consider changing them.

Then, having let the horse out of the stable, the Government decided to inspect the stable door. Once the licences had been issued, in early 1972 a review of licensing policy began. But by the time that Government left office, two years later, no conclusions whatever had been reached—two years of inexcusable delay and uncertainty.

This Labour Government were returned to office determined to put that right—and with a mandate to put it right, the mandate we are fulfilling in this Bill, together with the Oil Taxation Bill, which is awaiting Royal Assent. Four months after we took office we announced our policy in the White Paper of 11th July last year, "United Kingdom Off-shore Oil and Gas Policy".

Those proposals came under three headings: first, Government take; secondly, special measures to assist Scotland, Wales and the English regions in need of development; thirdly, the real core of our proposals, Government control and participation.

The major part of our fiscal proposals was incorporated in the Oil Taxation Bill, which was introduced into the House in November. The remaining part is in the current Finance Bill.

As part of our policy to assist Scotland, Wales and the regions, my Department's Offshore Supplies Office has been moved to Glasgow, 40,000 jobs have been created in Scotland, with more to come, and recently my right hon. Friends the Secretaries of State for Scotland and Wales published their proposals for Scottish and Welsh Development Agencies.

Now the legal framework for State participation and control is embodied in the Bill. Together with the Petroleum Revenue Tax and ring fence, the Bill completes our proposals for offshore oil. All concerned—our own Parliament, together, with the oil companies—can now go ahead in full knowledge of the Government's plans and intentions.

The Bill's objective is to ensure that the British people derive maximum benefit from their offshore oil and gas resources. It provides the means for public participation, makes possible greater public control, and provides powers to facilitate development.

First I should like to say something about participation. The oil offshore is already the property of the nation. Lord Home, as he once was and now is again, nationalised it in 1964 during his period as Sir Alec. But as soon as the oil is produced by a licensee, it becomes his property, and the nation has no further title to it. Except for the United States, every major oil-producing and gas-producing nation in the world has taken participation in the producing industry. I am not referring only to the OPEC countries, but also to Norway. Canada, Australia, New Zealand, and all the EEC members with substantial oil and gas production or prospects—France, Italy, Holland, Ireland and Denmark.

Only last month groups including most of the international majors accepted licences for Greenland—a much more expensive and risky area than the North Sea—on extremely tough participation terms. The House may also have read only this morning that the Irish Government have just announced tough new terms, including provision for 50 per cent. participation.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Is it not fair to say that in that list many of the countries have not abrogated the existing terms under the existing licences? Why is the Minister seeking to do it here?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

Because most of those Governments had already made provisions, the sort of provisions that should have been made before the fourth licensing round. France, Italy, Holland and New Zealand participate in finds already made. Their provisions are comparable to the provisions that we are making.

The Opposition's bluster against State participation is only synthetic. The right hon. Member for Sidcup (Mr. Heath) made this clear in a speech in the House 13 months ago, when, as Leader of the Opposition, he declared that he regarded carried interest for existing licences as a major option and added that a Government could do what they liked with future licences. If the Opposition Front Bench seek to repudiate their former leader on this issue, as they have on so many others, they can hardly repudiate, just yet at any rate, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), who, a year ago to the day, admitted in a burst of candour in Oslo that the last Conservative Government had by no means ruled out" participation. I do not yet know the views on the subject of the right hon. Lady the present Leader of the Opposition. It is a hard choice for her. If she agrees with her right hon. Friend the Member for Wan-stead and Woodford she has the unpalatable task of agreeing also with the right hon. Member for Sidcup.

We believe that participation, is the best way of ensuring that the nation shares fully in the benefits of North Sea oil. Participation gives the nation a direct title to the oil produced. It creates a partnership between the people of this country and the oil companies. Further, only through participation can the nation acquire its own direct knowledge of, and capability in, oil and gas production.

As a result, our policies will be much better informed than were those of the Tory Government. The Public Accounts Committee Report pointed out how the previous Government had misunderstood the profits and costs of oil production. It went so far as to say that Government calculations were "misleading". By sharing risks and responsibilities with the oil companies, we shall be able to understand their problems better as well.

But, of course, our policy does not consist only of participation. When the British National Oil Corporation is fully established, it will be able to hold licences as sole licensee. For commercial fields on such licences, all net revenues will come to the nation, not the 70 per cent. in the case of royalties and tax alone.

The establishment of a complete capability under national control will reduce our dependence on the oil companies. We value their expertise. They have been pioneers in one of the most difficult projects ever known, requiring immense technical skill and great individual personal courage on the part of the men who work in some of the most dangerous and inhospitable waters on earth. We want to continue to attract their expertise, and to work in partnership with it. But no other major producer outside the United States has thought it wise to be completely dependent on the oil companies, and all over the world the companies have accepted that.

Participation has yet another advantage. It provides the framework in which the State can help licensees to raise the very heavy costs of development. A field of Forties size starting now would cost about £1,000 million to develop. The sums required are colossal. The Tory Government in their last licensing round let in some small licensees—with no special contribution to make—who would be out of their depth in a children's paddling pool.

But costs of development are now so high that only the biggest companies can expect not to meet difficulties in raising money. This is not because the North Sea is no longer profitable—far from it—but because they have to borrow the money, and any prudent lender is bound to compare their resources with the scale of their borrowings.

The development of offshore oil requires resources on such a massive scale that it is difficult for the private sector alone to provide them. That is why I am sure that if the Conservatives had remained in office they, too, would have had to put into practice their readiness to consider participation to which I have referred. Indeed, what else could they have done if they had been in office and licensees had come to them, as they have come to us, for help in raising money? Would they have provided the money, with no compensating stake for the British people, who really provide the money?

The Bill provides the means for participation by setting up the BNOC. But it does not by itself bring about participation in future licences. This will be laid down in the conditions under which future licences are awarded. For existing licences it will be achieved through free and voluntary negotiation.

A number of major oil companies have shown readiness to discuss our participation proposals. In this connection, the House will wish to know that during the last few days the chairman of British Petroleum has told me that his company is prepared to enter into discussions with the Government with a view to agreeing terms for majority State participation in BP's North Sea oil holdings. Deminex has agreed in principle, and we shall have 51 per cent. of Burmah's stake in Ninian and Thistle. I am glad to be able to inform the House that two further companies, Tricentrol and Blackfriars Oil Company, have accepted the principle of participation in their shares of the Thistle and Argyll fields, and Blackfriars accepts it for any further commercial finds it makes. The benefits to be secured through participation agreements and future licences will be held by BNOC on behalf of the people.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

Before the right hon. Gentleman leaves the subject of financing, which he appears to be about to do, will he draw a specific line between the rather misleading figures he gives the House? He has spoken of a cost of £1,000 million for the exploitation. The cost of exploration is not in the same league. Once discoveries have been made, the raising of capital is nothing like as difficult as the right hon. Gentleman is trying to imply.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I have not left the subject of financing. I shall be returning to it shortly, and some of the points the hon. Gentleman mentioned will be dealt with then. I entirely agree with him that there is a great difference between development expenditure and exploration expenditure, but our proposals in the Bill will help both types of expenditure to a great extent. We shall look extremely critically at the proposals that come before us if some of the licensees ask for our help.

I have been describing some of the functions of the British National Oil Corporation. I can tell the House that its headquarters will be in Glasgow. If the House gives the Bill a Second Reading tonight, I hope in due course to nominate an organising committee, including a chairman and chief executive.

The House will understand that pending passage of the Bill it may be necessary for my Department to enter into commitments on behalf of the corporation. Any expenditure incurred after Second Reading as a result of such commitments, and the costs of the organising committee, will be met in the first instance from the Contingencies Fund and will be recovered from the corporation in due course.

I want to make it clear that BNOC will not be the means by which the Government exercise control over private licensees. It will be the Government who continue to issue licences, and to administer all the licence controls, both those in existing licences and those added to them by the Bill as well as those laid down for new licences. For its part, BNOC will hold licences issued by the Secretary of State and will be subject to licence controls like a private sector licensee.

The BNOC's job will be different and distinct. It will hold the Government's participation interest in production licences, in partnership with private sector companies. In these cases it will, of course, act commercially. Its future partners need have no fear that it will try to force the consortium to act contrary to ordinary commercial criteria.

But BNOC may also become sole licensee and operator in some future licences. In this rôle it will not necessarily act commercially. It might be in the national interest, for example, for it to explore and locate reserves and yet not develop them. Therefore, the BNOC can play an important and unique rôle, and one of a non-commercial character.

Again, BNOC will be available to give the Government advice on oil matters generally and to perform other services for them, normally on repayment. It can, for example, be asked to take over management of the Government's pipeline and storage system, which is maintained for defence purposes. It could act for the Government in any future barter deals such as that arranged with Iran in 1973, although I want to make it clear that none is at present in prospect.

Oil is of enormous importance in modern life. It is impossible to predict the uses to which a public sector body with expertise and knowledge about it might, in the national interest, be put. The BNOC will have powers to go into oil refining and distribution, with the consent of the Secretary of State.

It will take time to acquire the necessary resources and expertise and its clear priority must be to establish itself in oil production. But, subject to Government approval, it will have maximum flexibility to make use of the oil and the knowledge of the oil industry which it will have gained from participation in production. When it extends into refining and distribution it will, of course, do so on a commercial basis. It will not be used to compete unfairly with private sector companies.

The BNOC, then, will have a mixture of functions. In some—the holding of production licences with private sector partners, and in downstream activities—it will act commercially. In others—exploration to establish the size of our reserves, the performance of services to the Government—it will act in effect as an agent of the Government. Its actions will be of enormous importance to this country and the sums of money flowing through its accounts will be vast. Assuming 51 per cent. participation in all oilfields, its gross revenue in 1980 could amount to between £2,000 million and £3,000 million.

Its circumstances are unique and it will therefore have a structure unlike that of any existing nationalised industry. In particular, we want it to have a specially close and intimate contact with the Government. The Bill therefore provides for the appointment of two official members, for the issue to the corporation of specific and general directions, and for the payment of its revenues into a National Oil Account under the Government's control, from which its needs will be met.

Photo of Mr Peter Rost Mr Peter Rost , Derbyshire South East

The right hon. Gentleman said a moment ago that the BNOC will not trade unfairly against existing companies. Can he explain why, therefore, this nationalised oil company is to be exempted from petroleum revenue tax?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I dare say that this subject will attract a good deal of attention when the Bill goes into Committee because I have received comments on the matter already. I can assure the hon. Member that there is nothing unusual in this arrangement. If it were a device to put the BNOC into a better position vis-à-vis the other companies, it would be a very clumsy and ham-fisted way of going about that. There is no secrecy attached to the National Oil Account. It would he under the control of the Government, subject to the scrutiny of the Public Accounts Committee, audited by the Comptroller and Auditor-General, and, if necessary, debated in this House. The hon. Gentleman therefore need have no fears about the National Oil Account or the way in which it will operate under these controls.

I have already said that the first purpose of the Bill is to provide for public participation and that the second is for greater public control. Parts II and III of the Bill are designed to bring about greater public control of the oil industry. The controls which we inherited are hopelessly inadequate at the moment.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

The first part of the Bill seems to describe very sensibly a fairly standard classic public corporation. There is no provision, for instance, for 50 per cent. of workers' participation as favoured by my right hon. Friend the Secretary of State for Industry. Is this accidental or deliberate?

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

The BNOC will have workers' representatives on it in the same way as other public corporations that fall under my responsibility. My hon. Friend will have seen that overall responsibility for worker participation in the public sector, as well as in the private sector, is being considered by my right hon. Friend the Secretary of State for Employment. I know, of course, that my hon. Friend put his question only to be extremely helpful, and I take it in that spirit.

As I was saying, the present controls are totally inadequate and I should like to go into detail to show how. At present there is no control over the rate of depletion in the national interest. Even Opposition Members recognised in their proposals before the last election that such control was essential, but those proposals—suggesting a cumbersome body which would have been powerless to achieve the objectives set for it—were inadequate when it came to depletion.

At present there is no requirement for continuing exploration. A licence may last for 46 years. Exploration programmes are required for the first six years. A licensee then surrenders half the territory—he chooses which half—but on the area he keeps he need do no more exploration for the remaining 40 years.

At present there is no control over the ownership of the licensees. The ownership of the licensee company can determine its technical competence and its financial standing, and yet we have no control over it through the licences. Under the terms we inherited, the Government could give a licence to a company owned and operated by one person or group A and then find that it had been turned into a company owned and operated by quite another person or group B who may be of a different nationality—and all this could be done without the Government's knowledge.

At present there is no effective control over dealings in the profits or production from licences. Much of these dealings are, of course, entirely legitimate and we would not wish to prevent them. But at the moment there is nothing to stop a smart operator, with no interest in actually producing oil or gas, from getting a quick profit, and such profits can be shifted outside the United Kingdom corporation tax net.

At present there is no control over the development of pipelines to avoid proliferation, and to minimise damage and inconvenience to other interests and the risk of pollution. Nor is there any control at present over the safety of pipelines and those working on the laying of pipelines in these dangerous conditions. There is no means of preventing the North Sea from becoming, in the graphic phrase of the oil industry, like an "upturned plate of spaghetti". The Bill closes all these gaps. It is astounding that they have not been closed before.

There is another important new control contained in Part IV. It will ensure that national policy on oil is taken properly into account in decisions on refinery construction. To obtain maximum benefit from the exploitation of North Sea oil we need to have the right sort of refining capacity, in terms of both quantity and sophistication.

Refinery projects are, of course, subject to the usual planning procedures, and will continue to be. The main purpose of these procedures is to assess the implications of the project in terms of land use and the local environment. But in a field as important as this, it is right that there should be a separate evaluation of the oil policy considerations. Part IV will assist the planning authorities in their task, whilst in no way infringing on their prerogatives. It will be possible for projects which are clearly undesirable from the national point of view to be turned down at an early stage.

The powers to facilitate North Sea development are contained in Clause 42. This clause makes it possible to give oil companies guarantees of up to £600 million, or make them loans of up to £50 million, where it is desirable to maintain development. We shall use these powers only in special cases where need is demonstrated. Where we do use them, we shall require proper terms for taking on a share of the risk. And we shall normally insist on acceptance of participation as a condition of giving the financial help.

In accordance with normal practice, we shall, in exceptional cases, and where it is necessary to avoid delays in development, be prepared to give loans or guarantees up to the limits in the Bill once the House has approved it in principle by giving it a Second Reading.

The main purpose of this Bill is to give the British people rights over their own oil, and to do it while retaining the interest and resources of the oil companies. Everything in the Bill is directed towards achieving this balance. On the one hand, we have sought to put right the results of the unregulated scramble for our resources which the previous Government allowed. On the other, we seek continued investment here by the companies on terms which recognise the interest of the British people in their own oil.

We are trying to get a reasonable reconciliation of all interests which will last. I am sure that the oil industry recognises that the anarchy which we inherited could not be allowed to continue and that it will be willing to accept our offer of a durable partnership with the British people. Our oil resources are a precious asset which must be explored, exploited and at the same time husbanded to meet the nation's needs. We must be prepared to implement a sensible and prudent depletion policy.

Exploration today is going on at a record rate, confounding the doom-laden pronouncements of Tory right hon. Gentlemen opposite. Despite the slippages of which I warned a year ago, exploitation is going ahead satisfactorily. Huge resources are being committed daily. This year oil will start to flow bringing to fruition the first stages of this great enterprise. This Bill will ensure that all these activities are conducted not for the benefit of a few but in the interests of all the people of all of Britain. This is a practical Bill, a patriotic Bill, a Socialist Bill. I commend it to the House.

4.31 p.m.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

The truest words in the Minister's speech were uttered at the end of it when he said that this was a Socialist Bill. In my speech I shall show how damaging the Bill will be if it goes through in this form—damaging to the interests of the people of this country.

The right hon. Gentleman devoted a considerable part of his speech to some wide-ranging personal and political abuse. I do not propose to follow his example but rather to talk about the Bill. There was one part of his speech which took my breath away. It came when he said that the oil industry could now go forward "in full knowledge of the Government's plans and intentions". All I can tell the right hon. Gentleman is that from my discussions with the industry—and I do not suppose I have had as many as he or the Treasury—it seems that the industry is in a state of complete confusion about the Government's intentions.

Last January Government policy was stood on its head. We learned from the Chancellor of the Duchy of Lancaster that participation would take some novel form in which the companies would have the same profit earnings as they would have had if they had not surrendered 51 per cent. of the oil. I do not know what the right hon. Gentleman's view of this is. He seems to live in a cocoon of complacency which entirely divorces him from what is going on in the real world of the oil industry.

The Chairman of BP may have told him that he is prepared to negotiate for 51 per cent. participation, but he told me and a number of my hon. Friends that he had not the slightest idea what the Government's offer means. No doubt he will talk to the Government, but he has yet to know what is the Government offer. That goes for every other company that has engaged in these participation talks. I have not found one company which has had any offer of any sort made to it in writing. Of talks there have been quite a lot, but there has not been one single word in writing about what arangements are to be made, what the terms of the participation are to be, and how the companies will participate, becoming partners of the Government. No doubt we can explore these details in Committee.

It is nonsense for the Government to continue pretending that the programmes are going forward with full confidence and momentum, which was the case a year ago. The Under-Secretary is often touring the country—he is left to pick up all the dirty work—telling people that the number of drilling rigs in the North Sea is more in 1974 than it was the year before. I will put to him and to his right hon. Friend the truth of the matter from a senior managing director of British Petroleum, Mr. "Monty" Pennell, who is quoted in the Financial Times earlier this month rebutting politicians' claims that: the companies are bluffing when they talk of reducing exploration drilling in the North Sea. He suggested that: the actual rate of drilling could fall by as much as 60 per cent. in the next year. 'Politicians who look to the current rate of drillling', he asserts, 'appear not to understand that rig activity today results from decisions taken a couple of years or more ago and that decisions taken over the past few months will largely determine the rig activity next year'. If the Minister takes the trouble to ask his hon. Friend the Member for Dudley, West (Dr. Phipps), he will be told that today, as opposed to a year ago, any company can hire a drill rig for the asking at any time. The drillings are very nearly a drug on the market. I hope that we shall hear no more about confidence in the industry being unimpaired. The Government have thrown the industry into chaos. This was done first with the petroleum taxation Bill. We got most of that put right, and now we have this Bill. The Government must face up to the consequences.

As for the canard that the Government inherited anarchy—that is a ridiculous statement. They inherited an industry which has grown from nothing to a point at which we can become self-sufficient in oil by 1980. It is the most remarkable story of exploration, discovery and development in offshore oil that the world has even seen. To describe that situation as anarchy is comparable to the famous remarks by Mr. Attlee when he described the position found by his Government in 1945 as the "mess of centuries". That is what the right hon. Gentleman makes of the triumphs and achievements of the North Sea.

I turn to the Bill and the British National Oil Corporation, together with the proposals for the 51 per cent. participation. We are told t hat these are necessary to ensure a proper return to the Exchequer and proper control over investment, production, depletion and so on. The Secretary of State merely repeated what he has said before. What is abundantly clear is that Part I whatever else it does has nothing to do with such factors. It is irrelevant to participation and control.

We know, because we have been told by the Chancellor of the Duchy, that the Government are not looking for any further increased financial return from participation. He told this to the oil companies in the Carlyle Hotel in New York in January. At the beginning of February he was quoted in The Times as saying that— the key point that had to be appreciated was that the British Government had no intention of adding to their take from the North Sea through participation plans designed to give the Government majority control over the oil resources. He believed that the only way the Government should obtain revenue from the North Sea oil was by means of the new oil tax and through corporation taxes. I wonder whether the Secretary of State ever talks to the Chancellor of the Duchy. We had a great deal more about the need for participation to raise revenue. I am content to rely on what the Chancellor of the Duchy says.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

Would the right hon. Gentleman not accept that that statement referred specifically to licences already given out and not to future licences?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

With respect, it does not do anything of the sort. It is a statement exactly as I quoted it; there is nothing about being confined to existing licences.

The Secretary of State said last November: There is the question of making sure that the British people get a proper share and that cannot be done by taxation."—[Official Report, 25th November 1974; Vol. 881, c. 5.] He has been flatly contradicted by the Chancellor of the Duchy of Lancaster. We have had the Oil Taxation Bill. The Opposition agreed that it was proper to increase taxation. We did not vote against that Bill, as we were committed to introduce taxation when we were in office. The statement by my then right hon. Friend, now Lord Barber, as long ago as March 1973 made that abundantly clear. We argued for an excess profits tax. Happily, we were able to change the Bill into a form in which Lord Balogh was able to say in the House of Lords, In fact, of course, this tax represents an excess profit tax".—[Official Report, House of Lords, 10th April 1975; Vol. 359, c. 205.] We won, and we shall win again on this Bill.

As I shall show later when I deal with the National Oil Account, so far from adding money for the benefit of the British people, the Bill extracts it from the taxpayer and uses it for the Socialist purposes of the right hon. Gentleman.

I come to the second alleged reason, which is that the Bill is necessary for control of production and depletion. As the right hon. Gentleman made clear, the Bill shows that participation and the BNOC have nothing whatever to do with the control of production and depletion. Those powers are contained in Part II of the Bill and in Schedules 2 and 3. The BNOC and participation are in Part I.

The controls exist entirely independently of the BNOC; they bear no relation whatever to participation. The BNOC has no rôle, and the Secretary of State was good enough to make that clear. The powers stem from the model clauses in the Bill that are imported into the licences. They are administered not by the BNOC but by the Secretary of State, and they are enforced by penalties. When the Secretary of State said … we can have an effective depletion policy only on the basis of public participation".—[Official Report, 25th November 1974; Vol. 881, c. 5.] he was again talking complete rubbish. The Bill makes it clear that what she said then was totally untrue.

If the reasons are neither revenues nor controls, what are they? The Secretary of State gave us the answer today. The Government have a political commitment. That is what it comes down to. In other words, majority State participation is no more than the ugly unacceptable face of Socialism.

But if they are committed to some form of State corporation, what form should it take? There are two broad possibilities. Either the Government could take on the rôle of an investment banker, or one could have a new nationalised State oil company. The former rôle would be like an investment holding company—passive, watchful, steering, monitoring and supervising, but not itself climbing down into the arena. Such a body would advise. It could sponsor research and it could invest selectively if the Treasury had spare resources to enable it to do so. However, it would leave the active exploration and development of the oilfields to the industry which understands the work and knows how to do it. Such a body might have fairly loose terms of reference. It could be a departmental agency—an extension of the Department of Energy. Its powers would, rightly, be heavily circumscribed.

The alternative rôle, and the other possibility, is the active, entrepreneurial body which would aim to compete fairly with existing companies. It would be subject to similar rules to those for the rest of the industry. It would pay taxes like the rest of the industry. It would have a good deal of commercial freedom. It would look to the Exchequer for its capital. And it would be answerable to the House of Commons for its results.

I suppose that is perfectly possible though I am bound to say that the recent cry of despair that we heard from Sir Monty Finniston about trying to run such a corporation in the steel industry does not inspire much confidence that it would work in the oil industry.

As it is, the BNOC tries to be both. The result is a hopelessly confused mishmash of vague objectives, sweeping powers, fiscal privileges and stultifying ministerial constraints.

The Bill gives to those who are to run the BNOC no clear purpose. It sets no objectives. It establishes no commercial criteria. It makes the BNOC a privileged body by exempting it from PRT. It retains for the Minister not only strategic control but detailed control over the day-to-day operation of the company. The BNOC may not actually be part of the Department of Energy, but from the outset it is to be tethered hand and foot to the Ministers and officials in the Department.

I shall give some illustrations of this. There are 70 specific examples of minis- terial controls and powers in the Bill, but I shall take just three.

Photo of Mr Edmund Dell Mr Edmund Dell , Birkenhead

When the right hon. Gentleman said on going out of office that the Conservative Government had not ruled out participation, which of the two alternative forms of BNOC did he have in mind at that time?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

When I said that, I mentioned "carried interest", which is not necessarily quite the same thing. I believed that it was a possible alternative to taxation. Now that we have the tax we see no reason for participation.

The BNOC is, apparently, to have no responsibility whatever for its own finances. Instead, it has to transfer all its revenues to the National Oil Account, itself under the control of the Secretary of State. Clause 40(2)(a) is astonishing It says: There shall be paid into the Account… (a) all sums received by the Corporation from any source or standing to the credit of the Corporation in any bank account. There is an exemption for petty cash, so I suppose it will be allowed to buy the matches for the boardroom table. It is not allowed to incur serious expenditure, because under subsection (3) of that clause it may pay such sums as the Secretary of State considers are needed to enable the Corporation and any relevant subsidiary to defray expenditure properly chargeable to revenue or capital account. The whole of the operating expenses have to have the sanction of the Secretary of State. So the BNOC has no financial autonomy whatever. The Secretary of State retains complete command of the purse strings.

It has no managerial autonomy either, because the Secretary of State, in addition to settling general lines of conduct for the undertaking and having the usual power to give general directions, can give this body specific directions of any kind whatsoever. Clause 4(1), which sets out that power, must be one of the most sweeping assumptions of dictatorial power by any Government in this country outside wartime. The Bill reaches a point of complete absurdity, as was stated in the Financial Times in its somewhat critical leader of 10th April. It said: Now it turns out that the Minister is not prepared to trust his own creature; the Minister can himself give directions not only to the National Oil Company itself, but to the operating companies in which it has a controlling interest. The robot cannot even be trusted to transmit its master's messages. The third point is perhaps the most astonishing of all. The whole thing can be hidden from the gaze of Parliament and the public under a cloak of secrecy. Not only are the directives to be secret—the chairman is not even to have the right of publishing ministerial directives for self-protection, which is bad enough—but in one of the most astonishing clauses ever to find its way into a Bill, Clause 10(2) empowers the Secretary of State to direct the BNOC to prepare its accounts in such a way as to hide whether it is making a profit or a loss.

I find this absolutely breathtaking. In the context of the Government's Industry Bill, which imposes rules of disclosure upon the private sector going far beyond anything that has gone before, it is not only breathtaking; it is shocking. It must be changed.

