North Sea Oil

– in the House of Commons at 12:00 am on 6th July 1979.

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11.6 a.m.

Photo of Peter Viggers Peter Viggers , Gosport

I beg to move, That this House believes that the Government should encourage initiatives to ensure that the opportunities for new investment and greater productivity in the long term in British industry and business provided by the exploitation and financial return from North Sea oil are fully realised. I wish, as the preamble to the motion states, To call attention to the challenge of North Sea oil and the opportunities presented for investment and improvement of the long-term prospects of the British economy. I have for some years specialised in this subject, and, indeed, my maiden speech was on the proper use of North Sea oil resources. Before I came to Parliament I was a director of an oil company, and have retained that interest which has given me some specialist knowledge of the subject.

It is a proper subject for the House to debate.

Coal shaped the environment of this country in the late eighteenth century and early nineteenth century during the industrial revolution. Oil and gas can perform a similar function. It is the second debate on the subject that I have instituted in the past six months. The first was last December. That was overshadowed by the remarks of the then Secretary of State for Energy, the right hon. Member for Bristol, South-East (Mr. Benn), who made comments about the nationalisation of North Sea oil and British Petroleum. I hope that this debate will enable right hon. and hon. Members to express their long-term views on that priceless, nonpolitical asset.

"The Challenge of North Sea Oil" is the title of a Labour Government White Paper produced in March 1978. It has never been debated, which is surprising, even amazing, considering the importance of the subject. However, there is a reason for that. The White Paper says nothing special about the North Sea oil resources but is designed to say everything to everyone. It is riddled with logical inconsistencies and non sequiturs. It comes down on every side of every fence, rambling on about a new approach to industrial relations on one page, a socially just society on another and a permanent return to full employment on another. All the points are well meaning but have little to do with North Sea oil and its recovery. It is flabby and vague. It read like the first draft of the Labour Party manifesto.

The Prime Minister of the day was frank enough to refer to rebuilding the east end of Glasgow when he presented the White Paper to the House of Commons. Hon Members who were here then will remember that there was a by-election pending at Glasgow, Garscadden and some people were cynical enough to feel that this had some connection with the Prime Minister's reference. It added insult to injury when the taxpayer had to pay the cost of this first draft of the Labour Party manifesto because it was presented under the guise of a Government White Paper.

Later when he was asked for a debate on oil revenue, the then Leader of the House said in a reference to North Sea oil revenues: That mater is being constantly debated in the House, including debates now proceeding on the Budget."—[Official Report, 13 April 1978; Vol. 947. c. 1675.] I feel that the subject is broad enough to merit its own debates. We need a wider ranging debate throughout the country. This is not a debate on the immediate and pressing issues of petrol prices and distribution—they form one small aspect of the long-term issues posed by energy production and supply. I hope that this will be a debate about the energy implications of North Sea oil and gas and the industrial and financial opportunities which they offer.

The broad trend of energy consumption is upwards throughout the world. Until recently the level of a nation's industrial sophistication was measured in terms of its energy consumption. The more it used the more it was deemed to be an industrially sophisticated society. Only recently have we applied serious thought to energy conservation.

In this long-term pattern of energy growth, both in supply and use, there are hiccups in the upward trend. As supply and production and demand change slightly, so there will be short term problems. At present we are experiencing a short-term problem with the aftermath of the revolution in Iran being followed by a shortage of petroleum products generally. This has given the opportunity to the OPEC countries to increase the price of petroleum products. However, in my view, these short-term problems are as nothing compared with the longer-term supply and demand imbalance. We should not be distracted from the longer-term view by the short-term problems. It is quite misleading for anyone to suggest that we could intervene and solve the problems. All this would do is mask the symptoms of the longer-term problem. A policy of allowing prices to increase is not easy or popular, but in the short term it is right. It is our duty to make this clear.

It is completely misleading for anyone to say, as the right hon. Member for Bristol, South-East said recently: Most of the present oil shortage could have been avoided if the Government had used powers of supervision which it inherited from Labour, over supply, pricing and distribution of oil. This is completely misleading, as there is no real alternative to the stark choice facing us. My hon. and learned Friend the Minister of State, Treasury pointed this out the other night when he said that there were two alternatives in the attempt to reduce oil consumption by 5 per cent—to introduce rationing, or to leave it to the interplay of market forces. He went on to say that the balance between supply and demand would be set at quite a different point from the one at which it was four months ago. It is indeed a stark choice, and it is right that the British people should face it.

We are fortunate in the United Kingdom in that we have our own supplies of coal, gas and oil. We maintain a lead in nuclear power as well. We have an opportunity and a challenge. It is worth remembering that once we are self-sufficient in oil after 1980–81 any increases in oil and gas prices will reflect to our benefit rather than our disadvantage. Although the oil revenues represent only 3 to 4 per cent. of our GNP, they are particularly important because this percentage is incremental. Also it is occurring in a new industry, thus giving us an opportunity for new investment and reshaping the environment in the appropriate areas.

However, United Kingdom self-sufficiency should not blind us to the problems, and I shall name three. The first is that the oil and gas resources are finite. This is an arguable point. There are more reserves in the world than we have really begun to identify. Many are in inaccessible and hostile environments. If the price is right, these will be exploited and that is why we must not interfere with the proper functioning of market forces. But these undiscovered resources are not infinite and it will be expensive to exploit them. The costs will increase on a sliding scale, and as the cost increases so it will become more worthwhile to develop them. Nevertheless, I must reiterate that Britain's oil and gas resources are scheduled to last about 30 years, depending on recovery techniques, price and so on.

Secondly, we must not forget that if we are self-sufficient in oil and gas, there are other countries less fortunate, particularly in the Third world. We may run short of fuel on a short-term basis, and that may be inconvenient and damaging to business. But where the line between life and survival is narrow, people in underdeveloped countries may starve, and the general slow-down in trade, resulting from energy disruption, could distort their markets for their crops.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

Is that not a direct result of what the hon. Member supports—allowing the free market forces to take sway?

Photo of Peter Viggers Peter Viggers , Gosport

The hon. Member must recognise that oil and gas are international industries and there are only two choices facing us. The first is to monitor these resources on an international basis, which is completely unrealistic and I have not heard anyone put it forward as a serious proposal. The second is to allow market forces to operate. There is really no choice. Of course, one can moderate the severity of such policy by giving aid to certain countries, and one should do that, but to try to maintain that a pattern can be superimposed on world supply and demand is quite unrealistic.

Thirdly, we must face the economic problems which result from the wealth that we have. Our wealth means that the value of our currency has increased, and this means that there is a danger of our exports being uncompetitive. In my view, there is a case for exchange control regulations which will enable overseas investments to take place and will keep the value of our currency within reasonable bounds.

Faced with these alternatives, what should we do? Should we allow market forces to take over, or should we plan for the future? There are some people who say that market forces should be allowed complete freedom. I have seen a survey by a leading world oil company which claims that there are enough reserves of oil and gas in the world to last another 100 years and that if market forces are allowed to operate oil companies will move in and develop these reserves. If they are constrained, they will not be able to do so. It takes so long to develop new energy resources that it is not realistic to imagine that the whole future of energy planning can be left to private enterprise. Clearly, there must be compromise between those who believe in market forces and those who believe in planning. It takes about 30 years to bring on a new energy source. It is our duty to avoid future disruption in supply and a fortiori it is our duty to avoid long-term shortage.

I quote Dr. Walter Marshall who was Government chief scientist in 1976, who said this of planning: The one thing we can be certain about the future is that any closely defined view of energy will be wrong in the event. We must seek to keep open as many energy technologies as we can, any of which might prove important under particular circumstances. What plans fit this general pattern, both for the development of North Sea oil and gas and for the funds generated from them? There is no subject on which the long-term needs of Britain and the world are so liable to conflict with short-term popularity. This is a subject which has no immediate political impact in the country, except when it affects people through their immediate supply and demand. Therefore, it requires a long-term view and political courage.

I pay tribute to my right hon. Friend the Prime Minister, who was prepared to make it clear that she saw no alternative but a dramatic increase in the amount of nuclear power generation in this country. This is not a popular thing to say in some circles, but it is true that there is no clear alternative now to a diminution in our dependence on oil and gas and an expansion of nuclear generation. On a long-term basis we must reduce our reliance on oil and gas.

It is a paradox that the Labour Party, which tends to think of itself as the party of planning, has done so little to plan our energy future. On the other hand, the Conservative Party, in only a short period in government, has already taken steps to do something about future energy supply.

Photo of Mr Allen McKay Mr Allen McKay , Penistone

Since the hon. Gentleman is dealing with planning, does he not agree that it is about time we planned our energy resources to bring all these matters under one umbrella and to have a co-ordinated fuel policy which will use the best fuel in the best possible way?

Photo of Peter Viggers Peter Viggers , Gosport

The hon. Gentleman puts forward, with clarity and brevity, a policy which was stated to be the policy of the Labour Government, but they did nothing about it. There were infinite conferences, consultations, discussions and meetings. But what happened when it came to planning nuclear generation? The nuclear power generation industry was crying out for a clear Government lead, but for years nothing happened, until eventually the former Secretary of State for Energy, the right hon. Member for Bristol, South-East, gave the go-ahead for two AGR stations and a conditional go-ahead for one PWR station. They talked about planning, but did not actually carry it out.

I maintain that planning has a place in energy strategy, but to maintain that one can impose a blueprint on the project misunderstands human nature and the ability of private enterprise. It also over-estimates the ability in Whitehall and the nationalised industries to give a complete lead on a long-term blueprint basis.

We must recognise an energy dimension. I must tread carefully on ground which may cause my hon. Friend the Financial Secretary to be concerned. Nothing causes a Treasury Minister to be less happy than mention of the hypothecation of income. It is a question whether it is right to have an energy dimension in our oil and gas planning and of the funds connected therewith.

I speak with some diffidence, and I would not dare put forward such a proposal myself, but I have before me in the Financial Times no less an authority than Samuel Brittan. Yesterday in that journal he wrote in extreme language about the hypothecation of income. It was language that I would not dare use. The article reads: The conventional discussion assumes that the oil revenues are at the disposal of the Chancellor to use responsibly by reducing the Budget deficit or irresponsibly by cutting the basic income tax rate to 25 per cent. But they are not in fact that kind of revenue at all. They are an economic rent collected from the North Sea companies in return for being allowed to exploit a highly profitable national resource … The Treasury's objection to hypothecation of revenue' was invented long before it became a landlord—or rather the landlord's agent—for the North Sea; and no longer has force today. To muddle together the management of North Sea revenues with the rest of the Budget, is as detrimental to the Chancellor's own fiscal control as it is to outsiders trying to assess his conduct of affairs. North Sea oil is merely part of the national income which has to pass through the Chancellor's hands for considerations of convenience. My hon. Friend the Financial Secretary well knows that Samuel Brittan is paddling his own canoe—a canoe which he originally launched in Lloyds Bank Review in April 1978. He then proposed North Sea oil units which could be distributed to people in this country.

I do not agree with Mr. Brittan in his proposal, but buried within it is an interesting idea which I look at in a rather different way. I regard the oil and gas in the North Sea as a capital asset and believe that it should be regarded as capital to be reinvested rather than spent as revenue. I should like to see a capital element in the planning of the funds from the North Sea. I should like to be sure that no Government will use the funds from the North Sea as if they were part of Government revenue to be spent without reference to the longer term.

We have the national oil account which gives us the figures, but it would be interesting to know whether the Government have had time to examine the application of North Sea funds, and whether that further examination would serve any useful purpose. The Labour Government, in their White Paper "The Challenge of North Sea Oil," said, in paragraph 59, that they would bring forward a paper each year to show how successful the Government had been in applying the funds along the lines of the White Paper. However, there is no point in following that procedure because that White Paper was so vague and meaningless in its terms that to report on progress would be a waste of time.

It is interesting to bring in another parallel. United Kingdom companies have to include in their balance sheet a statement which is called "The source and application of funds". That statement shows where assets and funds have come from and how they have been applied. I believe that it might be helpful if a statement comparable to that was included in national budgeting to show the extent to which our longer-term capital and energy objectives have been met in the preceding year.

A third point on planning relates to the control of oil and gas depletion rates. I enter a plea for Government control of some kind over the way in which oil and gas are controlled. Oil and gas companies have their own reasons for wishing oil and gas to be developed quickly. It is a complicated point, but oil companies tend to have a high depletion rate amounting to about 25 per cent. From a company's point of view, it is worth proceeding as quickly as possible to develop an oilfield and to cap it off and then move on, using the money which it has made so far but leaving some of the resources in the ground. I am confident that no Government will allow this to happen because the resources are of a finite nature. No Government will allow an oil company to behave in such a profligate and short-term way.

Photo of Peter Viggers Peter Viggers , Gosport

It is to the benefit of this country that we should have as much discovery of oil and gas as soon as possible, but it is against the interests of the oil companies to discover the oil without having some kind of production plan. One thinks of the possibility of a scheme to enable oil companies to proceed with seismic development, and perhaps initial exploration, with some kind of State backing to enable them to do that, with the assurance that they will not lose in the long term if oil and gas should be found. One might have thought until this morning of the example of the United States strategic reserve, but that reserve, which would have encouraged oil companies to develop and then sell their oil and gas to the State, has backfired—if that is not too emotive a word to use about an oilfield.

Among other problems which have emerged is the fact that the United States Government found ways of pumping oil into large underground reservoirs, but neglected to arrange a way in which to pump it out again. This is causing some difficulty. We should watch United States developments with interest.

Energy research and production must be given proper priority. The Labour Party White Paper, to its great discredit, put energy research and development third on its list of priorities for the spending of North Sea oil and gas. I would place it first. I reiterate and confirm my complete support for the Prime Minister in the matter and my congratulations upon her statement on nuclear power. Alternative energy sources must be developed. I do not refer to the so-called benign sources only but I believe that nuclear power will produce 20 per cent. of our energy in the early 1980s. That is the way ahead.

In encouraging research and development of energy, I urge the Government—whichever Government—to ensure that a proper proportion of research and development funds go to private enterprise. I understand that the pattern in this respect is similar to that of research and development of defence projects. Both Government and private institutions undertake research. Funds are applied from Government and from time to time there can be an increase or a diminution of the amount of money that is available. There must be a temptation for any Government, faced with a necessary cutback, to diminish the funds chanelled to private sources rather than those to its public departments. Market forces alone cannot solve the energy problem. However, they should be given an opportunity to participate in research and development.

When I made my maiden speech about five years ago I said that the British could be the Texans of the 1980s if the opportunity was properly grasped. We have not grasped that opportunity. What has gone wrong? It is not that the Offshore Supplies Office has been anything other than enthusiastic in encouraging the development of British companies to participate in the North Sea. It is not that the Government have not sought to give a lead in the matter. The problem is different.

We tend to think of oil as being an industry that is dominated by large companies. But anybody who attends the offshore technology conference in Houston realises quickly that it is an industry which is dominated by smaller businesses. It is the small entrepreneur—the man who trained as a driller or a mud engineer and who went on to form his company with his entrepreneurial skill and ability to expand and prosper—who has made Texas the world centre of the oil industry. How can Britain be expected to be a similar base for the oil industry in the 1980s and 1990s unless an environment is provided in which the smaller businesses can base themselves and prosper around the world from those United Kingdom bases?

Nothing has done more to encourage the long-term development of Britain as an oil centre than the reduction of direct income tax in the Budget. That is an important factor. International oil companies based in this country had found that their overseas executives were paid more than many main board directors and even chairmen in the United Kingdom. That, too, is an imbalance which has been rectified by the reduction in direct taxation. I congratulate the Chancellor on his encouragement of Britain's ability to expand the service and supply.

The reduction in direct taxation should give the entrepreneurs the incentive to expand. However, we should learn from the experience of the United States. I wonder whether the Government are considering bringing forward proposals for the smaller businesses. The Americans have given the lead with a smaller business investment corporation that enables the small business man to benefit from so-called "soft" loans and grants to set up his business. I hope that the Government will bring forward plans. I know that they are thinking broadly along those lines.

The energy of this country is a unique asset—once it has been used it will not be replaced and, indeed, cannot be replaced. Therefore, I stress the critical importance of conservation. There are four ways to conserve energy. The first is by exhortation and education. "Save it "can be shouted at people in the hope that they will turn off the fire. They can be told how much energy they are using by the labelling of electrical appliances and they can be encouraged to use less. Secondly, energy can be conserved by subsidising people to use the right fuels. Nothing could be more convoluted than an attempt to use economic measures to persuade people to use the right fuels. Too often that turns into a distorted and counter-productive method.

Thirdly, as beloved by Labour Members, energy can be conserved by rationing. Any Government can seek to impose rationing. It is the quick answer to those who believe that Whitehall knows best. However, in the long run it does not work, partly because energy is an international resource and Britain's energy must find its rightful pricing place in the world. Fourthly, conservation can be encouraged by pricing. That is the only realistic long-term way ahead. There is a world imbalance of supply and demand. Market forces must operate and there is no other way ahead in a free society. The alternative is a dictatorship in the way that energy is used.

To gain the full benefit of our riches, not only for ourselves but for our children, we need a determined campaign for energy conservation. It must be led with conviction and it should be dedicated to stabilising our long-term energy needs. There was a risk that our North Sea assets would have been squandered on Socialism. However, I am happy that the opportunity has been grasped for the challenge of private enterprise and I look forward to seeing the Government's further proposals and hearing the contributions to today's debate.

11.37 a.m.

Photo of Mr Robert Hughes Mr Robert Hughes , Aberdeen North

I congratulate the hon. Member for Gosport (Mr. Viggers) on initiating this important debate. I agree with much of his speech. However, having run the risk of irreparably damaging his reputation and future prospects by that statement, I should take an early opportunity to redress that by saying that I disagree with his opening remarks. He began by saying that this was a non-political subject. Nothing could be further from the truth. The way in which we husband, manage and plan the future of our North Sea oil resources is one of the most political issues in the country. If it is approached in any other way we shall fail in our purpose.

It is strange to read previous debates on the subject and to reflect about what has happened in the intervening period. The earliest occasion that I can find when the subject was debated was in the Scottish Grand Committee on 5 December 1972. The discussion was about North Sea oil and the Scottish economy. I am not given normally to quoting myself or past speeches, but on this occasion they bear some relevance. At that time, my hon. Friend the Member for Midlothian (Mr. Eadie) raised the question of how taxation should be raised on North Sea oil. I followed his remarks by saying: of equal importance is how the revenues are used. I strongly believe that the Treasury should not get a controlling hand on it. The Treasury does not like money to be earmarked for particular funds; it likes to control us. There are many ways in which the money can be used, and we must stimulate investment not only in oil and oil-associated industries but also in other industries … there is a great difference between Conservative and Labour ideas of how that should be done. Conservatives believe in market forces and personal consumption being big factors in stimulating investment. We disagree. Market forces may have a part to play, but much more important is direct investment. It would be wrong to leave this to be handled by the Treasury, one way to help investment developing the infrastructure—roads, housing, education, recreational facilities. All these services are important in their own right. … If the Treasury uses the revenues as a method of reducing personal taxation or petrol tax"— we know now that that is not to be done— for the purpose of increasing consumption—and Treasury Ministers are adept at this—that is an abuse of the revenues, and quite the wrong way of going about it. This is a new source of revenue, and it should be used as such. There is a great temptation to use the revenues as an economic regulator; for example, to boost the economy before an election. Treasury Ministers and the Government want to use the revenues in that way, but for them to do so would be disastrous. In a sense, this shows how in the very early stages there was a great disagreement and quarrel about how we should deal with North Sea oil.

