Orders of the Day — Nationalised Industries

– in the House of Commons at 12:00 am on 10th November 1981.

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Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South 3:59 pm, 10th November 1981

I beg to move, at the end of the Question, to add: But humbly regret that the Gracious Speech contains proposals which, in putting private profit before the public interest, strip the nation's North Sea gas and oil assets, create great uncertainty in the coal industry's future and wreck any prospect of an overall energy policy. In the past two years we have seen the Government operate in a way that amounts to a landmark in Conservative attitudes to economic affairs. They are doctrinaire and believe in a single approach to the economic affairs of the nation. They believe in monetarism, not as one arm of a policy to be reviewed in the light of a changing economic climate, but as a policy to be followed relentlessly. They are a Government who believe in ideology, and we can all see the results of their policy.

The new Secretary of State for Energy is an arch supporter of that policy. He believes in free market forces, as others believe in the State. I wish to make it clear that I believe in neither. There is a growing role for the State and, in certain circumstances, there is a role for free market forces, but they must be justified, in each case, on their merits. In natural resources, the State's role must be paramount.

A corollary to the Government's economic policy is their worship of the graven image of the public sector borrowing requirement. Much of their policy in the public sector is motivated by the aim to reduce it by selling capital assets. I refer to energy assets that could generate income in the future. We will be selling—perhaps at too low a price—our birthright. Above all, the Government and their supporters are motivated by a feeling against the public sector that can be described as vindictive as well as doctrinaire. That feeling ignores the different types of public ownership. The reasons for nationalising coal, oil or gas are different from the reasons that may apply to other types of industry and to different types of nationalisation and public ownership.

A Tory Government took Rolls-Royce into public ownership. They were right not to nationalise it, but they were also right, in the circumstances of the engineering industry, to take it into public ownership. Whatever the reasons for public ownership, or the different types of public ownership, the Government take every opportunity to denigrate such activities, and in that the Prime Minister takes the lead. In the foreseeable future there will be a large public sector and we should constantly consider how best it can be organised. I accept that we should consider the role of private capital in some public sector industries. However, the Government's attitude to the public sector represents a negation of the responsibility of the Government, or at least of a Government who seek to govern on behalf of all the community.

In the public sector, the Government's policy is to treat all parts in the same way. They are fundamentally wrong about oil and gas. Oil and gas are natural resources. In the last century there were grave arguments in the House about land. In the same way, to use the political terminology of that century, the natural resources of oil and gas are "God given". They belong to the people and are not to be wasted by a wanton belief in free market forces. By their very nature free market forces are short-run, and decisions on oil and gas need long-term vision.

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

Can the right hon. Gentleman explain why he and the previous Labour Government sold a large chunk of British Petroleum?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

Yes. I have a note in front of me to the effect that an hon. Member would interrupt at that point. British Petroleum is a different organisation from the British National Oil Corporation. It was set up in 1914 for different purposes. It may well be that there should be a change in the organisation of BP. All aspects of energy policy should be looked at time and again. The company was set up for a different purpose and the BNOC is not BP.[Interruption.] If the Minister thinks that BP is run as a State organisation and is under the control of the Secretary of State for Energy, he has something to learn. It is not run in that way. British Petroleum is a different type of organisation from BNOC.

We shall have to wait and see the legislation on oil to discover whether one or two Bills are involved. However, I shall refer to an oil Bill. We shall have an opportunity to deal with the Bill when it comes before the House in the new year. I have no desire—and I do not know whether it would be in order—to turn this into a pre-Second Reading debate. However, as the Secretary of State made a pre-Gracious Speech type of statement two weeks ago, I assume that I should not be creating a precedent.

I shall ask the Secretary of State for information on oil, gas and coal in order to illuminate the hazy words of the Gracious Speech and, in some respects, the even hazier words of the Secretary of State's apparent statement of clarification.

If a major need of Government policy is to reduce the public sector borrowing requirement, why not deal with the convention of the public sector borrowing requirement? It is not true that capital expenditure is treated in the same way for all the 100 per cent.-owned firms. Why does a holding of less than 50 per cent. not count in relation to the public sector borrowing requirement, given that substantial sums of money could be involved in a very large firm? Is that the only reason—we do not yet know the precise figure—for a figure of less than 50 per cent. being struck for the BNOC?

In the BNOC the Government are privatising not a monopoly but an equity based company that is different in kind from the National Coal Board and the Gas Corporation. It is not like BP. If the hon. Member for Derbyshire, South-East (Mr. Rost) had visited BP, he would know how many times it had been controlled by the Government. I refer, for example, to the Iranian crisis. Indeed, I was in Northern Ireland during the Ulster workers' strike, and BP did what it liked about petrol supplies for Northern Ireland. It was not under my control or that of the Government.