The National Oil Account is to have huge resources. The Secretary of State has power to hand them all over to the BNOC up to the limit, and he has power to tell the BNOC exactly what to spend them on. Then he has power to conceal the whole thing from the gaze of public and Parliament. I cannot believe that for one moment the Secretary of State thinks that he is going to get away with it. He is sometimes accused of assuming the mantle of a modern oil sheikh, but here he looks like a sort of 18th century Middle Eastern despot, with BNOC as his pampered, privileged eunuch.

One goes on—who is the Secretary of State going to get to serve on such a body? One may well ask. The right hon. Gentleman, who is not above being frank on occasions, gave an interview to the Daily Telegraph last July which resulted in this report: He agrees that there will be difficulties in recruiting management to build up BNOC but I would hope we can talk to British Petroleum about co-operation'. The Secretary of State has talked to British Petroleum. He knows just how much co-operation he will get there.

But there is another clue. Two civil servants are to be on the board of BNOC. But we have had ministers' verdict of putting civil servants in charge of running commercial operations, and it was given admirably by the Minister of State, Department of Energy—Lord Balogh. In an article he wrote in the Daily Mail just before the February General Election he said this: The Civil Service has in no way shown itself fit to supervise the admirably run multinationals a relatively easy job. I shudder to think what might be the result if they took over the running of the operation. Who else will they get? Who will they find who will swap the challenging disciplines of the private sector for this dreadful mess of pottage where he will be doing nothing but be, in the words of the Financial Times, the Secretary of State's robot?

I am told that the Government have been head hunting for some time and that they are now considering amending the terms of reference. It is not the terms of reference to the head hunters which need to be amended. It is the whole concept of BNOC as embodied in the Bill which must be radically changed.

The Government must decide. Is this to be an agency of the Government, a mere extension of the Department of Energy, or is it to be a genuine commercial enterprise? At present, it seems to be intended to be both, and it ends up by being neither.

We must come back to the reality of what this body will do. The dreadful thing is that this hairless wonder will be a majority partner of every operating enterprise in the North Sea. This is the body which must take part in every major investment decision to be taken in the development of offshore oilfields. Some of these oilfields require as many as 16 operating, technical and financial committees; and this body must be represented on all of them. No wonder the oil companies are fearful of the appalling bureaucratic delays this will set up. If the Bill means what it says—We must assume that it does—BNOC will have to go cap in hand to the Secretary of State for every penny it needs to spend. There are prodigious opportunities for delay and muddle.

It is also the body that the Minister can direct to invest in downstream activities—all the way from bitumen to plastic buttons, all the way from naphtha to nylon stockings. The House will have no say at all in these things. It will all rest with the Secretary of State. Like Petrobras in Brazil and ENI in Italy, BNOC could end up by becoming" a State within a State "and the creature of the Secretary of State.

But it is all unnecessary. There is no advantage to be gained for the British people by the existence of this corporation that cannot be gained by the taxation and licensing powers in the Bill.

It is a dreadful comment on the priorities of the Labour Party that it is prepared to risk the momentum of the exploration and development of North Sea oil by creating this faceless, flabby, purposeless BNOC.

I turn to the regulatory provisions—Parts II, III and IV—the licence terms, pipelines and refineries. Here, as the Secretary of State fairly said, the Opposition have some sympathy for the broad objectives of proper depletion control and orderly development policy. But we see serious and damaging defects in the methods chosen, in particular in relation to paragraphs 14, 15 and 16 of Schedule II, which are major new powers over exploration, appraisal and development, and which relate to depletion control.

As I say, we do not challenge that there must be effective powers, but this Bill departs from all previous European practice, in that these changes are retrospective and represent a unilateral abrogation of existing rights without compensation. The Netherlands, Denmark, Norway—none of those countries changed the terms of licences already issued. There the new legislation applies, with very minor exceptions, solely to future licences.

In Committee we shall want to test whether it is vital that existing licences should be subject to this retrospective provision. It should be recognised for what it is—a form of compulsory expropriation by the State just as any form of outright nationalisation.

On this matter international law is quite clear. This can be done only if it is accompanied by fair and adequate compensation. The Government's view on this principle was affirmed at the Sixth Special Session of the General Assembly of the United Nations only last winter. A draft put forward on behalf of the British Government and a number of other Community Governments, while acknowledging the right to expropriate, says that these rights shall be exercised in accordance with the applicable rules of international law, in particular with regard to the payment to the owners of prompt, adequate and effective compensation. On 12th August my hon. Friend the Member for Blackpool, South (Mr. Blaker) asked the Secretary of State for Foreign and Commonwealth Affairs whether that draft—the amendment in question—represented the position of Her Majesty's Government. The Minister of State said "Yes, Sir". My hon. Friend asked: May we assume that that applies to North Sea oil licences?"—[Official Report, 12th March 1975; Vol. 887, c. 488.] The Minister of State then went on to refer to participation.

It is not only participation. The abrogation of existing contractual rights is just as much expropriation as the acquisition of property. So, if the powers are to be exercised, compensation must be paid, and it is a matter of high principle which touches on the Government's whole honour and integrity.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

The right hon. Gentleman has attacked the depletion provisions which are retrospective in the Bill. The retrospectivity is necessary because no depletion controls were put into the 1971 licences. Will he explain why the last Conservative Government took no powers of depletion control in the 1971 licensing round?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

That matter was examined by the Public Accounts Committee. In Committee we shall want to examine the case for this in full, because it represents a very serious step indeed and it has done perhaps as much as anything to undermine the faith of foreign investors in the integrity of this country. Therefore, if it is to be done, let it be examined thoroughly, but, above all, it must be done for compensation.

If it is said that more effective depletion powers are needed, let it be made quite clear, as I made it clear last year, that compensation should be paid. I made a Press statement on 11th September. This report appeared in The Guardian on 12th September: Some compensation for this might well have to be paid by the Government, said Mr. Jenkin.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

Does not my right hon. Friend agree that every oil company operating in the North Sea has made it crystal clear that it would be delighted to co-operate with the Government in a proper depletion policy and is more than willing so to do?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

My hon. Friend is absolutely right. I have not spoken to every company engaged in this—there are a great many—but all those to whom I have spoken recognise that.

But the powers in the Bill and the discretion of the Secretary of State go a good deal further. Unilateral abrogation without compensation could have unfortunate repercussions on British investments overseas. British Petroleum has huge assets in Alaska and Ohio. Shell has a big stake in the Gulf of Mexico, California and elsewhere. I could quote many references to American opinion which I have read in the past year, but I will quote only one, from a distinguished Senator, Senator Dole of Kansas, who said this two months ago in a Press release: As I look at the billion of barrels of American oil which the British Petroleum Company is sitting on in Alaska, when I consider the holdings of the Shell Oil Company in the United States, it seems to me that these and similar holdings must be considered as the British programme to nationalise the petrol contracted for by American companies in Great Britain goes forward. It is sheer nonsense for the right hon. Gentleman to say—as he said in the House the other day—that all this is totally irrelevant to anything that the Government are doing. This unilateral abrogation of rights has to be met by compensation. If a civilised, developed country abandons the principle pacta sunt servanda, the consequences could be extremely damaging for the credibility of the country.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

As I suggested, the need for retrospectivity arises only because in 1971 no depletion powers were taken in the licences. Will the right hon. Gentleman tell the House why in 1971 the Conservative Government took no powers to control depletion?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

As I say, that was examined. Officials were examined on that by the Public Accounts Committee. It is important that we should look forward to the future under the Bill. In 1971 if anybody had said that by 1980 this country would be in the position of having to exercise depletion control he would have been regarded as being very far sighted indeed.

Photo of Mr John Davies Mr John Davies , Knutsford

It might be helpful to the debate to recall that the first ascertained commercially exploitable resources of North Sea oil were declared in the autumn of 1971.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

I am grateful to my right hon. Friend. I hope that he may be able to catch Mr. Speaker's eye, because he speaks on these matters with great authority.

In addition to the question of principle there is also the practical application of the controls. Depletion control raises complex technical and economic issues. Claims for conservation may conflict with the economics of investment and there is room for real differences of opinion on geological and geophysical factors. It is essential that these issues should be argued out fairly in a properly constituted forum.

Here I come to another major defect in the Bill. Under the Bill, these important powers rest, almost unfettered, in the hands of the Secretary of State. There are limited rights to be heard and very limited rights of arbitration, but they do not apply to the most onerous of the obligations.

In this area other countries which have oil provinces and a long experience have found that the independent, impartial, regulatory authority has an important rôle to play. The Alberta Energy Resources Conservation Board is the best known and most widely respected body. Several of my hon. Friends and I made a study of the board when we were in Canada recently. The annual report of the board has just come out, and it contains this passage: Under the Alberta Statutes the Energy Resources Conservation Board is charged with certain energy resource management and environment management functions with regard to oil, gas, oil sands and so on. The functions include the appraisal of reserves, regulation of exploration and the development of pipelines and transmission lines, insurance, safety, prevention of waste"— and so it goes on. The functions are performed by a properly constituted, impartial, regulatory authority before which all parties can make their case, which can be heard fairly by experts, and the issues decided. The same applies to the United States Interstate Oil Compact Commission.

I do not challenge that it is for the Goverment to determine the overall rate of depletion and the overall rate of production across the board, which will be governed by balance of payments objectives, objectives of repayment of debt and so on. But translating an overall policy decision into detailed directives on production, development and investment, field by field, company by company, where we are dealing with extremely complicated matters such as the development of secondary and tertiary recovery, and so on, calls for patient expert analysis, and the parties must be able to deploy their arguments before a highly qualified tribunal which can adjudicate on these issues.

Compared with the open and proven systems in Canada and the United States, the arrangements in the Bill are primitive, arbitrary and dictatorial. They put the companies entirely at the mercy of the Secretary of State's discretion, with virtually no redress against the abuse of power. This country must have a properly constituted regulatory authority on the same lines as the Alberta board and other boards.

The same goes for pipeline control. Here, too, there are often difficult technical and economic factors to consider. It should not just be left to the Secretary of State to decide who is to share which pipeline and how much he is to pay. There should be controls to ensure sizing, sharing, routing and so on, but they need to be impartially regulated, with proper compensation paid where appropriate. As it is, it all depends on the Minister's dictat, and that is wrong.

One asks what is the rôle of BNOC? The Secretary of State gave us some reassurance that the BNOC would have no rôle in this. But is that right? According to the Explanatory Memorandum, the Civil Service is to increase by no more than 10 to 15 to administer the controls under the Bill, whereas the Under-Secretary of State said recently in Glasgow that BNOC will have 800 headquarters people by 1980. Is it true that the Department will administer all the detailed controls, get all the returns and make all the decisions with only 10 or 15 extra people? I find that difficult to believe, and we shall need to probe it in Committee.

We shall move amendments in Committee, first, to establish the right of compensation for the abrogation of existing rights; secondly, to establish firm criteria on which depletion control must be based; and thirdly, to establish, as we said in our manifesto, a United Kingdom oil conservation authority to administer the regulatory functions which the Bill gives to the Secretary of State, and to act as a watchdog for the people.

Finally, I come to the financial provisions of the Bill which are perhaps most shocking of all. The National Oil Account is a very rum bird. It operates as BNOC's current account—revenues in, expenditures out. It is also the repository of all the royalty revenue that would otherwise flow to the Exchequer, the proceeds of sale of any royalty oil, the receipts by way of licence fees and other income.

There has been no official estimate of the royalty revenue, but one estimate that I have seen shows it rising to perhaps £755 million a year by 1980. In addition to the £900 million borrowing requirements that goes into the NOA, it will have a further £750 million a year by way of royalties.

It does not stop there. BNOC is free of PRT and, assuming that the Chancellor of the Duchy's offer means that there will be a buy-back provision for the 51 per cent. of oil the Government take, and that that goes back to the companies at a price which gives the companies the return post-corporation tax and PRT which they would have had, because BNOC is not liable to PRT, BNOC will make a substantial additional profit on that oil, post-corporation tax but free of PRT. My calculations suggest that there might be anything between £500 million and £750 million a year by 1980 flowing to the National Oil Account. So, in addition to the £900 million borrowing requirements under the Bill, there will be anything up to £1½ billion a year going into the NOA.

What the Labour Party has to realise—perhaps it does—is that not one penny of this is new money arising from the Bill. It is all revenue hitherto earmarked for the Treasury which is being siphoned off before it ever reaches the Treasury in order to provide the Secretary of State for Energy with the resources for investment through BNOC. Not one additional penny will reach the Exchequer as a result of this measure. On the contrary, anything up to a billion and a half pounds will be taken away from the Exchequer and siphoned off into the National Oil Account. In the context of our present economic situation, that is a very strange proposal.

Money which goes to the National Oil Account will not be available for normal Exchequer purposes—for example, for reducing the borrowing requirement, for repayment of debt, for investment in the social services or the Scottish and Welsh Development Agencies, or even, dare I mention it, for reductions in taxation. The Prime Minister said before the last General Election that the British people would see the results in either cheaper oil or lower taxation. In fact, they will see neither of those results—not a bit of it.

But the position is worse than that. I hope that the Secretary of State for Energy and the Paymaster-General are listening. I believe that these arguments are desperately important. The new money that will go to the National Oil Account will replace private investment which would otherwise have taken place. That private money will be freed for investment elsewhere. For instance, if the Government take a 51 per cent. holding in the Brent Oil Field, Esso and Shell will have to find that much less investment in the North Sea and will have that much more to invest elsewhere in oil development, for example, in the United States Outer Continental Shelf or off South Africa or Spain. That may seem a rum result, but that will happen.

But it goes further. Companies such as Esso and Shell have a high credit rating on the American bond market. In fact, Esso has a triple A rating. At present Esso can borrow more cheaply than the British Government. So we shall lose out as a result of exchanging private investment for public investment. We shall get the worst of all worlds. We siphon off revenue from the Exchequer and force up the Exchequer's borrowing requirement. We use the money to replace private investment, much of which could be financed more cheaply than Exchequer borrowing. At the same time we massively increase public expenditure. We do so just when the Chancellor of the Exchequer has at last begun to realise that many of his problems are caused by an excess of public expenditure. We cannot even have the excuse of loss of jobs that applies in the Leyland case.

These are the economics of bedlam. The Chancellor of the Exchequer is rightly worried about his £9 billion borrowing requirement this year yet his five-year forecast of public expenditure contains not one penny of the new public investment through BNOC. That investment might be as much as a billion and a half pounds a year. In fact, I do not expect that it will be as much as that because of lack of manpower. Not one penny of that investment is included in the five-year forecast. The Government could not put any figure on it, so they left it out.

Apart from the debilitating effect of all this on the pace of development in the North Sea, the effect of the Bill will be to put a further millstone around the neck of future Chancellors in their efforts to manage the United Kingdom economy and to balance their budgets.

All this must be changed. There must be proper financial disciplines established. Revenues earmarked for the Exchequer must go to the Exchequer and compete with other expenditure priorities. The BNOC must pay tax like any other oil company. The power of the Secretary of State to hypothecate revenue must be abolished. That must be done in a decent, open and democratic manner and not under the cloak of secrecy that the Bill provides.

This Bill is a total disaster. Its objectives are muddled and obscure. The institutions that it proposes are irrelevant or misconceived. The powers it confers on the Secretary of State are vast, wide ranging and abitrary. They offer little or no protection against dictatorial abuse. The financial provisions are an outrage. Huge revenues destined for the benefit of the Exchequer and for the benefit of the people will be siphoned off into wild Socialist schemes of nationalisation and expropriation. The retrospective, unilateral abrogation of agreements without compensation strikes yet again at the rule of law and may well put British assets overseas at risk.

Finally, the huge new public expediture commitments, which go far beyond the borrowing requirement, are not only largely unnecessary but will do grave damage to our economy. In short, it is a devastatingly bad Bill and we shall vote against it.

5.15 p.m.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

Yesterday I was given cause for sadness while reflecting on the political maturity of those occupying the Opposition benches. Yesterday morning, in Committee, I heard a Conservative Member say from the Front Bench in the Committee that the present Government were determined to bring pleasure to Hanoi and Moscow. Yesterday afternoon we heard a spokesman from the Opposition Dispatch Box condemn Government legislation. He suggested that it should be described as Communist. He was so extravagant in his comments that he tried to suggest that the only way to escape the tentacles of Marxism is to be cremated.

When the right hon. Member for Wanstead and Woodford (Mr. Jenkin) described the Bill's proposals as Socialist I thought we were having a little less of the silly extravagance that we so often hear. Unfortunately the right hon. Gentleman's speech had two defects. First, it was very long and, secondly, it was slavishly devoted to detail. The right hon. Gentleman never lifted his eyes so that he could see the wood from the trees. His metaphors were largely taken from the Middle East. We had references to messes of pottage, harems and eunuchs. T1r, right hon. Gentleman's assessment of the world situation seems to suggest that he understands the Middle East as pre-Mohammedan rather than post-OPEC. Sometimes one feels like commiserating with the Opposition rather than arguing with them.

The right hon. Gentleman did the House less than justice. He seems to be so devoted to detail in a finicky sort of way that he was rehearsing his Committee speeches and looking for tiny matters to criticise. He drew attention to provisions in Clause 10, but in his eagerness he forgot to inform the House that whilst the corporation may not have to draw massive attention to its profit or less during a short-fall it will have to keep proper accounts and records to be laid before Parliament.

If the right hon. Gentleman is saying that the provisions of the Bill have to be criticised because of the protective arrangements of a temporary character which my right hon. Friend may insist upon, he is also confessing that the serried ranks of the Opposition, with all the business experience which they proclaim, are unable to understand the balance sheets of public corporations.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

I do not know whether the hon. Gentleman has read Clause 10(2). I am sorry that he criticises me for talking about the Bill. That is what I understood Second Reading was all about. Perhaps he will read the last four lines of Clause 10(2). They read that a notice … may provide that the statement of accounts to be prepared by the Corporation … shall not be required to show the Corporation's profit or loss. That seems to make it clear that the profit and loss can be concealed. It is no use my hon. Friends being able to read a balance sheet if the figures are not there to be read. The figures will be hidden.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

The right hon. Gentleman does his hon. Friends much less than justice. The accounts will have to be presented to Parliament. They will have to be subject to parliamentary scrutiny. If the right hon. Gentleman's hon. Friends cannot understand the balance sheet of a public corporation they are not fit to hold the company directorships which they hold in such abundance.

Photo of Mr John Davies Mr John Davies , Knutsford

Is the hon. Gentleman really saying that the failure to understand the total profit and loss and reserve position of a banking institution, which is by statute entitled to reserve part of the facts so far as its public declarations are concerned, demonstrates the inadequate capacity of our business acumen? I should have thought that was wrong. What is proposed in the Bill is precisely analogous to the British National Oil Corporation.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

I am delighted that the right hon. Gentleman is bringing me to my next point. Since the Industry Bill has been in Standing Committee we have been receiving repeated complaints that the Government are seeking to insist upon the disclosure of information. Many of us feel that those complaints are utterly overstated. That is illustrated by the attitude taken by my right hon. Friend. We know that the people who will be employed in auditing the accounts of the board will be properly qualified and reputable professional people.

The right hon. Member for Wanstead and Woodford, in seeking to condemn the Bill, did not use the word "Communist", but certainly suggested that it was a Bill of an extreme Socialistic character. He overlooked a number of points. His search for detail did not lead him to the thoroughness that would have been appropriate in such an undertaking.

For example, the duration of existing licences has not altered and that will provide no impediment to private sector progress. While PRT and certain stamp duties may not be payable, the proper accounts will have to be kept, and it will be obvious whether the corporation is acting in a competitive and financially healthy way. It would be ludicrous, and would lead to excessive expenditure to have an increase in bureaucracy merely to enable the corporation to pay PRT to the Treasury as a notional bookkeeping exercise.

The right hon. Gentleman seemed to overlook the fact that the oil account is a useful way of being able to show to the nation how its assets are being maintained. If the right hon. Gentleman is to be believed, his approach seemed to suggest that the Secretary of State for Energy will be keeping money from the North Sea in an old sock in Chesterfield. There is little likelihood that that will be the case—and I am not suggesting that the crime rate in Chesterfield is any higher than it is in Opposition constituencies. That is not the way in which the system should operate but it is right that we should keep the accounts in the way proposed by my right hon. Friend so that the nation can see how much more effective are the present Government's policies in regard to the North Sea than were the indolent policies pursued by the Conservative Government in the wasted years 1970–74.

I was particularly pleased that my right hon. Friend took a sensible attitude over pipelines. Far from any Communistic or totalitarian approach the present proposals will be most helpful because they will prevent monopolistic and restrictive practices by those who own and control pipelines around our shores. Perhaps even more important, it gives my right hon. Friend the capacity to act in a helpful way in regard to refinery programmes. He can make sure that the refinery programme will encourage the promotion of a viable petrochemical industry in Great Britain. The right hon. Gentleman did not comment on the fact that the petrochemical industry could be developed within the public and private sector, as an example of the mixed economy which could also be maintained off our shores.

I am pleased to welcome the Bill and to emphasise that it is not a revolutionary concept. The right hon. Gentleman did not refer to ENI in Italy, Erap in France, DSM in the Netherlands, the Algerian oil company, or to Statoil in Norway. Statoil has been operating for three years —and it is a great pity that the BNOC was not established three years ago.

It is true we may have missed some of the pitfalls experienced by a large number of other countries with national corporations, but many of those pitfalls have been due to lack of experience or too little control, the sort of control which my right hon. Friend will exercise over his child in its early and formative years. Some of these pitfalls have come about because of involvement in overseas divisions. The West German corporation went astray in its investments in Libya. I hope that that kind of mistake will not occur in BNOC. I shoulld emphasise that the Statoil concern in Norway has exercised a stimulating effect on the Norwegian economy. One hopes that the British National Oil Corporation will exercise a similar effect in this country.

I was pleased to see—some of my hon. Friends will not agree with me—that my right hon. Friend did not include British Petroleum as one of the organisations to be taken under the umbrella of the corporation. I believe that my right hon. Friend is right to ensure that BP remains independent, because its rôle as an international company could otherwise be embarrassed, if it were brought into the tight State control involved in an internal offshore oil division. I hope that BP will continue to exercise its world rôle to the benefit of this country and the many other regions in which it operates.

Given that sensible approach, I believe that the criticism offered by the right hon. Gentleman was tedious in its adherence to detail. Unfortunately, there are Opposition Members who are opposed to any intervention, whether by this means, or by the investment bank approach, or by the entrepreneurial approach urged by Opposition Members, although the right hon. Gentleman did not say which one he would choose, That is a pity, because it is up to an Opposition to offer concrete alternative proposals. Unfortunately, the right hon. Gentleman floated all sorts of ideas and failed to commit himself to any one of them. The Opposition should be honest enough to say whether they oppose this arrangement or any arrangement in which the nation's interest is superimposed on the offshore industry around Britain.

It is right that my right hon. Friend will be careful to ensure that experience in the private sector is not lost. I do not think it will be lost. My right hon. Friend is right to ensure that there will be vigour and vision in our policy. Certainly, inadequate vigour and little vision were displayed by the Opposition in the years in which they were in office, when so much advance could have been made and so much protection brought into the situation to the benefit of the British people.

There have been a number of minor anxieties, and I should like to ask the Minister who is to reply to comment on one or two of these points. I do not object to the takeover by BNOC of the National Coal Board's oil assets. The decision some years ago by a previous Labour Government to ensure public involvement was right, it was the correct page on which to start the story; but we know a little more now and are writing a new chapter, and BNOC should be in charge of the nation's oil resources. However, I am a little anxious about the British Gas Council's oil reserves which, it is suggested, could be left out of consideration by BNOC. I hope that my hon. Friend will be able to comment on that matter.

A further matter which needs to be cleared up relates to the legislation on health and safety at work. Happily, that legislation is now assisting land-based industry, but, unfortunately, it does not apply to offshore oil employees. I should like my hon. Friend to look at that matter. Perhaps he will give some reason why that legislation has been omitted from the provisions of this Bill.

I feel that the value of the Bill to the nation will be enormous. At the same time, there is a real danger of looking at the trees rather than at the wood. That was clear from the right hon. Gentleman's speech. We are in danger of allowing people to believe that, by some miracle, offshore oil will ultimately mean great affluence for the British people—indeed, unlimited affluence. Anybody who contributes to that idea is acting against the national interest. Offshore oil presents for Britain a breathing space. It provides us with a substantial opportunity and give us the capacity to face the problems of our trade deficits and our international imbalance and the indebtedness which we have incurred as a result of the weakness and misfortune of the Tory Party.

The Bill gives an opportunity to Wales, to Scotland and to England. As Scottish and Welsh oil is exhausted, we hope that we shall find oil off the English shores. That will allow us once more to subsidise the Scottish people as we have done since the days of Culloden. I am sorry at this stage of my remarks to see that the hon. Member for Dundee, East (Mr. Wilson) is the only member of the Scottish National Party present. I am sorry that he is on his own and neglected by his hon. Friends. I hope that in due course the proceeds from English oil will once more enable us to help the Scottish people.

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

The hon. Gentleman must have known that that point was sure to provoke me into action. Does he not agree with the point I have made before, that oil resources are likely to be found off the southern coast of England? Is it not fair that Scotland should rely upon the oil resources off its coast, just as England is entitled to rely upon resources off the coast of England? What would be wrong with that?

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

I did not give way to the hon. Gentleman to indulge in an argument with him. Since all his hon. Friends were absent I thought it right that he should have the opportunity to identify himself so that he could present his alibi to the Scottish people.

The economic problem is vast. Our trading indebtedness is serious. The offshore oil will allow us, temporarily at least, to take ourselves out of pawn. It gives us a breathing space. I am delighted with the Bill, which will strengthen and enhance that breathing space. It will help to promote Britain's new industrial capacity, which must be developed. I am delighted that my right hon. Friend is not seeking to serve the needs of the AAA companies which may be able to obtain money cheaper than the Government. Those companies will be able to obtain that cheap money since great profits will leave Britain. Therefore, people abroad are prepared to invest their money so that they can share in the profits, of which we seek to retain a large proportion in Britian. This vehicle will go a great deal of the way towards giving us that capacity. I commend the Bill. It is a Socialist Bill, which seems to me to be of service to Britain. I commend it to the House.

5.33 p.m.