I continued: There is a strong case for the establishment of a development authority to have control of the money for use in development areas. Scotland is not the only under-developed area of the country. I am as concerned about the redundant miners of Durham as I am about the redundant miners of Scotland. That is why I suggest a development authority to be concerned with all the development areas. I went on to say that we already had a pattern for this in the Highlands and Islands development area.

I concluded by saying: The discovery of North Sea oil is a great opportunity, but, if we fail to use it for the benefit of the people, if we simply say that the quickest burn is the measure of success, we shall let down the people of Scotland and of the United Kingdom."—[Official Report, Scottish Grand Committee, 5 December 1972; c. 41–43.] Having looked at that speech again in the last couple of days, I am surprised to discover how much foresight I had in discussing how matters might develop. But what surprises me even more is how little things have changed in the last six and a half years. We are no further forward in resolving the way in which we use the tremendous assets that we have in the North Sea.

The hon. Member for Gosport made some scathing references to the Labour Government's White Paper. I agree that the White Paper ought to have been debated. I agree that it had its deficiencies. But at least it recognised that the revenues should not be used to gain quick popularity by handing out tax cuts to those who did not need them in the first place, and how we should concentrate on the ways in which we could reinvest in our people and in our resources, in our inner cities, in industry, and so forth. I do not think that we can take the North Sea revenues and simply put them into one small slot and say that all the money should be spent on it. It has to be used in different ways to top up taxation and Government spending on other sources. That is where I disagree entirely with the hon. Member for Gosport.

The hon. Gentleman thought that there was a case for planning and for reinvestment. But that flies contrary to the Budget strategy of his right hon. and hon. Friends, who say that the only way in which investment can arise is by leaving it entirely to market forces. However, they are beginning to weaken slightly. That policy is beginning to fray a little at the edges because the Government are trying to use their influence to see that there is proper distribution of petroleum, oil and so forth. That shows that the policy is not quite as hard as it was and, not to be diverted from the main issue of the debate, the Government are beginning to use their influence on the building societies and suggesting that perhaps the Government have a role to play.

As each day passes, as the Government see that they have no control over investment, that policy, too, will begin to fray at the edges. In the economic crisis which is beginning to face us and which is compounded by the increasing costs and the shortage of crude oil, they will find inevitably that they are forced to make decisions about planning. A Government dedicated to a free economy cannot approach planning in any sense in which they can look to the real priorities of the future.

The way in which this Government have tackled the problems arising from North Sea oil—the way in which they have looked at the various aspects which arise—is perhaps best illustrated by their extraordinary decision to capitulate to the EEC over investment assistance for the development of equipment for the North Sea. The contempt with which the Government approach this House is a matter of great importance, because many jobs are at stake.

The Government announced their decision in a written answer. There was no question of the Minister concerned coming to the House and saying that one of the most important issues facing the country should be open to question and answer or possibly debated. I give credit to the hon. Member for Gosport for raising the matter. However, this debate should have been initiated by the Government. There is no doubt that North Sea oil is vital to our future. Yet all we get is a written answer tucked away in Hansard telling us that a major decision has been taken.

We learn from the press that one oil company executive said that there would be "blind fury" about the decision. In fact, the oil companies have not raised a tremendous stink about it. But clearly, as a member of the Amalgamated Union of Engineering Workers said, the decision is "suicidal".

We had been threatened by the Commission. We know that this did not start suddenly. There were attempts over the years by the EEC to stop this investment assistance. Its efforts were resisted successfully by the previous Government. Then we were threatened that we should be taken to the European Court for being in breach of our treaty obligations. In my view, we should have allowed the Commission to take us to the European Court, we should have resisted and put our case right to the very last, rather than deciding suddenly that the game was not worth the candle.

The Minister probably will say in his defence that the Government were given assurances by our Community partners that they would no longer provide preferential export credits for companies seeking North Sea contracts.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

My hon. Friend must be joking.

Photo of Mr Robert Hughes Mr Robert Hughes , Aberdeen North

I do not know who believes that. I am surprised that the Government believe it. We know that they are naive, but surely they have found in their short time in government that their innocence was misplaced. They should recognise that throughout the development of North Sea oil and all the efforts to get industry to place its orders in this country one of the major disincentives was export credits, preferential interest rates on loans, and so on which were drawn to the attention of successive Governments. To be fair, no Government were able to tackle or end the scandal. This Government come into office and, within a matter of days, decide to let it go and that the free market economy must operate.

If we operate Government policy on North Sea oil on this basis, next we shall find ourselves capitulating on our right to determine how our revenues should be used. We shall capitulate on the basis of how we deal with our oil supplies, and we shall find that, far from the intention of the Secretary of State for Energy to see that less oil is exported, we are forced to export more oil, primarily to the EEC. This policy of a free market economy and of leaving matters to market forces spells long-term disaster for us.

I come next to a matter which has been publicised widely—certainly in one Scottish newspaper, the Glasgow Herald. It is to try to find out exactly what is happening at the underwater training centre at Fort William. I gave notice to the hon. Member for Honiton (Mr. Emery) of my intention to raise this matter, because he has a certain involvement in it.

There are two aspects to this major article and to the television programme which, regrettably, was shown only in Scotland. They are the standard of safety and the standard of training at the underwater training centre. A number of people have raised the point that the standard of training does not meet the standard that the oil companies themselves expect and which, it is said, they provide. I do not accept that the major oil companies and those engaged in professional diving are necessarily to be believed entirely, because they have a particular axe to grind.

But we must remember that this centre was established by the Labour Government, certainly on the suggestion of the hon. Member for Honiton—and he deserves credit for that—because of the great loss of life being experienced in North Sea oil exploration. The centre was intended to be a centre of excellence to provide training which would stand those working in hazardous conditions in the North Sea in good stead. We are told by a number of people who have worked at the centre that that is just not happening and that persons who pay to go to the centre are extremely upset at not getting value for money.

Perhaps more serious is the question of safety, also raised in the article in the Glasgow Herald. I am not sure whether he is a chief instructor or a director, but a Captain Bailey, on being challenged about safety aspects, had this to say, according to the report: He admitted all eight students in saturation would not get into the bell.'Some are not going to get in. Who decides where they go or who goes in a problem that has occurred over the centuries. You have got a boat, OK. Do you put the women and children in first or do you put the best brains in? I don't know.'Of the idea that students should not in fact risk deep dives in training, Captain Bailey says: 'I can't believe it is dangerous for students to do this in training but not dangerous on the job. They have got to start somewhere.' It is a pretty damning indictment of safety standards that men being trained for the conditions dangerous to life which they will experience on the job should have to experience those dangerous conditions in training. It is an extra-ordinary approach to the matter.

As I have said, I do not necessarily believe every word of the article. Some of it comes from people who may have a commercial axe to grind. But I believe that there is overwhelming need for an inquiry. I have put down a question to the Department of Energy—it has been transferred to the Department of Employment—asking for the institution of an immediate inquiry into the safety standards and the standards of training. We are entitled to have this matter probed deeply.

We have been lucky in the past 12 months that fatalities in diving activities have dropped off in number. We have passed the period where almost every week someone was killed in a diving accident. But that does not mean that we should relax or drop our guard. Anyone who knows the North Sea knows that it is a dangerous place. The seamen who work in it know it too well. It can be as calm as a millpond, but within minutes almost it can become a raging sea. Therefore, we must not allow training standards to drop.

Nor should we say that because there are deficiencies in the underwater training centre we should not proceed. I believe that the centre ought to remain and be allowed to carry on. I want to deal with the question of its management. The centre was funded, I gather, to the tune of £1 million in grants and loans initially. I do not know what the running costs have been since then. I am trying to find that out by question.

The centre was funded by the Manpower Services Commission. The contract for running the centre was given to the Shenley Trust, which is an offshoot of Charterhouse, the merchant bank. Charterhouse finally discovered that it was losing £800,000, and the Shenley Trust was quietly converted into a private company called Shenley Trust Services, originally Emery and Emery. The chairman is paid £12,000 a year, and he just happens to be the hon. Member for Honiton.

I do not know whether it is a quango or a quasi-quango, but the hon. Gentleman is quoted as saying that he thinks that this is a marvellous use of public money. I certainly do not think that it is. If public money is put into a venture like the underwater training centre, it should be wholly controlled by the Government. I also resent the way in which people who have been in the Department of Energy—and there are others apart from the hon. Gentleman, including, I regret to say, my right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon)—when they leave Government office suddenly find that they can get a commercial interest out of an area of activity with which they had been closely associated as Ministers.

I understand that, in the Civil Service, there is some bar to prevent senior civil servants from leaving Government service for private companies. There should be a similar bar for Members of Parliament. I believe that such activity brings the whole House into disrepute.

On the way to the House this morning, I heard a phone-in programme. A member of the public was complaining about Members' salaries—I will not go into that—saying that all Members of Parliament are in it for what they can get out of it and become public relations representatives, directors, and so on, and have outside jobs in which they feather their nests. The sort of situation I have described, in which people leap from being Ministers into private operations in an area with which they have been associated in government, brings disrepute on the House. It is a serious business.

The hon. Member for Honiton has kindly invited me to go to the underwater training centre. Much more important is that the Department of Energy or Department of Employment inspectors should go to the centre.

Photo of Mr Robert Hughes Mr Robert Hughes , Aberdeen North

In that case there should be an inquiry into the running of the centre because, if the Glasgow Herald article is anything like true, it is a scandal that standards have been allowed to drop. We should be jealous of the way we use public money; we should be jealous of our standards; we should be jealous of the fact that the men trained at the centre face the most hazardous conditions to be found anywhere in the world.

Once again I congratulate the hon. Member for Gosport. He has raised an important issue. I think that he is beginning to learn the facts of life about North Sea oil. He began by saying that this was a non-political matter, and ended, in a sense, by saying that there was genuine need for the Government to intervene and plan the industry, plan its investment, plan its future, and plan to husband our resources. That is why I believe that the issue is political. That is why I believe that the loss by Labour of the general election was a loss to our people of the North Sea oil industry—a totally disastrous loss—and that the sooner we can get some rational sense back in our approach, the better.

Several Hon. Members:


Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. I am in some difficulty. The hon. Member for Honiton (Mr. Emery) was referred to in the speech of the hon. Member for Aberdeen, North (Mr. Hughes), and it is customary to allow a Member so referred to to speak at once. Mr. Emery.

11.58 a.m.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

Thank you, Mr. Speaker.

I thank the hon. Member for Aberdeen, North (Mr. Hughes) for giving me notice that he intended to mention my name in the debate. I shall in due course, deal with some of the allegations that he has made. I begin by congratulating my hon. Friend the Member for Gosport (Mr. Viggers) on initiating the debate, because the North Sea and those working in it must be of major concern to everyone in this country.

That is not only because of the energy and the hydrocarbons in the North Sea, which will make the United Kingdom self-sufficient, probably by next year—then we shall be the only European country self-sufficient in petrol and oil—but because of the need to ensure that there can be growth, over as long a term as necessary, in the development of the exploration and exploitation of the hydrocarbons in the North Sea and of all those industries which enjoy spin-off and can provide the back-up for this major new area of discovery.

I believe that in the future it will be possible to mine many minerals as well as oil, from great depths in a way that was not envisaged even 10 years ago. Way back in the 1960s I strongly advocated that particular attention should be given to the possibility of Britain being able to lead the world into this new area of mineral wealth.

It is a great tragedy that for four and a half years under a Labour Government there was a major decline in oil exploration and exploitation in the North Sea. In 1973, 1974 and 1975 there were on average more than 24 exploration rigs operating in the North Sea, with sometimes as many as 28. That figure has fallen until it is now about eight. That must be because of the inadequacies of the Labour Government's policies, perhaps particularly those of the Minister in charge of the Department of Energy at the time. I very much hope that the present Government will rectify the position. We have already started by making it clear that we shall try to do so by ensuring that market forces are once again the guide to the way in which the whole oil industry is controlled.

Labour hon. Members, as well as the public, often mistakenly believe that we can ignore market forces. They think that by rationing it would be possible to keep the price of petrol down. That is nonsense. If we are to obtain a fair proportion of international supplies, as the present Government would certainly wish, we are bound to pay the international prices. I tried to make it clear on the Floor of the House only recently that if we did not do that we should be short of oil, because the supplies would go to France, Germany or Japan, which are paying the economic prices. There is no clever sleight of hand, by rationing or Government interference, that will bring cheap petrol back on to the market. That is an unpleasont truth which must be seen as a continuing fact of life.

The Department of Energy, in conjunction with the Treasury, should begin to take a lead with the oil companies in ensuring a proper conservation policy for new discoveries, not only in the North Sea but in the Atlantic approaches and the Celtic Sea, even out as far as Rockall. If we are to bring back the type of drive that existed in the late 1960s and early 1970s, the oil companies must be able to see a financial return for their massive investments. Not merely millions but billions of pounds will have to be found by private industry to carry on the ex- ploration and exploitation—and thank goodness it will be done by private industry and not the taxpayer.

It is essential that oil companies clearly understand the method by which they will obtain a return on the oil they may discover. It is no use suggesting that an international oil company should leave it in the ground for many years. The alternative is to sell it abroad. It may well not be in the country's national interests to deplete newly-discovered reserves in that way. There is a well-established aspect of oil contracts—normally known as a take or pay clause—whereby if the hydrocarbon is not extracted and used over a given period a part payment for it is made by the purchasing company or the Government. That might well be a way in which the Government could build up a vast natural reserve of hydrocarbons for the benefit of the nation while being able to encourage the large international oil companies to continue their exploration and exploitation on a larger scale than at present.

The second major matter that I wish to raise with my hon. Friend the Financial Secretary is secondary recovery. I have been a director of an international oil company. Although I have no connections with an oil company now, I must declare an interest in diving, to which I shall come in due course. The international oil companies have a vested interest in operating in a market of shortage. A surplus of supply may drive prices down. It is a known fact that international oil companies benefit considerably from operating in a market of shortage. Therefore, it is not surprising that we do not hear from them about secondary recovery.

The Government should be looking to encouraging other Governments to take action to bring about the secondary recovery of oil from old oil wells. Until the mid-1960s the recoverable reserves of any field were normally accepted as being in the range of 25 per cent. to 33 per cent. It was very good if a company could recover reserves of up to 33 per cent. The price of oil in those days was about $1 a barrel.

There are mechanical and scientific ways of raising as much as another third of the recoverable reserves of most used-out fields throughout the world, by the injection of gas or by pressure. That was not done initially because the equipment is quite expensive, and when the price of oil was $1 a barrel its use would have been uneconomic, particularly when there was a considerable amount of oil about. With the posted price of oil now about $20 a barrel, that is no longer the case, and there should be a major drive by Governments internationally to begin bringing already discovered but used-out fields back into use. If this could be done with every oilfield from which all oil had supposedly been extracted by 1960 we would be able to get perhaps another 20 per cent. or 25 per cent. from those fields. Then we would increase the established oil reserves of the world by another two-thirds of those now existing. This would be an appreciable amount to contribute to the overall position of oil and oil conservation.

I now turn to the accusations made by the hon. Member for Aberdeen, North. I have already declared my interest. In my judgment, the underwater training centre at Fort William operates diving training courses that are second to none in the world. The centre is unique. The centre is the only place in Europe where saturation training can take place. Any slur on the chief diving instructors, the diving manager or the diving team that might be implied by the hon. Gentleman would be absolutely wrong and very unfair. In regard to the safety standards at the centre, all equipment—the whole of the barge—has to be approved by Lloyd's. All the standards are approved and the equipment inspected regularly by the inspectorate of diving under the chief inspector of diving at the Department of Energy. The standards for the course are approved by the Manpower Services Commission.

The hon. Gentleman has seen fit, without speaking to any of the instructors or to any of the management at Fort William, or without speaking even to me, to repeat a report and a programme. Neither of the people concerned had been to Fort William to see the operation at the centre or to speak to the chief diving instructors or anyone operating the technical aspects. This is very serious. The hon. Gentleman should take up my invitation to talk to those people. The underwater training centre has a fine record. I would like him to become a supporter, which I think he would prefer, rather than someone who attacks the centre.

I understand that the chief diving instructor has visited the centre within the past six weeks. If there is any need for an inquiry, there is nothing to hide. Everything can be done openly. The centre would welcome an inquiry because it has a fine tale to tell. A quotation was used about me which I do not believe was accurate. I have referred, however, to co-operation between the Government and private enterprise which has been very useful.

It is interesting to note that the centre was established by the Labour Government, not by a Conservative Government. The original intention was that it should be financed by private capital. It was the Labour Government who insisted on using Government money. They selected the people to operate the centre who they believed were the most efficient. I wish to say no more. But that, at least, should be put on record so that it is clearly understood.

Photo of Mr Robert Hughes Mr Robert Hughes , Aberdeen North

Can the hon. Gentleman confirm that the Shenley Trust converted the management contract to his own company, having lost £800,000?

Photo of Sir Peter Emery Sir Peter Emery , Honiton

This is not the place to go into a matter on which I do not possess all the facts. Any loss that may have occurred with the overall company was nothing to do either with this contract or anything within the corporate finance department. Shenley Trust specifically requested that the corporate finance team that had been set up to manage this matter should continue with that management in order that there should be no break in the management and that it should be completed as efficiently as possible. That is why the new company was structured. That is the simple explanation to all these matters.

Photo of Mr Robert Hughes Mr Robert Hughes , Aberdeen North

The hon. Gentleman has not answered the point. He said that this was not the place to discuss the matter. Where is the place to discuss it?

Photo of Sir Peter Emery Sir Peter Emery , Honiton

If the hon. Gentleman would like to put the exact point to which he wants an answer, I shall try to reply. I do not believe that normal company business should be discussed on the Floor of the House. I have tried to explain to the hon. Gentleman that any loss about which he asks had nothing to do with the centre and had nothing to do with the corporate finance department of the Shenley Trust. That is a straight answer to what he was asking. The reason why the secondary company was then formed was to ensure that the whole of the management aspect of the centre could be kept together and could operate as efficiently as possible. There cannot be a straighter answer to the two questions put to me. I therefore regret any innuendo that I am attempting not to answer the matter fairly.

I thank you, Mr. Speaker, for calling me and giving me the opportunity to participate in the debate. I only hope that more people will know about the fine record of the underwater training centre and that more people will come forward for training. Diving and underwater work have a real role to play in extending the activities of industry for many years to come.