Photo of Mr David Mellor Mr David Mellor , Wandsworth Putney

It was all the better for that.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I am arguing that that is not the case for the BNOC. The Under-Secretary has recently been appointed to the Department of Energy, but I had hoped that he had learnt that elementary point. The assets of the BNOC will rise as the oil price rises with the long-term world energy shortage and we shall lose the added value. The BNOC is a successful firm and has played a major part in developing our North Sea assets in the last five years. Its achievements since 1975 are remarkable. It is one of our most successful organisations. It is an operator in three fields, and it is a venture partner in seven more. That was before the seventh round, when changes were made in that respect. The company moved quickly into profitability, with a profit of £88 million in 1980. Whatever else may be said, no Conservative Member can poke fun at the BNOC in the way that they can at some parts of the public sector, where it is almost impossible to make profits in the normal sense of the term.

The British National Oil Corporation is an extremely successful organisation. It is highly regarded by the foreign companies that deal with it, and by British firms. The Government cannot say that they are dealing with the BNOC because it has failed the nation. Alone among European countries, Britain is self-sufficient in oil. To take advantage of that position we must control investment in the North Sea, its development and the trading pattern. All of that will be put at risk by the policies that have been announced in the Gracious Speech.

With the proposed change of structure, the Treaty of Rome may—it is the Government's job to make an assessment—prevent us from restricting sales to EEC countries once the division has been made between a private producing company and a trading company that is 100 per cent. owned. Public ownership means that we receive 100 per cent. of the revenue. Private ownership will reduce that proportion and also the tax take.

Private ownership will encourage refining abroad. If I do not deal with this subject at length, we will have to find an opportunity to do so. The decline in Britain's refining capacity in recent months is an important issue. What will happen to refineries, such as that on the Isle of Grain, with the new BNOC? It would be helpful if we knew in advance of the Bill being drawn up. Will we be shown the articles of association of the new joint stock firm before the Second Reading debate?

From my investigations, I know that articles of association in a firm where less than 50 per cent. of shares, or whatever the proportion is to be, is in the hands of the private sector are most important. Will we see the articles of association in advance of the Bill, because I presume that the articles of association will prevent certain things from happening about which I and my hon. Friends are concerned. How will the sale of shares be undertaken? Will they be sold all at once, once the Bill is passed, whatever the price on the market? That may be an undervaluation of a precious asset. Alternatively, will they be dribbled on to the market?

What steps will be taken in the sale to protect the national interest? Left with a Government minority holding, control could pass to a foreign multinational or group of foreign multinationals. One of them, as an aside in a newspaper the other day, said as a light-hearted joke that whatever happened in the first instance one could purchase the shares on the Stock Exchange afterwards, and end up—[Interruption.] One of the firms said that as a joke. I do not regard it as a joke. We should examine that situation.

Does the Secretary of State intend to state in the articles of association, or in the Bill itself, that the interests of the British National Oil Corporation and what is done in the North Sea will be protected in the articles of association, by legislation, or by way of order, which ever is the more appropriate? Even if those three ways are not appropriate, my question still stands. Will the Secretary of State protect, under this legislation, British North Sea oil from a takeover by foreign national interests?

Surely the Government have made an estimate of the time taken to unravel the contracts in each field. I am referring not to trading, but to production in the North Sea. The problem arises in the transfer of British oil producing assets to the new company. They are held by the British National Oil Corporation in common with other firms and will alter the balance of some of the consortia involved. I have no wish to play House of Commons games, but the Secretary of State must have a view on this. The Government will have to negotiate agreements with all the interests involved. My right hon. Friend the Member fir Greenock and Port Glasgow (Dr. Mabon) was involved in setting up earlier consortia, and the rules laid down lead almost automatically to hybridity. What is the Secretary of State's view on that? It took five years, I am advised, to build up the agreements. —[Interruption.] Hon. Gentlemen may sneer, but it took five years. Do hon. Gentlemen disagree with that?

Photo of Sir Archie Hamilton Sir Archie Hamilton , Epsom and Ewell

Will the right hon. Gentleman give way?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

No, it was the hon. Member for Bedford (Mr. Skeet) who disagreed. He laughed at that.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

I shall laugh if I like.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. The right hon. Gentleman can decide whether he gives way.