Photo of Mr John Davies Mr John Davies , Knutsford

The hon. Member for Rother Valley (Mr. Hardy) echoed what was said by the Secretary of State. They sought to condemn the former Conservative Government for having failed to take action in a variety of ways, while the Secretary of State seeks to give birth to this new State hippopotamus. It would have been ridiculous in 1971 to do other than issue licences with a view to the earliest pos- sible prospecting of the North Sea. Anyone who imagines that the state of knowledge in 1971 was adequate to foresee the effective developments in the North Sea is mistaken. That should be fully realised. These charges are ridiculous beyond words. They demonstrate the fact that the Secretary of State understands very little of the nature of this industry.

I find that many industrialists complain that Ministers without previous knowledge of their activities are brought into Departments and are expected almost overnight, to master these extremely intricate problems. I contend that generally Ministers are very good at doing that. However, today's performance by the Secretary of State undermines my argument.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

The right hon. Gentleman was responsible for giving away licences like detergent coupons. It was not I who first brought that to light. That was done by the Public Accounts Committee. the majority of whose members belonged to the Conservative Party.

Photo of Mr John Davies Mr John Davies , Knutsford

That makes no difference. The state of knowledge at the time was totally inadequate to develop a different and more constraining form of licence. It is ridiculous in the aftermath to try to pretend otherwise.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

Does not the right hon. Gentleman accept that depletion practices and depletion controls are a standard part of the legislation produced in respect of a good number of countries throughout the world who have no oil production but who are merely trying to encourage exploration? I can think of at least three countries, where my own company is involved, where such controls have been incorporated in legislation for the past six years.

Photo of Mr John Davies Mr John Davies , Knutsford

My right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) touched on that point. Oil companies having licences to prospect in the North Sea made it abundantly clear that some form of control of production would be totally within their understanding of the reasonable activities of Government when appropriate. The point as to when they are appropriate is important in a country which foresees production, because it should know the quantity with which it will have to cope. It is idle to make theoretical provisions for such matters. It is important to make practical provisions.

I must declare an interest. Although I am no longer a member of the oil industry, that is where I spent the greater part of my industrial life. That declaration of interest goes a little further. For a considerable number of years I worked in a company, 51 per cent. of whose partner firm was owned by the State, whereas 49 per cent. of the company which I represented was similarly owned. I hope that I have some practical experience of what State ownership is like. I gained experience at that time because the form of the company was the inverse of what the Secretary of State is now proposing, since ENI, the company involved, in Italy, was an enormous power which dominated the Government. That is the opposite of what the Secretary of State wishes—which is a tributary concern which he shall dominate.

My experience of the constraints and privileges which such a mixed form of company can bring led me to the conclusion that the system of such associations was basically inept because the uncertainties of the needs of the State, which were extraneous from those of the industry it sought to operate, acted constantly as an element of confusion. I fear that the same will occur in this case. It will be much accentuated because of the almost ridiculous level of power which the Secretary of State seeks to arrogate to himself.

Of the concerns of a State character which have been developed in one country after another, I have never known one which was able to develop a valid international capacity. It is interesting that not one such company—even ENI, which was the nearest to doing so—was able to develop an effective international capacity.

We are dealing with the oil industry, which is the most international of all industries. The principle of the multinational company is greatly criticised these days. Everybody can earn a cheap round of applause at the expense of the multinationals. The only time when multinational companies are praised is when they cause investments to be made, offer jobs, pay taxes, earn profits, or invest in developing countries. They are always condemned until the time when they appear in developing countries. At that moment, they are the most beneficent of arrivals. It is slightly misguided to persist in this terrible criticism of multinational companies, which on the whole contribute to the economies of this and other countries.

The oil industry is perhaps the prototype of the multinational concern, and for very good reasons. It deals with an extremely complex international situation. It deals with a multiplicity of different qualities and locations of crude oil, an extraordinary variety of tanker routes, great differentials, the location of refining capacities and the unending variety of demands of the market, the quality of products, the nature of the products and the constraints of the pricing systems which are developed.

As a result, by its very nature, the oil industry has to develop an international aspect to the control and operation of its problems. It is interesting to reflect that it was a British company, British Petroleum, which was the great pioneer in devising integral programmes for the worldwide operation of its extraordinary complex of activities in order best to advantage its consumers.

It is a dangerous proposition to imagine that in real terms an organisation—even a perfectly devised one of the kind that the Secretary of State seeks—can contribute validly to the efficacy of this industry. My experience is that it is not so. It serves nationalistic purposes at times. It serves other causes in any State which creates it. But I have never noticed such an organisation contributing to the efficiency of the industry, to the cheapness and quality of its products and to its service to its consumers. Therefore, I must dissociate myself from and condemn the purposes of this Bill, which is designed to establish just such an organisation in this country.

If we had had three or four years ago a British National Oil Corporation of the kind that the Secretary of State wants today, can anyone believe that it would have contributed to developments in the North Sea? Would it have produced a new fund of geological, technical or engineering skills? I wonder. It would surprise me to know from where such an organisation would get its fund of knowledge. Perhaps it would come from the Secretary of State himself, but I rather doubt it. In my view, it would have contributed nothing.

In all his condemnation of the past, what does the Secretary of State believe that such an organisation would have brought to our affairs? I register the thought that it would have brought literally nothing. I register the further thought that in the future, as envisaged by the Secretary of State, it will still bring nothing. It will prove continually to be an element of deterrent and of retrogression and not an element in the development of our industry. The only possible valid contribution that the right hon. Gentleman can find in it is a political one.

My right hon. Friend the Member for Wanstead and Woodford dealt fully with the financial considerations involved in the Bill, and apparently the Chancellor of the Duchy of Lancaster takes the view that, whatever may be the financial advantages in this great find, for the British people they should be ensured by other means. My right hon. Friend was right to point out that the requirement for the control of production and depletion was a matter which by any standards could be dealt without any BNOC. There is no evidence to support the belief that the BNOC will play any part in this operation.

I am sorry to discover that we are now involved in taking steps which unfortunately will cause still greater confusion in all these activities. That would not matter so much were it not for the fact that the proper development and administration of this enterprise is crucial to our affairs. I am very much afraid that the results of what is now proposed, coupled with the uncertainties which unfortunately have arisen in the past 12 months, will cost us dear in the years to come.

There is no question of making modest amendments to these proposals. In my view, they are intrinsically bad and should be rejected.

5.45 p.m.

Photo of Mr Alfred Evans Mr Alfred Evans , Caerphilly

Like my hon. Friend the Member for Rother Valley (Mr. Hardy), I found, on returning to the House after a long absence, the debates of both yesterday and today altogether fascinating. Yesterday, the Opposition Front Bench spokesman painted lurid, apocalyptic pictures of what would happen if the community dared take control of some of its land. He had us fleeing from the Chamber terrified for the next decade of walking past cemeteries in case we heard the lugubrious groans of those who had nowhere to go because the State had stolen their graveyards.

I cannot pay tribute to the skill of the right hon. Member for Wanstead and Woodford (Mr. Jenkin) in his use of metaphors, but his powers of alliteration are remarkable. At one stage he described this Bill as a myopic morass of a mish-mash, whatever that may be. Yesterday's descriptions were applied to the Bill before the House solely because the community was waking up to the fact that it should share in its national assets. Today, we have a Bill which has been described as catastrophic, disastrous, shocking and a mish-mash. The reason once again is that the assets of the nation are being considered as a legitimate function of operation for those governing on behalf of the nation.

As one who comes from a mining area, I think that it is in order for me to remind the House of the experience which brought a great industry to its knees and which would have resulted in its death without the intervention of the State. I ask whether it is safe to leave to the same type of economic philosophy the exploitation of this great find in the North Sea, and to run the risk of seeing our oil industry become a replica of what happened to the mining industry until the State stepped in and rescued it.

My right hon. Friend the Secretary of State is right to regard this as one of the most significant discoveries since the Industrial Revolution, since the discovery of how to harness steam, and since the growth of the coal industry. Like my hon. Friend the Member for Rother Valley, however, I do not want to overestimate the importance of the find and to dangle before our people the myth—and I regard it as such—that we shall be transformed from a struggling economy which has seen great travail ever since the First World War into a country suddenly blessed by a thousand fairy godmothers. It will take very hard work and much constructive thinking to get our country on to something like an even keel once more.

Having said that, I agree that in a modern economy the key which unlocks the door is energy. In a world which is increasingly short of energy, Britain has been given several significant blessings. We have this enormously important discovery of oil round our coasts. Almost synchronised with it, we have explorations for coal fields which have discovered areas such as the vast field in Selby. We have natural gas. We have as yet paid too little attention to the possibilities of harnessing the power of our tides and estuaries. I hope that we shall at least begin to explore them. I regard our energy situation as a God-sent bridge over a gap when, for the most part, the world is becoming increasingly short of energy and when we are seeking our way to the exploitation of nuclear energy, and possibly, later, that of solar energy. That is why my right hon. Friend's remarks about depletion are so important.

Again, I pose the question arising from the history of the past: can we safely leave the rate of production and exploita-to laissez-faire economics?

We have seen what happened in too many other industries. There must be proper, fairly detailed control to ensure that the rate of production and of depletion are carefully guarded. I am not taken into the confidence of the Government. Therefore, I do not know whether any objective assessment has been made of the likely period, at fairly advanced rates of extraction, we can expect our present reserves to last. Because of the difficulties of assessment in any extractive industry—cost, rates of production, extraction, and so on—there must be a wide margin of calculation.

We do not know how much oil we shall find off the Welsh coast or off the South-West coast of England in the Irish Sea. Therefore, we cannot prognosticate possible likely finds with any reasonable degree of certainty.

I suggest that if we have unfettered extraction in a world which is increasingly short of energy, the pressures will build up so much that we are likely to see a 40-year potential, without a proper conservation policy, reduced to extraction lasting for only 10 years. That happened in the past in some of our richest coal mines, and I suggest that it is likely to happen again if we do not take proper steps to safeguard the situation.

I hope that a reasonable argument can be put forward for participation by the people of Britain in their own future and that there will be proper and reasonable control over rates of production and of depletion.

Wales has been promised an agency. Scotland already has one. Through that agency the benefits which will accrue from Celtic Sea oil, when it is found—we know that it will be found; it is largely a question of when it can be fully developed—will be used for the economy of that region. Therefore, in an area which has been traditionally underprivileged regarding incomes and the degree of industry, apart from its two basic industries, we must diversify to try to bring some kind of reasonable, not necessarily affluent, standard of living to the people. We therefore welcome the assurances that have been given by my right hon. Friend.

I want to make my remarks as brief as possible. I have one great fear which I suspect is shared by many people who have a little knowledge of the situation. It would probably be shared by a great many more people if they had been allowed, through the mass media or other means, to acquire that knowledge. I am afraid that the energy situation can create a massive shift of economic power from the continent of Europe to the British Isles. Therefore, I have serious misgivings about our entry into the EEC and its impact on our energy resources and policy. This is not outside the scope of the Bill. I hope that the Secretary of State, in winding up the debate, will ensure that some answers are given.

If world pressure on energy is increasing, how much more will that pressure be on a limited number of countries? There has been only a fumbling towards any kind of energy policy. If we are to derive maximum benefit out of North Sea oil, out of our energy situation in toto, we must not behave like a man who at cards has a grand slam in his hand and then grouses because he does not know which card to lead. We must use the situation to secure for ourselves the most favourable terms. If we operate the Bill in the way in which I think it is the earnest intention of the Secretary of State to operate it, the people of Britain can not only share intelligently in the exploitation of their own national assets but ensure a significant contribution to our general energy situation. I welcome the Bill.

5.57 p.m.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

In the Secretary of State's otherwise lucid speech explaining the Bill, I thought there was some confusion between the will of God and the propaganda of the Labour Party at the General Election. It may be that God gave the sea to the people, but he did not necessarily give it to bureaucrats any more than he is insisting that farmers should be civil servants.

The hon. Member for Caerphilly (Mr. Evans), in an interesting speech, said that the people are entitled to share in the benefit to be derived from North Sea oil. I agree. But the issue before the House is whether that can best be done through taxation or the kind of measure that is now before us.

I wonder what the Chancellor of the Exchequer thinks about the Bill. By far the most urgent and dangerous threat facing this country is inflation. I should think that this week we have added considerably to inflationary pressures in this country by increasing still further the top hamper which has to be carried by our productive forces.

We on the Liberal bench, and no doubt the Scottish Nationalists behind me, are glad that the headquarters of the BNOC are to be in Glasgow. Nevertheless, I consider the Bill as damaging to Scotland. Of course, it makes it clear that it is United Kingdom oil. I do not protest about that. But there can be no question of its being Scottish oil. This is another example of Scottish industry being tightly tied into the United Kingdom framework of nationalisation before we get an assembly in Edinburgh which can at least discuss what we want to do about our own economic affairs.

The first question that I want to ask relates to the timing of the Bill. Some years ago I pressed for steps to be taken by the then Conservative Government for better control over North Sea oil and all that went with it. I take the point made by the right hon. Member for Knutsford (Mr. Davies) that when licences were first issued in 1971, it was difficult, if not impossible, to see what the future might be, but by 1972 and 1973 it was apparent to anyone with any common sense, let alone whether he knew anything about the industry, that it would create a new situation and that, quite apart from pipelines in the sea, licences and conservation, there was also the question of the important alterations needed in our planning procedures. I was not the only person who thought that. That view was held by Shetland and Orkney County Councils which passed Bills through the House, but now, years later the pipeline to Flotta is almost at Flotta.

What is the situation now? The Secretary of State can give a direction to the Occidental Oil Company to do something which for good reason it may feel disinclined to do, and if it does not do it, he can withdraw the licence for further operations. It is a serious position, because the whole situation is now thrown into uncertainty.

I do not believe that we can afford more nationalisation of this type. We have learned the dangers of creating enormous conglomerates of one sort or another. It was the Secretary of State for Industry himself who pressed the British motor industry into a pattern which has proved so disastrous, by amalgamating the efficient with the inefficient into British Leyland.

From where do we get the staff? Where are these experts in oil who are not already employed in the oil industry? Who will the 800 people in Glasgow be? What will they contribute to that increase in productivity in this country which is so essential, as is the need not only to invest but to use our current investment better? Where will the money come from? The answer is that it will come from the Arabs, because there is already a £9 billion borrowing requirement on the Government's shoulder.

I speak as no expert in this industry, but it is a difficult one. Let me give two examples from my experience in my constituency. One oil company tried from the middle of November to the middle of January to do something to a rig. During that period it had only two working days, and it costs the company £40,000 a day to keep its equipment at the ready.

The cost of building platforms has risen from £12 million to £85 million.

Consumption of oil is down 40 per cent. on the estimates. So far from this country needing more refining capacity, it has unused capacity. All the prognostications about this industry are highly speculative and require tremendous expertise, and they are not likely to be undertaken by a new organisation in Glasgow.

I sympathise with the views of the hon. Member for Caerphilly about conservation, and so on, but I suspect that before long the Government may be pressing for an increase in the rate of extraction in the North Sea. At the moment the rate of explorations is falling, as is the consumption of oil, and no one can tell what will happen in the North Sea fields for more than a few years ahead. The idea that by planning now we shall be able to make certain predictions about what will happen is extremely optimistic. The price of oil in the Middle East is 17 cents to $1 a barrel, whereas in the North Sea it is well over $2. In this situation we are at the mercy of the Middle East. If the countries there bring down their price, the whole calculation about the North Sea is set at nought.

Our current problem is that we are creating too much government with too little ability. I think that nationalisation should be brought back under the control of Parliament. That is the opposite of the Bill, which removes the control of Parliament over nationalisation. If it is impossible to do what I have said, corporations should be subject to economic criteria.

There is no doubt that this is a civil servants' Bill. It has two extraordinary provisions. I regard this not as a revolutionary Bill, but as a bureaucratic one. I doubt whether normally west of the Communist countries there is a provision in a public Bill which says that the profit and loss account may be concealed. Further, the Bill appoints commissars. The civil servants on this board are in a similar position to commissars in the Russian system. They are there as Ministers' narks to keep an eye on what the management does.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

I attempted to interrupt the right hon. Member for Knutsford (Mr. Davies) when he made this point in an intervention during the speech of my hon. Friend the Member for Rother Valley (Mr. Hardy). If the real complaint of the Opposition is that this is concealing —though of course it is not—I should point out that the provisions of Clause 10(2) are the same as those in the Gas Corporation Act 1972, and they were put in that measure by the right hon. Member for Knutsford when he was Secretary of State.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

I have enabled the Minister to make a point against the right hon. Member for Knutsford, so my speech has not been wasted but I do not feel that I need necessarily reply on the right hon. Gentleman's behalf. I absolve myself from any responsibility for any gas Bill. It is an extraordinary provision that two civil servants are appointed, one of whom, unless expressly excluded by the Minister, must be present at all meetings of the management. The chief executive will be hampered in every direction. Is this the way to set up a viable industry of any sort?

I am interested in the history of British Petroleum. The Government had the right to appoint two directors to that company, but they allowed one post to remain vacant for 18 months. So important do they regard the representation of the national interest in a nationalised industry that they did not bother to fill the vacancy for 18 months. I find it difficult to see how the Government can argue that they must have a new corporation when they do not bother to use the machinery that they have.

The question of compensation and the position of the oil companies must be further examined in Committee.

What sort of people will be appointed to this corporation? Will they be representatives of the areas concerned? Will they be experts in industry, or a mixture of both? Or will they be trade unionists? Who will they be? There are some indications in the Bill, but we shall need to know more about that.

The powers in the Bill are nearly out of this world. The Secretary of State can do almost anything, or nothing. I suspect he could set up a motor car industry if he wanted to, on the grounds that this was related to petroleum. For the House to give him a white sheet, as it may be, or a black cloak, seems extremely risky.

Further, the Secretary of State can demand every conceivable form of information. It will mean that companies will have to supply immense quantities of paper and this corporation will be able to go in for the most risky undertakings. It will be able to dabble in tankers. Burmah Oil dabbled in tankers, and we know what happened to that organisation, and its expertise is much greater than that of BNOC. Of course it is the civil servants who will make the decisions.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

It came to the Government.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

No doubt it did, and so will the BNOC for money.

It is said that certain things are necessary, for instance, to get the oil companies to combine. We did this in Shetland without a Bill of this kind and without the bureaucrats. There are 17 companies combining at Sullom Voe. The Government should get hold of Mr. Clark, the chief executive of the county council. He gets the oil companies to feed out his hand without 800 civil servants in a building in Glasgow.

The oil companies are interested in getting oil. I do not say that they are not interested in profits, but they are co-operative and they are interested in making a success of this extremely difficult and expensive operation in the North Sea.

Most of the profits of the oil industry—I speak subject to correction by the right hon. Member for Knutsford—are made downstream. Will this corporation go into that element of the operation or not? [HON. MEMBERS: "Yes."] I know that it can, but do we know whether it will? If it does, I see no reason why it should he exempted from tax.

I have a very interesting letter, for which I should like to thank the Lord Advocate, about rights in the sea, which he agreed are both complicated and important. What will be the effect of the Bill on the rights of ordinary people in the North Sea and on the division of the North Sea between England and Scotland? The Bill seems merely to make the matter more complicated. I beg the Government to consult the Lord Advocate on this matter, which is of great impor- tance to fishermen and others in my constituency.

There is a good deal of detail in the Bill which can be examined at length in Committee. I should like to raise only two points, which are relevant to the Acts promoted by my local authority. First, there is the obligation to follow the methods and practice customarily used in good oilfield practices. One can see the point of that, but in Shetland it is important that the oil companies and others should be able, for instance, to experiment with new ways of storing oil underground. I trust that the Bill will not prevent such developments.

Schedule 4(6)(c) covers mineral exploitation. Should there not be a similar provision designed to cover the rights of fishermen, which in my part of the world are just as important as minerals? It is one thing for the Government to take a share in landward operations concerned with storage and the handling of oil and quite another for them to take a share in retailing the oil or getting it from the bottom of the sea.

We are now late in the parliamentary year. I wholly agree, as I have said for many years, that there is a need for fresh controls and so forth in connection with the oil industry and the planning Acts. I am not wholly unsympathetic, therefore, to the purpose of the Bill, but it is far too big, far too late, far too vague and far too bureaucratic. It is extremely unlikely that there will be time for proper parliamentary consideration of the mass of detail in this Bill, let alone the others that we have considered this week, by the end of July.

Why do not the Government withdraw it and see how much they can do under existing legislation? They can do a great deal under the licensing system, under measures they have already passed and by means of taxation. If, at the end of the day, they find that there is a legitimate gap in the control of oil, let them then come to the House again. But this Bill will do nothing but hold up the industry and damage the economy.

6.13 p.m.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

I must begin as usual by declaring my interest in oil matters, in which connection I would refer right hon. and hon. Members to previous oil debates.

I am particularly pleased today that the Labour benches are so populous. On the last occasion on which I spoke on these matters, on the petroleum revenue tax, I rose in splendid isolation. It is an illustration of the enthusiasm in the House for energy matters that there is today such a splendid attendance on both sides. Seriously, attendance at energy debates on both sides is deplorable when one considers that this subject is one of the most important things which we have considered this week and in many other weeks.

I particularly welcome my colleagues on this side because they can give me support in those matters by which I tend to be led astray. The synthetic indignation of Conservative Members about many aspects of Bills like this seduces me occasionally into the party fray. I am glad that my colleagues can take that duty on their shoulders, because I want to concentrate on the more technical aspects of the Bill.

I shall come later to the subject of the BNOC, which concerns me particularly, but I should like to begin with Part II, and particularly Schedules 2 and 3, which incorporate what I take to be an accumulation of experience by the Department of Energy over the last two or three years. Many of the additions that, to present controls, have been put into the Bill are important and necessary, and much of what has been said, particularly by the right hon. Member for Wanstead and Woodford (Mr. Jenkin), about the nature of the controls is misplaced. Many of the controls are extremely necessary. I believe that it has been the direct experience of the Department of Energy, not just under this Government but under the previous Conservative Government—The Government, after all, who stopped the transfer of licences and themselves became aware of various malpractices under existing legislation—That serious changes in our controls were required. Schedule 2 brings many of these into effect.

I cannot accept the apocalyptic statements of the right hon. Member for Wan-stead and Woodford, particularly his Draconian interpretation of the nature of the controls. It does not follow that the Secretary of State will use his controls to the full detriment always of the oil com- panies. Indeed, as I see them, the controls will exist for the benefit both of the companies and of the State. We need such controls. I should like to consider one or two of them in detail, because I believe that the Department needs to pay particular attention to the way some of them are operating.

I begin with the question of the transfer of licences. There has been an effective moratorium on the transfer of licences ever since, I think, November 1973, when the previous Government stopped future transfers. They were properly stopped, in my opinion, because there was developing a market in licences and in participations which arose basically from the 1972 allocations. Small firms and sometimes even individuals took a licence, bartered it and pocketed the money on their way back to Houston or Calgary. That was recognised as an improper practice and it was properly stopped, but we should not lose sight of the fact that farm-ins and farm-outs are part of the lifeblood of the oil industry. They represent one of the ways in which the industry has always operated. It would be wrong to prevent that type of activity, certainly if it were within the control of the Department.

I should like to make a particular plea for some of the smaller British companies. In the period, particularly 1972, when there was the last round of licences given out, a number of smaller British companies got licences which they could fund at the time. However, exploration costs have soared since then and many smaller companies are now finding that the money which could have drilled three wells in 1972 can drill only one and a quarter today. So they have to seek farm-ins to be able to fulfil their commitments. It would be a pity if they could not fulfil their commitments for want of being able to bring in reputable partners. We should also appreciate that in some cases it is to this country's benefit when farm-ins—transfers—are arranged internationally. On occasion one may exchange a participation in a licence in the United Kingdom for a participation in German or Dutch waters. These arrangements are not necessarily detrimental to the United Kingdom, and it would be a great pity if they were stopped.

Another small point on Schedule 2 is the power taken by the Department to publish data after five years. So far as I know, this is a completely new power, one of which I have always been much in favour. I should even like to argue that the period of five years should be shortened. In Canada, for instance, it is one year. The availability of data to the industry at large is one of the major influences in increasing and giving impetus to exploration. People can then make the kind of studies which enable them to spot where the good blocks and prospects are.

The arguments against this suggestion always come from the major companies which want to keep the data to themselves, which do not want them spread about and which want the advantage of knowing where to drill. For the development of the United Kingdom industry, five years is too long. I notice that this is merely a discretionary power. The Bill does not specify that data will be made public after five years, but I hope that the Minister will ensure that it is. Indeed, I should like to see that period shortened.

On the control of depletion rates which is dealt with in Schedule 2, I have heard expressions of disquiet from a number of oil companies. There is no country which does not control its depletion rates. In North America there are the Railroad Commission in Texas and the Alberta Commission. Depletion rates always have been controlled in the national interest. I think, for example, of proration in Texas. Control over depletion rates is esentially a North American invention. It started in North America long before it was introduced to the Middle East or anywhere else.

The companies are concerned about the high cost of development in the North Sea, and this concern has been recognised by my right hon. Friend. These high costs arise not merely because of the environment but because of the element of risk inherent in deciding whether to proceed on what is normally the bare minimum of data.

If one were exploring in shallow waters or on land, it would be possible to drill numerous wells to outline a discovery. Those wells could then be used for production. This is not possible in the North Sea. An exploration well in the North Sea cannot normally be used for production. II becomes an abortive expense. Production wells have to be put on platforms, and naturally there is a tendency to try to establish the reserve at the earliest posible stage, from the lowest possible number of wells, before deciding to invest in the platform.

The companies have a genuine reason for being disturbed by the thought that this large capital expenditure may not give the return that it should, because of powers vested in the Government. What is required is not a diminution of the Government's powers but a statement from the Minister that he fully recognises the importance of this situation, and that that is certainly not the intention of the Bill.

Part V contains one of the most important provisions, which gives the Government the power to make loans and to guarantee loans to oil companies that are developing discoveries in the North Sea. I was astonished when the hon. Member for Honiton (Mr. Emery) said that finding money for a development was easy. I do not know whether he has spoken to many British banks recently, but I have. Many of them, including the merchant banks, say that they are not used to non-recourse borrowing in the way that banks in, for instance, Texas are. They are unwilling to take these risks and to raise these sums of money.