12.18 p.m.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

I hesitate to follow the closing remarks of the hon. Member for Honiton (Mr. Emery). The important points raised by my hon. Friend the Member for Aberdeen, North (Mr. Hughes) have been ventilated. In so far as they concern the public purse, some form of ministerial answer should be given to the House. It is perhaps not a question for the Treasury today but an answer should be given by the Department of Employment or the Department of Industry when either sees fit.

I am concerned with the challenge of the North Sea. I congratulate the hon. Member for Gosport (Mr. Viggers) on raising the issue. It is significant that the underwater centre at Fort William has brought us to discussion of divers. We should pay tribute to the men who are winning these resources from the depths of the sea bed. In the period from 1967 to 1977, there were 88 fatalities in the United Kingdom sector of the North Sea, 18 of whom were divers.

I accept the remarks of the hon. Member for Honiton on the training facilities at Fort William, I hope he will accept that codes of safety practice, especially in relation to divers, are often run behind the actual practice. More than 40 divers died in the North Sea from 1971 to 1978. That is a shocking indictment of operations in that area.

We are obtaining many benefits from the North Sea. While recognising that people design the structures, we must also recognise that men risk their lives, and all too often lose their lives, to win hydrocarbon resources.

There is a technical challenge, and I have spoken many times on the techniques of North Sea production. The industry is conservative with a small "c". Like the hon. Member for Gosport, I have attended the underwater technology conference in Houston, Texas. I agree in some part with the hon. Gentleman, but I feel that the North Sea is not for the small companies. I am not trying to undermine the contributions made by some small companies in the supply of material and resources, be it mud or be it drill string. However, the organisation of North Sea ventures is something for the big boys. It is not that the big boys have all the expertise, but over the years they have acquired the skills needed for project management.

We have graduated in technology from the southern gas sectors of the North Sea through the depth of around 400 ft. in the Forties to the 600 ft. depth of Magnus. As depths have increased so have production costs. My hon. Friend the Member for Aberdeen, North referred to the debate in the Scottish Grand Committee, when we discussed capital development costs of around £1,000 per daily barrel. In terms of Magnus, that means £10,000 per daily barrel. Even allowing for inflation, that is a fivefold increase.

If the Government accede to the EEC request in terms of incentives to the industry—for example interest-free grants and loans for construction—care should be taken not to impair Britain's ability to compete with other countries which can build structures for the North Sea. The front end loadings for development that were among the tax proposals of the previous Labour Government were designed to cater, perhaps with hindsight too generously, for the capital costs when balancing petroleum revenue tax, the uplift and the oil allowance. The desire to gain the maximum tax revenue should not militate against the full exploitation of the North Sea resources.

There is no evidence that the oil companies are frightened by the tax provisions. Other provisions, such as licensing and restrictions on the progress of monitoring the development plans may have upset them.

I should like to see an increase in the public element of involvement in the North Sea, especially as we move into deeper waters. However, I am realistic and I will not let my ideal endanger the necessity of facing actuality. The role of the British National Oil Corporation should be enhanced. It is significant that the only Government statement in relation to the BNOC role was made in another place on 4 July.

The hon. Member for Gosport has complained, with some justification, that the previous Labour Government did not articulate their policy on North Sea revenues. All that we are obtaining from the Conservative Government is a succession of leaks—the statement about BNOC given in another place, and some statements in the press about the gas gathering system. There has been no comprehensive statement of Government policy on the North Sea in the House.

I have asked for a White Paper, and that would be a start. The House is due for some comprehensive indication of the Government's policy on exploitation of the valuable North Sea resources.

The current production profiles are a changing scene, but let us agree that the North Sea will give us self-sufficiency until around 1985. After that production will decline unless we take action now. I have looked at that problem as comprehensively as I could, admittedly through the eyes of the United Kingdom offshore operators. I am not expert enough to comment on their paper No. 17 which was submitted to the Energy Commission, but I believe it is about 80 per cent. correct. If the view expressed in that paper is accepted, we need to prove fields currently assessed in the 50 million to 150 million barrel resource range. The Government have a responsibility to state their policy on that matter.

Stratographic surveys and deep drilling programmes will help, but we are not sure how the Government intend to progress with the deep drilling programme. An increase in exploration drilling is vital. A balance has to be struck between the incentives offered to major oil companies, including BNOC, to persuade them to go into the deeper waters, and to persuade them to explore the techniques of exploiting the smaller fields.

Unless action is taken immediately we will be back in the international crude market with a vengeance, at a most unfortunate time—immediately post-1985. I hope that the Government will take action not only to sponsor the drilling activity, but also to develop production techniques.

No one was sure whether Magnus would go for a traditional jacket structure or go for what BP, with engaging modesty, called a TBP—a turbo buoyant platform. I disclose an interest here. I have been concerned with companies which are trying to exploit a similar device, namely a tension leg platform. There is a big model of the tension leg platform under test, assisted by the EEC Commission, off Catalina Island. The answers received from that device are good. If we are to exploit that production technique, Government assistance is necessary to persuade the oil companies to take a lead in production technology.

I turn now to the larger international issues concerned. We cannot see the exploitation of North Sea oil and gas in isolation. We must look at the larger issues, particularly the issues concerning OPEC and the Organisation of Arab Petroleum Exporting Countries. There are two extreme views that one might take. One view is that expressed by Edith Penrose, in which she argues that, if we did not have OPEC, we would have to create it. It really is a soft sell organisation. It does not have a lot of economic influence because supply and demand factors operate.

The other view, a harsher political view—to use the shorthand—is the United States' view, expressed very harshly in an article that I saw in the Financial Times of yesterday, in which it was suggested that there are plans circulating in Washington now for intervention in the Middle East if the Americans find it difficult to get their hands on the scarce oil resources. I hope that no one in the United States Administration will go for such a plan. It would be disastrous, because if intervention of that nature took place, the world would be in a disastrous state because the oilfields could very easily be blown up and it would be years before production could be resumed.

The United States is in difficulties. I note the remarks made by the right hon. Lady the Prime Minister at the Tokyo summit. Apparently she trusts the United States and President Carter to restrain American consumption. There is very little evidence that the United States' economy since 1973 has exerted a discipline for restraining consumption of oil. Looking at the most recent figures available, one finds that for the first quarter of 1979 the figures are up on those of a comparable period a year previously.

The key to getting order in the international energy situation, particularly in relation to crude oil, is restraining the United States. President Carter is fighting for re-election and is unlikely to exert the necessary disciplines, even if he could manage Congress and the conservationists.

Photo of Mr Julian Ridsdale Mr Julian Ridsdale , Harwich

Is not this really the pledge that the United States Government, through President Carter, gave at the summit? Because of that pledge, all the countries concerned have agreed to bring up the price of oil to world prices.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

I accept that the pledge has been made. However, anyone who has been a student of the United States' attempts to get an energy policy, as I have for the past 10 years, has seen that all these statements that have been made have been made in vain. Let me take one simple example. The energy statement that President Carter made shortly after his election said that he would be getting 1 billion tons of coal by 1985. What a hope! What a joke! There is no way in which President Carter will get 1 billion tons of coal. The way in which the Americans have treated their mining industry, under free enterprise, is shocking and appalling. Therefore, we must be very careful.

I say to the British people that the Prime Minister is now talking in terms that are very strange coming from someone who has just won an election on all the promises that she has made. She is now talking in terms of a diminution of our standard of living. Sir Winston Churchill once said that it would be a miracle if a country based on coal and surrounded by water and fish had a food shortage and a coal shortage at the same time. But we are a country which is the only "industrial country" which will be self-sufficient in oil, and the people of Britain are entitled to ask "How come, when we are self-sufficient, that our standard of living is likely to diminish when we have all these resources?"

We have to ask this question, because this is a matter on which the Government have responsibility for direct economic management. The United States' growth over the years has been dependent on securing cheap energy. It is now importing, in total terms, about 8·5 million barrels a day. That is over four times our North Sea production. Not only is the import of that crude selfish and undesirable in international allocation terms; it is selfish and undesirable in international monetary terms. The dollar will be over-valued, and we shall have to keep it over-valued to sustain the international monetary system. That is an unfair allocation of resources and an unfair allocation of ability to pay and to get claims on world wealth.

Photo of Mr Alan Clark Mr Alan Clark , Plymouth, Sutton

What does the hon. Gentleman mean by talking about "international allocations"? The Americans are buying this oil in the open market. I agree with the hon. Gentleman that many aspects of American policy are extremely ill-judged. However, I do not understand his flight of Socialist fantasy in believing that there is such a thing as an international allocation and that it is working along dirigiste lines, as he seems to imply.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

I do not want to discuss unduly the international monetary system. However, let us examine it briefly. Oil is related to the dollar. If America gets these imports, the dollars will not fly across the exchanges but will be in the hands of the Arabs. The Arabs will have to invest them somewhere. In order to make that investment reasonably attractive, the dollar's value will have to be kept up, as I see it. The Americans' ability to buy that oil and get their imports is related to the international value of the dollar. It is a circular argument. We must be very careful about trusting the Americans, particularly in these pre-election years, to fulfil their promises.

For Britain, it would be very unfortunate indeed, in overall terms, if, having these resources, our standard of living has to be diminished because of ill management or bad management on the part of the British Government. Conservative Members accept the conditions and constraints of the market, but I do not. I think that the market must be managed. Let me illustrate my point very simply. If we have a shortage at the pumps, as occurred in California, what does one do? Does one let the price rise? No; one says that cars with even numbers go on one day, and cars with odd numbers go on the next day. The queues do not vanish overnight, but they diminish and they are managed. That is using one's brains and not letting the market dominate.

There are garages in Britain which are letting the prices rise. When one asks garage owners why they are selling at £1·50 per gallon, one hears the reply "We have to have that, otherwise the pumps will run dry." They are engaging in a rip-off, albeit in terms of the inability or unwillingness of the present Government to take action.

I draw my remarks to a quick conclusion. We need a strategy which must be flexible in terms of public control. We need to see that the BNOC, if it cannot become an eighth sister—and it will not do that overnight—is at least built up to be an acceptable niece in terms of the international oil companies.

I would oppose totally any diminution of the BNOC's role. It is a very strange thing that when we are trying to persuade OPEC countries to take oil out of the ground and hope that they will invest in fixed assets in other countries, we, on the basis of the present Government's policy, are selling our stake in British Petroleum. That strikes me as an absolute contradiction. We are saying to the Arabs "Take the oil out of the ground and take investment stakes in our countries", and when we have a public stake in ownership here, the Government say "Sell that off."

We need a clear and distinct statement from the Government on the gas gathering system. I do not blame the Government for the delays. This is a complicated issue and the calculations about cost benefit and price are difficult. I see in the press that a project is coming along between the British Gas Corporation and Mobil Oil. I hope that we shall get a clearer indication of that. There must be support for new production techniques, and we must use the expertise that we have.

In my constituency at Rosyth is the Admiralty marine technology establishment at which magnificent research is being done on structures, particularly submarine hulls. All of that is directly related to the experience we shall need to acquire in going to deeper and more hazardous waters. However, nearly all of it is kept under military control, and I hope that the Government will consider the possibility of opening it for civilian use.

We have to ensure the development of our coal industry. If oil is more valuable under the ground there should be great pressure on the South of Scotland Electricity Board and the Central Electricity Generating Board to convert oil-fired power stations to coal. One could then reserve oil for uses for which coal and electricity are unsuitable.

We need a co-operative effort on conservation. We may be having our difficulties, but the people in the developing countries just cannot get energy because they cannot afford to pay the world price. That factor places upon us a responsibility for securing international co-operation.

We must monitor the experience and behaviour of the other countries with which we co-operate, particularly the United States and Japan. We must be careful to ensure that while we use our resources properly other nations are not behaving irresponsibly.

Several Hon. Members:


Mr. Deputy Speake:

Order. A great many hon. Members wish to take part in this important debate. I therefore appeal for reasonably short speeches.

12.42 p.m.

Mr. Iain Sproa:

I wish to congratulate my hon. Friend the member for Gosport (Mr. Viggers) on his good fortune in winning a place in the ballot and on his good sense in selecting this subject for debate today. It has been clear from the wide variety of subjects raised how necessary it is to discuss this most important subject, and how few opportunities we get to do so.

May I apologise in advance to my hon. Friend the Member for Gosport and to my hon. Friend the Financial Secretary if I have to leave the Chamber before the debate is finished. It will be because I have to get to the oil capital of this country—my constituency—and to do so I shall have to leave early.

I was interested in the remarks of the hon. Member for Aberdeen, North (Mr. Hughes). He said that the first time we discussed North Sea oil in the House was in the Scottish Grand Committee in 1972. There is one astonishing factor that I should like to point out to hon. Members, including the hon. Member for Dunfermline (Mr. Douglas) in view of all that has happened in Scotland in the past five years with the Scottish National Party. Its entire campaign in that period was based on the fact that North Sea oil would make Scotland economically viable and independent. Yet throughout this debate not one member of the SNP has been present.

I realise that hon. Members from other parts of the United Kingdom may see that comment as the sort of dig that one makes at one's political opponents. I beg them to realise the astonishing reversal of fortunes that this fact indicates. Although North Sea oil remains vital to the future of Scotland, as to all parts of the United Kingdom, we can now see the complete difference in attitude within Scotland about how this vital asset should be used.

With a new Conservative Government in office we have a genuine and vital opportunity dramatically to reverse the down-turn in North Sea activity which is threatening our ability to maintain the self-sufficiency level of 2 million barrels a day which we expect to achieve next year.

According to the last report of the United Kingdom Offshore Operators Association to the Energy Commission, it would not be an unreasonable prospect for this kind of production rate to be maintained well into the 1990s. With the current threat to our energy supplies and with the great need to maintain the benefits to the United Kingdom economy of North Sea oil, there is all the more reason for the Government to ensure that this target is achieved.

The understandable euphoria which arose from having achieved such high rates of production has tended to obscure, for most people, the dramatic drop both in exploration effort and in discoveries over the last few years. Before 1975 seven major fields were discovered. Only one major field has been discovered in the past four years. Up to 1975, one well in nine discovered a commercial field. The success rate since then has been only one in 74. Up to 1975, some 3,175 million barrels of theoretically recoverable oil were discovered after only five years of intensive exploration effort. That figure has since declined rapidly. Only 725 million barrels were discovered in 1977, and only 50 million barrels in the first five months of 1978. In addition, wildcat drilling has declined from 75 wells in 1975 to 37 wells in 1978. In the first half of this year the rate has been even lower.

It is imperative for us to reverse this trend. To do so there must be a massive exploration effort with up to 20 exploration rigs continuously in operation in the next decade drilling between 60 and 95 wildcat wells a year. In other words, the effort must equal in the future what we achieved in the peak year of 1975.

If that is not done there will be a very severe problem—as the hon. Member for Dunfermline admitted—in the late 1980s as production starts to decline from existing fields and cannot be replaced by production from new fields because these simply will not have been found. Such a slow-down in exploration and development would have severely adverse consequences—a deteriorating balance of payments position, a lack of opportunity for industry as a whole, less tax revenue from the oil companies to the Treasury and, which is of particularly crucial importance today, less secure oil supplies.

In other words, the Government must think very long term—at least 10 years ahead. I hope that the Department of Energy will not allow itself to be deflected in the future as it was under the last Labour Government by short-term Treasury considerations. I am particularly pleased that my right hon. and hon. Friends are considering with representatives of the oil industry ways in which the smaller marginal fields can be profitably developed. I welcome this long overdue inquiry.

The Government have made it quite clear, and I would not seek to dispute the justice of their case, that they will raise the petroleum revenue tax to 60 per cent. At the same time they are to reduce the allowances which the oil companies were previously allowed to set against tax. Though I do not quarrel with the principle in general terms, and certainly not in this debate, I hope that the Government will consider that this change may not be altogether suitable for the marginal fields.

I hope that those now engaged in examining what new incentives can be given to the oil industry for increased exploration, and to make marginal fields profitable, will consider three recommendations. First, the restoration of the oil allowance and the uplift provisions previously in operation only for the marginal fields is the kind of incentive for development which might very well turn the balance. Secondly, I hope that my right hon. and hon. Friends engaged in this review will recommend the provision of much more acreage.

The last Government reduced the rate of acreage to be made available to licensed rounds by about 90 per cent. Between 1964 and 1972 the offers of acreage averaged 600 blocks in each round. In the latest rounds the average has been about 60 blocks. I hope that we will have a big round of licensing as soon as possible, certainly this year, and that we will restore the blocks on offer to something like the past levels. Thirdly—I say this in contradistinction to what was said by the hon. Member for Dunfermline, and to what the hon. Member for Aberdeen, North thinks—I hope that the Government will severely clip the wings of the British National Oil Corporation.

Photo of Mr Iain Sproat Mr Iain Sproat , Aberdeen South

If the hon. Member will contain himself he will hear the very sage reasons I am about to advance. I am glad that, before the review concerning the future of BNOC, the Government have already taken some steps in the right direction by denying BNOC its right of first refusal in connection with the transfer of North Sea licences. I am particularly glad that the Government have made it quite clear that, whatever the future role of BNOC, it will certainly—if the corporation continues in existence—have to pay petroleum revenue tax just like any other company.

Welcome as these two steps are, we await the next steps with great interest and with some trepidation. The Government have not yet made it absolutely clear whether they intend that BNOC shall keep its right to have a minimum 51 per cent. interest in all new fields in the North Sea. I very much hope that the Government will recognise that the continuation of such an arrangement makes it extremely difficult—and will go far to making it impossible—to set about the enormous job of stepping up the exploration which must lie ahead if we are to meet our requirements in the late 1980s.

For a start BNOC does not have the manpower to take part in the kind of energetic exploration programme as is necessary. Nor does it have the financial resources. The average one-platform field costs around £500 million and each exploration well costs about £3 million. If BNOC were to participate in the way I understand the hon. Member for Dunfermline would wish, it would mean massive Government subsidies. That is totally contrary to the policies of my right hon. and hon. Friends on the Treasury Bench.

If, therefore, BNOC is to be allowed to have an automatic involvement—51 percent.—in all the new fields in the North Sea, that will have the effect of creating an enormous drag on the efforts of the private sector industries which alone will be able to step up the exploration that is required. It may well be, at the end of the day, that the Government will decide, in their review of the future of BNOC, that they want to keep it alive. If that is the conclusion they reach, so be it. But, if it is to be kept alive, let it be kept alive as an ordinary, healthy oil company competing on equal terms with other oil companies in the North Sea. There is plenty of room there. BNOC ought not to be a subsidised drag on exploration. Subsidies have to be paid by the taxpayer, to his disadvantage and to the disadvantage of the oil companies in the North Sea.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

I have no objection to BNOC paying PRT. The hon. Gentleman is suggesting that the BNOC should be treated commercially. If it is treated commercially, it will not be subsidised.

Photo of Mr Iain Sproat Mr Iain Sproat , Aberdeen South

I am extremely glad to have that reinforcement of my own argument. I said that, if the Government decide that BNOC is to be kept alive, it must be treated as any other oil company. It must not be subsidised by the taxpayer or feather-bedded by the Government as in the past. The Government must stop feather-bedding BNOC. The State is financially worse off as a result of this feather-bedding.