Photo of Sir Archie Hamilton Sir Archie Hamilton , Epsom and Ewell

It took that time to tie up the arrangements so that they could not be unravelled later.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

If the arrangements cannot be unravelled, the Secretary of State is in a funny position. If the hon. Gentleman is right, we have a game of hybridity before the House. I presume that the hon. Gentleman is wrong and that they can be unravelled. I hope that we are not to have a clause in the Bill to give power to the Secretary of State to do what he likes in this respect. If there is to be an unravelling, will the Secretary of State tell us what is to be done about the 49 per cent., 34 per cent. or whatever it might be?

The Secretary of State should tell us about parliamentary accountability. I understand from the media that the right hon. Gentleman has made profound changes to the Bill that was published last year. He has taken control. In my office we called the first Bill published last year the "East German Bill" because it gave so much power to the Secretary of State for Energy that he could do what he liked, whenever he liked, without coming to the House of Commons. I am sure that the right hon. Gentleman, with his regard for the House of Commons, would not approve of that.

In June of this year the trading company ran into a deficit. I am not saying that it ran into trouble, but the trading arm of the BNOC ran into deficit because of a pricing crisis. With the new company—the State-owned company, the trading company—will losses be funded by the Government? Will it affect the public sector borrowing requirement? Has an assessment been made of what the PSBR could be as a result? Will the Government set targets for the trading company? Will it be an equity company? Will it be a type of nationalised industry?

It is important that we know what type of company it will be, because, much as we disagree with what is being done in one section of the company, we should know the nature of the trading company. There could be trouble with the EEC in relation to the trading company. Will the trading company be able to act as the BNOC did during the Iranian crisis? We used it then in the national interest. Will the company be able to do that in future oil crises, because we are likely to have a number of oil crises?

What type of person will be appointed to the board of the company? For instance, will they be political appointees? Will they be appointed by the Secretary of State? What nature of people will be appointed to the trading company? A number of BNOC directors, particularly the non-executive directors, have knowledge of the private sector oil trade. Will the new appointees be civil servants? Will they be there to do as they are told? Perhaps the Secretary of State regards that as important. Will the appointees exercise their commercial judgment? Will they exercise the judgment that they have garnered over the years?

The BNOC acts on behalf of the Government. It handles the strategic reserves of oil. Who will handle the strategic reserves of oil under the new set-up? Will it be the trading company or the production company? It is important to clear up one matter in relation to that question. The story is that the Government are selling off a large chunk of the strategic reserve of oil. Is that true? It is important to know. A judgment about strategic reserves on the basis of free market forces will not get the Secretary of State far.

A long political battle lies ahead over the disposal of a large part of a successful firm. I have a question to ask about the BNOC and its board. Does the Secretary of State's policy have the approval of the BNOC board? I do not say that it should have that approval. I accept that the Secretary of State, who is responsible to the House, decides on policy. That is right, but does the Secretary of State's policy have the board's approval?

That is an important question, because in the last nine or 10 months in which I have been involved in the subject I have been impressed by the calibre of person on the BNOC board. Members of the board are not there for the fun of it. They are not there for the money. They are putting at the Government's service their knowledge of oil. It was right when the BNOC was set up that such people should be put on the board. However, are they allowed to express their views? Will they be able to give their views while the Bill is going through the House? If they could, it would be advantageous. I do not set myself up as an expert on the oil industry. I presume that the Secretary of State is in the same position. He has a Back-Bench Member to assist him. It would be advantageous if those on the board could help us to make a collective decision—as much as we disagree with the fundamental policy—on what should be done. Many members of the board have considerable knowledge.

I come now to the British Gas Corporation and the Government's proposals about its monopsony. I propose to work from a statement issued by the British Gas Corporation, about which the Secretary of State knows. It is a long, detailed statement raising some pertinent points about the British Gas Corporation's side of the matter. Many officers of the corporation have been involved in the gas industry for a long time. They have raised some questions which I will advance.

The statement says, first, that the corporation believes that the integrated structure of the industry provides a first-class all-round gas service to consumers and has helped maximise the benefit to the nation of the North Sea gas discoveries.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

And oil discoveries.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

Yes. If the hon. Gentleman wishes to raise the question of oil, he can do so. Some workers from Wytch Farm visited me last week to inquire about their prospects. However, time does not allow us to deal with all matters.

The statement says that the corporation sees no business or economic reason for breaking that integrated structure. That was not just the chairman speaking; it was the board and all the members not committed to any one political party. However, some of them are committed to the Conservative Party.