What is more important is that when banks say that they will raise these sums they want participation. They want it in the form of a royalty if they are to lend money on a non-recourse basis. They want exactly what my right hon. Friend is asking for on behalf of the British National Oil Corporation.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I was saying that the figures that the Secretary of State quoted to the House were misleading, because once exploration, which is far less costly than exploitation, has resulted in the discovery of oil it is simpler to raise money. I am a banker and I speak from first hand experience. I do not have to talk to anyone else. To raise money for the North Sea is now six times more difficult than it was a year ago, because of the threat of the Bill.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

I am grateful to the hon. Gentleman. Perhaps he could arrange for me to visit him sometime on behalf of some of the companies I represent. I assure him that for many of the smaller British companies this aspect of the Bill is the most welcome. It has taken away one of our greatest difficulties, namely, that because we did not possess a balance sheet which could justify borrowing these amounts we could not borrow them against the asset of the discovery.

Photo of Mr Timothy Renton Mr Timothy Renton , Mid Sussex

Does not the hon. Gentleman agree, from the depths of his experience in the oil industry, that recently British Petroleum merited only a double A rating from a company in the United States when raising an American loan? One of the reasons given was the possibility of a British Government majority holding in British Petroleum. The company was told that if the threat of a British Government majority holding were removed it would receive a triple A rating.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

I am not responsible for threats which may be held over this country by the United States. I am concerned to tell the House how many of the smaller British companies are for the first time able to go ahead confidently with the development of their fields. The banks that I have spoken to since publication of the Bill welcome the guarantees that the Government are prepared to give and the size of those guarantees.

The main provision of the Bill concerns the British National Oil Corporation. I declare an interest, because in 1967 I was co-author of a document which I believe sent shudders down the spines of all the international oil companies. The document, entitled "North Sea Gas", proposed the formation of a National Hydrocarbon Corporation. I have always had a sneaking preference for that title—rather than British National Oil Corporation. However, I am prepared to accept it in whichever guise it comes. We followed that document with another, called "The National Hydrocarbon Corporation", in which we set out the form of the corporation. At that time we felt that the arguments for having a National Hydrocarbon Corporation were strong.

Hon. Members on both sides of the House have discussed the principle of nationalisation or national participation, not as it applies to oil but generally. I do not wish to spend time discussing whether the principle of national participation in any industry is valid. If one accepts, as Labour Members do, that it is a proper function of the nation, there is surely no better case than that of oil for national participation. Oil is one of the major sources of our future prosperity. If there is a case for nationalisation or national participation, it is certainly in oil.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

I want to get on. If the hon. Gentleman wishes to raise a point on nationalisation, I do not wish to discuss it. I want to deal with the positive effects.

Photo of Mr Timothy Renton Mr Timothy Renton , Mid Sussex

I want to deal with the specific point that the hon. Member has just made. His report stated that Nationalisation would therefore be likely to delay the exploitation of the new wealth of energy which lies under the North Sea. Has he changed his mind?

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

If the hon. Gentleman reads the document in full, he will discover that our conclusion was that participation by the National Hydrocarbon Corporation with the industry was the best possible result. I am delighted to say that my right hon. Friend has now accepted that conclusion and that that is the form of the Bill. It is because, as my right hon. Friend has pointed out, we wish to keep the international oil industry here that we have taken this particular form of national participation. I stress that the present Government are in no way opposed to the multinational oil companies and their participation in this country The Oil Taxation Bill has illustrated the extreme solicitude that my right hon. Friends in the Treasury have shown towards the oil companies. The real point about having a BNOC is the positive—in a public enterprise sense—aspects that flow from it. It is not just a question of our controlling 51 per cent., or whatever percentage it is, of the oil in the North Sea. It is also a question of those matters that flow from it.

The right hon. Member for Orkney and Shetland (Mr. Grimond) asked whether the BNOC would be able to indulge in downstream activities. The Bill specifically provides that it may, with the permission of the Secretary of State. It is in the downstream activities that many of the companies make their largest profits. That is the area in which the Opposition would specifically prohibit the BNOC operating.

Apart from being able to operate in that area, BNOC will be able to operate internationally. The right hon. Member for Knutsford (Mr. Davies) may not believe in that. ENI has been an enormous international success, as has ELF. Those companies have also taken with them wherever they have gone Italian and French industry engaged in the oil business. It is no surprise to me that French and Italian companies have succeeded in obtaining orders for the North Sea ahead of British companies. It is because they have been supported for many years by an indigenous national oil company. The way in which Italian expertise has followed ENI and AGIP is remarkable. We have had Italian and French pipelines and refineries.

This promotion of the national interest in its totality is an essential feature of BNOC. We see it not as a narrow tax-gathering company but as the nucleus of something much more important, something much larger and international. It may be that Opposition Members do not share that vision, but I hope that they will allow us to work to see its fruition.

6.33 p.m.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

What concerns me about the debate is that there is nothing more important for the economy and the industrial expansion of this country than the successful and rapid exploitation of the North Sea. The North Sea and the oil industry should not be a political plaything. For them to become a shuttlecock for political dogmatists would be extremely damaging.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

While I am delighted to hear the Minister mutter that, the Bill makes them exactly that. It is for that reason as much as for anything else that I condemn what I believe to be a terrifyingly politically dogmatic Bill.

Wittingly or unwittingly, the Secretary of State said in the last sentence of his speech that the Bill was pure Socialism. That is so. But I remind him that pure, untrammelled Socialism is exactly the same as pure, untrammelled Communism. I am not trying to score party points, but when we look at their philosophy we see that the two are identical.

The Bill takes us along the road to complete governmental control of a major industry which is operating very successfully. That is why I am particularly worried about it.

I have one other point to make on the political side. The Goebbels-like repetition, nearly a ranting, that the years 1970–74 were wasted years in the North Sea is flagrantly untrue. Labour Members believe that if they say it often enough they will get the country to believe them. The success of the exploration in and exploitation of the North Sea is a modern industrial miracle. That is what we should be repeating.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

I shall not give way, because I promised to speak for only 10 minutes.

Ministers talk about speed and they say that we have more rigs operating in the North Sea than we have ever had. That is quite correct, but so we should have. If oil companies are to meet the commitments they have given for the three rounds of licences, there should be a minimum of 36 rigs operating in the North Sea, not 29. We still have exploration borings for the second round of licensing unfinished. Are we ahead of schedule or behind it on the exploration borings according to licences? I can give the Minister the answer, and he knows that it is right. We are behind schedule. Therefore, for him to suggest that everything is well is highly misleading.

I turn to the question of staff. The Secretary of State has an excellent Department. Some of the civil servants in it are second to none. But there will have to be a mirror-image Department to monitor what the BNOC is doing. The right hon. Gentleman will not get that done with 15 or 16 staff, as is suggested in the preamble to the Bill. Where are the Murrays and the Mongers coming from? In the whole history of the Civil Service we have had only one Angus Beckett. Will the Minister recruit the men from the oil companies? He will have to pay a much better salary than the poor Murrays and Mongers are being paid, and he will have to provide a top-hat pension scheme which the Civil Service Department will not allow.

I come to the question of the capital structure. When I consider the totality of the money that the taxpayer will be asked to put up, I immediately ask "Why?" Are we saying that it cannot be raised in the market under private enterprise? We have so far proved that it can be provided by private enterprise in the market. I understand what the hon. Member for Dudley, West (Dr. Phipps) said, but the money is being provided. It is wrong to have a Bill to increase the capital burden of the country by the printing of money—that is what it will be—and increasing the inflationary pressure just because of party political polemics.

Do the Government intend to suggest to the BNOC that it goes into the refining and marketing of oil on a retail basis? If so, the capital estimates in the Bill are wildly out. The amount of capital that will need to be raised will be nearly double the figures in the Bill. Until a company has a chain of about 300 petrol stations it does not begin to make a penny. In view of the capital cost of that, which the country will be asked to meet, I suggest that some of the advice that the Minister is receiving is foolish.

It is suggested that one of the major reasons for the Bill is to ensure a proper policy of depletion. I accept the Government's view that with the advance which has taken place since 1970 some techniques need to be improved. To believe that everything done in 1970 or in the 1972 round does not need improving is nonsense. However, I believe, that an agreement led and structured by the Government could be obtained with the oil companies on a depletion policy, and that this could be done without the need for legislation. That the Government should have rejected that is nonsensical.

I am worried more by this Bill than I think I have been by any other because it is so unnecessary. The industry is operating well, the capital is there and there need not be a charge on the taxpayer. The Government are bringing in this Bill purely for political and dogmatic reasons, and that is unforgivable.

6.42 p.m.

Photo of Mr James Craigen Mr James Craigen , Glasgow Maryhill

I know how you welcome brevity, Mr. Speaker, and having caught your eye earlier this week. I shall show my appreciation by confining myself to three main points. Unlike the hon. Member for Honiton (Mr. Emery), I think it is right to have public participation in and oversight of this major source of energy which surrounds our shores.

This is an important Bill for Scotland in particular and for the United Kingdom as a whole. We in the Scottish Labour group welcomed last summer's assurance by my right hon. Friend the Secretary of State for Energy that the BNOC would be located in Scotland. As a Glasgow Member, may I say how delighted the city will be that the decision has been taken in accordance with that assurance. There were strong claims from the Aberdeen area, which has been the centre of the operational side of the oil exploration business. In view of the possible future state of the Scottish economy, the decision to locate the corporation in Glasgow will help to provide a balance, because otherwise there would have been very little industrial inspill into West Central Scotland.

The decision to locate this major public corporation in Scotland is in itself indicative of fresh thinking in the corridors of Whitehall. This important measure of decentralisation indicates that no longer are we prepared to see the headquarters of any major public corporation having to overlook Hyde Park.

My second point concerns the control and enterprise which the corporation will exert. I agree with some of the sentiments that have been expressed in the debate and would suggest that a crucial area in our society today is management, whether one is managing private or public capital. From reading the Bill one might gather that there could be a serious problem for the Government over the shortage of expertise which must exist in these activities. Since the Government must always keep a careful eye on the governed, we would need two sets of experts, one set in the Department of Energy and an important set in the BNOC itself.

Unlike some other hon. Members, I worry about the trend of what one might call the international concentration of power in the oil industry. It seems to me right that Britain should garner together people who know their stuff in this business and not be subjected to the decision taking and advice that may well be proferred by a small number of international companies. The way the world is going, I think that there will be 300 or 400 companies in the world taking most of the major investment decisions, decisions which will concern every one of us.

I do not know why the right hon. Member for Orkney and Shetland (Mr. Grimond) should get so agitated about the fact that nationalised concerns should start to want to manufacture saccharin or the like. There are a number of major public corporations which see nothing wrong in extending the area of their activities—

Photo of Mr Timothy Renton Mr Timothy Renton , Mid Sussex

Look how much money they are losing.

Photo of Mr James Craigen Mr James Craigen , Glasgow Maryhill

That is an interesting remark coming from the benches opposite.

My third point concerns the rate of depletion. I gather that the Secretary of State anticipates that this will be somewhere between 100 million tons and 150 million tons by the beginning of the 1980s. I thought that the figure for self-sufficiency by 1980 would have been a little higher than the 150 million tons mark.

There is not only the question of dealing with a major resource of energy, but we are adding significantly to Britain's armoury. It may be more a matter for my right hon. Friend the Secretary of State for Defence, but I wonder whether we should not be paying more heed to the problems of overseeing from a defence point of view our very considerable investment in the North Sea.

I am concerned about the livelihoods of those who earn their living by the sea, not least the fishing community. I believe that a public body is more likely to show concern for their interests than any private concentration would be. After the scars left by the mining industry in the course of its exploitation in the last century in the west-central part of Scotland, it is most important that we should not now be creating oil slag heaps on the bed of the North Sea.

I confess that it is easier for all of us when we talk about North Sea Oil to say how the profits should be spent, and I have no doubt that in Committee we shall be looking more closely at the whole husbandry of this, the greatest of all our assets.

6.49 p.m.

Photo of Mr John Hannam Mr John Hannam , Exeter

The hon. Member for Glasgow, Maryhill (Mr. Craigen) succeeded an old friend and a near namesake of mine, Mr. William Hannan, in representing the constituency of Maryhill. I think that the hon. Member made certain important points, and one of them particularly concerned the question of staffing, which will cause great concern in the future. The right hon. Member for Orkney and Shetland (Mr. Grimond) made an admirable speech, especially when he referred to whether we were dealing with the will of God or the will of the Labour Party, and the push being given to the inflationary spiral by nationalisation measures. He stressed the dangers of bureaucracy creeping into oil exploration, and in that sense he was expressing fears that many of us feel.

The Bill represents yet another plank in the Government's programme of out-of-date manifesto commitments, and I confess to becoming sick to death of the repetition of the expression from the Treasury bench "This legislation fulfils another of our election manifesto promises." At this stage in the nation's crisis I would prefer to hear that the Government's legislation represents the country's best interests and requirements at this time.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

I hope that the hon. Member will bear in mind that we are asserting from the Labour side of the House statements made in two General Elections.

Photo of Mr John Hannam Mr John Hannam , Exeter

They are still wrong and they are out of date. The country is suffering because they are out of date.

We are sinking into the worst economic crisis in my memory and yet we have an administration drifting aimlessly with no tight controls on the economy and no productivity incentives. Yet the same Government seem hell bent on ignoring these facts of life. They continue to bring before us such irrelevant and damaging proposals as those for the National Enterprise Board and this Bill, with its State oil company.

What is interesting about the Government is that they give the impression that they always listen to advice and to warnings given by the experts. It is only when a Bill appears that—presto—we realise that all of the sensible representations have been ignored and that we are presented with a dangerous piece of legislation. We have seen this in recent weeks through the representations made to the Chancellor of the Duchy and to Treasury Ministers. Delegations representing the arts, owners of boatyards, small businesses, shipbuilding firms have pressed their case against a multi-rate VAT or State takeovers of their industries. They left those meetings with a sense of well-being, feeling that they had had a pleasant chat with the Ministers concerned. Then, crash! On the day the Bill is presented it is found to be as tough and as hard line as the Left wing wanted and as the rest of us feared.

In Committee we battle through days and weeks of detailed amendment and debate. Sometimes, as with the recent Oil Taxation Bill, we achieve substantial concessions from the Government and a more satisfactory measure emerges. During those sittings we have had to endure accusations of being hand in glove with the oil industry. If any piece of legislation affects a part of the economy of our society it is surely right to expect the Opposition to express the views of that group, to express its fears and to try to produce the arguments necessary, if the case is not to go by default. I found that that was what happened when I was sitting on the Government side in Committee.

This five-part Bill proposes to alter another major sector of the British economy, probably in the coming decade our most vital economic sector. The fascinating aspect of the Labour Party's approach to our present economic crisis is the totally contradictory element in its legislative programme. At a time when our nationalised industries are under severe financial strain and the burden of producing real industrial and balance of payments profits is falling on private industry so the greatest attacks on the investment and profit confidence of these industries are being made by the Government.

No one can deny that the oil crisis of 1973 has presented the oil-consuming Western nations with the need to restrain demand for high-cost imported oil as well as with the need to pursue the maximum exploration and development of their own energy-producing resources.

The immense discoveries in the North Sea appeared to be our salvation for the 1980s. It was a stroke of unparalleled good fortune that in our hour of need Britain should find herself surrounded by a potentially rich area of oil and gas. It appeared that all we had to do was to tap the riches by attracting the oil experts from outside and the necessary investment through the oil companies which would be able to raise the colossal sums of money required to provide the rigs and the pipelines.

The previous Tory Government's policy ensured such rapid development. In contrast, today we see declining activity, and confidence gradually ebbing away from the oil sector. All seemed well a year ago. Exploration continued to gather speed, and there was a high rate of success in productive wells with good reserves. The high, world oil prices revolutionised the economics of offshore production. Even the small, marginal field seemed attractive enough to commercial investors and bankers.

Then we had this love-hate relationship developing between the Labour Party and the oil companies. It meant that the companies were easy meat for political or populist attacks during two elections last year. Labour was certainly able to harvest a certain number of votes by promising all sorts of tough action to sort out the wicked oil barons—Who happen to be millions of small investors in this country and abroad.

First we had the Oil Taxation Bill with its PRT and field by field restrictions. Now there is this 51 per cent. participation and the coming into existence of the State oil company. As usual, the "divisive" Ministers and their Civil Service advisers are basically a year behind in their thinking, because all dreams of the bonanza profits which were to be attracted have burst.

The past year has seen an unprecedetented escalation in capital costs. If we add to those the uncontrolled inflation which the Government have allowed we can see a totally different picture emerging in the North Sea. The Government's tax terms and control regulations combined with the threats and uncertainties of participation have, in addition to soaring costs, produced a sharp decline of confidence and interest on the part of the oil industry.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

If it is such a dreadful thing, is it not surprising that, in the latest round, 50 per cent. participation was insisted upon and accepted by the international oil companies? Is it not also surprising that, if this is such a desperate, Socialist measure, the Irish Republic proposed such a measure yesterday?

Photo of Mr John Hannam Mr John Hannam , Exeter

It is acceptable that in the area of future exploration, where vast sums of money are required, Governments should produce such amounts, but there should not be majority participation, the taking over of a whole range of activities upstream and downstream, which is what we are faced with here.

The Government's tax terms and control regulations have contributed to the sharp decline in confidence in the industry. That cannot be denied.

The queries which the oil companies, large and small, are asking are: will world oil prices fall or remain where they are? Can the industry raise the cash to finance offshore projects? Can it achieve any profits from the fiendishly expensive costs in the North Sea? All of these worries are bad enough, but if we have the totally unnecessary political interference which this doctrinaire Socialist measure will introduce we have a receipe for withdrawal and contraction on the part of the risk-taking firms engaged in the North Sea.

We have had some brave assurances given repeatedly by Ministers to the effect that their participation and tax policies are having no effect on oil developments and that all the vital indicators show a continued expansion. This came out in the exchanges between the hon. Member for Dudley, West (Dr. Phipps) and my hon. Friend the Member for Honiton (Mr. Emery), one of whom is engaged in the oil industry and the other in the banking industry. It is the case that banks are no longer providing non- recourse finance. They were providing it up to a year ago, certainly on larger fields. Possibly such finance was not so forthcoming for the smaller, marginal fields. Small companies are now looking forward to selling out their interests. There is a sharp reduction in drilling activity. This was mentioned by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) who quoted Mr. Monty Pennell of BP who estimated a fall of 60 per cent. in the coming year.

What a time to be stepping in with the kind of irrelevant and unnecessary nonsense which the Bill proposes. It appears to go even further than the horrendous Industry Bill. Incidentally, that piece of legislation provides sufficient powers for the kind of majority State investment in energy companies. On that score alone there is no need for any further legislation.

For a country as near bankrupt as ours, which is having to borrow vast sums from overseas to sustain the multibillion deficits on our balance of payments, it seems madness to be embarking on an unnecessary exercise in State intervention on the pretext of safeguarding supplies of oil which were already ours, and of ensuring control of depletion of the oil which can be done through licensing controls. An authority could be set up completely separately from this side of exercise.

The first major criticism I have of the Bill is that Part I, which relates to the setting up of the BNOC, is unnecessary and contains dangerously wide powers for the Secretary of State.

Part II seeks to amend the terms of petroleum production licences and has worrying implications in the retrospective nature of the model clauses.

Part III, dealing with oil pipelines, is relatively uncontroversial. It seems sensible to have an orderly and national plan of the seabed pipelines. It is fair to say that in the past the oil industry has played a constructive rôle in setting up such plans. The Brent system, involving 17 oil companies and serving five oilfields, is an example of the constructive approach the oil companies have shown to this problem.

Part IV deals with refinery controls, and these seem basically sensible. They avoid wasteful investment and overcapacity in the future. The Secretary of State has shown that he is aware of the dangers of this, and, although he has made one or two wild promises in Scotland about possible new refineries, I am reasonably confident that this part of the Bill will work fairly well and that we can avoid launching into unnecessary expenditure on new refineries, except, perhaps, in the area needed to deal with the special high quality North Sea crude which we shall be producing.

Part V introduces the bizarre National Oil Account which will provide the Secretary of State with a fund worth hundreds of millions of pounds quite separately from the Treasury. With this money, which could be coming in at a rate of £700 million to £800 million a year by the end of the decade, the Secretary of State, without reference to Parliament, can acquire companies, petrol stations and refineries, and operate in any activity connected with the oil and petrochemical industries plus exploring and developing oilfields anywhere in the world.

The whole concept of financial discipline as it should apply to the BNOC is completely kiboshed by this strange beast of a National Oil Account. The use by the BNOC of funds from this oil account and the fact that, unlike competitor oil companies, the BNOC will not pay PRT, means that there will be no way of comparing that corporation's operating efficiency with other companies. The right hon. Member for Orkney and Shetland made this point.

Therefore, we have, not a mishmash of a Bill but a "mic-mac" of a Bill—I prefer the French term which, I believe, stands for "organised chaos". This is what it is. The Bill is half a monster of the outdated Left wing 1974 manifesto and half an amalgam of depletion and control measures which could easily have been provided by such an authority as Conservative Members proposed—a United Kingdom oil conservation authority which would deal with licences for pipelines and depletion.

On particpation and the creation of the BNOC it is difficult to understand why the Government feel it is necessary to engage in creating such a monster. Some views have been expressed that the corporation, with its estimated tiny staff and the as yet mythical oil genius at its head, presents no threat to the industry. Like the monster lying asleep in its coffin, although slightly terrifying, it causes no real terror—till it awakens one day, when the Secretary of State of the day decides to activate it. Then look out, because the powers it will have, the strength of interference in oil industry affairs, from the oil well, through refineries, on to the forecourt of the nearby national petrol company pumps—all these powers of direct involvement by the BNOC are in the Bill. And for what? Not for increased finance, for the Chancellor of the Duchy has stated "no gain, no loss" for the oil companies. There fore, it represents a switching of oil income from the Treasury to the new oil account.

Given that the nation's share of the income from the North Sea has already been secured under the Oil Taxation Bill and that the need to control North Sea development will be met by the powers vested in the Secretary of State under this Bill, participation is meaningless unless the BNOC is intended to become involved in the day-to-day decision-making processes of developing a proven commercial field. This decision making must, therefore, involve all the partners concerned. The fact that one participator has demanded and secured a majority shareholding does not undermine the rights and obligations of the other partners in the licence, particularly as one of them is likely to be the operator of the field concerned.

So begins the introduction of the bureaucratic State monster into this highly commercial and highly competitive area of oil development. This must result in the slowing down of these developments, just when the emphasis should be on getting the oil and natural gas from the North Sea on to land as quickly as possible.

There are in the Bill many other points which, no doubt, will arise in Committee. This is a Bill that comes from a shaky administration. It is a political Bill and we must oppose it tooth and nail. I welcome the tough and uncompromising line taken by my Front Bench, and I hope that the House will refuse to give this damaging piece of legislation a Second Reading tonight. At some time the Government have to be brought to their senses and govern for the country and not for Transport House.

7.05 p.m.

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

I regard the Bill as something of a mixture. One of its principal parts is acceptable to the Scottish National Party, namely, its proposals for participation, which we have supported for many years. I intend to deal with that first before criticising other aspects of the Bill. It has been our view that participation is an essential element for the taking over of a national resource for the benefit of the people as a whole.

Although there may be matters of interpretation, it is generally agreed, as the initial legislation which came from a Conservative source made clear, that oil which is discovered offshore lying within the Continental Shelf sector and which is applicable either to Scotland or Great Britain, whichever standard is taken, belongs to the people of the countries concerned. We have started from that viewpoint and support it.

However, we regard participation as a question of partnership. We have always disputed the case for a complete 100 per cent. nationalisation of the oil industry. We should certainly argue that in the initial stages it would be impracticable to suggest that 100 per cent. nationalisation or any immediate form of nationalisation could prove workable.

The establishment of a national oil corporation, which has been indicated by the Secretary of State, is not a strange beast in the international oil bestiary. It is found in many other countries. I do not want to refer to the Middle East in particular. The excellent reference sheet produced by the scientific section of the Library makes it clear that countries like Finland, France, Austria, Italy, Spain, Germany to a minor extent, Ireland and the Netherlands are all involved in forms of participation, either existent or emergent. I do not think we have to be frightened or need explain why the United Kingdom is taking this step.

An analysis of the benefits which could accrue from oil, should immediately lead us to the conclusion that it is a necessary buttress to the Oil Taxation Bill. It would appear from the reference sheet that Norway is hoping for a 90 per cent. overall take of the profits with up to 75 per cent. participation, the Netherlands is hoping for an 80 per cent. overall take with 40 per cent. participation, and Greenland is hoping for an 80 per cent. overall take with 50 per cent. participation.

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

I am talking from the Scottish point of view and I have no objection to the argument about small populations because we have a small population. Nevertheless the principle is the same.

We accept that participation is a necessary adjunct to the Oil Taxation Bill. This is particularly so on the contentions made by myself and my colleagues that the figures which the Government eventually negotiated with the oil companies produced a deficit of about £7,600 million which might well have come to the United Kingdom over the lifetime of the oilfields. If the Government are claiming, as they have claimed, that they are going for a 70 per cent. take, the new figure for Norway, with participation added, brings out some interesting information. In his reply I ask the Minister to estimate what the overall take will be for the United Kingdom from PRT, royalties, corporation tax and participation.

I do not think that we need to be hesitant about the steps which are being taken, because participation has been largely accepted throughout the world. The North Sea, despite the rise in costs, is still a very productive and profit-making area for development. It is estimated that in 1974 the United States of America, through the oil companies, spent 8 billion dollars on domestic exploration and drilled 33,000 new wells, but only 2 per cent. of those produced commercial fields. There is a significant number of commercial fields offshore the United Kingdom.

The Bill is establishing a framework for participation. We do not yet know what negotiations are proceeding in the voluntary fashion referred to by the Secretary of State or, indeed, in any other fashion. I hope that better terms will be obtained by the Paymaster-General or whichever Minister is dealing with the question than were secured in relation to oil taxation.

My colleagues and I strongly object to the proposals in the Bill for United Kingdom control over what will be Scotland's oil resources. This is a well-known argument to which I return with no limit to my enthusiasm. The Government must quickly make up their minds on this point, because they propose to set up the Scottish Assembly. If they are to have the Scottish Assembly, United Kingdom Governments being what they are I have no doubt that they will ensure that there is no reference to direct funding from oil revenues going to the Scottish Assembly.