The powers which the Government rightly need to control certain aspects of North Sea development are within the ambit of the Department of Energy. It is totally unnecessary to have BNOC as a kind of very expensive watchdog in the North Sea doing, at enormous expense what could be done at no expense by the Department of Energy.

By vastly reducing the financial burdens created by BNOC, the Government would, immediately, increase the speed and efficiency with which the private sector companies would be able to tackle the vital task ahead—that of stepping up our exploration and of ensuring that in the late 1980s we have net self-sufficiency in oil. I very much look forward to hearing an early statement from my right hon. Friend on what exactly the Government intend to do about the future of BNOC in the North Sea.

12.59 p.m.

Photo of Dr David Owen Dr David Owen , Plymouth, Devonport

I am sure that the whole House is grateful to the hon. Member for Gosport (Mr. Viggers) for giving us the opportunity to have this debate. I believe that he is right when he says that we should try to look to the longer term and not be diverted by too many current issues.

There is no question but that North Sea oil, its revenues and their use, is a highly political question. I agree that this can in no way be considered to be a nonpolitical subject, though that does not necessarily mean that it has to be a sharply divided issue between the parties.

When we are dealing with a major national resource—which will dictate the economic future of this country over the next two decades—there are at least some advantages in searching genuinely amongst the parties, and across the Floor of the House, for a measure of agreement.

It is valuable that the new Government have felt able to proceed with the proposals on petroleum revenue tax which we announced in August last year, and in what I shall have to say on petroleum revenue tax now and in the future I shall certainly seek to give the industry as much stability in its tax treatment as possible. Without doubt, there has to be a degree of continuity if the industry is to be able to plan forward and make the necessary investments to exploit the North Sea to the fullest extent.

Although I think that, on the balance of argument, the Labour Government were right to exempt BNOC from petroleum revenue tax, I never felt that this was an issue of fundamental importance, and the present Government's decision to remove that exemption is not one with which I should be prepared to take great issue.

Nor do I believe that many of the then Opposition's criticisms of BNOC over the years can be justified in any way. I put it to the Financial Secretary that over the decades during which we have been considering this issue there has been a growing recognition on both sides of the House that there cannot be a completely hands-off attitude to such a precious asset as oil supplies. Indeed, one can go back to Winston Churchill's justification for taking a 51 per cent. stake in what became British Petroleum. His words are worth listening to even now: … it would be much easier and pleasanter for us simply to sit still, and loll with supine ease, while we watched the absorption of every independent oilfield—to sit still and observe the whole world being woven into one or two great combinations—to treat those combinations with the utmost consideration, to buy from hand to mouth in the so-called open market what we wanted from time to time, to pay the grant oil trusts what they consider an encouraging price …"—[Official Report, 17 June 1914; Vol. 63, c. 1152.] Winston Churchill—then as a Liberal, and later to become a Conservative—justified a role for the Government at that time, and that justification has become increasingly necessary.

In the early days of North Sea oil, there was a tendency to leave it just to market forces. In the first place, the oil market is not a pure market. It is a managed market. There are two major cartels. There is the OPEC cartel and there is the cartel of the large oil companies, the so-called Seven Sisters. Within this, there is not a common price on any of the products at almost any level, and there is a great deal of Government interference at almost every level, whether in Western industrialised countries or in developing oil-rich countries.

We are not, therefore, dealing with a totally free market. Certainly, the experiences of the then Conservative Government in 1973 are of direct interest in this context. Faced by an acute oil problem, the then Prime Minister went to the oil companies expecting that they would be able to divert oil supplies to this country and was met by a group of people—not least from BP itself—totally refusing, in effect, to give the priority which he rightly felt was necessary.

It was therefore inevitable that a new Labour Government would seek to take a far greater control and influence on the development of North Sea oil. From many of my hon. Friends came the argument that we should nationalise the whole asset. That was rightly, in my judgment, resisted. I do not believe that we should have been able to reach the state of certainty of self-sufficiency in oil in 1980 had we not formed a partnership with private industry and its private expertise, using its access to investment funds and gradually developing through the instrument of the BNOC a capability within the ambit of Government to find out exactly what is going on in the oil companies.

The factual position regarding BNOC is clear. It was laid down in these terms by the Minister in the recent debate in the other place: … in law … BNOC has no supervisory or regulatory powers over offshore activities. These are vested with the Secretary of State for Energy"—[Official Report, House of Lords, 4 July 1979; Vol. 401, c. 385.] I believe that to be right. I would not wish it to be different. I wish to make that clear. But what I believe the vital asset of BNOC and the shareholding in BP give, and have given, to successive British Governments over the years is the potential for discovering exactly what is going on in this managed market.

Without knowing that one source of information will be open and fair, it is almost impossible to get any appreciation of what is really happening on transfer prices, on sales, on exploitation and on the potential. I regard this access to a source of information which, while operating totally commercially as BNOC should do, will tell the Government what its appreciation of the situation is as a precious asset, and it would be folly were the Government to take steps to dismantle or to neuter BNOC.

I very much hope that, just as we resisted when in office the blandishments of some who saw a simple and easy solution in total State ownership, the present Government will resist the blandishments of those, quite strongly represented on their Benches, who seem at times to want to return to a totally free market economy. In this area in particular, it cannot be justified.

Against the background of that firm view, I urge the Financial Secretary in particular, given that he speaks with the authority of the Treasury in this matter, to reconsider the possible sale of BP shares, which, we understand, the Government have in mind. It is a major decision for the Government to forgo a majority shareholding in British Petroleum.

Successive British Governments have always made clear that British Petroleum should operate commercially and that there would be no interference in those commercial operations. Indeed, the position was stated in the stock issue prospectus as recently as 1977. But, equally, successive British Governments have considered that it is a British national interest for the broad strategic decisions of the company to be decisions consistent with the Government's overall policy, and their foreign policy, in particular.

The Bradbury Bridges letters of 1914 can, of course, be said to be out of date in some ways. There is, for example, a reference to protecting oil supplies for Admiralty contracts. But if the letter is read in the whole, and if the practice which has been pursued, based on the Bradbury Bridges exchanges ever since 1914 is followed through, we see that it gives the Government of the day a majority influence on the strategic position of British Petroleum—though it is not always exercised, I should add.

I do not believe that that relationship of influence was exercised as effectively as it should have been by the company in response to the then Prime Minister in 1973. I do not believe that the company acted in full appreciation of the British interest in making arrangements with the French over the Channel and the allocation of oil. I do not believe that in very recent times the company has operated always in the fullest consultation with the Government in protecting the national interest and making arrangements for exports of North Sea oil and, in particular, guaranteeing them to the Federal Republic of Germany for a long time.

I do not think that the relationship is ideal. Indeed, when we were in government we wished to strengthen it. We felt that there was a strong case for having two Government directors on BP Oil, the subsidiary which deals with marketing arrangements in the United Kingdom. In my view, it is not enough just to be represented on the main board, and the board members should be much more actively involved, devoting more time to it and taking a more involved part in the operations of the commercial company.

But, that being said, I am content to rest on the Bradbury Bridges letters and I am content to rest on the present arrangement. I hope, therefore, that the Government, and the Financial Secretary in particular, will think very hard about what we understand them to be considering in regard to the BP shareholding. Apart from anything else, on the strict economic case, they would be giving up the revenues for a really quite small capital gain to deal with a pressing minor problem in the public sector borrowing requirement of the current year. Not only would the Financial Secretary forgo substantial revenues, which are bound to increase over the next few years, but on any economic assessment it is, I think, a bad deal. He would be likely to give it up just when the capital value of the stock would appreciate, and since the sale in 1977, the capital stock appreciation has been phenomenal. There are other ways to close that gap, and he would be making a profound mistake.

I wish to make it unequivocally clear that a future Labour Government would not accept a situation where, by the sale of shares, the overall strategic control of the affairs of British Petroleum enshrined in the Bradbury Bridges letters and exercised by the British Government in the British national interest had been surrendered. We would take such steps on taking office as we would deem necessary either by legislation, share acquisition or other means to restore the position envisaged in the original exchange of letters. It is neither prudent nor necessary to spell out now the exact way in which we would restore the position, but no one should be under any misapprehension about the firmness of our intention. Even if the present Government will not accept the strategic wisdom of retaining this degree of control over the affairs of BP, on grounds of any fair assessment of the nation's economic self-interest it would be economic folly to sell any part of the existing 51 per cent. shareholding in British Petroleum.

The Government can co-operate with private enterprise and international oil companies, and I hope that the present broad balance of partnership, involving many international oil companies and foreign ownership in North Sea oil, will continue. The influence that we have through the 51 per cent. shareholding in British Petroleum should not be tampered with and the role and position of BNOC should not be radically altered. A major change in any of those parameters would be profoundly against the national interest. I hope that the Government will look at the matter objectively and fairly. If they do so, they will find support from the Labour Party and have that precious asset of a broad continuity in dealing with the problems of the North Sea.

Over the past few months we have found our supplies threatened. In such circumstances the Government must have fairly strong powers to protect the consumer and industry. It is a sad fact that British Petroleum exports a far higher percentage of its return from the North Sea than any other company. Because of the participation agreements with BNOC, the 51 per cent. sell-back arrangement was made with the provision that the oil would come to the United Kingdom. The other 49 per cent. is also frequently negotiated to come back to the United Kingdom.

It is not by accident that Esso, Shell and Texaco are putting their North Sea oil back into the United Kingdom, but as a result of arrangements in the participation agreements with BNOC. British Petroleum, even in its own interest, was unwise to make extensive long-term arrangements for the export of North Sea oil without the ring price provisions that Shell made. Under the previous Government, and I believe under this Government, every possible persuasion is being used to set back the maximum amount of North Sea oil for the United Kingdom consumer. British Petroleum should voluntarily renegotiate wherever possible to make other arrangements.

As the hon. Member for Gosport said, we are in a dilemma in the long term. There is a strong case for discovery to locate the future resources of oil. That involves drilling and expense, which is of national interest. The commercial company, having discovered the oil resource, wishes to exploit it, usually at the earliest opportunity, and that is not necessarily in the national interest.

Over the past few years we have had to change our estimates of the oil surplus that Britain will have in the middle 1980s. The hump of surplus production from the North Sea over demand has been substantially increased from the last estimate in 1977 to the estimate in 1979. We have an overriding priority to flatten that hump and spread the North Sea oil production into the late 1980s or early 1990s, so that we do not produce an over-supply in the early 1980s. That is difficult and will need to be done in co-operation with the industry. I hope that the Financial Secretary is not a slave to official advice and I urge him to look carefully at the argument that there is no room for manoeuvre in depletion policy.

The forecasts of a hump are grossly under-estimated and the hump of production over demand will be far greater. Over the next few years low growth will substantially reduce the forecast demand, and the hon. Gentleman should consider the matter urgently.

Shortly before leaving office we decided to go for a more conservationist policy— and gas is also affected and that is why flaring regulations are so important. The oil companies will be more receptive to a controlled depletion policy now than they were two or three years ago, when they were worried about the international oil prices. Few oil economists will advise international oil companies that they cannot but look to a steady increase in the overall oil price. By restraining their extraction and production rate and opting for developmental delay, even with rapid exploration, they are keeping money in the bank which will appreciate. I believe that more oil companies will understand that, and it should be possible to persuade British Petroleum of the advantages.

It may be argued that room for manoeuvre is circumscribed by the so-called Varley assurances in 1974, but that is not so. The circumstances are totally different. Those assurances were given at a time of great uncertainty about the future of North Sea oil—about the exploration rate, the amount of oil and the need quickly to move to self-sufficiency. Those priorities were correct but the situation is now different. It is paramount that North Sea oil resources are used as long as possible to retain self-sufficiency for the United Kingdom.

The Financial Secretary may be tempted to go for high revenues in the next few years, but there are already great problems in the management of the economy through the mere existence of North Sea oil. There is great pressure raising the exchange rate because of our North Sea oil resources. We have criticised the decision deliberately to increase the rate of inflation, and the Government will be hoping that the high exchange rate will ease the problem. That is a short-term view and we must not have an unrealistically high exchange rate during the 1980s. A more realistic depletion rate would he of assistance in reducing pressure on the exchange rate. In the 1960s for a sustained period of seven to eight years there was an unrealistically high exchange rate. In the 1980s there is a danger that that will again occur. The hon. Gentleman should consider depletion policy as a prudent national decision, which would help long-term economic management.

The Government must also reconsider the international tradition of using the United States dollar as the reference point for oil. Britain has an interest with other OPEC countries in opting for a basket of currencies. The petroleum revenue tax take has been substantially reduced with a weak dollar and a strong pound, and that may be another way of increasing our overall revenue.

I know that many hon. Members wish to speak in this debate, therefore I do not wish to develop too many areas of policy in a field in which I am only learning I am very attracted to the strong-underlying trend of much of the debate that the principle of hypothecation of North Sea oil revenues should be considered and not be treated as some sacrosanct aspect of Treasury theology. The techniques for achieving the objective differ widely. I am interested in the view of Mr. Sam Brittan, who was mentioned by the hon. Member for Gosport, but on the other hand one can take the viewpoint that all the revenue must be ploughed back into the regeneration of British industry. There are very different approaches. But the one approach for which there is little support in this House is that the revenues should be simply part of the overall financial arrangements of the Treasury and thus be frittered away in a way which none of us would ever he able to pinpoint. That is what happened to the Dutch with their gas. We have there a model of artificially high exchange rates and why we should prevent North Sea oil revenues from being subsumed in the overall Exchequer management. We would live to regret such a course in the 1990s. We would look back at the 1980s and ask ourselves how we used that revenue. It would he terrible if we found that it had just somehow drifted away.

To some extent this is what happened over our own gas supplies in the 1960s. Therefore, we must look at the techniques again. There was a discussion in the White Paper on North Sea oil which a previous Labour Government produced. In my view, that White Paper was not sufficiently detailed. I believe that an annual report is a help, but neither is that sufficient in itself. Certainly, we on this side of the House want to be sure that that money is being used to try to protect the economy of this country, particularly its industrial and manufacturing strength, into the next century. There is a priceless chance for us to use this money wisely.

One way of doing this is to keep oil in the ground, which would mean a depletion policy with a much greater bias towards conservation. The other is to make it clear that that money will be used in ways which will make not a short-term contribution to the economy, but a longer-term investment potential. That is the responsibility of the Government. History will judge them very ill if they dissipate it.

On the broad issues, I hope that we can forge some sort of agreement to give this industry the chance to fulfil its full potential. We shall look objectively at any proposals for changes in the PRT. We hope that the Financial Secretary will take account of the concerns mentioned by my hon. Friends the Members for Aberdeen, North (Mr. Hughes) and for Dunfermline (Mr. Douglas) about the offshore oil industry, and particularly the consequences that are being felt now as a result of the Government accepting the objections of the EEC Commission. I hope that he will look at the employment prospects and the necessity to try to have a level of ordering that will allow that industry to survive in difficult years and to give us overall service. I hope that he will bear in mind the points that have been raised about the underwater safety standards. Above all, I hope that he will now take decisions which are prudent and in the long-term national interest I hope that he will see this as a resource, and not as a short-term manipulator of the British economy. If the Government can produce that perspective in their management of British North Sea oil, despite the other political differences that there may be between us, history will judge them well.

I believe that when we look back over the period of North Sea oil stewardship of the Labour Government between 1974 and 1979, it will be seen that we enabled this Government to have the right degree of influence and control over that resource and to build a creative partnership between private enterprise and the industry. It would be foolish, and a dogmatic assertion of the new Government's power—and undoubtedly they have it—were they to dismantle that apparatus purely and simply for doctrinal and party reasons. I urge the Financial Secretary to think very carefully before he makes any changes in BNOC or in the shareholding in BP which the Government have had since 1914.

1.25 p.m.

Photo of Mr Michael Brown Mr Michael Brown , Brigg and Scunthorpe

I crave the indulgence of the House on this auspicious occasion. I congratulate you, Mr. Speaker, on your splendid sense of timing, for it was at 1.25 just nine weeks ago to the day that I was declared elected as the hon. Member for Brigg and Scunthorpe. It is also exactly three years ago tonight that I was selected as the prospective Conservative candidate for Brigg and Scunthorpe. Therefore, I feel a sense of occasion, not only because of the momentousness of this moment but because of the sense of history which it stirs in me.

I am of somewhat tender years and have a lot to learn. I have been a little reticent in the past nine weeks, which is not a normal characteristic of mine. But having been educated at a secondary modern school, perhaps I could be described as a late developer in these matters.

It is the convention on these occasions to pay tribute to one's predecessor, and this is a convention that I am happy to follow. My predecessor was John Ellis, who represented Brigg and Scunthorpe from February 1974 until the general election. He served his constituents well and will be remembered as a Member who made vigorous, energetic, enthusiastic and—I do not think he would take this amiss—emotional efforts on behalf of his constituents. I am sure that the House will wish him well and also send its good wishes to his wife and family. He had the unerring support of his wife Rita, not only in moments of victory, but also in defeat. I am sure that the House will wish him well in the years ahead.

In some ways I feel as if I had crossed the Floor. Before the election I worked for two hon. Members, which was a privilege and a pleasure—my hon. Friends the Members for Arundel (Mr. Marshall) and Macclesfield (Mr. Winterton). I regret that neither of them is here today, but they were unable to attend because of commitments elsewhere. My hon. Friend the Member for Arundel is now a junior Minister, and I congratulate him. I owe my hon. Friends a considerable debt of gratitude, because they helped me considerably during my three years of political apprenticeship.

I have the honour and privilege to represent a unique constituency. This is the first time for half a century that a Conservative Member has made a maiden speech as the Member for Brigg and Scunthorpe. Scunthorpe might be regarded by those who have never visited it as a music hall joke. Nothing could be further from the truth. Scunthorpe is one of the most beautiful industrial towns in this country. It is renowned for its friendliness, cleanliness and industry. It has a charm and beauty enhanced by the steel industry, which is the major industry in the town. The town's growth and development has been based on that industry for the past 50 or 60 years. A total of 18,000 people work in the steel industry, and most industries in the town are dependent on it. There is a proud record of industrial relations, but of course the people of Scunthorpe and those who work in the steel industry are looking forward with pleasure to the period of office of the Conservative Government and the work that they will do to regenerate British industry and increase the demand for steel.

The other part of my constituency consists of the borough of Glanford, which is some 240 square miles of the most beautiful rural North Lincolnshire. There are a number of small towns, the most historic being the market town of Brigg and the town of Barton.

Agriculture dominates as the other crucial industry. For hundreds of years Brigg and Scunthorpe has been an isolated constituency and it has been cut off from the rest of the country because of poor communications. We are now fortunate to have a motorway system which in two weeks' time will be extended, with the opening of the motorway bridge over the River Trent. I hope that the Minister will soon announce his intention to extend the M180 from Barnetby Top to Grimsby, thereby completing the motorway system in the South Humberside area. At some stage in the present Parliament the controversial Humber bridge will, for better or worse, be completed as the largest single suspension bridge in the world, linking my constituency with Hull on the north bank of the River Humber.