As to buying rights, the corporation believes that its existing rights for natural gas, which have their foundation in the Petroleum (Production) Act 1934, have been fundamental to the rapid but carefully managed development of the North Sea gas finds since the 1960s. Gas sales to domestic users have quadrupled, and to industrial consumers have increased almost sevenfold. However, the wasteful use of large volumes of gas in crude-heat applications—which is now being abandoned in Europe and which has led to a scarcity of natural gas in the United States—has been avoided in Britain. That is a result of the policy of the British Gas Corporation.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

The hon. Member for Bedford may disapprove of that. I do not wish to give way to the hon. Gentleman, who believes that he only has to stand up in a debate about gas and everyone will give way.

The statement goes on to say that, at the same time, gas in Britain has been consistently cheaper than other fuels. That remains the case today. The statement then deals with marketing policy. It says that the marketing policy of concentrating on the premium or high value markets has been endorsed by successive Governments and is wholly consistent with a conservationist approach to energy utilisation and the corresponding long-term depreciation of the nation's offshore resources.

I understand that British Gas has had no information from the Government that that policy should be abandoned. If it is not the Government's intention to abandon that policy, how can it be implemented under the new legislation? Must we follow the American and European policies, which have been changed in recent months? Because of energy price increases, those countries' gas policies have proved to be wrong.

The statement then refers to the Secretary of State, who said that gas was the only fuel of which there was a shortage in Britain and implied that the shortage stemmed from the corporation's buying rights slowing down exploration. There was a shortage of gas, not because of lack of availability in the North Sea, but because of the flight from oil by British fuel users after the Iranian revolution and the oil shortages and price rises that followed. Large numbers of oil users wished to switch to gas, and that could not be done overnight.

In the industrial market the corporation became committed in a number of weeks to supply gas that it was planning to sell over a number of years. The avalanche of demand could not have been anticipated. It was a fundamental increase in the demand curve and not a movement along it.

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

Will my hon. Friend explain that the legislation that has brought in the integrated structure was Conservative legislation in the 1970s?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

That is correct, and it stemmed from a report of the Public Accounts Committee.

The Secretary of State is changing the structure. How are the principles to be carried out in the new structure? Only a proportion of the avalanche can be met without seriously endangering the industry's obligation to meet peak demand from existing customers. The statement goes on to deal with the additional problem of the availability of Brent gas. In terms of a success story, despite the flight from oil, the corporation has not only satisfied virtually all the outstanding demands from those industrial customers to whom a gas supply is essential for their processes, but has supplied an additional half a million domestic customers during that time. The British Gas Corporation has done well.

The statement goes on to say that the overwhelming proportion of unsatisfied demand from industry is from those who could just as readily have used oil or perhaps coal. There are implications for the coal industry in the change of policy about the monopsony powers of the gas industry.

Photo of Peter Viggers Peter Viggers , Gosport

Can the right hon. Gentleman strengthen his argument by quoting any examples of monopolies that have recommended their own abolition? If he cannot, are we not entitled to remember the words of Miss Mandy Rice-Davies, who, when she was told of something that had been said by a gentleman, said "He would, wouldn't he?"

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I doubt whether she would have known the difference between monopsony and monopoly.

The injection of free market forces will increase the price of gas, endanger the policy of conservation and the use of gas at its premium or high market value.

I wish to raise the matter of the corporation's buying powers and the first refusal position. Producers must offer gas for fuel use to the corporation first at a reasonable price. The Secretary of State will be the arbiter of a reasonable price. A Secretary of State has never had to intervene in that matter. The corporation has not played it badly in that respect. Since the negotiations began in the mid-1960s, Secretaries of State from both parties could have been involved. My point is that they have not been. If something had gone wrong, they would have had the right to intervene.

The corporation makes it clear that the prices that it pays are not only reasonable but earn high returns on the original investment. The corporation's pricing policies have been to the benefit of British gas users, both industrial and domestic. The corporation has repaid all its borrowing and has not been a burden on the public sector borrowing requirement. It is 100 per cent. self-financing. The Government imposed a gas levy on the corporation, but when gas prices went up because of the levy the first person to complain was the Prime Minister, whose Government imposed a levy of £1,250 million.

The Government's proposals will give producers a licence to auction gas. It will go to the highest bidder. The only result of the ending of monopsony powers will be to force up prices. Auctioning will lead to a more rapid depletion of stocks. The bulk fuel users will buy and burn more gas. The corporation says that the bulk users do not properly consider the way that they burn their gas but that the small users do.

Are the contracts of the BNOC part-time executive directors of the board to be renewed? The newspapers claim that Sir Denis Rooke has been reprimanded—if not court martialled—under sections 4 to 44 of the Army Act for conduct prejudicial to good order and discipline. Recent statements from the Department of Energy have new vigour and verve. The involvement of the Secretary of State is clear from the use of the words "huffing and puffing". Is Sir Denis to be sacked? The press claim that that is on the cards. He was appointed only a few months ago, but he dared to stand up and express the unanimous view of the board.