The United Kingdom Government will be mistaken if they think that that will be the end of the matter. As soon as there is a directly-elected Scottish Assembly and as soon as Scotland has its own chief executive, whether he be called Prime Minister or something else, his very first action will be to telephone the Prime Minister of the United Kingdom and say, "Prime Minister, I should like to see you soon to discuss the question of Scotland's share of oil resources". If we have any say in that matter in the Scottish Assembly, we shall be pressing for it.

Such disputes are occurring throughout the world. Difficulties are emerging in Australia between the federal and state governments over control. Western Australia has, regardless of the views of the Federal Government in Canberra, renewed licences recently on terms suitable to Western Australia, although the Federal Government claim that they had the right to do so. In the United States of America litigation has arisen from time to time between the states and the federal government over the ownership of oil resources. According to the reference sheet supplied by the Library, this has led to endless complications.

In Canada not only is there the dispute which has continued between Alberta and the central Government, but there is also the fact that the offshore provinces, particularly those on the east coast which are poorer than some of those in central Canada, now have the opportunity to obtain oil and have raised the question of their share.

The Government must recognise that, whatever happens, the Scottish people have their eyes fixed on the oil resources off the Scottish coast and will not take their eyes off those resources now.

I thank the Minister for keeping his promise to bring the headquarters of the oil corporation to Scotland. Leaving aside my rôle as spokesman for the Scottish National Party on oil matters, I have a constituency interest which has caused me a twinge of disappointment. Dundee, which I consider to be Scotland's second industrial city, sometimes feels left out of things. We have high male industrial unemployment on Tayside. Having lost this morsel which has been thrown to placate Scottish national feeling over the oil revenue, I ask the Government to consider my own area more sympathetically and not to be put off by the unfortunate reputation which Dundee Corporation has within the Labour Party.

The principal benefits which I see arising from participation are the equity share it will give in oil and the fact that it can lead to an audit of expenditure, because the Government will be involved through BNOC in what is happening and, therefore, checks will be made and so remove the chances of arrangements being made for diminution of profit by accounting methods so as to reduce petroleum revenue tax, corporation tax and so on.

Participation will also be effective in bringing pressure to bear on the placing of orders with Scottish industry for various types of equipment connected with the offshore industry. This point should be stressed more than it has been.

I want to enter a caveat on the question of downstream development. The refining and petrochemical industries throughout the world are in a state of flux. In the Middle East in particular, the OPEC countries are switching over fairly rapidly to using their own sources of crude for refining to build up their product and industrial base in their own countries. There is nothing wrong with that, but it could lead to an over-supply of petrochemicals.

I do not wish to put forward too doctrinaire a point, but in December the Minister made a statement about the proportion of North Sea oil which might be refined in the United Kingdom. Little mention was made of Scotland's rôle. Obviously we in Scotland would not want our coastline to be littered with refineries. However, the Scottish Council has strongly argued that there is room for the development of some refineries in Scotland and for Scottish industry going more into chemicals than has been the case. I accept that the overall world market situation has a bearing in Scotland, as it would in the rest of the United Kingdom.

Another reservation I have about the Bill—here I shall be approaching it throughout its various stages with a very open mind—is that the BNOC in its operations should be made as comparable as possible with other operating oil companies so that a comparison can be made of its activities. This would be good for the corporation, because a comparison would be available and a check could be made on the profits it was earning for the country.

One of the principal arguments for the corporation is that it will have an equity share. It should be there to produce more for the State than would otherwise be the case. We do not want a loss leader in a sector which should do very well.

My second point, which I make strongly, is that in its early days the BNOC with its staff should adopt a very humble posture. It should recognise that staff, particularly skilled staff, may be difficult to obtain. It should recognise that there are special problems in relation to development in the North Sea and should be willing to listen to operators who have been active before it. If the BNOC were to get off to a jet-propelled start without having obtained sufficient experience, it could well lose a lot of money instead of earning it.

I could go on for much longer—[HON. MEMBERS: "Hear, hear."]—but I shall now give the sugar on the pill. Many of the points I should like to make can be made either in Committee or on Report. My colleagues and I propose to vote for the Bill on Second Reading, but unless substantial amendments are made in Committee, particularly on the principle of the Scottish control of operations, we may well have to reconsider our vote on Third Reading.

7.20 p.m.

Photo of Dennis Canavan Dennis Canavan , Stirlingshire West

Since October, when I first became a Member of the House, this is the third Bill which has been introduced by the Department of Energy dealing with North Sea oil. I know that high work rate causes envy to the Opposition, particularly among part-time politicians who spend most of their day in business or in legal practice and who may be kept in the House until perhaps five o'clock in the morning. But I congratulate my right hon. Friend on producing this third Bill. If the oil companies reciprocate by attaining a rate of exploitation which is commensurate with the rate of the introduction of legislation, we need not have much fear of failing to reach the target by the 1980s of between 100 million and 140 million tons of oil a year.

The keystone of the Bill is the BNOC. Along with my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen), I was delighted to hear confirmation that the BNOC is to be based in Scotland. The headquarters are to be in Glasgow. I well understand the disappointment felt by the hon. Member for Dundee, East (Mr. Wilson), because Dundee is also an area of relatively high unemployment, even by Scottish standards. I was aghast to hear cries of "Shame" from the hon. Member for Aberdeen, South (Mr. Sproat). He must realise that although Aberdeen may be the oil capital of Scotland there are other more underprivileged areas of Scotland, and as a Socialist Government our job is to direct industry and jobs to the underdeveloped and under privileged areas. The establishment of the BNOC in Scotland will go some way towards achieving that by introducing an element of industrial devolution.

We hear a lot from the Liberal Party about devolution, yet the right hon. Member for Orkney and Shetland (Mr. Grimond) said that we were going a little too fast and should wait until we get our Scottish Assembly before we think about how much industry can be devolved in the Scottish context. I do not agree that we should do that, because urgency is required. I congratulate the Department on siting in Scotland the BNOC as well as the Offshore Supplies Office.

Doubts were expressed by Opposition Members about the presence of civil servants on BNOC. There are to be only two. Even if their incompetence is such as was described by Opposition Members—and I do not think it is because many finance companies and banks are only too pleased to get the services of retired civil servants who know more than a little about finance and industry—

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

The hon. Gentleman will remember that the comment was not mine but that of Lord Balogh.

Photo of Dennis Canavan Dennis Canavan , Stirlingshire West

Whether the comment was made by the right hon. Gentleman or Lord Balogh, it was inappropriate to quote it. The right hon. Gentleman took the opportunity to quote it in support of his argument, and I take the opportunity to demolish it. Even if the civil servants are incompetent, they will be in a minority on BNOC because there are to be only two.

What Opposition Members are confused and annoyed about is the element of public participation. They seem to have an allergy to public ownership and public participation. I am grateful to my right hon. Friend for pointing out that it was that great "Socialist" Sir Alec Douglas-Home who nationalised the oil under the sea bed. It is a pity that he did not extend public participation or public ownership further when the Conservatives were giving out the licences. They seem to have been given out almost like Green Shield stamps.

I ask the Minister why it is proposed that the public stake should be the magical figure of 51 per cent. Public participation in the oil industry is nothing new. In British Petroleum there is a public stake of 48 per cent. already, and if we were to take into account the former BP shares in Burmah which now rest in the Bank of England the State share would be about 70 per cent. The total estimated Government take by the 1980s is about 70 per cent., which takes into account participation, royalties, PRT and corporation tax. When I consider what is done in other countries I wonder whether we cannot do a bit better.

For example, in Norway it is estimated that eventually the State's take will be 90 per cent. plus participation up to 75 per cent. The take in Greenland is 80 per cent., in Greece it is up to 80 per cent., in Libya 81 per cent. and in Malaysia up to 85 per cent. Although we are grateful for small mercies, perhaps the 51 per cent. should be seen as a starting step rather than a finishing step in participation.

I am glad that the Bill contains a reference to the safety of workers. When we talk of high finance we often forget the people whose careers are tied up in the industry, the men who have to leave their wives and children to work for months at a time away from home in dangerous circumstances. Why is there no specific reference in the Bill to workers on oil rigs and in other parts of the industry being covered by the Health and Safety at Work etc. Act?

The preservation of the environment is also important. I hope, however, that the Secretary of State will not look upon the giving out of certificates to refineries as being conditioned only by the preservation of the environment. Employment prospects, too, are important. There is a refinery in a neighbouring constituency, Grangemouth, and many of my constituents are grateful to the refinery and the ancillary petrol-chemical industries surrounding it for the employment prospects which are offered. In giving out certificates I hope that the Secretary of State will bear in mind the prospect of enlarging the Grangemouth refinery or possibly constructing another refinery in Scotland, either at Hunterston or elsewhere.

The Bill also deals with pipelines. I recently had the privilege of visiting the site at Cruden Bay in the North of Scotland where the BP pipe from the Forties field comes ashore. I was impressed by the environmental conservation work which has been done by BP. One is hardly aware of the enormous amount of work which has been put into laying a pipeline under the sea and from Cruden Bay about 100 miles down to Grangemouth. It is a remarkable piece of work for which I praise BP. I hope that the Secretary of State will see that other companies live up to those high standards.

The more I read the Bill, the more I wonder why both sides of the House cannot give it unanimous support. I understand the doctrinal opposition of the Tories, with their commitment to private enterprise and their hatred of public participation. I was more pleased by the contribution made by the hon. Member for Dundee, East. I hope that he was speaking on behalf of his party, because he showed much more co-operation than the SNP did in November when it voted for a Tory amendment on the Queen's Speech which condemned public participation in North Sea oil. I hope that the presence at Westminster of SNP Members and the arguments that have been presented by Labour Members have been educational experiences that have contributed somewhat to their change of heart.

I would also encourage the SNP to remove its disturbing slogans which deface the Scottish landscape. The slogans read "Scottish oil—but whose hands on the money?" It is significant that the slogans end with a question mark. That is the same as many pieces of SNP propaganda. The SNP seems to pose many questions but does not give many answers. Perhaps if it has its way the hands that will be on the Scottish oil will be those of Sir Hugh Fraser or other capitalists involved in the multinational oil companies.

I hope that the SNP will manage to muster its full first eleven and that it will come into the Government Lobby tonight. If that does not happen, and if by some chance the Government are defeated, I hope that SNP Members will remember that they are placing Scottish jobs at risk. I hope they will remember that if they stop the BNOC from coming to Scotland, which will happen if the Bill does not get a Second Reading, they will be hampering the employment opportunities of many Scottish workers.

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

If the hon. Gentleman is so keen to support the interests of Scottish workers, how much pressure will he bring upon his own party to ensure that the oil revenue from the development of Scottish oil will go to Scotland to produce more and better jobs for Scottish workers?

Photo of Dennis Canavan Dennis Canavan , Stirlingshire West

I shall bring every pressure to bear on the Government—and my colleagues will support me—to ensure that working people in Scotland and in underprivileged areas in other parts of the United Kingdom receive the full benefit of the oil exploration. I exhort hon. Members to remember that there are already 40,000 jobs in Scotland that are bound up directly or indirectly in the oil industry. That is a lot of jobs and there are certainly more on the way. I exhort SNP Members to support the Govern- ment tonight and to ensure that further jobs come to Scotland.

But the selfishness of SNP Members is apparent not only in their cheap advertising but in their references to Scotland's oil. If they consider the oil in a Scottish context, they should remember that if Shetland and Orkney were to declare UDI a huge slice or possibly even most of Scotland's oil, as they put it, would be taken away from Scotland. I remind SNP Members that there are vast coal reserves in Selby and that 95 per cent. of the gas which is used in the United Kingdom is English gas. Let us not be silly and selfish about this Scottish dimension.

Of course we want to see the people of Scotland benefit, but there is no room for selfishness. We must ensure that there is an equitable distribution of energy resources. That should apply not merely at national level. We must remember that there is an international shortage and maldistribution of fuel.

I shall quote from a recent publication produced by two economists, one at least of whom is a Scot, called Mr. Philip Connelly and Mr. Robert Perlman. I refer to the publication entitled "The Politics of Scarcity", which concerns itself with the international scarcity and maldistribution of fuel and resources in general. After making an exhaustive study they did not come to the same conclusion as Malthus, who made the forecast that the human race could run out of resources and virtually destroy itself. They are a bit more optimistic than that but they point out that the resources that we have require careful handling.

They write: In the end, we believe that there must be an underlying political basis for constructive reciprocal relations between the proprietors of resources and the proprietors of markets and technology. But"— this is the important part— market forces will not alone be sufficient to bring about such harmony. I echo what has already been said by one hon. Member that there is no room for the politics of laissez-faire and the silly private enterprise system which has been preached from the Conservative benches. This is a very serious business. I think that the Bill will go a long way towards showing that the benefits from North Sea Oil will go to the people of Britain and, perhaps, some of it even to people in underdeveloped countries.

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

On coming into the Chair at this time of the evening I sometimes use my limited knowledge of arithmetic to tell hon. Members just how many Members wish to take part in the debate and how long they should take. Hon. Members will be aware that the wind-up speeches will begin at 9 o'clock, which leaves hon. Members with an hour and a half. There are about 12 Members who are anxious to take part in the debate and they can all do so if some consideration is shown by those who are called by the Chair. I hope that they will each take roughly seven or eight minutes. As I have told the House before, a great deal can be said in eight minutes. My wife tells me that quite often.

7.36 p.m.

Photo of Mr David Lane Mr David Lane , Cambridge

I will not enter into the Scottish controversy, except to say that I agree with the hon. Member for West Stirlingshire (Mr. Canavan) in the tribute that he paid to the people who work in the British oil industry. Many of them work in conditions of danger and discomfort. We do not often have a chance in the House to praise them.

I declare a personal non-interest. Before I was elected to the House in 1967 I was employed by Shell. I now have no connection with them, and I have not discussed the Bill with them. It has never been my view that the oil industry is faultless. I hope, therefore, that the House will not accuse me of speaking from a partisan standpoint.

Looking at it objectively, I fear that the Bill is ill conceived and irrelevant and that the country will pay dearly for the Labour Party's dogma. So far North Sea oil and gas have been one of the great post-war success stories of British industrial and commercial enterprise. Now that success may well turn sour. There may now descend on British oil operations the same dead hand of political control as is afflicting the steel industry, the Post Office and other sad examples in the public sector.

I doubt whether the Secretary of State has his heart in the Bill. He was unconvincing today, and altogether too glib. The arguments that he put forward were well demolished by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin). My right hon. Friend showed that the interests of the public are amply safeguarded without the extreme risks that the Bill will bring with it.

In view of what has been said I must defend the part that my party has played in the development of the North Sea success story. I am thinking, for example, of my right hon. Friends the Members for Bridlington (Mr. Wood) and Knutsford (Mr. Davies) and of course Lord Barber who made it clear in his 1973 Budget that we were to introduce special tax measures for the oil industry. My right hon. Friend the Member for Wanstead and Woodford has shown clearly, time and again, how Conservative policy for the oil industry would be developed in the national interest. I contrast that with the doctrinaire approach of the Labour Party, which would put all this at risk.

I have paid tribute to what has been done already in the North Sea. Some of the criticism of the oil industry that is made from time to time may be justified, but the industry does not receive enough bouquets. It deserves a particular bouquet from East Anglia and from my constituency. Cambridge was the first major city to receive natural gas supplies, thanks to the policy of quick development that my party introduced. The companies' care for local interests and amenities was well demonstrated in the way in which they organised the onshore part of the gas operation. They showed their willingness to consider the public interest and not only their private interests.

My main criticisms of the Bill are that it will introduce uncertainty, extravagance and inefficiency. The uncertainty has been mentioned in a number of speeches already. As time is short I shall quote only an independent view contained in an article in The Times by William Gillen on 28th April. He wrote: This setback in orders for platforms is seen by Edinburgh financiers as a direct result of the oil companies' increasing caution over North Sea operations. We shall have uncertainty and hesitation, when what we need is full speed ahead for the maximum exploitation of this national asset.

Secondly, in the matter of extravagance, I wish to put the obverse of the Secretary of State's argument. The provisions of the Bill represent a waste of scarce public funds when ample funds could be forthcoming from private sources. The Bill will be a further strain on the Exchequer when already the extent of borrowing is excessive and unhealthy.

How much will these provisions cost the taxpayer? We have asked time and again, but have been given no satisfactory answer by the Government. One modest estimate puts the figure at £3,000 million—a figure which might eventually double. The Chancellor and the taxpayer will have to carry all this—and British Leyland, too.

Thirdly, I believe that the new structure to be erected will certainly be inefficient in several respects. There is bound to be muddle between the Minister and the BNOC and the companies. We have seen an awful example in another industry of which I had some experience before coming into the House. I refer to the steel industry and to what has happened there as a result of interference and confusion. Incidentally, one person for whom the Bill provides no effective say in the whole area of nationalised operations is the consumer. The Bill also establishes the British National Oil Corporation. What chance is there of attracting men of high calibre for the sort of set-up that is to exist? The Secretary of State talked of flexibility, but it is far more likely that the corporation will suffer from the straitjacket of Whitehall control. There will be no fair measure of the corporation's efficiency because of its peculiar and privileged financial arrangements.

Above all, there will be the Secretary of State who is giving himself frightening powers. He is taking a blank cheque, and is setting up a large separate fund quite distinct from the Treasury. There will be minimal parliamentary control. The Minister will be involved as an active operator in the oil business and there must be a risk of unfair competition. It would have been far better if the Secretary of State had stayed aloof and had held the balance over the operation by exercising detached supervision. It would have been far better if he had been satisfied with developing the present arrange- ments with the companies—companies which have shown time and again that they are ready to meet the changing needs of Government and public interest.

The Secretary of State thought this was a wonderful week. I say it is a sad week, when the shadow of nationalisation hangs over the House. We are observing the drama in the steel industry involving the Secretary of State for Industry and Sir Monty Finniston. Today we have seen introduced into the House the Aircraft and Shipbuilding Industries Bill—another distracting irrelevance. And now we are debating this Petroleum Bill.

The Government are obsessed with public ownership and public control. The word "control" occurs with frightening frequency in the White Paper and in the Bill. The Government want public ownership and control for their own sake even when they are not justified by the facts of the situation. The Bill is a recipe for confusion and frustration. Contrary to the Government's claims, the Bill will bring to the public not benefit but detriment. The Secretary of State for Energy will be remembered for generating not energy but inertia.

7.45 p.m.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

There should be no difference of opinion among hon. Members on the fact that North Sea oil should be exploited and utilised for the maximum benefit of the British people. At the same time we must make it abundantly clear that the companies engaged in oil exploration in the North Sea at present and companies that will come into the operations in future have a right to expect a reasonable and suitable return on the high capital investment risk. There can be no argument on that score. It will give no confidence to the industry if the feeling is allowed to go out from this House that nationalisation and public participation will introduce uncertainty and doubt. We in this House must make it clear that we believe confidence in the industry is of paramount importance.

It is important that we do not inject into this subject any narrow doctrinal views on a party-political basis. That would serve no useful purpose. We must seek to scrutinise the Bill at all stages, in Standing Committee and in general term here. We know that in that task this House can excel itself.

It is clear that we have been rather late in coming round to the idea of public participation in the oil industry. There are 50 oil-producing and oil-exploration nations and, with one single exception, all have public participation. Some of the nations operate extremely successfuly and are commercially profitable with 100 per cent. public participation. Therefore, since such participation has worked in other countries, it is reasonable assumption that it can work in Great Britain.

It is also true to say that for more than a decade the level of public participation in the oil industry in the United Kingdom has been of a minor kind. We have a 16 per cent. public participation in the oil industry, 14 per cent. public participation in the gas industry, and a 48 per cent. national shareholding in British Petroleum. That is not the work of greedy Governments—and that applies to both Conservative and Labour Governments in past years. That small degree of participation is now to be changed, and, in my view, not too radically changed. The Bill will enable BNOC to take over the 16 per cent. oil holding from the National Coal Board. The Labour Goverment do not intend to take anything from the British gas industry nor from British Petroleum. There could be a case for taking over the latter because the Burmah shares in BP are now in the Bank of England. If we could take those shares into account the 48 per cent. Government holding would amount to 70 per cent. However, the Government have turned down that suggestion and I believe that their judgment is right. The Bill declares that no existing companies will be taken over.

The aim in our highly industrialised country—a country where the North Sea and the Channel are congested by traffic—is to seek to deal with the proliferation of pipelines in an orderly way. We hope to be able to protect the fishing industry in a proper manner. We seek to control pollution, and we hope to take action in the construction of pipelines and other installations in such a way that the national interest is very much considered.

Secondly we must have a "take", which is the term, from our own resources. We must take the initiative in affording to the older industrialised regions of the United Kingdom, including Scotland, the North-East of England, and Wales, the employment opportunities which they desperately need. There should be no conflict about general principles, so that confidence outside the House is maintained.

My constituency is in an important region which has suffered greatly from unemployment. We are pleased to have a stake in the oil industry in building an oil rig. Some of that work is nearly finished. Although it will take some time before the Bill becomes law, I hope that the Minister will reciprocate our special interest in the Bill's success by giving work to that area within the next few months. Otherwise in Committee I may have to carry out a job not of conciliation but of challenge.

7.52 p.m.

Photo of Mr Peter Blaker Mr Peter Blaker , Blackpool South

I believe that Part II of the Bill is dangerous, because it is likely to harm this country's overseas interests. There has been no indication from the Government that they realise that what is done in Parliament is observed by countries overseas in which we have large investments. The House may not be aware that we are the world's second biggest overseas investing country.

The details of such Bills are reported to overseas countries not only by the Press but by the embassies and high commisions of those countries in London. A significant number of junior members of embassies and high commissions in London will have gained kudos by pointing out to their ambassadors the fact that the British Government have adopted for the first time the principle of expropriation without compensation. I think that that will be noted by many countries.

In his admirable speech my right hon. Friend drew attention to the remarks of Senator Dole of the United States in which he pointed out that he thought the United States Government should take a look at British oil interests in the United States in view of what the British Government intend to do to United States oil interests here. Those remarks were made before the publication of this Bill. I have no doubt that Senator Dole and other senators will be interested to note that in Part II of the Bill we have adopted the principle of expropriation without compensation. That will be noted by countries on every continent. There is no doubt that Part II of the Bill involves expropriation without compensation.

I do not propose to take the House through Clauses 14, 15 and 16 of Schedule 2. They give virtually unlimited power to the Minister to limit the rate of depletion. The criteria which they impose on him are totally inadequate, consisting principally of his interpretation of the national interest. We know what it means when a Minister defines the national interest.

I have heard a senior Minister say that the national interest included the survival of a Labour Government. There is no doubt that the unilateral alteration of existing contracts with retrospective effect involves expropriation. It involves, in international law, a taking of property.

In a Written Answer on 6th December the Secretary of State gave certain assurances to the House about what he would not do in changing the rules. That is not good enough. If that is his intention, he should write it into the Bill. He should also include in the Bill the provisions for compensation. I do not dispute the right of the Government to expropriate in the way intended under Part II, but I do not think that that is wise. However, I do not dispute the legal right of the Government to do so according to international law, because States have sovereignty over the property within their territory.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

It is distressing to hear the Opposition always talking about foreign comments in relation to this matter. Does not the hon. Gentleman agree that it is about time he and some of his right hon. and hon. Friends started to speak up for Britain when we are under criticism from people abroad?

Photo of Mr Peter Blaker Mr Peter Blaker , Blackpool South

I am sorry that the Under-Secretary has wasted the time of the House, because clearly he has not been listening. I am speaking up for the interests of Britain. I am saying that the Bill will do serious damage to those interests.

In the past Britain took the lead in asserting the importance of international law and its observance. In December the Under-Secretary of State for Foreign and Commonwealth Affairs, when answering a Question about the expropriation of assets of British subjects in Uganda, said that we were pressing for prompt, adequate and effective compensation. Those are the classic words which have always been used in the past. I was glad that the hon. Lady used them. There are strong pressures in the world to reduce the strength of the recognised rules of international law, to devalue them and to create a situation in which compensation does not have to be paid. There are strong influences in the United Nations. It is very much in the interests of this country, of its prosperity and its overseas investments to see that the traditional rules are upheld as far as possible.

In May 1974 the Socialist Government of the United Kingdom put forward a joint resolution during the Special Assembly of the United Nations which upheld two main points—the right to compensation in the event of expropriation and the importance of or the necessity for an impartial observer to assess it. In December 1974 at the United Nations the Labour Government put forward a further draft which upheld those points. My right hon. Friend quoted a passage from that draft. In March I asked the Secretary of State for Foreign and Commonwealth Affairs whether the position then taken by the representative of the United Kingdom at the United Nations represented Government policy. I was told that it did.

Part II of the Bill, however, pulls the rug right out from under the Government. It destroys their case. I see no evidence that the implications of what the Government are doing have been considered by the Department of Energy. Indeed, I wonder whether the Department even consulted the Foreign and Commonwealth Office before drafting Part II in its present form. It is not worthy of Britain's reputation for fairness and for upholding international law—

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

Denigrating Britain again.

Photo of Mr Peter Blaker Mr Peter Blaker , Blackpool South

I am not denigrating Britain. I am denigrating this Government, and they deserve it. This is the kind of legislation that we would expect from General Idi Amin. It is not the sort of legislation that we expect from a British Government, of whatever colour. Britain's example in international law is still widely followed across the world. I wonder what the advisers to the rulers of Dubai and Kuwait are saying. British companies are negotiating with them at present, and it may be that it is being pointed out to those rulers that we have imported into our law by this Bill this new principle of expropriation without compensation.

But it is not only unfair and contrary to our tradition. It is very much against our interests. To illustrate what I mean, let me mention some of the cases of the expropriation of British property in the past few years. In Libya, since 1969, more than £250 million worth of British property has been expropriated, and we are still negotiating for compensation. In Uganda, in December 1972, 34 British firms were expropriated, and we are still negotiating compensation. The value of the property involved may be as much as £500 million. In Tanzania we are still negotiating, and in Ethiopia recently there were nationalisation measures. The value of the British property involved there is not known.

In answer to a recent parliamentary Question the Government gave a list of 20 countries receiving aid from Britain against which we have outstanding claims for compensation for British property which has been expropriated. That is only the tip of the iceberg, because it takes no account of the property of British subjects and companies round the world which has not been expropriated, and it is about that that I am extremely worried.