History and geography have separated Lincolnshire and Yorkshire from each other. Local government reorganisation, regrettably in my view, tried to change this, but the bridge will be the hope of many that two traditionally rival communities may yet be united. I am a little sceptical at the optimism on this point, but we await the future with hope.

It is a pleasure for me to speak in this debate initiated by my hon. Friend the Member for Gosport (Mr. Viggers) because agriculture and steel depend on sources of energy. I commend the motion to the House because it is important for the future of British industry and agriculture to ensure supplies of energy.

My hon. Friend rightly indicated the need to conserve our valuable resources. At the same time he rightly drew attention to the need to ensure that oil is sold at the correct price. As one who believes passionately in a free society, I believe that the best guarantee of such a society is the operation of market forces whatever commodity is involved. Oil has been underpriced in recent years, and only when oil is priced correctly will we appreciate its scarcity.

The painful alternative is rationing. I do not believe that Governments are capable of taking such painful decisions. Industry would be set against industry and individual against individual. Priority given to one industry would mean a lack of priority for another industry. The operation of supply and demand to ensure that oil is sold at the correct price is the best way to ensure an even and fair distribution of this scarce commodity.

I am something of a Gaullist on matters relating to North Sea oil. I believe that this valuable commodity must be utilised for the benefit of our people. I appreciate that we live as a trading nation. That has been our history and will continue to be so. I recognise that oil must be used in our trading capacity. Nevertheless, when we have the great advantage of a scarce resource that is not available to other countries, it is important to ensure that North Sea oil is consumed by the people of this country rather than by people in other countries. It is not unfair to make such a comment.

When we have utilised our natural resources resulting from our geography and history, we have done so to defend ourselves against an important crisis or a war. In war we took unashamed advantage of the fact that we were an island. Likewise, in terms of the energy crisis which confronts the world, we should take some advantage from the fact that we have North Sea oil on our doorstep. I recognise that there are many long-term problems which must be solved by the world as a whole in an unselfish way. Therefore, I very much agree with the long-term view of my hon. Friend the Member for Gosport.

Many other hon. Members wish to take part in this debate, and I shall not incur the wrath of the Chair by extending my remarks. I wish to thank the House for being so tolerant in my terrifying experience of addressing the House for the first time.

1.35 p.m.

Photo of Mr Raymond Ellis Mr Raymond Ellis , North East Derbyshire

I wish to congratulate the hon. Member for Brigg and Scunthorpe (Mr. Brown). He mentioned a number of coincidences in his life. Let me give the House another one. We both made our television broadcast together, and I hope that I can match his eloquence in the House.

When I first came into the House I found myself in the Central Lobby like a little boy lost. A long-standing hon. Member came up to me and asked whether I was a new boy. I said "Yes, I am Ray Ellis from North-East Derbyshire." The response was "That was Tom Swain's old seat. What a grand old lad he was." We all know the tragedy of the circumstances in which Tom met his death. Whenever I meet a colleague in this House for the first time, reference is always made to my well-liked predecessor. He was very well respected in the House.

Tom Swain came to the House after a lifetime in the coal mines. He was a larger-than-life character and was a high-profile man. He once held the record for the production of the largest tonnage of coal in the war years. In those days he dug coal with a pick and shovel and in one shift he dug 24 tons. As he lived, so he had to die. He was killed literally by 24 tons of coal. His car collided with a National Coal Board lorry in a tragic road accident. That accident happened only days before his retirement when Tom was looking forward to spending his retirement in producing the prize tomato to outdo all other tomatoes. No doubt had he lived Tom would have achieved that aim.

Twenty years ago when Tom came to the House the constituency of North-East Derbyshire was a very different place from what it now is. In those days there were dozens of coal mines in the area and coal was the heartbeat of the constituency. There were a few farms and little else. It is an entirely different place today. We have seen the decimation of the coal industry. Pit after pit has been needlessly abandoned, wasting billions of tons of coal. Indigenous resources of energy have been lost for all time—energy which the nation sorely needs today. Had it not been for the granting of intermediate status, the constituency today would have been a disaster area. We in our area are eternally grateful to previous Governments who have granted intermediate status and enabled us to stave off what would have been galloping unemployment.

We still have a few modern coal mines left. Furthermore, we still have the farms. Fortunately, we now have a nucleus of new industry, including new factories, where the management is delighted with the work force which comprises mainly ex-miners. That is a peculiarity of the coal miner. On the one hand, he will fight tooth and nail to prevent pit closures but, once he is declared redundant, he quickly settles down into any other job and, in the main, he never goes back to the pit. That is not surprising, because those who have visited coal mines know that such underground work is not an environment to love and cherish. Yet, left alone most of Britain's miners would remain underground for their working lives. It is in the interests of the nation that we should take advantage of that. The nation could make capital out of the miners' inherent tendency for masochism.

When Britain led the world, the industrial revolution was built on coal. Coal can be our salvation again. It is under our feet and we have the techniques, the know-how and the men. I hope that we, in this House, have the intelligence to utilise fully our national assets in order to ensure that never again shall we be at the mercy of outside forces.

Oil is far too precious to be burned to boil water, to raise a head of steam and to create electricity. It is stupid for oil to do those jobs when there is an abundant supply of coal to do them for us. The industrial revolution was dependent upon, and could not have occurred without, the raw energy of coal. In the same way, the modern economy is dependent upon the petrochemical components that are contained in oil. It is criminal folly needlessly to burn it. We use oil for motor fuels, aviation fuel, diesel oil, lubricants, waxes, methane, propane and butane gases. I should like to pay tribute to the Library which has supplied me with these facts in a matter of hours. It is a great asset to all new Members of Parliament and if any hon. Member is lacking in background knowledge it is his fault and not the fault of the services that are provided.

From oil we also obtain solvents, dry cleaning fluids, paints, printing inks, polishes, adhesives, edible oils, benzene, chemical feedstocks, agricultural fertilisers, weedkillers, insecticides, detergents, polythene films, mouldings, pipes, netting, ethylene oxide, antifreeze, terylene, detergents, styrene, polystyrene and plastics. The list is miles long and I shall not bore the House with it. But, not until I went through this exercise was I aware of how we are dependent absolutely upon the petrochemical qualities of oil.

We all walk on oil derivatives. Most of us wear plastic-soled shoes and even those of us who can afford leather walk on oil in the form of bitumen on the roads and pavements. If we all demanded leather shoes the additional oil in the form of edible oils, fertilisers, weedkillers and insecticides would be needed for the cattle. We are dead without oil. To those who argue that the same chemical components exist in coal, I would say that oil is much more easy to crack. Oil is coal that is more than two-thirds of the way through the refinery.

This liquid gold must be husbanded carefully and not wasted where it can be replaced by coal. At the earliest possible time, no more oil should be used in power stations, on the railways or for central heating. Coal or "coal by wire" can do these jobs adequately in the short and medium-term future. Coal is the answer.

Most hon. Members will have received letters of complaint from constituents who can no longer get oil for central-heating purposes. They complain that the gas board is loth to convert their heating systems to gas. Although I and other hon. Members are attempting to persuade the Gas Board to convert oil central heating to gas that makes sense only if, at the same time, steps are taken to convert back to coal-produced town gas. We relied on that for more than 100 years. Although North Sea natural gas is rich in chemical feedstocks, it will run out before North Sea oil. Therefore it needs to be husbanded even more carefully. In the longer term, coal will have to be the main-stay of the chemical feedstock industry, however difficult and expensive in terms of capital expenditure that may be.

Eventually, after our exceedingly slow pace in the matter, nuclear fission will supply most of our energy needs. Ultimately, the time will come when we have wedded the techniques of nuclear fission to the microchip revolution. There will be no problems when we reach the era of "fish and chips" and we shall all be frying every night. That is not true of today. Today, most other industrialised nations are setting a premium on coal. The comparatively small supply of coal that has heretofore been available on the international market will soon vanish without trace. Britain is the only advanced industrialised nation that has adequate indigenous supplies of all forms of energy. If we act wisely there will be no queues at petrol stations, no energy shortage, no balance of payments problem, zero inflation and a reduction of unemployment.

The main plank in our strategy must be to agree to the utilisation of and the reliance upon our abundant indigenous supplies of coal. Coal is safe and secure. If anybody believes that the miner is less trustworthy than the OPEC cartel, I advise him to think again. The miner is not a revolutionary—most miners are not even red-blooded Socialists, more is the pity. Miners are apolitical, but they have enough shrewdness to be aware of their bargaining position from time to time and the sort of wages that they are worth.

The world is seeking desperately for secure energy supplies. Britain's solution lies in the coal industry, in the abundant and proven reserves of coal, in our acquired techniques over the years and—most of all—in the skills and good will of the work-force. All that the Government have to do is to provide the capital investment, pay adequate wages and keep their noses out of the industrial relations system that has developed organically over many years.

I should like to say a few words about the closed shop. Before I escaped at the general election to come to this place, I had completed 40 years underground. In all that time, working in many pits, I never met an underground worker who was not a trade union member. Even before nationalisation, the practice was to leave school, go along to the pit, apply for a job and, if successful—not everybody is, because the tests are stringent—join the union. That is the practice to a man. There is no argument about it. It happened when I was 14 and it still happens today.

When the Government examine their souls they will do better to hark back to Edmund Burke rather than to Adam Smith. Although I do not have much time for Edmund Burke, the Government should have time because he gave them their philosophy and their principles. Although he was not referring to the organically-grown pre-entry closed shop within the mining industry, he might well have been doing so in the main touchstone of the stricture that he delivered to the Conservative Government of the day. His prime principles—the grass-root and foundation of Conservative thinking—lie in his most quoted statements. He warned Conservative Governments to resist the temptation to alter in any way the longstanding, organically grown institutions of the country. The traditional relationship within the coal mines is one of those organically grown institutions, like it or not. He warned the Government to refrain from meddling because if they tampered with those institutions and relationships, whatever their motives, they did so not only to the danger of the nation but at their own peril.

1.50 p.m.

Photo of Mr Mark Lennox-Boyd Mr Mark Lennox-Boyd , Morecambe and Lonsdale

I am happy to make my first contribution as a Member of the House, and I am pleased to be called immediately after the hon. Member for Derbyshire, North-East (Mr. Ellis). I hope that I make as eloquent a contribution as he did.

The hon. Member for Brigg and Scunthorpe (Mr. Brown) described his constituency as unique, and in that he was right. Every constituency is unique, and every constituency is beautiful to its Member of Parliament.

I, too, represent a constituency which is beautiful. It is a most beautiful constituency in the North-West, and I follow into this House a very distinguished former Member, Sir Alfred Hall-Davis. I know that it gave my constituents as much pleasure as I am sure it gave him to hear that 15 years of devoted service to this House and to his constituents had been recognised by the Prime Minister in one of her first acts in her Honours List in the form of a knighthood.

Before I became a Member of Parliament, of course, I knew of all the trouble which Sir Alfred took about the problems presented to him in the constituency. But when I was handed his files I had quite a shock, for I discovered to my cost how every problem, large or small, was given his personal detailed and immediate attention and quite often dealt with in more than one way. He set a very high standard. It is one that I shall find difficut to live up to.

Sir Alfred will be remembered above all for his kindness and consideration, and I know that he leaves numerous friends in this House, in the constituency and elsewhere, all of whom wish him the very best in his future career.

My constituency is one to which many people come on holiday. It is an area of great contrasts between the rocky crags and peaks of the Lake District down to the vast sandy expanse of Morecambe Bay at low tide. Because Morecambe Sands is exposed at low tide, technically it is part of my constituency. That leads to a curious geographical quirk, for it means that at high tide some 100 square miles of my constituency is under the sea.

It used to be the case that the main route north-west from the Morecambe area to the Furness area was in the County Palatine across the sands, in and out of those quicksands. I do not know whether any previous hon. Member came to a sticky end on that tricky route, but today I have to leave my constituency in order to travel from one half to the other and pass through the constituency represented by my right hon. Friend the Member for Westmorland (Mr. Jopling) Bearing in mind his responsibilities and my duties towards him, I hope that I shall have no occasion to get into any trouble on that route or on any other.

My constituency has many important and diverse elements. First, there is a large retired population who are more than grateful to hear of the substantial pension increases promised by the Government. Of course, there is also a thriving tourist industry both in the resort of Morecambe and in the Lakes. I also represent a large number of farmers. All these interests make me all the more conscious of the great need to protect and preserve all that is beautiful in our towns and countryside. Today there is an immense respect for the quality of life and for our environment. It is probably of greater public concern than ever before. It is in the context of concern for the environment in this debate about energy that I make a few comments.

Last week, the Government announced their decision to go ahead with the second stage of the nuclear power station at Heysham, which is in my constituency. Apparently it will become one of the most powerful electricity centres in the world. No Government, whether democratically elected or despotic, could introduce or expand a nuclear power development unless they were completely satisfied that nuclear-generated electricity was at least as safe as any other form of industrial activity.

Initially, I was sceptical about the virtues of nuclear power. I believe that such scepticism still exists among many members of the community and that it goes completely across party lines. It must be the duty of those who believe that nuclear power is not only safe but necessary to neutralise such fears. It is a commonplace that when the oil runs out we shall need nuclear energy. But it is wrong to start the argument with need. Need must come second. Safety must come first.

It is wrong when discussing safety to talk simply about our having the highest safety standards in the world. Everyone in Britain knows that. People would not want to live in Britain if that were not the case. It is much more important, and there is a great need, to explain that nuclear energy is no less safe than any other industrial activity with which we have lived for years. The public need to hear and need the reassurance that the overwhelming majority of informed scientific opinion in the democratic countries of the world and elsewhere believes this.

I touch briefly on one or two other matters. I shall be brief not because that will ever increase my chances of catching your eye, Mr. Speaker, in the future. I am told that that is not the case. None the less, I believe the opposite is the case and that those hon. Members who are lengthy probably will have less opportunity to catch your eye in the future.

I make one comment upon a situation of the moment, namely, the fact that our pound is so strong. Yesterday we had, and no doubt in times to come we shall have, interventions and contributions seeking to discover what the Government intend to do to assist exporters who are hampered by this burden. Inevitably we shall have to live with a strong pound as long as North Sea oil flows. The best way to regulate the value of the pound must be to relax exchange controls which were measures introduced during a period of wartime emergency and should have been scrapped on liberal principles many years ago. I am glad that the Government have indicated that there will be action in that area.

When that action is taken there will be opposition to the effect that British capital funds will be leaving the United Kingdom. That will be true. There will also be opposition to the effect that therefore there will not be sufficient capital funds in the United Kingdom for investment in British industry. That will not be the case. There is no shortage of capital funds for investment in the United Kingdom. The fact that our pound is getting stronger demonstrates that.

There are of course some areas where there is no mad rush to invest in British industry. That is a very different matter. As the saying goes, "You can take a horse to water, but you cannot force it to drink." However, I shall not stray too far down that oath of controversy.

I recognise that any Government must do what they see to be necessary first to ensure that it is the people of Great Britain who enjoy the benefits of North Sea oil and not the multi-nationals and, secondly, to encourage investment in British industry. But it is totally wrong to imagine that the advent of substantial North Sea oil revenues means that we have to make decisions of a fundamentally different kind.

The title of the White Paper we have been considering in part, "The Challenge of North Sea Oil", sends a shiver down my back, for it suggests that there are radical and far-reaching decisions that we have to make. I believe that the decisions which have to be made by the Government are the decisions that the Government always have to make—how to encourage investment, how to maintain a stable currency, how to decide the level of public spending, how to discourage a consumer spending spree. These are all decisions that Governments habitually have to make. The only difference for us is that we have more time than other countries which are not fortunate enough to have this great asset.

I enter this House, along with others, for the first time at a time when Great Britain will enjoy this great asset, and I have no doubt that it will last throughout the whole of my parliamentary career. If I am lucky enough to be here in 20 years' time, I am sure that we shall then be considering how we are to face the future without this great asset. Therefore, hon. Members in my position are in the unique position of seeing this great asset being available throughout the whole of our parliamentary careers.

I feel that it will be my duty, and, I am sure, the duty of other hon. Members, to test and question Governments of all political complexions in the years to come to ensure that we do not fritter away this great asset either by means of substantial reductions in taxation, which will be the temptation for Conservative Governments, or by great increases in public expenditure, which will be the temptation for Labour Governments, because both courses would be acts of prodigality. That is the contribution I am making today in warning that we must not squander our inheritance if we wish to have the respect of generations to come.

2.2 p.m.

Photo of Mr Geoffrey Dodsworth Mr Geoffrey Dodsworth , South West Hertfordshire

It gives me great pleasure to congratulate my hon. Friend the Member for Morecambe and Lonsdale (Mr. Lennox-Boyd) on his excellent maiden speech. We all enjoyed the account of the rising tide of Conservatism in Morecambe Bay and admired greatly his ability to dodge the quicksands of Westmorland and all that might lie within them. We congratulate him on his perspicacity in recognising the difficulties which might lie ahead and which I am equally sure he is likely to avoid. It was also a pleasure to hear his compliments to his predecessor, whom we all admired. We share with him the pleasure at the signal honour bestowed upon his predecessor.

There have been two other maiden speeches which I very much enjoyed—those of my hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown) and of the hon. Member for Derbyshire, North-East (Mr. Ellis). Many of us knew my hon. Friend the Member for Brigg and Scunthorpe already. We greatly appreciated their excellent contributions and look forward to hearing them again on many many other occasions. I notice that the hon. Gentleman who immediately followed my own maiden speech is now on the Treasury Bench. I was greatly obliged to him at the time for his kindness and subsequently for many other kindnesses. It is a pleasure that we can all share in working together in this House.

We all congratulate my hon. Friend the Member for Gosport (Mr. Viggers) on the excellence of his choice of subject for debate. We are all aware of the significant challenge before us. It has become clear that everyone is well aware of the dangers of financial strength and industrial weakness. I hope that I shall be allowed to draw back for a moment to see how we have arrived at our present position so that we can get a perspective of forthcoming events. The events of 1973–74 are brought to the memory by more recent events, and in looking to our energy supplies in the world it is important to assess the role of our own oil supplies in domestic and world affairs.

During the general election campaign I gave many of my constituents the opportunity to present their own views on this subject. I asked them to answer a number of questions. Nearly 400 of my electorate replied in great detail, setting out their views about North Sea oil. It is important to realise the impact on and knowledge which exists among members of the public, and their concern about the course of the debate on North Sea oil. That has been underlined for them by previous events.

From 1958 to 1969, the supply position outside North America was generally one of surplus in crude availability, refining capacity and tanker tonnage, leading to a fierce competition in the markets. The rapidly growing demand for oil and the enormous absolute growth that occurred year after year provided an attractive background for new entrants to the market, and encouraged the expansion outside America of a number of American companies. The impact of those entrants on our affairs is apparent from the debate.

The last few years have seen many contrasts in the world oil markets. The years 1971 and 1972 were characterised by an almost static demand, which gave way during 1973 to renewed substantial growth, though not at the rate experienced in the 1960s. By the autumn of 1973, the prospects of domestic heating oil shortage within the United States began to influence prices, which moved from their previous depressed levels. That movement was accelerated as a result of successive steps taken by the OPEC countries to increase their revenue from their oil production and therefore increase their control over the assets of the production companies.

The heavy burden that these increases placed upon the cost of oil and the balance of payments throughout the world was a demonstration of the vulnerability of the major oil-consuming countries to the political use of oil. There we see the first essential change—the movement to the political use of oil as demonstrated in the Arab-Israeli war. This led to a greater degree of intervention in oil supply and marketing matters by consumer Governments. Furthermore, the large increase in oil costs came at a time when the industrialised countries were on the whole moving into a period of recession.

The combination of high price and slackening economic activity caused a significant reduction in oil consumption during 1974, the latter half of which was characterised by the re-emergence of strong competition, although at much higher prices than in previous years. This competition intensified during 1975 as the reduction in demand caused by higher prices, conservation measures and the continuing world recession led to large surpluses in the supply of petroleum products, which has since been rather altered by recent events. In Committee on the Finance Bill, one of my hon. Friends referred to the possibility, even in the current situation, that, by taking certain action, one might see the redevelopment of surpluses.

Yet, despite this thoroughly unsuitable market climate, the resources of North Sea oil have been fully exploited by private companies with notable success. The story of North Sea oil so far is one for which the system of private enterprise deserves extensive praise. The oil companies have brought from conception to fruition an enormous amount of research, investment and management, realising for this country a potential that no other Western Power possesses. They have put on tap supplies of oil equivalent to our total national needs. That is a remarkable achievement. It has been achieved within the short span of a decade—in these terms, a very short time.

The first substantial discoveries of oil in the United Kingdom continental shelf were made only in the early 1970s. The contribution which this oil could make to improving the security of our energy supplies and the balance of trade penalty inherent in continued oil imports were strongly underlined by the embargoes imposed by some producing countries in the autumn of 1973, and the subsequent fivefold increase in the world price of oil. However the production of North Sea oil is managed over time, it seems certain that there will be substantial quantities available for export in the 1980s. The Opposition spokesman on energy matters, the right hon. Member for Plymouth, Devonport (Dr. Owen) said that the hump appeared to have grown bigger rather than smaller.

Four-sevenths of the world's proven oil reserves are in the Middle East. The proven reserves in Europe account for 3 per cent. of the world total. About 20 per cent. of the world's oil, and 5 per cent. of its natural gas, come from offshore fields. The undersea search for additional resources is therefore an important activity. The exploration entails heavy expenditure, and the risk of failure is high. We have heard mention of the need for balance, the need to conserve our resources but at the same time carry out the exploration and exploitation in the national interest.

A land exploration well costs between £300,000 and £400,000 a month. Under difficult circumstances, the figure can increase to £700,000. Offshore drilling may cost up to four times more than a similar operation on land. Development costs of new fields have increased dramatically in the hostile environment in which they are frequently found. Many Labour hon. Members have given particular attention to the difficulties faced in the hostile North Sea at different times of the year. Production investment for a major oilfield in the North Sea can exceed £5,000 per barrel per day of peak production.

By 1980 United Kingdom offshore oil consumption should be between 90 million tonnes and 110 million tonnes, roughly equal to United Kingdom net consumption. The sharp build-up of production from almost nil in 1975 has required heavy capital investment. Close co-operation between all the oil companies, the financial sector and Government Departments has made that dramatic step remarkably smooth. In 1977–78, the expenditure was equivalent to about a quarter of industrial investment in the United Kingdom, and was a tenth of total domestic fixed capital formation.

All of that underlines the immense strides that have been made in a short time. We are grateful for the developments which have been brought about by what was at the time an inspiration, a development which has made the best possible use of private enterprise operations.

We must be alert to the entry of the Soviet bloc into world markets in the mid-1980s. That will put further pressure on oil prices. Such an important resource requires an alert defence, both in the Gulf and in the North Sea.

Britain is fortunate in having a greater resilience in accommodating oil shortages than the citizens of the United States appear to have. We must be grateful for that, as the oil scarcity is a silent enemy. We must guard against its dangers with foresight, determination and ingenuity.

I should like to outline a few basic proposals which if implemented might be of advantage to our nation. Our first objective must be to reduce our dependence on oil in general, because to be dependent on something is to be very vulnerable. Such vulnerability should be minimised, and it can be. Secondly, North Sea oil must be used not simply as a resource that we fortunately have in order to meet an immediate shortfall in oil supplies, but as a resource to give us strength to remedy the structural defects of our economy and rekindle the manufacturing or marketable sector upon which the nation's wealth depends. We have heard in this debate of the Treasury's role and the need to recognise that what we are discussing is not merely an energy resource matter but a financial and economic matter.

The reduction of dependence on oil involves looking for alternative sources of energy. I welcome the support given by many hon. Members to the development of nuclear resources. I have taken part in a number of debates on the need for concern about nuclear safety. When asked how we should use our North Sea resources, many of my constituents replied that we should use them to develop alternative energy resources. But they also said that we must he absolutely satisfied that the processes on which that depends are safe not only for those who work in the industries concerned but for all the people who live around those industries. A small degree of error can have catastropic consequences.

My constituents are also deeply concerned above all that the resources are not frittered away. The people want to see that we use the resources to develop industrial activity and new energy resources. We must adopt conservation measures to the full. Public authorities use 6 per cent. of the country's energy. Savings can be made by them. Public sector housing, which uses 9 per cent. of our energy, can set an example in energy saving. New standards can and should be set for thermal insulation. The prospect of dearer fuel in a decade gives individuals little incentive to carry out investment with a long-term financial and energy-saving benefit.

There is a range of matters to which the House can address itself. We must consider how best to use our North Sea resources in both energy and economic terms. Individuals must also make similar judgments. The Government have the opportunity to develop a strategy for the nation so that in the next century we have a steady climate for the transition from the use of oil. In the meantime, the Western world is threatened by restrictions on its most fundamental resource. North Sea oil gives Britain a unique opportunity, an opportunity that we must not waste.

2.17 p.m.

Photo of Mr Julian Ridsdale Mr Julian Ridsdale , Harwich

I am glad that you have not called me to speak until now, Mr. Speaker, because I have had the opportunity to hear three excellent maiden speeches.

My hon. Friend the Member for Brig and Scunthorpe (Mr. Brown) spoke with great confidence and at times did not use his notes. We shall all wish to listen to him again on many occasions.

The hon. Member for Derbyshire, North-East (Mr. Ellis) spoke with all the humanity of someone who is a worthy successor to Tom Swain. He showed the understanding of a man with long experience in the mining industry at the coal face. It will be a great pleasure not only to know him outside the Chamber but to hear him again on the Floor of the House.

My hon. Friend the Member for Morecambe and Lonsdale (Mr. Lennox-Boyd) spoke about what would happen in 20 years' time. I think of the time 20 years ago when I was a parliamentary private secretary in the Colonial Office alongside his father, with Airey Neave and Jack Profumo. I must congratulate my hon. Friend most sincerely on his most thoughtful maiden speech. When he spoke about exchange control as well, I do not know whether he heard cries of "Hear, hear" from my seat just in front of him. I look forward to hearing many more of the speeches that my hon. Friend will no doubt make.

This is a day of congratulations, because I also congratulate my hon. Friend the Member for Gosport (Mr. Viggers) on having been so bold as to move the important motion that we are debating. How right he was to underline the longterm importance and challenge of North Sea oil! There has been a balance in the debate between those supporting market forces and those supporting planning. Sitting on the Conservative Benches and believing in the private sector, I naturally want to see the balance come down much more on the side of market forces, although, possibly, to a degree—one does not wish to be didactic; it might be 90 per cent. on market forces and 10 per cent. on planning—but certainly not to the extent that many hon. Members on the Labour Benches would wish.

My hon. Friend the Member for Gosport said that it took 30 years to develop new energy resources. I agree that it takes a long time, but I would remind him that 15 years ago, possibly a little longer, it was the Conservative Government that gave the initiative to develop the oil in the North Sea. I was glad to hear my right hon. Friend the Prime Minister say recently that Britain must go ahead with nuclear investment. In the same way that we had the foresight 15 years ago to invest in the oil in the North Sea, we must now have the foresight to invest quickly in nuclear energy because of the diminution of oil supplies.

Sam Brittan, in an excellent article in the Financial Times, has talked about North Sea oil being a trust and how it might be given to the people as a whole. I cannot go so far as Sam Brittan has gone, but any thinking person regards the North Sea oil as a capital asset and certainly not revenue. In the article, Mr. Brittan talks about the necessity of bringing down the public sector borrowing requirement. I congratulate the Treasury on having brought down the borrowing requirement from £11½ billion to £8 billion. One would like to see, like Sam Brittan, the borrowing requirement brought down to £3billion. If that were done, I believe that in four years' time we should see an inflation rate of nil and a minimum lending rate under 5 per cent. In those circumstances, the incentive would exist for private individuals to invest in the things vital to this country, enabling us to play our rightful part as economic leader in world affairs.

I have talked about 5 per cent. investment in the public sector as opposed to 95 per cent. in the private sector. We must turn our eyes to investment in other forms of energy. This is a vital necessity. I have not yet heard the words "fast breeder reactor" used in this debate. Unless we go ahead on the next stage of nuclear development to the fast breeder reactor and learn from Sir John Hill, chairman of the United Kingdom Atomic Energy Authority—perhaps the most experienced chairman in this sphere in the world—we shall be missing a great opportunity for this country, given the fortuitous help of North Sea oil.

It is vital to develop our coal resources and gasification from coal. As fast breeder reactors are the next stage on the nuclear side, so gasification of coal is the advanced technology of the coal industry. One wants to see in the coal industry advanced technology and co-operation from the coal industry in productivity. The present production figure of 110 million tons is not nearly large enough. We should be able to double that figure with all the opportunities that exist for meeting demand in the world.

Photo of Mr Allen McKay Mr Allen McKay , Penistone

I am grateful to the hon. Gentleman for raising that point. The policies of the Government will lead to the situation that existed in the coal industry in the 1950s and the 1960s. At that time, collieries were closed down that would now be worth their weight in gold. This should be taken into consideration.

Photo of Mr Julian Ridsdale Mr Julian Ridsdale , Harwich

This is not a matter in which I wish to play party politics across the Floor of the House. It is an important national problem. We must not look back. We must look forward. Let us not begin playing party politics with coal or any other industry. Let us do what is right for the country. It is vital to the country to achieve an understanding with those who produce the wealth of the country—the miners, people on farms, and people in technology and industry. That is the challenge we must face. Let us look forward.

Photo of Mr Allen McKay Mr Allen McKay , Penistone

We can learn from history.

Photo of Mr Julian Ridsdale Mr Julian Ridsdale , Harwich

Certainly, we can learn from history.

I wish to underline the point made by my hon. Friend the Member for Morecambe and Lonsdale in his maiden speech, when he referred to exchange control. I agree with Sam Brittan who says in his article: This requires not the relaxation but the immediate shelving of all exchange control. In addition to the immediate shelving of all exchange control, I would also ask the Minister of State if he will look into all the restrictions of the previous Chancellor on income arising from abroad and all the difficulties of the entrepreneurs of our country, working in New York, Tokyo or other capitals who, by their skill, are making money for this country. To give them opportunity and incentive, we should scrap the ludicrous protectionism of the controls introduced by the previous Chancellor.

We must realise how far we are behind in technology compared with countries like Japan, West Germany and the United States. We must try to encourage joint ventures with Japanese, German and American companies. Unless that is done, and unless incentives are given, we will find that we are not moving quickly enough into what must be the next stage in our industry—the higher technology. My hon. Friend the Member for Gosport was right to refer in this respect to small businesses. Small businesses must be the heart of the new technology.

If we can give incentives by taxation and other means, we will find that small businesses become far more flexible to the demands of a quickly changing international economic trading situation. I met leaders of small industries in my constituency last week. I was interested to hear their remarks about apprenticeships. They argued that more tax incentives should be given for companies to train their own apprentices rather than sending them to technical colleges or training schemes. Some of the apprentices sent to training schemes find themselves telling the teachers and the classes what to do.

My message on this occasion is a simple one. I hope that we shall meet the challenge of North Sea oil by carrying out many of my suggestions, but also by getting the balance right and freeing private enterprise from the controls that have existed in the last few years. Above all we must get government off our backs.

2.30 p.m.

Photo of Mr Michael Welsh Mr Michael Welsh , Don Valley

First, I congratulate the maiden speakers—the hon. Members for Brigg and Scunthorpe (Mr. Brown) and Morecambe and Lonsdale (Mr. Lennox-Boyd), and my hon. Friend the Member for Derbyshire, North-East (Mr. Ellis). I made my maiden speech only a fortnight after entering the House with this intake, which shows that speeches which are made later are better both in quality and quantity. It has been said a number of times, though I have fought shy of it, that this intake will be a vintage one. Those speeches seem to prove it. I am pleased to be one of this intake, although I know that I shall not be classed as one of the vintage.

I congratulate the hon. Member for Gosport (Mr. Viggers) on the way in which he moved the motion. I asked him to give way at one stage and he declined. That is acceptable, because in this Chamber, which is modelled on the great debating chambers of Oxford, one gives way only when one wishes. However, when my party returns to government in about two years, I will ask my Whips to ensure that Labour Back Benchers give way as much as possible.

The hon. Member said that the Opposition favoured rationing but that he preferred the free market. But is not the free market a method of rationing by the purse, which can be brutal? I was only a young lad in the 1930s. When rationing was introduced in the war, what was the first time that I had good meals.

I do not maintain that we should ration now and I do not think that anyone has said that oil should be rationed. But there will have to be priorities. It cannot be right that some men can drive a Rolls-Royce which does 10 miles to the gallon while a farmer's tractor is standing idle. So often, those who oppose rationing but preach energy saving come out of meetings and get into cars that drink oil.

There are two sorts of rationing and we should be careful what we mean by it. I have never subscribed to rationing by the purse, since the only people it hurts are my own people in my own constituency, retired miners and so on. Those with plenty of money, on £30,000 a year, can look after themselves. I have never worried about them and I have no intention of starting now.

Only a few days ago a Scottish Minister said that if any areas of Scotland had an oil shortage, he would look into the matter to see that something was done. So that is one Minister of the Crown who is prepared to interfere with free market forces. That is right. It may be totally against Conservative principles, but that Minister knows that when people are suffering he should go to their aid.

I agree with the hon. Member for Gosport that oil proceeds should be invested in our industrial base. If we want all the good things, such as an increase in local government spending, we must have a good industrial base. But the main thing is investment in energy. By the turn of this century, we shall be embarrassed for any sort of energy. Then it will be energy at any price. Investment in energy saving should begin now.

Over 60 per cent. of the output of oil-fired power stations goes up in smoke. Ours is about the only country in Europe without a combined heat and power system. The only reason is lack of capital investment. Reinvestment of the proceeds of North Sea oil would help to overcome that wastage and help to heat our cities by this method.

I had the honour to speak on this issue to the Marshall committee, whose report will be published shortly, on behalf of the local authorities. I said that combined heat and power would help elderly citizens. It would give them beautifully warm homes instead of constant worry about energy bills. I believe that the Marshall report will recommend combined heat and power systems—in which case, I hope that the Government will accept the recommendation. I am sure that the hon. Member for Gosport would support that kind of investment of North Sea oil money.

I should also like to see investment in coal. Like my hon. Friend the Member for Derbyshire, North-East, I am a miner. I started in the pits at the age of 14 and I am still employed in the industry. Now that I have been elected, I must tell my area manager that I am no longer employed there, that I have lowered my standing by coming to the House of Commons.

Photo of Mr David Stoddart Mr David Stoddart , Swindon

And your standard of living.

Photo of Mr Michael Welsh Mr Michael Welsh , Don Valley

My hon. Friend is right.

I am proud to be one of the mining fraternity. I know that investment in coal is needed. It is the only energy source that we shall have after the end of the century. When I was at Oxford in 1957, I heard Schumacher lecture. As things have turned out, he forecast our energy needs and our present fix practically perfectly. Sadly, that great economist and Rhodes scholar has passed away, but his forecast has been proved right. Everyone has ignored him: no one has taken any notice whatsoever. That gentleman has passed away. He has probably gone to a better place. He has been proved absolutely correct.

We must use part of our North Sea oil revenues to invest in coal so that we still have energy. By and large, that is what the motion is about. We must not allow pits to close, in the meantime, while energy is still down them. I shall not mention the name of a particular colliery whose closure is imminent because I have not had time to consult the hon. Member in whose constituency that colliery exists. However, it is in the geographical area of Wales. The miners of Wales will probably vote, by a postal ballot, in favour of strike action. The present Government will be quite pleasea that the vote will be taken by postal ballot, but it will most probably be in favour of strike action. Miners in other areas may deem it correct to support those in Wales.

Men who work on the coal face, hewing coal and working hard, sometimes know at least as much if not more than the great technical experts, because they work certain seams and know where they end, and so on. I would not like to see a strike on the issue of closing a colliery. I ask the Government to help in any way possible. The chairman of the National Coal Board should reconsider his decision. We now have only 27 million tons in stock, and it is going down very fast. Also, 10 million tons of that is most probably "duff", because it has been in stock for so many years. Therefore, we shall be entering a winter very much dependent on coal but with not a great deal in stock.

It is very important for the Government not to allow collieries to close if they contain energy. No one would be fighting for a colliery which has run out of seams and has to be closed. However, if there is energy in a colliery, although it may be a little expensive to invest in new headings, in the long run it may pay dividends. If the Government say "Where will the money come from?". I would say that as coal is part of the industrial base, we could use part of the revenue from oil to invest in it.

At all times we must maintain coal production. We must keep it very high and improve it. It has been said that we must have more coal. I agree that we need 200 million tons a year. The only way to get it is by investment. Although we need capital investment in coal because the mining industry is now very capital intensive, we also need miners. The Government must pay those men to go down into the bowels of the earth and to sweat and grovel to get the coal, so that the rest of the country may have a reasonable standard of living.

I notice that at its annual conference, the National Union of Mineworkers has asked for an increase of about 65 per cent. in wages. The Government should look at this matter very seriously. No one wants a conflict; certainly not a conflict in the winter, when we shall be very short of coal. I am sure that what all hon. Members want is that the men who get the coal should be paid well. If it is decided not to pay them well, we shall not get the coal. It is as simple as that. It does not take great mathematicians to work that out. It needs only a simple mind to do it. If we do not pay miners properly, we shall not get the energy we need. I know that hon. Members on both sides of the House want to see miners enjoying a good standard of living. I hope that there will be no conflict this year.

I want to comment briefly on the question of nuclear power. I declare an interest in this matter. My interest is that I have two kiddies. I am hoping that they will marry—indeed, as soon as I can get them out of my house and married, we shall be better off. I hope that they have children and will live in this country, the finest in the world, and I hope that they will enjoy it. I do not want them to be living near any nuclear power station. I do not want their children's children to be living near a nuclear power station.