Of all the countries least suited for the production of a proposal of this kind, it is Britain. I hope that the Government will agree to incorporate in the Bill some provision for compensation, otherwise I fear serious loss and damage to our interests.

8.3 p.m.

Photo of Mr Joseph Dean Mr Joseph Dean , Leeds West

Surely this debate is about the best way to exploit this new-found wealth in the North Sea, and to do so in the best interests of the British taxpayer. It is about that that the Government and the Opposition differ fundamentally.

This is an excellent Bill because it will allow the maximum participation in the exploitation and development of these resources under the guiding hand of Government policy which will see that the right priorities are observed.

I am glad to see that the right hon. Member for Orkney and Shetland (Mr. Grimond) has returned to the Chamber because he, like the hon. Member for Honiton (Mr. Emery), seemed to go overboard in favour of the existing national and multinational oil companies if we are to get the best value for money and exploit these rich resources to the maximum for the benefit of the people. I fail to see how they can make that deduction if they care to look back only 12 months at the record of some of the multinational companies and their activities during the energy crisis brought about by the last military flare up in the Middle East. On that occasion no one could accuse the multinational oil companies of showing that they were at all that conscience stricken about Britain, or, in the case of the national companies, at all patriotic. Responsible circles in both America and Italy made accusations at the time that in order to make a killing, the multinational companies actually kept millions of tons of oil at sea rather than bring it ashore. I do not recall any of those accusations being answered adequately, and I, for one, do not believe that we should place the future development of such a priceless asset in the hands of such people.

This country elects a Government, be it Conservative or Labour, to act in the best interests of the people. That is why we are here debating this Bill. However, the hon. Member for Blackpool, South (Mr. Blaker) went out of his way to put this present Government in the category of those of some countries which have not been elected by a free vote. I resent that, because, if nothing else, I am a democrat. I live by the ballot box, as does my party and the present Labour Government. To put the Government in the same category as people like General Amin and the dictator of Libya is to hit below the belt, and I expected the stature of this debate to be a little higher than that that type of remark should be made.

I want now to comment on the speech of the hon. Member for Dundee, East (Mr. Wilson) who, as usual, treated us to a few minutes of diatribe and then left the Chamber. The Scottish National Party seems to be attempting to light some peculiar fires, which may have devastating results for the nation if we are not careful. I was born and bred in and I represent a constituency which can hardly be described as over-privileged. Some of us are becoming a little tired of listening to representatives of the Scottish National Party constantly parading the so-called poverty of Scotland and suggesting that Scotland should have priority over everyone else. I know many parts of England that would love to be designated a development area, as all Scotland is, but no such privilege is allowed. We have to take our turn, and we have to struggle for what we can get.

The hon. Member for Dundee, East also said that his party did not want to see the over-development of the industrial side of the industry in Scotland. He made special reference to processing plants. I take that to mean that his party does not want any of the dirt in Scotland. All that it wants is the money.

The issue is a broader one than that. The oil and gas and the subsequent products of those two substances have to be used to the best of our ability on behalf of all our people. Earlier in the debate it was argued—and I have heard this line of thought put forward before—that we should not put all our eggs in one basket and gear our economy to this wealth in the North Sea because it could be destroyed completely overnight by the oil sheikhs of the Middle East. That is nonsense. In a world where there is no limitless amount of oil, and in which it is only because of the existing world recession that there is a small percentage decrease in the demand for oil, no one can say that the Middle East sheikhs who suddenly found themselves sitting on a bonanza and began to realise it are likely to depress the price of oil because Britain has discovered oil in the North Sea.

It is almost certain that oil will be found elsewhere in the world as exploration techniques improve. It may well be found under the ice caps in almost unlimited quantities. At present the oil sheikhs of the Middle East are in a strong bargaining position, but no one will convince me that the position will change when the oil begins to come ashore here.

One important aspect which should be studied carefully is the industrial side of the oil development. I myself have come from industry, although not from one noted as being accident prone. However, in the past we have seen alternating at the top of the league of industrial distress, because of deaths and injuries, the coal mines and, in latter years, the building industry. What is becoming apparent now is the number of injuries and deaths being caused in our exploration and exploitation of North Sea oil and gas. In the interests of humanity, because some of these people being killed and maimed are highly qualified—for example, it costs a great deal to train a deep sea diver—we must do better than we have been doing. We must use the knowledge that we have already gained regarding safety precautions and apply it most rigidly. One life lost in this area is one life too many.

I commenced by saying that the two sides of the House differ on ideologies. The Conservative Party thinks that the best way to exploit this new asset is to allow the multinational companies to come in and to give them the major stake, and for the recoupment to be made by taxation. That sounds very good, but it will not solve the problem at base.

I consider that the case was overwhelmingly proved just over 12 months ago in the last energy crisis. I believe that the energy policy which has become so vital to our economic success should be in the hands of those who are answerable to this Parliament. We must have control of our energy resources, and that can best be achieved with a publicly owned corporation such as that proposed in the Bill. I welcome the Bill.

8.12 p.m.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The Under-Secretary of State for Energy indicated that new licences were being issued by the Irish Republic. What he did not indicate was that Marathon, which has a subsisting licence, is not having its licence altered. We are arguing that unilateral abrogation of the industry's accrued rights with no offer of compensation is wrong. Why do not the Government pursue the policies followed in the Irish Republic, Norway, the Netherlands and Australia where existing rights are respected?

The tenor of the argument put forward by the Opposition has been that the situation would be mitigated to a certain extent if compensation were agreed to be paid. I have a Written Answer which I received from the Secretary of State yesterday in which he said: There is no provision for compensation in the Bill, but in exercising the powers proposed in Part II I shall take into account the likely effect on licensees. It is unlikely that people operating in America or the Far East will read that chance observation by the Secretary of State in Hansard.

We are saying that if compensation is to be paid for a diminution in rights, it should be stated in the Bill which is now before the House. But the Secretary of State indicated in his answer to me that there is no compensation provision in the Bill. Is he prepared to give an assurance that when the Bill is in Committee he will put that provision in as a separate clause?

It is extraordinary that arbitration should be so limited when the obligations being foisted on companies will be considerable. Regulation 40 provides limited arbitration rights. The Minister, again in an answer to me yesterday, said that: Arbitration has not been available in respect of matters directed by the Secretary of State under the terms of any petroleum production licence granted since 1964. The Petroleum and Submarines Pipe-lines Bill proposes no change in this position. Why go back to 1964. If the right hon. Gentleman is pushing on the companies onerous obligations which could prove totally uneconomic, have they not got the right to go to some independent authority or court to test whether the obligations are reasonably or unreasonably imposed?

The increased penalties or obligations under Regulations 14 to 16—these have already been mentioned—can often be exceedingly heavy. If a company falls down on any of the conditions, its licence may be revoked under Regulation 39. That may be because perhaps one out of 10 companies in a consortium has defected on the arrangements.

The Minister is on to this point. If he looks at Regulation 39(b) he will see that it refers to non-observation by the licensees of any of the terms and conditions of the licence. The obligations imposed on a company may be totally uneconomic. If the company fails to fulfil those obligations, its licence will be revoked and its investment will be lost.

What apparently has missed the attention of many hon. Members is that Part II provides for retrospective alteration of conditions in subsisting licences. According to the Bill, the licence terms may be further amended by means of a statutory instrument at any time without the need for new legislation. It is taken beyond the control of this House.

I listened intently to the Secretary of State when he said that the BNOC need not act on commercial principles, particularly when acting alone as the agent of the Government. It is not surprising, flowing from that, that when I asked what the rate of return of the corporation would be, in another answer to me the Secretary of State said: This will depend on the financial duties laid on the corporation under Clause 5 and these have not yet been determined. The right hon. Gentleman knows that over the last 20 years all the nationalised industries have had nil returns on capital investment in the United Kingdom. Why have another corporation which is also likely to have a nil return?

It might be interesting if I read—the Minister must have looked into this matter carefully, because this is the font of his experiment for the BNOC—what is said about ENI and all its ramifications, reported in The Times on 5th April. One hundred senior executives of ENI got together and prepared a document which states: The document regretted that the politicians' sharing out of spheres of influence had affected state-owned industry, with the 'negative consequence that the primary requirement has become that of safeguarding and consolidating power balances'. Management strategies had thus lost vigour. The capacity to identify and pursue strategic objectives had been progressively diminishing. That is precisely what the right hon. Gentleman is asking the country to do. He is setting up a body on which he can impose his own patronage, which does not have to operate on commercial principles, does not have to pay PRT which all the other companies have to pay, and is to get certain preferential advantages.

I suggest that 51 per cent. participation, the raison d'être for BNOC, is irrelevant, and I can give some reasons for that. The Secretary of State asked for control over the oil and its disposition. If he looks at his own amended regulations he will see that the licences are as comprehensive as any in the world, and therefore he has full control.

If the right hon. Gentleman is concerned about the control of oil exports, I suggest that they are already sufficiently protected by existing legislation, particularly the Fuel and Electricity (Control) Act 1973. According to Regulation 27(1) of the new regulations, all petroleum … shall be delivered on shore in the United Kingdom unless the Secretary of State gives notice of his consent in writing to deliver elsewhere". The ownership of the oil is vested in the Crown under Section 61 of the Continental Shelf Act 1964. Oil profits are dealt with in the Oil Taxation Bill.

Participation is particularly expensive for the State as vast sums would be required for development expenditure and they would aggravate the Government's borrowing requirement. This expenditure would otherwise be found by private participants or from the open market. If the Minister wants control he has it under Part II, and if he has it there why is he asking for 51 per cent. participation? This is not being asked for in America or in Canada. I am aware of Petro-CAN, but the Government in that case are not asking for 51 per cent. participation in EXXON Gulf subsidiaries or in any of the others. They have set up one company and there are a number of different areas which are challenging the authority of the central body.

Control of depletion can be covered by independent authorities, as my right hon. Friend said. There is the Texas Railway Commission and there is the Energy Resources Conservation Board in Canada. Pipelines under Part III could more suitably be covered by amendments to Sections 9, 10, 20 and 24 of the Pipe-Lines Act 1962 which covers the proliferation of pipelines on land.

Refinery expansion, in my judgment—and this is a personal view—is covered by planning control. It should be left to the market. If the control of refineries is to prove as effective as the regulation and assessment of production platforms and sites, the Government had better abandon the attempt. The National Oil Account is a matter primarily for the Treasury and is outside the Bill.

We have been told that we must have BNOC, but if Britian has two international majors in the United Kingdom why have a separate company? We have BP and the Royal Dutch Shell group. The two countries to which the Secretary of State inevitably refers are Italy and Norway, but they have no international majors. There is, therefore, no reason why they should be brought into the argument.

It is not as though the State has no interest in this matter. BP, in which the State holds a 48 per cent. interest, has the Andrew, Forties, Magnus and Ninian fields in the north North Sea. The British Gas Corporation has an interest in the Beryl, Hutton, Montrose and southern gas fields. In fact, it has an interest in 20 production licences. The National Coal Board, which is wholly State-owned, has an interest in the Dunlin, Hutton, Statfjord and Thistle fields. In fact, there are 15 production licences.

If the Government were astute they could consolidate all their assets in the British Gas Corporation, but that has been kept separate and they have not bothered about anything else. If the Minister must set up BNOC, why does he not offer the public participation in the equity of the concern? In other words, the State would have 35 per cent. and the public and others would have the balance. They would be able to contribute and participate, and the public would be able to share in that. A similar experiment has been tried by Alberta Energy Company Limited, and it has proved quite successful.

The Secretary of State says in his rather glib way that the public will own these assets. He should ask the commuters of Bedford whether they own British Railways when their trains come in late. They have no more ownership of them than flying. If the trains do not run on time and commuters try to take them over, they find they are committing a crime.

Perhaps I may mention the extraordinary idea—

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

I am sorry to interrupt the hon. Member, but I remind him that some of his hon. Friends are still anxious to take part in the debate.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

I am always observant of the time and your wishes, Mr. Deputy Speaker, and I shall conclude my speech with one or two final observations.

It is extraordinary—I give this for the Minister's guidance and benefit—that Esso would doubt the feasibility of establishing an Arab network in the United Kingdom. It is unlikely that BNOC will get off the ground. AGIP and Occidental have vacated the United Kingdom market. Is BNOC to spend £400 million on establishing a marketing and refining network in the United Kingdom? If so, where is the money to come from for establishing what is required and carrying out the obligations to develop in the North Sea? Is all this to come from the taxpayer or is it to be added to the nation's debt? Perhaps the Minister will consider these things when he next faces the electorate.

8.26 p.m.

Photo of Mr William Small Mr William Small , Glasgow Garscadden

An old Greek philosopher used to say "I grow old learning many things", and that has been my objective today in listening to the history of the case. A Scottish minister used to say "Poverty is no disgrace, but it is confoundedly inconvenient", and that is the position of the Government.

The track record starts with the Esso Petroleum Bill of 15 years ago when a private company desired the power of a public authority. The process has continued, and the style now is to deprive the people of information. What is happening is that, on behalf of the public interest, we are building up a degree of technical and legal expertise.

Clause 2 sets out the new corporation's powers and says that it can, among other things search for and get petroleum … in any part of the world; move, store and treat petroleum … buy, sell and otherwise deal in petroleum and anything derived from it. That is the value of what is being entered into in the national interest.

For those who are anti-nationalisation and anti-public ownership I draw attention to what was said in the Financial Times last week. It was a case of whether we took over British Leyland in the public interest, or the Iranian Government bought the company from under our noses.

As all that is the pattern of life today, and as there are these transnational arrangements, I hope that BNOC will build up all the background, legal, technical and commercial knowledge which is available so that it can serve the nation properly. That is the great virtue of what this is all about. We are creating a new situation which I fully support.

I am glad that the headquarters of this new organisation will be in Glasgow, which is a very different place from the South-East of England. The brains of Scotland will be associated with an international endeavour. It is the international element on which this whole notion depends. Those who are interested in currency matters as they might be affected by our membership of the EEC might take note that we shall need a complement of experts in the changing values of currencies which are used for oil dealings. I hope that we shall have a bank of such knowledge in Scotland. We then shall not have to be at the mercy of the atmosphere of mistrust which surrounds the balances afforded us by the big multinational companies. This is not always a straight issue and we do not always have access to all the information.

To that extent and for that reason I support the Bill.

8.30 p.m.

Photo of Mr Alexander Fletcher Mr Alexander Fletcher , Edinburgh North

The headline in yesterday's Morning Star was: Saigon surrounded by army of liberation. I got the impression from the Secretary of State's speech that that is how he regards his work, including this Bill, in the North Sea. He quoted the Prime Minister's comment that the oil belongs to the people. I do not see how the Bill will give anything to the people. What the right hon. Gentleman calls participation will involve not the people but only the Secretary of State and one or two of his political and Civil Service cronies in a secret hideout, in Glasgow of all places, well beyond the gaze of people or Parliament.

There is more participation in and public scrutiny of the oil industry today than is promised or is likely under the Bill, despite the protests of Labour Members. I wish that they would try to understand that this country is fortunate to have a substantial British presence in the multinational oil industry. The Secretary of State does not complain that private enterprise in the North Sea has let Britain down, that the oil companies are not making a proper contribution to the Exchequer or that there has been a lack of enterprise and initiative such as to require the setting up of a State oil company.

The BNOC is the result of a few ill-chosen lines in the Labour Party manifesto. It is laughable for this Government, of all Governments, to pretend that a Bill like this could launch an oil company capable of operating alongside BP or Shell or Esso or any of the smaller companies. Ministers should know that with the best will in the world it would take a new oil company like this a generation to become an effective competitor within the oil industry. Its rôle is not to compete—that is the pretence. Its rôle is to dictate—and that is the danger. That is the threat to the development of our oil resources.

The Bill does not set up a State oil company which will be free to operate with maximum independence as a publicly-financed entrepreneur charged with setting a fast and effective pace in exploration and development. The Bill sets up the Secretary of State as a TV-type tycoon, a "Mr. Mogul"—a rôle for which, with respect, neither he nor his Department is fitted.

The Bill launches a new Ship of State which will be the slowest and most cumbersome vessel in the North Sea, firmly anchored to the Secretary of State and his Department. Proof of this is the enormous number of referrals that the corporation will be required to make to the Secretary of State. Particularly important is the fact that the Government's participation proposals will require the private part of the oil industry to proceed at the speed of the BNOC, the speed of the slowest ship in the convoy. The BNOC referrals to the Secretary of State do not just affect the pace of decision making in the new corporation. If the Government take a controlling interest in the oil fields as compulsory partners with the independent companies, the private companies will find that their commercial decisions are being made by the Secretary of State. Such a position is unlikely to give a spur to new investment and lead to quicker results in the exploration of the North Sea.

It is not just the sheer irrelevancy of the proposed State oil company that concerns those who wish to see the maximum benefit flowing from offshore oil into the British economy. The Bill sets up a board to do what is unnecessary, to do what the companies are doing at present—and doing extremely well. It fails to set up a board to concentrate on the regulations and that part of the Bill which is mainly in the area of Government responsibility and which requires Government action. It would be of great benefit to the House and the country if Ministers were required, when introducing legislation, to set up a new public authority to propose the winding up of an existing authority.

If one considers the profusion of Government Departments and public bodies involved in offshore oil, it is not difficult to see the need for a more streamlined and effective approach. That is why Opposition Members argue for a conservation board and not for another oil company, because that is completely unnecessary.

We should like a board to supervise the licensing, the depletion policy and the environmental aspects of oil developments. That is what Parliament should give its time and priority to, rather than the self-indulgence of Ministers playing the power game in a business they do not comprehend. The co-ordination of activities in the Department of Energy, the Department of Industry, the Department of Trade, the Scottish Office and local authorities requires the undivided attention of Ministers. Those are areas that are still being neglected by the Government.

The hon. Member for Dundee, East (Mr. Wilson) and his Scottish National Party support the jargon of participation and partnership, the pretence that people feel involved as participants with the National Coal Board or the Gas Corporation, and would feel so involved with the BNOC, It is an insult to Scottish people to include them in this farce. I shall be happy to vote for private investment in the oil industry and for public investment in the infrastructure of Scotland and England by voting against the Bill.

8.37 p.m.

Photo of Peter Viggers Peter Viggers , Gosport

As someone once said, a week can be a long time in politics, but this week has been an expensive time in politics. Some extremely important points have been made during the debate, but no one has yet referred to the sheer magnitude of the money with which we are dealing. The Bill deals with £600 million, perhaps rising to £900 million. Inflation being what it is, I feel that it is almost certain that it will be £900 million, and we should think of it as such.

There have recently been proposals for a remarkably large amount, £1,200 million, to be spent on British Leyland. The Community Land Bill proposes expenditure of £300 million to £400 million a year, totalling over a 10-year period £3,000 million to £4,000 million. This Bill proposes expenditure of £900 million. In effect it comes to about £15 for every man, woman and child in the country. For every typical household of two and a half people, it comes to approximately £37.

The Government have squandermania. They hear the Chancellor of the Exchequer reading the Treasury brief and talking about the need to contain inflation, but they do not listen. The squandering goes on because the Government do not care. They are happy to see inflation, because it allows them to deal with the money according to their own Socialist principles.

What would happen if we asked everyone "Would you rather have £15, and your family £37, letting the Government raise revenue from the oil industry by taxation, or would you rather pay £15 or £37 to the Government in taxation, letting the Government pay that money to the British National Oil Corporation? The BNOC could invest and perhaps make money itself, and the Government could spend it or reduce taxation, and thus return it to the people who originally put up the investment" If that simple arithmetical proposal were put to most families, they would overwhelmingly vote in favour of keeping the £37. That is the alternative. It needs to he put in those stark terms. The Government are full of ideas on spending but not so good at earning the money first.

I should declare an interest. Before I came to the House I was an executive and director of a merchant bank involved in financing, particularly oil. I also became a director of a small independent oil company with its registered office in Scotland. I am still on the board of those companies. I have searched my conscience, and I can see no way in which I stand to gain or lose as a result of the Bill, except as a taxpayer.

Parts of the Bill derive from a font of inspiration other than Socialism. For example, with small exceptions, the pipeline proposals are eminently reasonable. It is right that someone should have the right to arbitrate between institutions. A powerful company setting up a major pipeline might be in a position to exert pressure on smaller companies. It is right that the body to arbitrate between companies should be the Government.

No one can say that the safety record in the North Sea is exemplary. The work done there is very dangerous. It is carried on in hazardous conditions, and the commercial pressures on those working in the industry are extreme. Britain leads in some areas, particularly diving, an area of particular danger. It is right that there should be extreme safety measures. The Government should take them, and we should back them.

I turn briefly to Part V of the Bill, which contains miscellaneous and general provisions. They are a real rag-bag. It is extraordinary that the Government are so pressed for parliamentary time that they have to include in the Bill two measures which have nothing to do with its general purport. The first is power to pay money to the Bank of England in respect of the Burmah shares. The clause relating to Burmah should be cut out of the Bill. The Government should first explain their proposals in relation to the Burmah holding in British Petroleum. It is not right for them to suggest that the matter should be dealt with when their intentions have not been made clear.

The second thing that should not be in the Bill is that extraordinary animal the National Oil Account. It gives the Secretary of State his own personal fund to take all BNOC's revenue plus royalty payments. That cannot be right. There are huge problems of resources management at the Government-industry interface where State corporations and national organisations operate. It is one of the Government's most intractable problems to create institutions, public utilities and nationalised industries which are satisfactorily and dynamically controlled and properly commercially aware.

Governments of both parties have wrestled with this problem. There does not appear to be a simple solution. But one that is utterly wrong is to immunise the Secretary of State, to cut him off from the commercial pressures that might be exerted if BNOC were allowed to operate as its own entity.

There is an inherent difficulty in Government thinking because they are incapable of thinking long term. The right hon. Gentleman who now graces the Government Front Bench may well not be Secretary of State a year, two years or three years hence. He may not even be in the House. His successor may well have a different approach. Therefore, it is wrong that the Secretary of State should be in a position to dictate to the BNOC.

Of the BNOC proposals generally, I can say only that the Left wing of the Labour Party wanted to nationalise the North Sea by majority participation, but some Ministers who have respect are aware of the immense cost of the nationalisation participation proposals, variously estimated at costing between £3,500 million and £6,000 million. What do we have in this case of difficulty? On this occasion we do not have a referendum. We have a compromise. We have a Bill which proposes the participation, but which fails to provide the money to carry through the proposals.

The Bill therefore will not work. The arithmetic in it does not add up and the whole thing does not make sense. The Government's intentions have discouraged potential investors in the North Sea and it is right that the Opposition should oppose the Bill.

8.45 p.m.

Photo of Mr George Park Mr George Park , Coventry North East

I suppose it was only to be expected that in speech after speech from the Opposition we would hear expressions of worry and the view that the Bill is completely unnecessary because it affects a highly successful industry in which the Government should not interfere. This is the natural order of things in this House and, therefore, we should not be surprised at such a reaction. When we talk of a successful industry, however, we are entitled to ask for whom it has been successful. In terms of the general population of the country, it has not been entirely successful.

I gather from information we have been given that some 45 or more countries are already taking steps similar to those proposed in the Bill, and in some cases the action is much more stringent. Conservative Members, it seems, would have us adopt a policy of waiting, as other oil-producing countries have done, until the best profits have been creamed off, and going into the game very late in the day when the exploiters are ready to pack up and move out, leaving the community to clear up the debris left behind.

We have seen this in the case of other natural resources. We have seen the spoil heaps which the community is expected to put right because the exploiters have long gone, as will be the case with these multinational companies which are so dearly loved by Opposition Members.

More than one Opposition Member has said that my hon. Friends and I keep referring to our election manifesto commitments. We were elected to carry out that manifesto and we wish to show that we are trying to honour our pledges. This may sound strange to Conservative Members, but it is the pattern we wish to set as long as we are in government.

I felt some sympathy for my right hon. Friend the Secretary of State while listening to the comments of the hon. Member for Dundee, East (Mr. Wilson), because it would seem that when it comes to the SNP my right hon. Friend is as bad burned as scalded. The hon. Member welcomed the fact that the offices of the BNOC are to be established in Glasgow, but in the next breath he said that the only reason for this was that pressure was brought to bear by his party. My right hon. Friend cannot win on that basis. Although I cannot welcome the fact that the corporation will not be established in my constituency, I am glad that it has been located in the city of my birth. Like thousands of other Scots, I had to emigrate to England to find continual work.

Conservative Members have repeatedly alleged that they are speaking on behalf of the public. Their interpretation of the term "public" differs from mine. It is quite clear that they are speaking for some of the public. This became clear when one hon. Member said that the Government should take a 35 per cent. interest and that the public would then invest in the remainder, and that this would allow participation. That type of participation was markedly absent in the case of British Leyland.

Tory Members would have been prepared to see British Leyland go to the wall in spite of the chaos that would have been caused in thousands of homes. They were quite prepared to see a receiver move in. If I have to declare an interest, it is on behalf of the members of my union involved in British Leyland and in construction work in the oil industry. I am certain that the interests of my union's members would be much better protected under a Labour Government than under the conditions now applying on the rigs.

The Government will have to pay much greater attention to working conditions. I know that this does not come within the Bill but it is a subject which demands serious attention. We are not speaking for some of the people. We believe that in introducing this measure we are introducing something which will be for the benefit of all the people.

Several Hon. Members:

rose

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

Order. There are still four hon. Members who wish to take part in the debate in the 10 minutes remaining before the Front Bench speeches. I leave those hon. Members to sort that out among themselves.

8.51 p.m.

Photo of Mr John Moore Mr John Moore , Croydon Central

With that inviation, Mr. Deputy Speaker, I will endeavour to be as rapid as I can. I hope that hon. Members will understand if I do not respond to the points they have made. Tonight sees the continuation of a national debate involving mythology and reality. The mythology reminds me of a nursery tale—not "Little Red Riding Hood" but "Little Red Benn". We have been listening in this national debate to the discussion about the potential national bonanza beneath the sea. It is said that, "It is like gold on the ground, easy to scoop up" This is a nursery tale. I have a strong feeling that the "Jolly Woodcutter" is here now in the shape of "Tribune Eric" coming to "Little Red Benn's" rescue. Taxes, taxes followed now by stealing.