There is nothing wrong in living near the coalfield at Selby, where the end product, due to the environmental work that is to take place, will be camouflaged, grassed and beautiful, and no one would know that five collieries were there. People will be able to live as though they were in rural country although coal is being mined underneath them.

That is all right. But I do not want my children to live near a nuclear power station. I do not think that the safety aspects of nuclear power stations have yet been cracked. That is vitally imporant.

We must put something in place of fear. Anyone who lives near a nuclear power station must be living in fear. There is no other choice, because anything can happen. Some people may disagree with my view, and I do not say that they should not disagree. But people living near such stations, having read about what has happened occasionally, especially in America, must be in fear. Under the previous Government a Minister had to insist that any faults that occurred were reported to the House, because they were not even reported until then. Therefore, I declare an interest on behalf of my children.

There is enough coal in Britain. If we mine it correctly, it could save us over the next 300 years.

I again congratulate the hon. Member for Gosport on his very good motion.

2.46 p.m.

Photo of Mr Alan Clark Mr Alan Clark , Plymouth, Sutton

I am very glad to have heard two excellent maiden speeches this afternoon.

I congratulate my hon. Friend the Member for Morecambe and Lonsdale (Mr. Lennox-Boyd), whose speech I followed with the greatest interest. Possibly there were faint shadows of interventionism cast in certain passages of his speech to which one might, on another occasion, take exception, but I look forward to debating that aspect with him at a later stage.

I hope that the hon. Member for Derbyshire, North-East (Mr. Ellis) will take it as a compliment when I say that he is a very worthy successor to Tom Swain, who was a most agreeable companion outside the Chamber, just as he was a combative and forthright Member here on the Floor of the House.

It is most seemly that the House of Commons should welcome, in a new intake, Members such as the hon. Members for Derbyshire, North-East and for Don Valley (Mr. Welsh), who bring with them long years of experience at the coalface. They come here at a time when their industry is returning to a specially pre-eminent position in Britain's economy. We shall value their advice and comments throughout this Parliament and in the years to come.

I should declare an interest in the subject we are debating. I and other members of my family are beneficial owners, in consort with the Ashland Oil Company, of blocks of offshore prospecting rights off Brunei. I know that that is a very long way from the North Sea, but the ramifications of the oil industry are such that no interest can be truly separate from any other. For that reason, therefore, I want to get that out of the way at once—although the usual claque of hon. Members who are very hot on calling upon other hon. Members to declare interests seems to be absent today. I assume that they are nursing their constituencies. In their absence, however, I feel it proper to declare this interest.

I do not propose to talk about the detailed arrangements for extracting and disposing of North Sea oil because as I understood my hon. Friend the Member for Gosport (Mr. Viggers), whose masterly exposition of the subject contained so many propositions with which I agree, he was inviting the House to consider the broader issues and the impact of this bonus on our economy and how we should adjust our affairs to deal with it. In spite of certain grammatical and stylistic solecisms in his contribution, I agreed with much of what the right hon. Member for Plymouth, Devonport (Dr. Owen) said. He used the rather curious phrase about the problems that North Sea oil is bringing to the economy. Those problems are as nothing to the problems from which the economy would suffer if the oil was not there.

It is a peculiar symptom of the jittery and depressive condition of British industry and the body which claims to represent it—the CBI—that they should now be complaining about the strength of the pound. They are moaning that the exchange rate is rising.

One could give a number of answers to that. The most obvious seems to be that if British industry is to base its export prospects on the cheapness of the goods, not caring about significant factors such as quality and delivery, which are the proper province of a high technology economy such as ours is or should be, it has a finite life ahead of it. There are plenty of economies growing in the Third world and elsewhere which will always underprice it. Any idea that British industry may have that it can somehow save itself for a bit by holding sterling down and trying to undercut its competitors is extremely short-sighted.

I do not want to deflect the House into strictures against the CBI, but I often wonder by what right it tries to call the tune on what Governments should or should not be doing. It strikes me as being a body which is at the same time cowardly, slothful and regressive. Its interventions in politics are curiously clumsy and ill-judged. We know that its avowed concern for a long time during the last years of crisis from which this country was suffering was for a Government of All the Talents, by which, presumably, it meant a Government whose personalities were drawn from its own ranks.

It then spent a great deal of time and money subscribing to one of the minority parties—I will not name it since none of its members is here at the moment. It then moved on and put a lot of money into campaigns to introduce proportional representation. I suppose that the form that Government consultations take makes it obligatory that from time to time one should show a nominal deference to what the CBI has to say. But I hope that my hon. Friend the Financial Secretary, whatever he may be constrained from saying or admitting when he replies to the debate, will pay little attention to the pleas and bleating that the CBI will make for some action to be taken to hold down the value of sterling.

If it were not for the North Sea oil bonuses and the revenue and foreign exchange earnings which the oil is just starting to bring in our economy would be in a disastrous condition. We should be in a state of actual as well as relative decline. We would be faced with the most acute restrictions due to the balance of payments difficulties from which we should be suffering, and we should have to be considering radical measures to protect our economy. At the same time we should be faced with very serious inroads into the standard of living of all our people at every level.

One factor is responsible for this condition and is still working away, eating into the vitals of our economy. It has brought about the regrettable truth that we are still only periodically in balance on our foreign exchange account, even though we are beginning to get the benefit of North Sea oil earnings.

That factor is given various titles or descriptions by the economic commentators. The current one is that it is our insatiable propensity to import manufactured goods. This factor is repeatedly miscalculated by the Treasury. Every year the Treasury's Red Book forecast of manufactured imports is an underestimate. Sometimes it produces a best case and an actual case, and the true position is always worse even than the actual case. The Treasury seems to have slightly altered the form of its model this year, but it still admits on pages 9 and 10 of the Red Book that the prognoses of the volume and value of manufactured imports in the next year are gloomy. I think that already we can begin to see that these are underestimates.

This enormous and growing accumulation of manufactured imports is having a series of effects. It is adding enormously and unnecessarily to our balance of payments deficit, calculated after taking account of North Sea oil bonuses. It is running down one section or another of our domestic manufacturing industry with all that that means in strategic and human terms. It is having a very serious effect on unemployment and on what one might loosely call commercial and industrial imbalance. That means that whole sectors of industry are being extinguished or driven into obsolescence. It has a very serious effect on the domestic budget, because relief has to be paid to individuals who are out of work. There is pressure to bail out so-called lame ducks and industries that have been forced into or near to extinction by foreign competition. We have been told that the Government will do their best to resist that pressure, but I doubt whether they will be able to do so in every case.

This is a cyclical problem because each symptom aggravates another. However, the cure is very simple. It is regarded as a heresy. I have spoken it on the Floor of the House and I have written about it in national newspapers. I declaimed it at the Bow group annual conference this year. It is, however, always greeted with a kind of patronising but indulgent good humour. Perhaps that is simply because it is so simple. When people see a very simple solution they automatically discount it and reject it. They feel that it is so obvious that there must be a catch in it. My hon. Friend has heard my argument before, but may I explain it to him this time in terms of symbolic logic. There is a symbol—I will try to help the Official Reporter later; perhaps his compositor has a cypher for it—in symbolic logic that means "leads to".

If we were to introduce, by law, protection against the entry of manufactured goods into this country, that protection leads to an immediate benefit to the balance of payments; which leads to a strong pound; which leads to reduced interest rates; which leads to greater investments; which leads to a reduction in unemployment; which leads to a reduction of the PSBR. That circle can be interrupted at any stage and we will get the same results.

However, if we remove the element of protection against foreign manufactured goods, one turns the circle from the benign to the malign. A strong pound leads to reduced costs of imports; which leads to a greater inflow of imports; which leads to a reduction in the demand for domestic products; which leads to greater unemployment and industrial failures; which leads to an added burden on the PSBR. The key element here—and one which is disguised by the enormous surpluses we are getting and which will increase but which we are currently squandering—is the enormous inflow of manufactured goods which is soaking up the foreign exchange North Sea oil earns for us. I suspect that it will also take a great deal of the loose change, as it were, the extra earnings that people will be allowed to keep under our new financial arrangements. It will, I suspect continue to increase arithmetically, and carry in its train, an extension of unemployment in certain domestic industries, and a constant overloading of the balance of payments deficit.

I give an example from my own constituency. A manufacturer in Plymouth was alarmed at the prospect of a Japanese factory being established in this country. With colleagues from both sides of the House, I lobbied the then Secretary of State for Industry on a number of occasions to prevent the establishment of that factory. We were successful after a long struggle. At that time the thanks furnished to me by the concern in question were somewhat perfunctory, though I put that down simply to the pressure of its daily affairs. I thought no more of it until some time later when I discovered that that concern, just as it had threatened to do, closed down. It was no longer manufacturing anything but was operating as an agent importing the very goods which, it had originally protested, should not be manufactured in this country by the Japanese.

We cannot expect much initiative or self-sacrifice from British industry in this field. Industry is really too diseased and depressed to do much about it without substantial intervention by the Government. I know that it is thought very unfashionable in the Tory Party at present even to consider such things, but it seems to me perfectly respectable to use the power of the State to control, and if necessary prohibit, imports. It is a perfectly respectable continuation of the ancient paternalistic tradition of the Tory Party.

I remind my hon. Friends—I am greatly obliged to so many of them for being present here on a Friday afternoon—that our historical association as a party is more with the country squires of the eighteenth century, who looked after their tenants' needs and held robustly nationalist views, than it is with the great Whig and Liberal capitalists who pursued gain without regard to human misery.

That seems to me to point to the real danger of some aspects of the Chancellor's change of policy. He is leaving it all to human nature, and it is strangely and uncomfortably redolent of the old Liberal laissez faire doctrine that the prosperity and wealth of the nation are best promoted by leaving everything to individual initiative and the self-regulating mechanism of the market.

I think that many of my hon. Friends, and much respectable opinion among economists, dismiss the idea of import controls because they identify it with the right hon. Member for Bristol, South-East (Mr. Benn) and his acolytes and their desire to impose a siege economy, as they call it, with everything that that entails in terms of bureaucratic intervention, restriction, direction and so on.

I wish to convince people that it is not necessary always to bring with a policy of import controls all the characteristics of a siege economy. Once we have established a protective wall against manufactured imports, the whole of the rest of the economy within that wall can thrive very effectively, with great benefit to both employment and investment as well as exploitation of the market and, one hopes, innovation, without any form of Government intervention being needed and, indeed, with great savings in what the Treasury dispenses since unemployment will inevitably be reduced.

Industries which would otherwise have been threatened and contracting will all at once find that they have guaranteed markets which will allow them to expand and invest. Moreover, I am certain that relations with the trade union movement will improve, since part of the trouble in industrial relations now is that so many trade unionists and their leaders feel an obligation, as it were, to string out the life of the industry or concern in which they are working for as long as possible by overmanning, restrictive practices and so on.

If trade unionists can see new prospects of extra labour being taken on, extra work contracted for, many of the difficulties will go, I am sure, and the whole atmosphere will be one in which it will be much easier to strike appropriate productivity deals with them.

I recognise, as I say, that this advice is to some extent tainted by association with Socialist dogma, but it does in fact have a Tory pedigree. We need only look back to the 1930s when our internal economy was perfectly free but our manufacturing industries were protected against foreign competition. In fact, 1936 was the very last year in which the pound had a greater internal value at the end of the year than it had at the beginning. It was the last year in which we had a nil rate of inflation.

Furthermore, with the prospects of United States recession and with the highly uncertain and jittery condition of the world economy, I believe that there will be a growing tendency on the part of individual countries to start looking at protectionism in any case. It is important that we get our thinking straight on this matter immediately and that we decide how to proceed. We can evaluate the risk of retaliation, we can decide the rate at which the system will be introduced and the sectors to which it will be applied. It has to be done selectively. I am not suggesting that it can be done overall and absolutely.

Perhaps my hon. Friend the Financial Secretary will tell us whether there are any contingency plans to that end and whether the problem is being looked at at all by the Treasury. I am convinced that, unless we resign ourselves to understanding that we must give our manufacturing industry a 10-year to 12-year span of protection, it will continue to run down and in the fulness of time whole sectors will be extinguished. I believe it to be urgent that we start thinking about this matter and setting about it now, for it is better that it be done decisively and unflinchingly from a position of relative strength rather than weakly and hesitantly, as may well be the case in years to come.

There will be a dreadful moment when the first memorandum is circulated among the bankers of Zurich calculating when North Sea oil will start to run out. The right hon. Member for Devonport mentioned the hump. They will see that in 1982–83. The graphs will then begin to falter, and will soon be pointing steeply downwards if by that time we have not corrected our industrial base. Hon. Members have talked about alternative sources of energy, but if by that time we have not corrected our industrial base, the prop that will have supported our balance of payments for that five or six years will diminish in strength. The foreign financial community will be calculating when it will disappear altogether. It is not too soon to take appropriate measures now when the pound is strong and we can operate behind the defensive shield of a balance of payments surplus for the next four or five years. Unless we do that now, no action taken by any Government will be workable or effective.

I hope that my hon. Friend, in a moment of relaxation, will consider the possibilities. Unless there is contingency planning, action will be forced on the Government, and if it is done hastily it will be much less effective, and great damage will already have been done to the economy.

3.11 p.m.

Photo of Mr Allen McKay Mr Allen McKay , Penistone

I share the concern of the hon. Member for Plymouth, Sutton (Mr. Clark) about many of the points that he raised, and I should perhaps call him my hon. Friend. I also congratulate the hon. Member for Gosport (Mr. Viggers) on coming first in the ballot. I came second to him, but that is the luck of the draw. It is regrettable that we do not have time today to discuss my motion, but I may be able to raise it on the Adjournment. The hon. Member for Gosport said that the previous Government had failed to deliver a co-ordinated fuel policy, perhaps through lack of will. I suggest that it was through lack of numbers. It would have been difficult to put forward such a policy in a minority Government.

I have worked for about 20 years underground in the mining industry as an electrical engineer. Prior to coming to the House I was an industrial relations officer with the Coal Board. I share a life in the mining industry with my hon. Friend the Member for Don Valley (Mr. Welsh) and we are together in this debate.

Throughout history, market forces have not only helped in development. They have also destroyed. They tend to exploit the short-term situation and maximise profits rather than have a long-term effect. We must consider the long-term situation today.

My hon. Friend the Member for Don Valley mentioned Dr. Schumacher. I attended one of his talk-ins at the time when we were closing collieries. Due to the shortsighted policy of the Government and the powerful oil lobbies which sought to exploit cheap oil, we did not look to coal as a basic industry in the long term. Those collieries were closed, but today they would have been beneficial to our economy. When collieries are closed, whole communities are closed also and the supply of workmen dries up. The people who traditionally go into the mining industry drift away as more collieries close. Not only do we have no collieries, we have no work force either.

At the time Schumacher put forward his "A, B, C" theory of collieries, he looked at the Profitability of them, which was wrong in such a basic industry. He decided that the "A" collieries should continue. The "Bs", which were on the borderline, should continue, provided that the "Cs" were closed. The theory was that the men who worked in the "C" collieries would move into the "Bs". What made Schumacher think that that would occur? Why should men from the "Cs" go to the "Bs"? When one lot of collieries can be closed just like that, there is nothing to stop the same thing from happening to another lot. Today we have a situation in which the amount of coal we mine no longer supplies the needs and energy requirements of this country.

Hon. Members have said today that we should not look back into history but instead we should look forward. If we do not look back at the mistakes that were made and take due notice of them, we shall make the same mistakes again. The market policies that Conservative Members have put forward will lead us back into history and the same mistakes. Are not the market forces encouraging cheap, heavily subsidised coke and coal to come into this country? In fact British Steel is encouraging such a policy. Will not this undermine the future of the coal-mining industry just as the powerful oil lobby almost destroyed it?

I suggest that we should not let the market forces run the energy industry because it is vital that we preserve North Sea oil as far as possible. Money from North Sea oil should be invested in creating an industrial base, and the coal industry is part of that industrial base. It is necessary to provide investment money for the experimental stages of the gasification of coal and production of petroleum products from coal. We have the fluidised base experiment which will provide cheap fuel for the power stations, and two experimental schemes are going ahead on which £32 million has already been spent to produce petrol from coal, and for the gasification of coal.

Policies that the Conservatives have put forward in relation to the market economy will make that a nil product, because they will undermine both schemes. There is a need for Government intervention because of the energy crisis. North Sea oil is estimated to last until the year 2000. One oil company has estimated that by that time the present exploitation will cease, unless action is taken to spread it out. That company is now investing heavily in Australian coal and coal products. Obviously that company sees an end to the present situation. Unless we are prepared to grasp the nettle and allow the Government to intervene, we shall have to go to the open market. That will be very much to the detriment of this country and our oil products.

We are informed that gas supplies will run out just before the year 2000. Therefore, at that time we shall depend entirely on what happens to world supplies. We have known coal reserves of 300 years-plus—reserves which can be got at. There are other reserves which will be more difficult to reach, but no doubt as technology improves we shall be able to reach them. Therefore, we should also examine that area of activity.

I read with regret in one newspaper that the Government intend to examine the "perks" in various industries, and among them is miners' concessionary coal. I sincerely ask the Government to leave that topic alone; they do not know what they are doing. This is a "perk" which has arisen for historical reasons. It assists miners' widows, pensioners and other unfortunate people. There is no more emotive issue in the coal industry than the home coal scheme. Not even wages or closures take a more important place. If the Government wish to set the world on fire, they will certainly do so if they interfere with the subject of concessionary coal.

I speak from experience since I was an industrial relations officer in the industry. This is an arena in which one should tread very carefully. I warn the Government to leave matters well alone.

This debate has given us the chance to grasp the nettle in considering future energy policy, but we will not do so if we consider merely market forces and market intervention. This could create serious problems for future generations. It is about time we gave up some of our sacred cows and reached sensible conclusions and policy decisions.

The benefit of debates on a Friday is that we are able to consider these subjects in a wider sense. We must look at these matters objectively, otherwise future generations will condemn us for not having had the courage to accept the need for Government intervention in seeking to forge a good energy policy for the nation.

3.24 p.m.

Photo of Sir Ray Whitney Sir Ray Whitney , Wycombe

I listened with interest to the speech of the hon. Member for Penistone (Mr. McKay). He has a great depth of knowledge of what goes on in the coal industry. I shall later refer to that industry in the limited amount of time I have at my disposal.

I regret that I shall be unable to pursue the fascinating comments of my hon. Friend the Member for Plymouth, Sutton (Mr. Clark). I agree with a number of his remarks—for example, that his view is backed by only a small minority of the Conservative Party. I agree that his idea of protectionism amounts to high Toryism. That is the case, and I happily claim to be of the Whig tradition—a tradition which at present appears to be uppermost. I offer to my hon. Friend the Member for Plymouth, Sutton another part to his first equation which he omitted. There is another point to his circle of restriction, of keeping the economy enclosed—it also leads to inefficiency. I am sure that we agree on that point and on the general timetable for getting British industry right.

I should like to take the opportunity of uttering one warning. My hon. Friend the Member for Gosport (Mr. Viggers) has provided us with the opportunity to debate the matter; and I offer him my congratulations. I warn about the dangers of running into the problems which have afflicted the economy of the Netherlands, the dreaded Dutch disease. The bonanza that was given to Holland from their tremendous gas finds created a welfare economy, one based not on genuine welfare needs but on a soft economy. That led to a great loss of incentive and industrial weakness.

The Dutch had a high exchange rate which was not matched by a control of inflation. There was a tremendous loss of profitability in industry and a loss of investment. Those are the dangers. In the debate we have referred to the challenge. That challenge contains the concept of failure and danger. That is the sort of danger that besets us. To that extent, I accept the point that I understood the right hon. Member for Plymouth, Devonport (Dr. Owen) to be making about the problems that are brought along with North Sea oil.

The problems facing the Government are those of a weak economy. The Labour Government White Paper promised last year that our financial position had improved substantially. We know now that about £4 billion will be the benefit to the current account this year from North Sea oil and gas revenues. Yet, from January to May of this year alone we were in a £1 billion deficit. That highlights the danger that we have to face.

I believe that the potentially vicious circle can be turned into a virtuous circle. Many references have been made to Sam Brittan. I do not know what hon. Members would do without Sam Brittan and the Financial Times. In an article yesterday he referred to a financial analysis that was published by Messel about a virtuous circle which North Sea gas and oil earnings can create. I shall be interested to hear the Financial Secretary's comments on the figures in that analysis. It painted a scenario of North Sea oil receipts rising to about £6 billion in current prices in 1983–84, leading to a reduction in the PSBR to about £3 billion, the increase in the money supply dropping to 5 per cent. and with a price inflation of about 5 per cent. That is still a bad rate of inflation, but it is a great deal better than the rates to which we have grown accustomed over the past five years.

It is a hopeful scenario which may be rendered more hopeful if oil prices double in real terms over the next few years, as is threatened and, indeed, as looks likely. If that occurs, the equation offered by the Messel analysis improves even more. It makes no sense and would not be practicable for the protectionist barriers—to which my hon. Friend the Member for Plymouth, Sutton referred in such enthusiastic terms—to be erected. It would not be possible to insulate our energy prices from the world market to any significant degree. That means that the energy revenues that are available to the Government will increase pro rata. Paradoxically, that may mean that what will be dreadful for the world economy—a real doubling of oil prices in a matter of a few years—will be of benefit to our Government finances.

I am glad that the bonanza is in the hands of the present Government team rather than those in the last Parliament. I am confident that they will bring to it a determination to continue reducing the PSBR and to extend our investment overseas, which means freeing our exchange control regulations and building up overseas assets. There is no conflict between the possibilities of building up overseas assets and investing in capital equipment and industrialisation in our home manufacturing industry. We must work to this and keep away the neo-Keynesians. I warn my hon. Friend the Financial Secretary that there are still neo-Keynesians lurking about, even in the Treasury at official level, who may creep out of the woodwork again if the going gets rough.

Having the opportunity and the freedom that oil will give, we must look to our investment and, as a first priority, we must look to energy. In terms of the threat to the country—economic, political and strategic—we must rid ourselves of the shackles which the present energy position has imposed on Britain and the whole Western world. It is vital that we break out of this straitjacket; and we are given the opportunity to do so by our own North Sea oil.

In the future perhaps the renewable energy resources will lead to possibilities. There have been a number of references to them today. I hope very much that the amount of money made available for research in renewable energy resources, which is of the order of £15 million and appallingly low, will be increased. Then we must look to our coal resources, so well represented by many of those who have made contributions from the Opposition Benches today.

I, too, like to regard myself as a friend of the coal industry, not least because I married into it. But we must look for a better performance from the industry. The increase in miners' wages last year was 18·5 per cent. On average, face workers took home £122 a week. A sum of £180 million was put into the new productivity scheme. The result was that we had the lowest output in the coal industry since 1973–74. That is the measure of the problem. None of us is hostile to the coal industry. It is a precious asset. But it must be developed. I look to Mr. Scargill to stop interfering in Portuguese waiters' disputes and to come back and do an honest job of work to get our coal industry going.

Above all, however, we have to go to nuclear power, as my right hon. Friend the Prime Minister recognises. We have to recover from the shilly-shallying of the right hon. Member for Bristol, South-East (Mr. Benn), whose presence is so sorely missed today. One wonders what other decisions he is taking. He did not take decisions when he was Secretary of State for Energy. Decisions are needed. We must not be put off by the lobby of "nuclear superstition". This was a phrase used by Lord Ritchie-Calder in a debate in the other place two days ago. He is a gentleman of impeccable background in the eyes of right hon. and hon. Members on the Opposition Benches. He was vice-chairman of the Campaign for Nuclear Disarmament, and he is fully appreciative of the dangers. He said: We are cowering like our Neanderthal ancestors in the dark age of our own emotions—[Official Report, House of Lords, 4 July 1979; Vol. 401, c. 412.] I hope that the Government will have the courage to develop our nuclear industry. I look forward to hearing concrete proposals from them for the development of the industry and for an information programme to put away these Neanderthal superstitions so that we all come to realise that no one in Britain has been injured, let alone killed, by anything to do with nuclear energy. It can and must be controlled if we are to solve the energy problems facing us.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

On a point of order, Mr. Deputy Speaker. I have waited to raise this matter until my hon. Friend the Member for Wycombe (Mr. Whitney) had concluded his remarks.

I went to the Vote Office to ask for the draft order on Member's pay. I was given the draft order on ministerial and other officers' pay. Whether that was to encourage me, I do not know. The fact remains, however, that I have been asked about pay and will be asked about pay. We were promised by the Leader of the House yesterday that the order would be available today. It is not, and the time is getting towards four o'clock. It appears that the press and radio have it but that we still do not know about it. It does not help me to look at ministerial salaries and pensions.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

I think that the document that the hon. Gentleman wishes to see is, in fact, in the Table Office. If he goes there, he may have an opportunity of seeing it. My recollection is that the subject is not likely to be debated until next Wednesday.

3.36 p.m.

Photo of Sir Peter Lloyd Sir Peter Lloyd , Fareham

I am grateful for the opportunity to squeeze in for the last couple of minutes for Back Benchers in the debate. I congratulate my hon. Friend the Member for Gosport (Mr. Viggers) on initiating it. I have listened with great interest to many expert contributions, both on the oil industry and on the other energy-based industries. I want to stand back and make one or two more general points.

The public reaction to North Sea oil development has shown our national character—delighting to snatch disaster out of our good fortune. Before the oil began to flow there were prospects that we would either live like Texas oil millionaires or like Middle East sheiks, according to our personal predilections. Now it is clear that we shall be like lugubrious Dutchmen, watching, as the pound rises, our exports decline and the employment on which they are based here declines.

The right hon. Member for Plymouth, Devonport (Dr. Owen) posed the question as accurately as anyone has in the debate—what do we do with the proceeds from North Sea oil so that the country can benefit in the long term? I use the term "regenerate British industry" because that is the devalued phrase in which the idea has entered political debate, and the division between the Conservative and Labour Parties is not over whether we want to see British industry regenerated but whether it is best done under Government direction or through private enterprise. We believe that it should be done by private enterprise and not through Government spending.

Secondly, we believe that, North Sea oil being only a temporary asset, we cannot use the proceeds from it to reduce personal taxation because, after the oil has ceased to flow, public spending would be based on a tax base insufficient to support it. As a new Member, I understand that, when one has a difficult problem to which one does not know the answer, one outlines it and passes it over to a Front Bench spokesman for his comments. I hope, therefore, that my hon. Friend the Financial Secretary to the Treasury will indicate how the proceeds of the tax taken from North Sea oil can be spent without undermining our public spending disciplines and without the Government themselves directing investment in industry.

3.38 p.m.

Photo of Mr Nigel Lawson Mr Nigel Lawson The Financial Secretary to the Treasury

We have had a particularly wide-ranging debate on a number of important issues. I think that my hon. Friend the Member for Gosport (Mr. Viggers), having been fortunate in coming first in the Ballot, is to be congratulated on having tabled a motion of the utmost importance. Indeed, if he is to be criticised, it is that he has perhaps packed into the motion too much to have adequately discussed in a debate on one Friday.

I shall deal with most of the points raised by hon. Members, at least those still in their places, but first I pay tribute to the three maiden speeches we have heard: from my hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown)—a notable Conservative victory—from the hon. Member for Derbyshire, North-East (Mr. Ellis), and from my hon. Friend the Member for Morecambe and Lonsdale (Mr. Lennox-Boyd), who bears a very honourable name in Conservative politics.

I did not hear all the maiden speeches, because some of them were made during my lunch break, but I am assured that they were all speeches of great wisdom and great sensitivity to the mood of the House. We shall very much welcome the opportunity of hearing my hon. Friends and the hon. Gentleman again. Those of us who, like me, were unfortunate enough not to be present when some of them were speaking will particulary welcome the opportunity of hearing them for the first time, having been told of the calibre of what they said today.

My hon. Friend the Member for Gosport moved a motion which covered a number of different topics, including the important topic of North Sea oil and the more general issue of the economy, or the management of the economy, however one likes to put it. Although those two issues are interlinked, they are not the same. It is a mistake to assume that somehow they are the same and that the decisions that a Government make on North Sea oil are the key to getting the economy right. They are important in themselves, but they are not the be-all and end-all of getting the economy right. It would perhaps be simpler if that were so, but it is not.

I shall try to deal with some of the points made by hon. Members, particularly those who, despite the fact that it is a Friday afternoon, are still present. My hon. Friend the Member for Gosport and a number of other hon. Members—in-cluding, I think, the right hon. Member for Plymouth, Devonport (Dr. Owen), who now speaks for the Opposition on energy matters—asked for statements of Government policy on North Sea oil generally and on the future of the British National Oil Corporation. Others asked for statements of Government policy on marginal fields, depletion policy and so on.

Apart from the fact that those are really matters for my right hon. Friend the Secretary of State for Energy, it is fair to point out that the present Government have been in office for precisely two months. These are issues that demand a great deal of long and serious thought. It is much more important to get them right than to rush into a premature decision.

My right hon. Friend the Secretary of State for Energy announced on 21 June that he was having a review of marginal fields to see whether any changes in policy were needed, for the reasons adumbrated by many speakers in the debate.

It has also been announced that there is to be a review of the future of BNOC. The right hon. Member for Devonport said that we should not, in a fit of ideological fervour, rush into a premature decision on BNOC and tear it up. It seemed to me that if anything the right hon. Gentleman's attitude was a trifle ideological, which is unusual for him. He seemed to be saying that that great Labour creature was so perfect that was not susceptible to change or improvement in any way. We believe that it should be thoroughly reviewed on its merits and on the basis of what is right in the country's interests. My right hon. Friend has made clear that there is to be a review, and conclusions will be announced in due course.

Depletion is a matter to which we have not yet come. No doubt we will, but it is not a matter into which we have to hurry. We are talking about a long period ahead. Under the last Government, the Varley assurances, which, in effect, took the place of a depletion policy, were an attempt to get the oil out as quickly as possible. That is what the right hon. Member for Devonport wanted when there was a Labour Government. Now that there is a Conservative Government he wants the oil to come out as slowly as possible. We will try to get the matter right. Obviously a balance needs to be struck.

But much common ground exists. The right hon. Gentleman welcomed the changes in petroleum revenue tax introduced in the Budget. There has been a general welcome for the fact that we do not intend to use petroleum revenue tax—nor did the previous Government—as an economic regulator. There may be circumstances in which petroleum revenue tax needs to be changed. This year's Finance Bill gives rise to one such occasion. But that is a different matter from use of the tax as an economic regulator. We do not intend to do that. There has to be a stable regime within which North Sea oil companies can operate.

My hon. Friend the Member for Plymouth, Sutton (Mr. Clark) made the speech that I have heard on a number of occasions which he always delivers eloquently and which it is always a great joy to hear. It was his speech in favour of protection and import controls. No one would gainsay the political pedigree of that device. That is the historical truth. What was new was his symbolic logic. It was an aspect I had not heard before.

My hon. Friend spoke about controls on the import of manufactured goods. Complications would arise in our trade with the European Community that could not be subject to these controls and remain consistent with our membership. No, doubt this would not worry him. But it would worry me, and it would no doubt worry the vast majority of my right hon. and hon. Friends and many Labour Members, including the right hon. Member for Devonport. Apart from that dimension, we have a large surplus on our trade in manufactured goods. Last year, the value of the manufactured goods we exported was about £4,000 million more than those we imported. It is an extraordinary proposition to put forward that this country should start the merry-go-round of protectionism which would undoubtedly be followed by other countries. We have far more to lose than we have to gain.

Photo of Mr Alan Clark Mr Alan Clark , Plymouth, Sutton

Why does my hon. Friend suppose that these two matters are directly interchangeable? The calculations can be made in different ways. If, as he claims, we are in surplus on trade in manufactured goods, why does he suppose that our manufactured exports will automatically disappear because we close the door to imports? They emanate from totally different sectors.

Photo of Mr Nigel Lawson Mr Nigel Lawson The Financial Secretary to the Treasury

They would disappear because, if we closed our doors other doors would be closed against us.

As my hon. Friend the Member for Wycombe (Mr. Whitney) said, one of the great problems is the low productivity and efficiency in British industry. That has to be corrected by British industry becoming more efficient and not by protecting it from the awkward embarrassment of foreign competition in home or overseas markets.

The reference by my hon. Friend the Member for Sutton to symbolic logic made his argument all the odder to me, because symbolic logic is not the prerogative of one nation. Thus, on his own inexorable logic, if import controls and protection are right for this country, they must be right for every country. He himself, on his own logic, would be shutting the door to British exports. But other countries have not sought this role. I hope that they will not do so. I think that we and they are right not to do so.

My hon. Friend the Member for Gosport referred to the Opposition's White Paper in 1978, "The Challenge of North Sea Oil", from which I suspect he took the title of his motion. In paragraph 53, I think, of that White Paper the then Government committed themselves to producing an annual progress report on the use made of North Sea oil resources. Their plan was that the first report should be published this summer. It seemed to us that that was little more than a gimmick and we have decided not to proceed with that proposal.

Photo of Dr David Owen Dr David Owen , Plymouth, Devonport

Does that mean that there will be no report to the House on what is happening to North Sea oil revenues? Is the Minister ruling out any form of Treasury explanation of the destination and the way in which this has been handled, or is he just deciding that he does not want an annual report? Could he say a little more? Is this a totally negative decision?

Photo of Mr Nigel Lawson Mr Nigel Lawson The Financial Secretary to the Treasury

I believe that the whole concept of the hypothecation of revenues which is implicit in this idea is fallacious, but of course we shall wish to bring to the House as much information as possible on what is happening in the industry and about the full amount of revenues and how it breaks down among PRT, corporation tax, oil royalties and so on.

There is one way in which we shall certainly be fulfilling—and have fulfilled—the spirit of that White Paper. In paragraph 26, the previous Government said: By cutting taxation, the Government strategy will improve the incentive to work, and will help to ensure that the potential improvements in our growth rate, made possible by higher investment, will in fact be realised. Such an improvement in our national performance will provide extra resources to improve our public services. That is precisely what the Chancellor did in his Budget and I am sure that that will satisfy the Opposition.

My hon. Friend the Member for Wycombe also suggested that things were looking rosy and he referred to the Messel analysis. I do not have the time to go into that at length, but on present trends the PSBR outlook is nothing like so rosy as that contained in that analysis. Obviously some policy conclusions follow from that.

I have dealt briefly with BNOC, to which the right hon. Member for Devonport referred. However, the right hon. Gentleman made a statement on the Government's intention of selling some shares in British Petroleum. He seemed to be very exercised about that—strangely exercised. First, he seemed to think that there was some great magical importance in the Government 51 per cent. holding. In fact, the Government holding has been below 51 per cent. before now. It went to 48 per cent. under the Labour Government led by the right hon. Member for Huyton (Sir H. Wilson). Nothing happened. There was no great disaster.

The fact is that the Bradbury Bridges arrangements are not dependent upon 51 per cent. The articles of association are there. They ensure two Government directors on the board and that those two directors—although there are only two—have a veto. That veto has never been used. But it is there. A reduction of the holding below the 51 per cent. mark has been done before, under a Labour Government. It can be done again, and there will be no adverse consequences to this country. This country's security of supplies will in no way be affected; nor will the relationship between the Government and BP, which is a very special kind of relationship, be in any way changed.

I think that the right hon. Gentleman is barking up the wrong tree. I hope that I have been able to set his fears at rest.

Photo of Dr David Owen Dr David Owen , Plymouth, Devonport

Is the Minister saying that the Government's intention is to sell off only 3 per cent., so as to take their holding down from 51 per cent. to 48 per cent.?

Photo of Mr Nigel Lawson Mr Nigel Lawson The Financial Secretary to the Treasury

No, I am not saying anything of the sort. There is no magic about the 51 per cent. The Government's interests in BP are protected by means other than the size of the shareholding. Therefore, the size of the shareholding can be reduced significantly without any of the consequences which the right hon. Gentleman seemed to think would arise.

The right hon. Gentleman also mentioned the problems of a strong exchange rate. I must say that in 1976 he and his colleagues could have done with the problems of a strong exchange rate. The exchange rate has risen since the Budget by about 6 per cent. Bearing in mind that we import roughly one-quarter of our gross domestic product that, as many people would calculate, would mean a reduction in the rate of growth of the retail price index of inflation by about 11 per cent., other things being equal. Indeed, some people—Sam Brittan has been quoted—believe that there is a one-to-one relationship over a longer period.

But of course there are problems. One of the reasons why we have decided on a progressive dismantling of exchange controls is in order to build up now overseas investments which will bring in a stream of overseas revenue and earnings in the future at a time when the oil revenues are declining. That is a sensible policy to follow at a time when we have a strong exchange rate.

Finally, it is a delusion to imagine fondly that North Sea oil is somehow an everlasting blessing and a boon. It is, equally, a greater folly to imagine that it will conquer all our problems. At most, at present, it provides about 3 per cent. of total GDP and about 3 per cent. of Government revenue from taxation. The problems of our economy—of inflation, on the supply side, of a lack of incentives, of excessive borrowing and excessive Government expenditure—remain and must be dealt with. North Sea oil can only at the margin help us to deal with them. If we delude ourselves by thinking that difficult, harsh decisions will not have to be taken because we have North Sea oil, there could be no more serious delusion.

Therefore, I beg all hon. Members not to imagine that here we have, in North Sea oil, the key to our future. It is very important, and it is very important that we take the right decisions within a long-term framework. But there is no magic key to our economic future to be derived from what is, I accept, a blessing but still, on the whole, a marginal factor such as North Sea oil.

I think that I have replied briefly—

It being Four o'clock, the debate stood adjourned.