What is the truth? It is that this vast treasure does exist, but in inhospitable waters, expensive to work. Not only that, they are waters from which we shall reap the benefit because of an investment by private industry of approximately £2½ billion. Those who deplore the activities of our international companies and international companies operating from other shores should note that is they who have taken all the risks and the potential losses. As a nation we have so far taken none.

The Oil Taxation Bill removed the problem of Middle East posted prices by the creation of a ring fence. That was a problem accepted on all sides and answered in the oil taxation legislation. Where are we today? Do we need this extra legislation? The nation will have the oil at no cost and no loss even if we do not enact this Bill. There will also be, according to the Government, 70 per cent. of the profits for the nation. We know that the Government, thanks to the Conservative Continental Shelf Act of 1964, have strategic control of the oil and of the companies through licensing and through the new oil tax law. We know that the depletion argument is a snare and illusion. We know that that could have been done without the BNOC.

Why are we having the Bill? The Treasury made it quite clear that no bonanza is involved in this exercise. They showed us that they learnt this in the debate on the petroleum revenue tax. The Government, like many politicians of all parties in the past—but today especially true of the Labour Party—will not face reality. They will not face the reality that the nation, because of their policies, is to be allowed to pretend that a bonanza will come. However, there is not to be a bonanza but meaningless participation.

We are constantly told that Middle East countries have some form of partnership.

There are, tragically, some strategic and important differences between us and Middle East countries. Middle East countries have a developed resource, oil. The Government should remember that blackmail is possible with a hostage but difficult without one. There is also the comparison between high-cost North Sea oil and high-risk North sea oil and low-cost Arab oil.

I remind the House of the huge capital requirements of the North Sea. It is estimated that a further £12·3 billion will be needed by 1985. There is thus one other key distinction between us and the Middle East—they have the capital and we have not. The Minister is looking puzzled. I make it clear that I mean capital. It is clear that our needs and weakness demand the help of the oil companies.

With this structure, the BNOC, we shall create a nationalised oil industry in the United Kingdom in less than a generation. We shall destroy private exploration, refining and distribution, and we shall secure the eventual destruction of the private petrochemical and plastic industries. There is no question but that the cuckoo in the nest in the shape of the BNOC has no possibility of being competitive with private industry under the structure introduced by the Bill.

I shall conclude the lengthy arguments I had hoped to make by suggesting that at the end of the day the ultimate corruption that this form of State socialism will create, as has been indicated by Labour Members, is a State monopoly of our energy supply and distribution. The conclusion is simple. The Bill will mean, in the short term, a cost of £900 million to the taxpayer. In the long term, it will mean subsidised, unionised monopoly control of another national asset by the uncontrollable forces of spendthrift Socialism.

8.58 p.m.

Photo of Mr Iain Sproat Mr Iain Sproat , Aberdeen South

I am glad to see that the hon. Member for Glasgow, Garscadden (Mr. Small) is present. He welcomed the siting of the BNOC in Glasgow. I, too, welcome it coming to Scotland. However, I am infinitely depressed that the Government have decided to site it in Glasgow. They are flying in the face of commercial reality. Everyone knows that the international headquarters of the oil companies is at Aberdeen. That is where the Government should have sent the BNOC if they had to have such an organisation. Many people in Scotland will think that the decision to site the BNOC in Glasgow relates more to the electoral support that the Government hope to gain than to the needs of Scotland and the rest of the United Kingdom.

This is an unnecessary Bill, because we do not need a BNOC to secure the financial benefits and control of the oil industry which the Bill will secure. The BNOC is unwanted because the country does not want any more nationalisation. If a referendum were held, I am sure that the Government would find their views rejected.

The BNOC is damaging, because it introduces into an industry that is facing considerable difficulties bureaucratic delay, interference and all the ills that we associate with the Civil Service trying to run a business.

The BNOC will be cumbersome and dilatory and it will cause cumbersomeness and delays in others. It will be extremely expensive and will cost us between £3,500 million and £6,000 million to buy our way into the oil companies. On the Government's own estimate it will cost £3,000 million to develop the oil resources until 1977 alone. Taking half that figure, £1,500 million is an enormous extra burden to place on the taxpayer. It would be crazy to place such a burden on the taxpayer at any time, but to place it on a country like ours now when it is so near to bankruptcy is absolute economic lunacy without parellel.

8.59 p.m.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

When the Minister started his remarks this afternoon he said that this was a historic and a great week for Britain. I concede that it is a historic week. I do not concede that it is a great week. Rather, I suggest that the Bill is the third in a week of undiluted Socialism.

Although certain of the provisions of the Employment Protection Bill and particularly the Community Land Bill may seem to be obnoxious, in the long term it is in this Bill that there are to be found the proposals which are potentially the most damaging to our economic prosperity.

The right hon. Gentleman referred to a state of anarchy existing when he took over our policy for energy. A party which supports law breakers in the form of Clay Cross councillors and Clydebank councillors—I am sorry that the hon. Member for Bolsover (Mr. Skinner) has taken to his heels so quickly—should be the last to talk of anarchy in any shape or form.

There are sections of the Bill which will have our support, but even those can be improved and in Committee we shall move amendments with that in view. We accept that it is desirable for the Government to have control over the rate of decline of our oil resources. We agree with the clauses in Part II which deal with licensing in an essential part of any legislation designed to control exploration and production. Whether the Government have got it right will be carefully considered in Committee. It is certainly arguable that a unilateral abrogation of existing licensing rights should be tempered by payment of full compensation. We shall certainly deal with that in Committee.

I come to the wide powers which are to be taken in Part II. There is the situation where severe financial penalties could be inflicted on companies whose existing production licences enabled them to be financed for exploration and production and that finance based on the production profile of the field. It is reasonable that these companies should expect some assurances from the Government, at least in the short term.

Neither Norway nor Holland has taken such steps. The Under-Secretary referred in an intervention to Ireland. I remind him that the policy of the Irish Government is not to inflict upon the company which has been exploring there already the terms which they are now introducing.

My right hon. Friend the Member for Knutsford (Mr. Davies) went into detail about the situation when the licences were granted in 1971. The Minister said that the terms to which we took exception were contained in a previous Bill, and he made light of the whole affair. I assume that as the Minister makes light of this affair he will not be averse to accepting an amendment in Committee to delete the provision from the Bill. If it is of relatively minor importance and there is no great snag involved, I am sure that he, being the reasonable man that he claims to be, will be prepared to concede this at a later stage.

The more one studies the Bill the more one despairs of it. Closer study reveals that some of the arguments which might have been thought to be fairly innocuous in relation to some of the clauses become less and less desirable.

The Bill requires careful scrutiny in Committee and a great deal of consultation both within and outwith the House. We shall wish to know a great deal more about Part III which deals with submarine pipelines and about the powers which are given to the Secretary of State.

Let us for a moment look at those powers. The Secretary of State takes unto himself the power to authorise all pipelines and their use. In Clause 21(3) he takes power to have complete discretion over the terms of the pipeline authorisation. He goes on to take power to fix the sums to be paid by additional users and power to direct an increase in the capacity of the pipeline and even to change its route. In Clause 24 and 25 he takes power to terminate a pipeline authorisation, to cause it to be forfeited and to reallocate it if he so wishes. In Clause 33 he may designate ownership.

Those are all major considerations for companies which are already involved. In those circumstances, I hope that the Minister will not contemplate putting the Bill to a Standing Committee before Whitsun. Consultations are essential for the benefit of those who have already invested million of pounds. It is easy to kick at multinational companies, but I remind the Under-Secretary of State that the thousands of new jobs in Scotland have not been created by the Labour Government or by the Conservative Government when in power. They have been created by companies which have invested in the area. The people in my constituency and, I am sure, in his who benefit from the jobs which have been created do not want those jobs to be put at risk, which is a possible result of the measures proposed in the Bill.

We shall wish also to explore the effect on other industries, for example, on fishing. That, again, is a cause to delay the sending of the Bill to Standing Committee. Many consultations require to be taken.

On Part IV, I welcome the fact that the Government are to decide what is in the national interest. That has proved difficult for local authorities in the past and they should not be involved in it. If, however, the right hon. Gentleman takes as long to make up his mind on each adjudication as he has taken in giving guidance on this matter to local authorities in the past, the whole purpose of the provision will be defeated. In Part IV the Secretary of State has given himself even greater and more far-reaching powers.

My right hon. Friend dealt in detail with Part V, particularly with the establishment of the National Oil Account. It is difficult to understand why the Government have opted for this method instead of decreeing that moneys should be paid directly into the Treasury. The Scottish Development Agency and the Welsh Development Agency will presumably receive their funds from the Treasury. If the Government are sincere in their belief that oil revenues should be spread evenly throughout the land, it is strange that they have not provided in the Bill that a percentage of the intake to the National Oil Account should be paid to the Scottish Development Agency. It may be that we shall want to have consultations on that matter in Committee.

Photo of Mr Bruce Millan Mr Bruce Millan , Glasgow Craigton

Is not the hon. Gentleman putting forward an extraordinary proposition? I understood that the Opposition were to vote against the Scottish Development Agency?

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

The hon. Gentleman must not take anything for granted. He is at liberty to take whatever meaning he likes from what has been said. If the Conservative Party decides to vote against the agency it will make that decision for very good reasons. One reason which would weigh heavily with us would be whether there was a guarantee that a considerable percentage of the revenue taken by the national fund was automatically to be paid into the Scottish Development Agency and used in Scotland.

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

I have been following the hon. Gentleman's argument and his development, or vacillation, of Conservative policy with considerable interest. I ask him to state what percentage the Scottish Conservative Party would consider suitable to be devoted to the agency from the oil revenues or from its proposed Scottish development fund. I ask that question because the same question was asked of the hon. Member for Glasgow, Cathcart (Mr. Taylor) in the Scottish Grand Committee 11 months ago and he refused to give an answer.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

The hon. Member for Dundee, East (Mr. Wilson) must grow up. We all know that both he and his party are politically naive. I am rather long in the tooth to be taken in by an intervention of that sort. The hon. Gentleman should realise that the Scottish National Party is not the only group of people interested in Scotland.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

If the hon. Gentleman wants to know the sum let him table an amendment in Committee.

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

If the hon. Member for Ross and Cromarty (Mr. Gray) would address the Chair there would be no need for me to pour water on troubled oil.

Photo of Mr Hector Monro Mr Hector Monro , Dumfries

Does my hon. Friend agree that all the economic and financial advantages to Scotland under the Scottish Development Agency can now be provided under the Industry Act 1972 that was introduced by a Conservative Government, and that only thoroughly undesirable matters are in the Government's SDA programme?

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

That is correct, but if the present Government were to make some percentage inclusion for the SDA that could well change our view. If we thought that there was to be a large amount of money specifically devoted to Scotland we could well take a different view. However, we shall be talking about that in Committee in greater detail.

There are no real controls at present on the disposal of National Oil Account funds. There seems no safeguard or Treasury control on how it will spend its money. There is nothing to ensure that it does not invest in uneconomic activities. It is all very well for the Government to say that under no circumstances will it enter into uneconomic activities, but how are we to know what the future holds? We have no guarantee that the right hon. Gentleman will be the Secretary of State for Energy for an unlimited period. We could see some more conjuring by the Prime Minister. No one is a better conjuror than the Prime Minister. He could decide eventually that the Secretary of State for Industry should become the Secretary of State for Energy. Nobody would wish that right hon. Gentleman on our debates. One never knows what ideas he might have and how he might wish money to be spent.

It is, however, the creation in Part I of the Bill of a British National Oil Corporation and the enormous power which it will wield which causes us concern. This hallmark of doctrinaire Socialism may well prove to be a costly prototype for Government intervention in the oil industry. The cost of 51 per cent. participation in the present stake in the North Sea could be between £4,000 million and £6,000 million. Even if that investment were to be positive, it would mean delaying for many years any benefits to the long-suffering taxpayer, who may end up by being deprived rather than enriched by the activities of this money-consuming giant.

I believe that the corporation, conceived by the Government as a sop to their Left wing, has all the heredity markings of a large dinosaur. It will move very slowly. It will swallow up the small. It will lean on the large. It will dig its huge claws into any organisation not agile enough to manoeuvre from its clutches. In the name of participation it will suck the life blood from the existing profit-earners until they are coerced into total submission.

Unless we are able to make substantial amendments to the part of the Bill outlining the creation of this monster, it will, as time goes on, develop an insatiable appetite for money. It will be aided and abetted by the Left who will never accept that the NOA has reached a level at which its surplus should be transferred to the Treasury. The Government will always find something else in which the BNOC should participate—some additional company in which they may wish to meddle, some further activity to which they wish to commit public funds.

What is the Government's next move? A total of 51 per cent. participation is only the beginning. If private investors decide in future not to participate with BNOC, the dinosaur might find it will have to swallow more than it can digest.

This afternoon I fully expected the Secretary of State, when opening the debate, to announce the name of the new chairman of the BNOC. Perhaps he will let the Under-Secretary of State for Energy announce the name when he replies to the debate. However, I very much doubt whether that Minister will be given the opportunity to make such a plum announcement. It is simply amazing that of all the people approached by the Minister, nobody will accept the job. Nobody wants it—

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

The hon. Member for West Stirlingshire (Mr. Canavan) said he will take it. That is precisely the calibre we shall get.

I think the Government may be embarrassed by the situation. The Minister may get out of it by saying "I shall be announcing in due course the name of the chairman". Well, they will have to find him first. Why does nobody want the job? The answer is simple. Nobody wants to be a mere pawn at the will of the Secretary of State. The Secretary of State is the person who is to be zoo-keeper in charge of this dinosaur.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

No, I shall not give way. The hon. Gentleman was only in for a relatively short part of the debate—[HON. MEMBERS: "He made a speech."] He was whipped in from the Tea Room like most of the others. I am not giving way. Two of my hon. Friends were kept out of the debate because the Government Whips brought in people to speak on the Labour side. I must not allow the "Whips' union" to be led into disrepute by the Minister.

The corporation will face a serious staffing problem. I join those who have welcomed the news that the headquarters will be situated in Scotland. I believe that my hon. Friend the Member for Aberdeen, South (Mr. Sproat) prefers Aberdeen while the hon. Member for Dundee, East favours Dundee. I think that the Government are right, for once. Glasgow is the place where it should be situated because it is important that we should create a sense of rejuvenation in West Central Scotland.

There will be considerable difficulty in obtaining staff. Where will the corporation find the trained professionals capable of taking the major decisions and of evaluating the problems? Large sums of money—all too often other people's money—will inevitably be Involved.

I do not have to remind the Minister of the implications of delay in the oil industry. The BNOC will require a staff which is larger than even that of the greatest oil company, because theoretically it will be involved in dealing with all the proven fields and in each case with different sets of partners. A mammoth task lies ahead of it. I am worried about its capacity to attract the right calibre of staff to undertake those duties.

The Opposition are agreed that the BNOC is unnecessary. Governments have many other ways of collecting revenue from the industry. At the end of the day they could obtain those revenues without the creation of this corporation at such vast expense, since £600 million or £900 million will only fill the tank to residue level. The main flow will come from royalties. That is money which should go directly to the Treasury.

If the BNOC is to be created it must be made to operate in a fair and competitive way in an industry in which the criteria for success have always been efficiency and expertise. Those are hardly qualities for which the Government are renowned. It is wrong that the BNOC should not pay PRT. I hope that there will be no question of its receiving further disguised subsidies or hidden preferences. This corporation will be enormous. It will have tremendous power. It will have the ability to explore and to produce petrol, to transport and refine petroleum, to store, distribute and sell petroleum and its derivatives, to build, hire or operate refineries, pipelines and tankers. Yet despite all that the Secretary of State retains under Clause 10(2) the power, if he so desires, of concealing whether the Corporation is making a profit or a loss. It is wrong that that power should be retained. Why should we put millions of pounds of taxpayers' money unnecessarily at risk?

Oil companies have faced enormous cost escalation. Steel costs have increased by between 50 and 80 per cent., and, as one of my hon. Friends pointed out, production platforms account for 40p in every £1 spent on offshore development. The cost of these platforms has doubled and in some cases trebled. In BP's Forties field, the cost of development has risen from £350 million to £700 million plus, and Brent and Ninian look like costing approximately £1,000 million each to develop.

Why should money be put at risk in this way when it can be provided by private concerns? But, of course, no one will invest this kind of money in such an area unless there is complete political stability, and in this regard there are those Government supporters who can take no credit from the fact that political stability in this country is not as strong as it once was.

The Secretary of State can hardly wonder that there is apprehension within the industry about the likely situation if the Bill goes through in its present form since he is one of those prepared to tear up a treaty signed by this country. It is no wonder that there is apprehension in this area.

The BNOC will be much more a creature of Government than any other nationalised industry. It is to be given much stronger powers of direction, and it will have two civil servants on its board. It was the right hon. Member for Orkney and Shetland (Mr. Grimond) who pointed out that there cannot be any other country west of the Iron Curtain where such a regulation exists.

There is no economic case for establishing a downstream BNOC function since distribution facilities, for example, in this part of the industry are more than adequate, and there is plenty of competition in that market. We accept the need for legislation, but we do not accept the need for it in this form. Control by a regulatory body with the Government having their share through the tax system seems much more realistic.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

Does not the hon. Gentleman accept that it is also in the national interest that BNOC and the public gain profits from the downstream activities which are currently denied the public?

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

There are ways in which the Government can take their profit without this type of participation. This is not an activity in which the Government should participate directly—

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

Because there is no necessity to commit public funds to this kind of investment when those public funds can he so much better used in other directions. The Bill has already created doubts and fears in the industry at a time when continuing high investment is essential.

My right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) and, later in the debate, another of my hon. Friends referred to the recent statement by Mr. Monty Pennell, the managing director of BP, in which he put forward the view that drilling could be reduced by as much as 60 per cent. in the coming year. The interesting feature is that he gave that view within a week of the Under-Secretary giving quite the contrary view in answer to a Question on 7th April, which hon. Members will find in col. 795 off the Official Report. It might be that the Government would benefit greatly if they listened to the advice of such people as Mr. Pennell rather than to some of the preconceived ideas being fed to them at present.

There is a great similarity between BNOC and NEB. It is interesting that the Paymaster-General should have given his opinion about the NEB in a letter to The Guardian on 6th June when he said: This will be the most powerful body in the country, more powerful within its field of activity even than the elected Government. BNOC is going to be even more powerful than that. During the Committee stage on the Bill we shall oppose strongly the passages in the Bill which are wholly distasteful to us, but we shall provide constructive opposition and endeavour to improve those parts, the principle of which we accept. The duty of the Opposition is to oppose, and this we shall do tonight. We cannot accept that Second Reading should be given to a Bill which includes a provision to establish a corporation which we believe to be wholly unnecessary, vastly expensive and completely undesirable. We shall vote against the Bill tonight.

9.31 p.m.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

It is my first pleasant duty to welcome the hon. Member for Ross and Cromarty (Mr. Gray) on his first appearance on the Opposition Front Bench in an energy debate. He said that the Opposition would look carefully at various matters in Committee. I noticed the difficulty that he got into in trying to argue with his hon. Friends whether the Conservative Party will vote for or against the Scottish Development Agency, but I hope we shall not waste time discussing that in the Committee stage of this Bill. The Government attempted to bring forward a Bill to set up the Scottish Development Agency but the Conservative Opposition stopped it from going to the Scottish Grand Committee. They had better make up their minds about their policy.

The hon. Gentleman repeated some of the mistakes of fact which have characterised the contributions of Conservative Members. The right hon. Member for Wanstead and Woodford (Mr. Jenkin) made one of his usual hyperbolic speeches this afternoon. One matter for which I had always given him credit was his careful attention to fact, but this afternoon he attempted to mislead the House by suggesting that Clause 10 contains an unusual and novel proposition about the non-disclosure of accounts showing whether there is a profit or loss. I remind him that precisely the same provision appears in Section 23 of the Gas Act 1972 which was passed by the Conservative Government at the time when the right hon. Member for Knutsford (Mr. Davies) was Secretary of State for Trade and Industry.

The hon. Member for Ross and Cromarty repeated the allegation, which was mentioned also by the right hon. Member for Wanstead and Woodford, that nowhere west of Communist countries are there official members on the boards of publicly-owned industries. In fact they exist in the Netherlands, Italy and Australia. In Norway, Statoil has Ministers on its supervisory board, and in France it is common practice to have civil servants on the boards of public corporations or companies in which the Government have a shareholding.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

Does the hon. Gentleman agree with the verdict of his colleague Lord Balogh that civil servants are not the right people to run this country?

Photo of Mr William Ross Mr William Ross , Kilmarnock

The right hon. Gentleman should stick to his own speech.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

The proposal in the Bill is that there be two official members on the board, without voting rights. The purpose of having them there is to allow for speedy communication between the Government and the board of the corporation. I should have thought that was a sensible proposal. We must never think that we have the structure of public corporations right. It is remarkable to hear the right hon. Member for Wanstead and Woodford putting forward arguments advanced by my noble Friend Lord Balogh in support of his argument.

We have had many criticisms from Conservative Members, based principally upon their ideological opposition to the extension of public enterprise in any form. One of the things that strikes me as curious about this House is that when the Labour Party brings forward proposals for public enterprise it is regarded as doing that in the cause of ideology, and so it is—[Interruption.] We bring forward proposals for public enterprise because we are Socialists. The Conservative Party opposes our proposals root and branch because it is the Conservative Party and believes in private ownership and control, but somehow that is not regarded as ideology of any sort.

A new obligation has come in. After listening to the speeches by Conservative Members today, as many hon. Members had to listen to them during the debates on the Oil Taxation Bill, one begins to wonder whether the Opposition properly understand that their rôle is that of Her Majesty's Loyal Opposition, not an Opposition promoted by the oil companies. We shall watch carefully when the Bill goes into Committee to see whether hon. Gentlemen opposite collect their oil company briefs in the corridor or whether they will be handed to them in the Committee room while they are discussing the Bill.

Photo of Mr Alexander Fletcher Mr Alexander Fletcher , Edinburgh North

Will the hon. Gentleman tell the House whether it is the exclusive right of the Government to have secret meetings and negotiations with oil companies while Members of the Opposition publicly discuss these matters in the House and in Committee with representatives of the oil companies?

Photo of Mr John Smith Mr John Smith , Lanarkshire North

The Government have had confidential meetings with the oil companies and considerable consultations. We are often told that we do not consult them enough. I am now informed, though I did not know it before, that the Opposition have had secret meetings with the oil companies. That is their business. What I object to is the repetition, tediously and at length, of oil company criticisms of legislation brought before the House. The function of Members of Parliament, when they receive representations from oil companies or other interests, is to pass them through the filter of their concept of the public interest before passing them on. That critical period is missed out by Conservative Members.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

If the Under-Secretary is referring to the debates on the Oil Taxation Bill, may I ask why the Treasury accepted almost every amendment that we put forward?

Photo of Mr John Smith Mr John Smith , Lanarkshire North

That is a gross misinterpretation of what happened. The right hon. Gentleman knows that it was on that Bill that the present tendency of the Conservative Party to repeat every oil company criticism was first manifested. We hope that during the progress of this Bill through the House they will not be so slavishly addicted to criticisms shoved into their hands by oil companies and will not be so adept at repeating any criticisms they can make of any public enterprise in this country.

It is surprising that Opposition Members should be so ignorant about what is going on in other parts of the world where there are offshore oil and gas resources. The impression seems to exist in the minds of some that participation is a feature only of OPEC countries. It is true of Norway, Canada, Australia and New Zealand and of EEC members with substantial oil or gas production—France, Italy, Holland, Ireland and Denmark. I should be surprised, since the Irish Government yesterday announced terms of 50 per cent. participation, that they should be regarded as advocates of red-blooded Socialism. They would not be easily recognised as such. Some countries participate in territories already licensed—for example, France, Italy, Holland and New Zealand.

The Government have to enter into negotiations with existing licence holders because such a botch was made of the 1971 licensing by the Conservative Government. The right hon. Member for Knutsford referred to this earlier. He was the Minister responsible for our policy at the crucial time between 1970 and 1972.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

The right hon. Gentleman made what I thought was an offensive reference to my right hon. Friend the Secretary of State for not paying close attention to the interests of the oil industry, as he put it. The right hon. Gentleman prayed in aid of his own defence the lack of controls, particularly over depletion policy. He said that there was no existing knowledge on which one could make assessments in 1971. I see that he still sticks to that view. That is surprising, since the substantial Ekofisk field, not far from the British sector, was discovered in 1969 and the Forties field was discovered in 1970. The oil companies were prepared to bid a total of £100 million in the 1971 round of licensing. If the right hon. Gentleman did not know that there was a lot of oil there, the oil companies, about which he is supposed to know, certainly knew.

Photo of Mr John Davies Mr John Davies , Knutsford

The Under-Secretary clearly demonstrates precisely the point I was making—that complete ignorance of the realities of the industry prevails in his Department. The truth is that the time from the point of discovery to the point of ascertainment of reserves is a long and arduous period. If the hon. Gentleman imagines that in 1971 the ascertainment of reserves was at a point at which one could count on a major production from the North Sea, he is wrong.

Hon. Members:

Withdraw.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

The right hon. Gentleman is rather unworthily suggesting that this is a party political argument got up simply to make a party political point. Let me remind him—[HON. MEMBERS: "It is your argument."] It is not only my argument. I am repeating an argument advanced by the Public Accounts Committee of this House. There were a large number of Conservative Members on that Committee—

Photo of Mr John Smith Mr John Smith , Lanarkshire North

— a majority, I am told, on the Committee—who did not dissent from conclusion No. 15, in which the Committee said: We are concerned that licences granted remain valid, without a break clause exercisable by the Department, for 46 years; and that there is no provision for variation or renegotiation of the financial terms, however, large the finds, or for obtaining a degree of government participation". That was the view of the PAC.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

If this is so obvious to the Under-Secretary, in the six years of licensing while the Labour Party was the Government why did they not alter the terms? What is certain is that they did not.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

Because all the rounds up until the fourth were thought to be concerned exclusively with gas. It was not until 1970 that there were substantial oil finds—

Photo of Mr John Smith Mr John Smith , Lanarkshire North

The Conservative Party cannot have it both ways. The right hon. Member for Knutsford says that there were not ascertainable oil discoveries until 1971. I am quite happy to be in the good company of the Public Accounts Committee. The hon. Member for Honiton (Mr. Emery), a former Minister in the Department of Energy, raised today the fact that under the second round drilling had not been completed. In fact, it was completed in 1971 when he was a Minister in the last Conservative Government.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

I am sorry that he was not. However, he should have discovered this fact after he became a Minister.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

It is important that the House should not misconstrue the paragraph that the Under-Secretary read from the report of the Public Accounts Committee. It has been perfectly clear all along—the Conservative Government recognised this and were about to act on it—[Interruption.] My right hon. Friend, the former Mr. Tony Barber, announced the proposals from the Government Dispatch Box. Taxation has always been reserved to the Government, and it would have been similarly reserved by the Conservative Government.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

We have heard this tale before. From 1972 until 1974 there was a remarkable period of inactivity. We are told variously that the Conservatives were moving towards the framing of their policy, moving steadily towards the framing of a policy, but we got no concrete proposals at all on taxation from the Conservative Party—

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Talk about the Bill.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

I should like to, but I have been too indulgent in giving way to the hon. Gentleman's hon. Friends. I will now turn, if they will allow me, to the substance of the Bill—

Photo of Mr John Smith Mr John Smith , Lanarkshire North

It will do not good the right hon. Gentleman shouting "Disgraceful"—

Photo of Mr John Davies Mr John Davies , Knutsford

But it is disgraceful.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

We are making up for the deficiencies of the right hon. Gentleman's policies when he was Secretary of State. He cannot shuffle off responsibility for the massive neglect which he and his colleagues showed and which we are now engaged in catching up in this legislation.

At the very centre of our proposals is the establishment of the British National Oil Corporation, which I am glad my right hon. Friend was able to announce will have its headquarters in the city of Glasgow. This will be a practical example of the devolution of decision-taking and follows the decision of the Department of Energy some time ago to site the headquarters of the Offshore Supplies Office in Glasgow.

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

Since the Under-Secretary is pursuing the theme that Scotland will benefit from the Offshore Supplies Office and the establishment of the BNOC, would he care to follow through that argument to its conclusion and say here and now what proportion of the oil revenues will be going to the Scottish Development Agency, especially in view of the question which he was asked earlier?

Photo of Mr John Smith Mr John Smith , Lanarkshire North

The hon. Gentleman is well aware of the Government's proposals about how the Scottish Development Agency is to be funded. He knows that it is to be funded by the Treasury. Since he raises the question of benefits to Scotland, let me remind him that 40,000 jobs in North Sea oil-related activities are already being launched in Scotland. If the hon. Gentleman has any concern for Scottish industry, he will stop advancing the argument that we should cut back production from 100 million tons to 40 million tons. That would kill stone dead the fast-developing offshore industry that exists at present in Scotland. [Interruption.]

I hope that Scottish National Party Members will let me be heard. If they want to cut back and destroy our offshore supply industry, I hope they will take themselves round the module yards, the platform building yards and all the engineering works and tell all the Scottish people why they want to put them out of jobs.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

Unfortunately there seems to be some misapprehension on the part of the Opposition about why the Government have moved towards participation. I should have thought that a look around the countries I have already mentioned would indicate that this is desirable. It seems necessary to spell out clearly to the Opposition why we are adopting a policy of participation, for which the British National Oil Corporation provides the framework. It is a pity that the Opposition are totally obsessed with the rights of private property, to the extent that foreign property rights become more important than British national interests. In their unreasoning aversion to public enterprise they cast out these proposals without examining them closely.

I shall spell out clearly the reasons why the Government wish to have participation through the British National Oil Corporation. First, it will give this nation a direct right to the oil extracted from our own sea bed. Oil underground belongs to the nation, but once it is extracted it becomes the property of the licensee. Under participation we shall gain a right in the property and a say in the disposal of our own oil. Through the British National Oil Corporation we shall acquire our own direct knowledge of the difficult techniques of oil and gas production. That will make our policies much better informed. Perhaps with that knowledge and information we shall avoid the mistakes made by the right hon. Member for Knutsford.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

Will the Minister tell the House what figure the Government have put on the cost of 51 per cent. participation in the present investment in the North Sea.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

We have not completed the negotiations with the oil companies. The hon. Gentleman knows that very well. He knows what we are doing. My right hon. Friend has already announced those companies which have conceded the principle of participation. Negotiations are proceeding with these licence holders. [Interruption.] I should like to get on with the Bill. I have given way more than most closing speakers do.

Through the British National Oil Corporation and participation, we can engage profitably as a nation in the exploitation of our own resources. In future licensing rounds it will be possible for the BNOC to be the majority holder and in some cases the sole licensee. In those cases the return to the nation and the benefit to our own citizens and to our own taxpayers will be that of the owner as well as that of the tax collector. Why our ratepayers and taxpayers would wish to miss the opportunity of gaining that extra profit for the nation, I cannot understand. Perhaps most important of all, we shall gain for this country an independent capability in oil and gas production which will reduce our dependence upon international and other oil companies.

Throughout the argument over the past year on the structure of taxation, excess profits and the wider question of how we advance the development of our own oil and gas resources, we have been constantly reminded by the Opposition that we must be extremely careful not to offend the major international oil companies. We have been told that if we taxed them too much, or if we advanced our proposals for participation with the self-confidence that we do, they might get up and go. We were given graphic descriptions of all the places in the world to which the major oil companies, if they did not approve of the policy of Her Majesty's Government, would go.

The House has heard those arguments time and time again. Have Conservative Members not understood the real meaning of such an argument? Why did we get ourselves into such a position? The constant reiteration of the argument that we are not masters in our own house is eloquent testimony to the need to become masters in our own house. That is what the Government will achieve through majority participation.

The form we have adopted allows us to enter into partnership with the existing oil companies. The skill and courage they have shown in tackling the immense problems in wresting oil and gas from one of the most hostile territories in the world demand universal praise. We shall continue to seek their assistance and expertise to develop our new-found wealth. We seek a partnership with them now and in the future, and we wish them to find a profitable outlet for their skills and resources. But we insist, as I should have thought any Government conscious of their responsibilities to the nation must, that we have effective control and secure national benefit. We want a partnership, but it should not be the partnership of the horse and the rider. We want co-operation with them both over the matter of the exploitation of our resources and in the sharing of the benefit.

Opposition Members have suggested that it will not be possible to have effective co-operation between publicly-owned and privately-owned companies. That flies in the face of the facts about the North Sea. The National Coal Board is already a partner with Conoco and Gulf in a number of fields in the North Sea.

The British Gas Corporation, which has a very good record of exploration and development on our Continental Shelf, is in partnership with Amoco and some other American companies. Those companies have paid tribute after tribute, well-deserved, to the activities of the National Coal Board and the British Gas Corporation.

Photo of Mr John Smith Mr John Smith , Lanarkshire North

I shall not give way. The right hon. Gentleman cannot complain that I have been ungenerous in giving way to him and his hon. Friends.

An important part of the Bill is to be found in Parts II and III, in the additional controls which the Government propose. There has been constant criticism of the way in which these licences were left by the Conservatives in the 1971 licensing round. Let me remind the House of some of the defects, some of the gaps in the controls that the Government possess. First, we have no control over the rate of depletion. That is probably the most important issue we have to decide for future policy—the husbanding of our resources. There are no controls in licences which run for 46 years. If we made no changes we should not be able to affect them until 2018. That is a massive neglect of the national interest.

There is no requirement for continuing exploration for 40 out of the 46 years of the licences' life. There is no control over ownership of licences. As the Public Accounts Committee pointed out, there is insufficient information on both the technical aspects of exploitation and the cost. There are gaps in the safety provisions for the laying of pipelines, for example, which were not covered in the Mineral Workings (Offshore Installations) Act 1971.

We are closing those serious gaps in the Government's proper aspirations for control over development in the North Sea. The right hon. Gentleman does not want the Government to have these controls. We shall no doubt go into the matter carefully in Committee. The right hon. Gentleman wants a United Kingdom oil conservation authority, an independent body. Such an independent body would not be under Government control. For balance of payments reasons and all sorts of other reasons, it is necessary for there to be Government control. If there were to be overall Government control, the independence of such a body would be greatly weakened. It is difficult for the right hon. Gentleman to have it both ways.

Many points were raised which I hope will be examined in Committee. I hope that the Opposition will rise to the challenge in Comittee, not only looking from the point of view of the industry, legitimate though its interest may often be, but try to balance, in the presentation of their arguments, the public interest with the interest of the oil companies, their friends. That is certainly the view we are trying to take in creating a balance between the legitimate needs of the industry and the national interest.

However, it is important in this major piece of legislation, which will bring in participation and additional controls, that we do not underrate the importance of the subject. North Sea oil and gas represent a massive increase in the nation's wealth. It has been properly said by hon. Members on both sides of the House that it is not a bonanza which will allow us to escape from our economic problems and difficulties, but it is a massive increase in our wealth and it could hardly have come at a better time.

By our actions we are reversing the neglect of the Conservatives on the question of energy resources. It is not just a question of oil and gas. The Tories left the coal industry in a parlous condition, and we have now embarked upon a major expansion. They dodged taking a decision on nuclear policy for two years in exactly the same way as they dodged taking a decision on oil policy. Now we are the closest we have probably ever been to a co-ordinated energy policy. We cannot in these circumstances sit back and let the events over oil and gas take their course in the lazy laissez-faire manner of the Conservatives.

We need to have guarantees of public control and public benefit over such a vital resource. One would have thought that it was obvious to every producer country in the world, except the United States, that participation should be followed. However the blinkered ideologues of the Conservative Party cannot see past their own aversion to public ownership.

In this important Bill we seek to assert the controls that will give the nation a real say in the development of its own resources. We also seek a fair return for the citizens of this country from their own assets. I hope that the Bill, together with the Oil Taxation Bill, which is awaiting Royal Assent, will be seen as the end of a period of neglect and negligence during which we allowed control over our most important oil and gas resources to pass outwith this nation and its elected Government and Parliament. I hope that this will be seen as the start of a new period in the development of our energy policy, in which the British people assert their proper right to full control over the assets under our seas and secure a fair return from those riches.

We have listened today-[HON. MEMBERS: "So have we."] Hon. Members

must recognise that there is a difference between listening and listening and learning. There is not much evidence that the Conservatives have done the latter.

The Bill is an important feature of the Government's economic strategy because under its provisions the British Government will not be thought of as merely a passive tax collector: they will become the owner of a large share of this wealth. As such they will be able to harness the benefits and husband them, too, for the future of this country and its citizens. It is because of this important principle above all that I ask the House to be confident in giving the Bill a Second Reading tonight.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 286, Noes 258.

Division No. 195.]AYES[10.0 p.m.
Anderson, DonaldCrawshaw, RichardGraham, Ted
Archer, PeterCronin, JohnGrant, George (Morpeth)
Armstrong, ErnestCryer, BobGrant, John (Islington C)
Ashley, JackCunningham, G. (Islington S)Grocott, Bruce
Ashton, JoeCunningham, Dr J. (Whiteh)Hamilton, James (Bothwell)
Atkins, Ronald (Preston N)Davidson, ArthurHamilton, W. W. (Central Fife)
Atkinson, NormanDavies, Bryan (Enfield N)Hardy, Peter
Bagier, Gordon A. T.Davies, Denzil (Llanelli)Harper, Joseph
Barnett, Guy (Greenwich)Davies, Ifor (Gower)Harrison, Walter (Wakefield)
Barnett, Rt Hon Joel (Heywood)Davis, Clinton (Hackney C)Hart, Rt Hon Judith
Bates, AlfDeakins, EricHattersley, Rt Hon Roy
Bean, R. E.Dean, Joseph (Leeds West)Hatton, Frank
Benn, Rt Hon Anthony Wedgwoodde Freitas, Rt Hon Sir GeoffreyHayman, Mrs Helene
Bennett, Andrew (Stockport N)Delargy, HughHenderson, Douglas
Bidwell, SydneyDell, Rt Hon EdmundHooley, Frank
Bishop, E. S.Dempsey, JamesHoram, John
Blenkinsop, ArthurDoig, PeterHowell, Denis (B'ham, Sm H)
Boardman, H.Douglas-Mann, BruceHoyle, Doug (Nelson)
Booth, AlbertDuffy, A. E. P.Huckfield, Les
Boothroyd, Miss BettyDunn, James A.Hughes, Rt Hon C. (Anglesey)
Bottomley, Rt Hon ArthurDunnett, JackHughes, Mark (Durham)
Boyden, James (Bish Auck)Dunwoody, Mrs GwynethHughes, Robert (Aberdeen N)
Bradley, TomEadie, AlexHughes, Roy (Newport)
Bray, Dr JeremyEdge, GeoffHunter, Adam
Broughton, Sir AlfredEdwards, Robert (Wolv SE)Irvine, Rt Hon Sir A. (Edge Hill)
Brown, Hugh D. (Provan)Ellis, Tom (Wrexham)Irving, Rt Hon S. (Dartford)
Brown, Robert C. (Newcastle W)English, MichaelJackson, Colin (Brighouse)
Brown, Ronald (Hackney S)Ennals, DavidJackson, Miss Margaret (Lincoln)
Buchan, NormanEvans, Fred (Caerphilly)Janner, Greville
Butler, Mrs Joyce (Wood Green)Evans, Gwyntor (Carmarthen)Jay, Rt Hon Douglas
Callaghan, Jim (Middleton & P)Evans, loan (Aberdare)Jeger, Mrs Lena
Campbell, IanEvans, John (Newton)Jenkins, Hugh (Putney)
Canavan, DennisEwing, Harry (Stirling)Jenkins, Rt Hon Roy (Stechford)
Cant, R. B.Fernyhough, Rt Hon E.John, Brynmor
Carmichael, NeilFitch, Alan (Wigan)Johnson, James (Hull West)
Carter, RayFlannery, MartinJohnson, Walter (Derby S)
Carter-Jones, LewisFletcher, Raymond (Ilkeston)Jones, Alec (Rhondda)
Cartwright, JohnFletcher, Ted (Darlington)Jones, Barry (East Flint)
Castle, Rt Hon BarbaraFord, BenJones, Dan (Burnley)
Clemitson, IvorForrester, JohnJudd, Frank
Cocks, Michael (Bristol S)Fraser, John (Lambeth, N'w'd)Kaufman, Gerald
Cohen, StanleyFreeson, ReginaldKelley, Richard
Colquhoun, Mrs MaureenGarrett, John (Norwich S)Kerr, Russell
Cook, Robin F. (Edin C)Garrett, W. E. (Wallsend)Kilroy-Silk, Robert
Corbett, RobinGilbert, Dr. JohnKinnock, Neil
Cox, Thomas (Tooting)Ginsburg, DavidLambie, David
Craigen, J. M. (Maryhill)Golding, JohnLamborn, Harry
Crawford, DouglasGould, BryanLamond, James
Leadbitter, TedOwen, Dr DavidStott, Roger
Lee, JohnPadley, WalterStrang, Gavin
Lestor, Miss Joan (Eton & Slough)Palmer, ArthurStrauss, Rt Hon G. R.
Lever, Rt Hon HaroldPark, GeorgeSummerskill, Hon Dr Shirley
Lewis, Arthur (Newham N)Parry, RobertTaylor, Mrs Ann (Bolton W)
Lipton, MarcusPavitt, LaurieThomas, Jeffrey (Abertillery)
Litterick, TomPearl, Rt Hon FredThomas, Mike (Newcastle E)
Lomas, KennethPendry, TomThomas, Ron (Bristol NW)
Loyden, EddiePerry, ErnestThompson, George
Luard, EvanPhipps, Dr ColinThorne, Stan (Preston South)
Lyon, Alexander (York)Prentice, Rt Hon RegTierney, Sydney
Lyons, Edward (Bradford W)Prescott, JohnTinn, James
Mabon, Dr J. DicksonPrice, C. (Lewisham W)Tomlinson, John
McElhone, FrankPrice, William (Rugby)Tomney, Frank
MacFarquhar, RoderickRadice, GilesTorney, Tom
McGuire, Michael Ince)Reid, GeorgeUrwin, T. W.
Mackintosh, John P.Richardson, Miss JoVarley, Rt Hon Eric G.
Maclennan, RobertRoberts, Albert (Normanton)Wainwright, Edwin (Dearne V)
McMillan, Tom (Glasgow C)Roberts, Gwilym (Cannock)Walden, Brian (B'ham, L'dyw'd)
McNamara, KevinRobertson, John (Paisley)Walker, Harold (Doncaster)
Madden, MaxRoderick, CaerwynWalker, Terry (Kingswood)
Mahon, SimonRodgers, William (Stockton)Ward, Michael
Marquand, DavidRooker, J. W.Watkins, David
Marshall, Dr Edmund (Goole)Roper, JohnWatkinson, John
Marshall, Jim (Leicester S)Rose, Paul B.Weetch, Ken
Mason, Rt Hon RoyRoss, Rt Hon W. (Kilmarnock)Weitzman, David
Maynard, Miss JoanRowlands, TedWellbeloved, James
Meacher, MichaelRyman, JohnWelsh, Andrew
Mellish, Rt Hon RobertSandelson, NevilleWhite, Frank R. (Bury)
Mendelson, JohnSedgemore, BrianWhite, James (Pollok)
Mikardo, IanSelby, HarryWhitehead, Phillip
Millan, BruceShaw, Arnold (Ilford South)Whitlock, William
Miller, Dr M. S. (E Kilbride)Sheldon, Robert (Ashton-u-Lyne)Willey, Rt Hon Frederick
Miller, Mrs Millie (Ilford N)Shore, Rt Hon PeterWilliams, Alan (Swansea W)
Mitchell, R. C. (Soton, Itchen)Short, Rt Hon E. (Newcastle C)Williams, Alan Lee (Hornch'ch)
Moonman, EricShort, Mrs Renée (Wolv N)Williams, Rt Hon Shirley (Hertford)
Morris, Alfred (Wythenshawe)Silkin, Rt Hon John (Deptford)Williams, W. T. (Warrington)
Morris, Charles R. (Openshaw)Silkin, Rt Hon S. C. (Dulwich)Wilson, Alexander (Hamilton)
Morris, Rt Hon J. (Aberavon)Sillars, JamesWilson, Gordon (Dundee E)
Moyle, RolandSilverman, JuliusWise, Mrs Audrey
Mulley, Rt Hon FrederickSkinner, DennisWoodall, Alec
Murray, Rt Hon Ronald KingSmall, WilliamWoof, Robert
Newens, StanleySmith, John (N Lanarkshire)Wrigglesworth, Ian
Noble, MikeSnape, PeterYoung, David (Bolton E)
Ogden, EricSpearing, Nigel
O'Halloran, MichaelSpriggs, LeslieTELLERS FOR THE AYES:
O'Malley, Rt Hon BrianStewart, Donald (Western Isles)Mr. Jack Dormand and
Orbach, MauriceStewart, Rt Hon M. (Fulham)Mr. John Ellis.
Ovenden, JohnStoddart, David
NOES
Adley, RobertButler, Adam (Bosworth)Finsberg, Geoffrey
Aitken, JonathanCarlisle, MarkFisher, Sir Nigel
Alison, MichaelCarr, Rt Hon RobertFletcher, Alex (Edinburgh N)
Amery, Rt Hon JulianChalker, Mrs LyndaFletcher-Cooke, Charles
Arnold, TomChannon, PaulFookes, Miss Janet
Atkins, Rt Hon H. (Spelthorne)Churchill, W. S.Fowler, Norman (Sutton C'f'd)
Awdry, DanielClark, Alan (Plymouth, Sutton)Fox, Marcus
Baker, KennethClark, William (Croydon S)Fraser, Rt Hon H. (Stafford & St)
Banks, RobertClarke, Kenneth (Rushcliffe)Freud, Clement
Beith, A. J.Clegg, WalterGalbraith, Hon T. G. D.
Bell, RonaldCockcroft JohnGardner, Edward (S Fylde)
Bell, RonaldCope, JohnGilmour, Rt Hon Ian (Chesham)
Bennett, Sir Frederic (Torbay)Cormack, PatrickGilmour, Sir John (East Fife)
Bennett, Dr Reginald (Fareham)Corrie, JohnGlyn, Dr Alan
Benyon, W.Costain, A. P.Godber, Rt Hon Joseph
Berry, Hon AnthonyCritchley, JulianGoodhart, Philip
Biffen, JohnCrouch, DavidGoodhew, Victor
Biggs-Davison, JohnCrowder, F. P.Goodlad, Alastair
Blaker, PeterDavies, RI Hon J. (Knutsford)Gorst, John
Body, RichardDean, Paul (N Somerset)Gow, Ian (Eastbourne)
Boscawen, Hon RobertDouglas-Hamilton, Lord JamesGower, Sir Raymond (Barry)
Bowden, A. (Brighton, Kemptown)Drayson, BurnabyGray, Hamish
Boyson, Dr Rhodes (Brent)du Cann, Rt Hon EdwardGrieve, Percy
Braine, Sir BernardDurant, TonyGriffiths, Eldon
Brittan, LeonDykes, HughGrimond, Rt Hon J.
Brotherton, MichaelEden, Rt Hon Sir JohnGrist, Ian
Brown, Sir Edward (Bath)Edwards, Nicholas (Pembroke)Grylls, Michael
Bryan, Sir PaulEmery, PeterHall, Sir John
Buchanan-Smith, AlickEyre, ReginaldHall-Davis, A. G. F.
Buck, AntonyFairbairn, NicholasHamilton, Michael (Salisbury)
Budgen, NickFairgrieve, RussellHampson, Dr Keith
Bulmer, EsmondFarr, JohnHannam, John
Burden, F. A.Fell, Anthony
Harrison, Col Sir Harwood (Eye)Marten, NeilScott-Hopkins, James
Harvie Anderson, Rt Hon MissMates, MichaelShaw, Giles (Pudsey)
Havers, Sir MichaelMather, CarolShaw, Michael (Scarborough)
Hawkins, PaulMaude, AngusShelton, William (Streatham)
Hayhoe, BarneyMawby, RayShepherd, Colin
Heseltine, MichaelMayhew, PatrickShersby, Michael
Hicks, RobertMeyer, Sir AnthonySilvester, Fred
Higgins, Terence L.Miller, Hal (Bromsgrove)Sims, Roger
Holland, PhilipMills, PeterSinclair, Sir George
Hooson, EmlynMiscampbell, NormanSkeet, T. H. H.
Hordern, PeterMitchell, David (Basingstoke)Smith, Cyril (Rochdale)
Howe, Rt Hon Sir GeoffreyMonro, HectorSmith, Dudley (Warwick)
Howell, David (Guildford)Montgomery, FergusSpeed, Keith
Howell, Ralph (North Norfolk)Moore, John (Croydon C)Spence, John
Howells, Geraint (Cardigan)Morgan, GeraintSpicer, Jim (W Dorset)
Hunt, JohnMorgan-Giles, Rear-AdmiralSpicer, Michael (S Worcester)
Hurd, DouglasMorris, Michael (Northampton S)Sproat, Iain
Hutchison, Michael ClarkMorrison, Charles (Devizes)Stainton, Keith
Irving, Charles (Cheltenham)Morrison, Hon Peter (Chester)Stanbrook, Ivor
Jenkin, Rt Hon P. (Wanst'd&W'dt'd)Mudd, DavidStanley, John
Jessel, TobyNeave, AireySteel, David (Roxburgh)
Johnson Smith, G. (E Grinstead)Nelson, AnthonySteen, Anthony (Wavertree)
Jones, Arthur (Daventry)Neubert, MichaelStewart, Ian (Hitch'n)
Jopling, MichaelNewton, TonyStokes, John
Joseph, Rt Hon Sir KeithNormanton, TomStradling Thomas, J.
Kaberry, Sir DonaldNott, JohnTapsell, Peter
Kellett-Bowman, Mrs ElaineOnslow, CranleyTaylor, R. (Croydon NW)
Kershaw, AnthonyOsborn, JohnTaylor, Teddy (Cathcart)
Kimball, MarcusPage, John (Harrow West)Tebbit, Norman
King, Evelyn (South Dorset)Page, Rt Hon R. Graham (Crosby)Temple-Morris, Peter
King, Tom (Bridgwater)Pardoe, JohnThatcher, Rt Hon Margaret
Kirk, PeterPattie, GeoffreyThomas, Rt Hon P. (Hendon S)
Kitson, Sir TimothyPercival, IanTownsend, Cyril D.
Knight, Mrs JillPeyton, Rt Hon JohnTrotter, Neville
Knox, DavidPink, R. BonnerTugendhat, Christopher
Lamont, NormanPrior, Rt Hon Jamesvan Straubenzee, W. R.
Lane, DavidRaison, TimothyVaughan, Dr Gerard
Langford-Holt, Sir JohnRathbone, TimViggers, Peter
Latham, Michael (Melton)Rawlinson, Rt Hon Sir PeterWainwright, Richard (Colne V)
Lawrence, IvanRees, Peter (Dover & Deal)Wakeham, John
Lawson, NigelRees-Davies, W. R.Walker-Smith, Rt Hon Sir Derek
Le Marchant, SpencerRenton, Rt Hon Sir D. (Hunts)Wall, Patrick
Lester, Jim (Beeston)Renton. Tim (Mid-Sussex)Walters, Dennis
Lewis, Kenneth (Rutland)Rhys Williams, Sir BrandonWarren, Kenneth
Lloyd, IanRidley, Hon NicholasWeatherill, Bernard
Loveridge, JohnRidsdale, JulianWells, John
Luce, RichardRifkind, MalcolmWhitelaw, Rt Hon William
McAdden, Sir StephenRippon, Rt Hon GeoffreyWiggin, Jerry
McCrindle, RobertRoberts, Wyn (Conway)Winterton, Nicholas
Macfarlane, NeilRoss, Stephen (Isle of Wight)Wood, Rt Hon Richard
MacGregor, JohnRossi, Hugh (Hornsey)Young, Sir G. (Ealing, Acton)
Macmillan, Rt Hon M. (Farnham)Rost, Peter (SE Derbyshire,
McNair-Wilson, M. (Newbury)Royle, Sir AnthonyTELLERS FOR THE NOES:
McNair-Wilson, P. (New Forest)Sainsbury, TimMr. Cecil Parkinson and
Madel, DavidScott, NicholasMr. Michael Roberts.
Marshall, Michael (Arundel)

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).