What will be the role of the directors under the new legislation? I know that I am questioning the Secretary of State in a challenging, House of Commons style. One hon. Member asked about the role of the BP governors. Will it be different from the role of the governors of the new trading bodies? I agree that the Secretary of State must take decisions. However, if he or any other Secretary of State takes people out of industry to serve on boards, he must give them the right to speak out and add to the knowledge of the body politic. Their views are vital to a proper consideration of oil and gas legislation.

The Government's proposals will affect the coal industry. I am not sure that I clearly understand the shorthand of the Queen's Speech, which says: Measures will be introduced to amend the financial arrangements of the National Coal Board. The NCB's external financing limit set by the Secretary of State's predecessor turned out to be wrong, because it was not sufficient. In February the Government had to produce a different figure. At that time questions were asked on the Floor of the House about imports. We were told that the EFL was nothing to do with imports. However, something positive was said about investment in the Plan for Coal. Figures about pit closures were bandied about. There was talk of the EFL not being sufficient in the face of the position being taken by the NCB. There was great consternation, and the Government changed their mind and back-tracked. They produced a new package in June.

What is the position now? In last week's debate on the Queen's Speech the Prime Minister revealed her colours when she spoke about the coal industry. She said that the NCB had a deficit of £1·1 million—

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Get the figure right—it was £1·1 billion.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

It was £1·1 billion. But the Prime Minister was wrong. I am glad that the hon. Member for Bedford thinks that the Prime Minister should get her figures right. —[Interruption.] The Prime Minister got it wrong. The EFL was raised to £1·1 billion—an increase of £231 million. Grants and subsidies rose from £300 million to £550 million. That is the figure to be quoted if one wishes to use the word "deficit".

The Conservative Party has an instinctive desire to knock the nationalised industries whenever possible, because it thinks they are a drag on the nation. If that is true, why not nationalise the NCB? Perhaps that is the meaning behind the words Measures will be introduced to amend the financial arrangements of the National Coal Board. Do the Government intend to stick by the Plan for Coal? It is important to know the answer to that question. Will the Secretary of State continue the tripartite agreements? Will he stick to the procedures for closing pits and restructuring imports? Will the Government stick to the principles that have been agreed by both sides of the House?

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

The right hon. Gentleman is always careful to ask the Government if they will stick to the Plan for Coal. Is it not reasonable for Conservative Members to ask the right hon. Gentleman whether he will ensure that the National Union of Mineworkers also sticks by the Plan for Coal—especially the provision that calls for the closing of obsolescent and old pits?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I am the son of a mine worker. I learnt as a child that no one can answer for the NUM. The hon. Gentleman should not ask me to do so. I do not control the NUM or the Yorkshire area.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

During the past six or nine months a number of collieries have been closed, including one in my constituency, which was the subject of great concern. The miners have stuck to the Plan for Coal. We expect the Government to stick to their bargain and rapidly ensure that the Belvoir coalfield goes ahead.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I shall come to the question of the plans for the Belvoir coalfield in a moment. A large number of collieries have been shut down since the plethora that were shut down in the 1960s. The NUM objects to the closures, but they are carried out through the proper procedures and with the proper use of geologists and mining engineers. —[Interruption.] Of course pits will close down. However, under the Plan for Coal new collieries should open. The two go together. I want to hear what the Secretary of State has to say about that.

All countries are switching to the use of coal. I am worried that the new scheme for oil will affect the Plan for Coal. It pays to use coal. The building of a new colliery and new facilities can take as long as 10 or 12 years. It is not Marks and Spencer or United Biscuits, where the supply curve can be altered rapidly. The Government's objective should be made clear. There is an assured future for coal, which one day will be used for liquefaction. We shall wait and see the role of the Department of Energy.

The NCB is a successful organisation that deals in a different area from the BNOC, because of its older collieries. The NCB is different from the transport industries. Too often the coal industry is knocked and not given credit for the incredible technical developments that have taken place in recent years.

There is the question of free market forces. I hope that the EFL, which will be struck, will not force the NCB to shut down its collieries on the North-East Coast of Scotland and Wales. Although there are problems in those areas, there are large supplies of coal there and new collieries ought to go to those areas as well.

The Secretary of State for Energy knows that the Opposition will fight this Bill. Our energy resources must be owned by the community. In the extraction of oil the private sector must play a vital part, as in Norway. Under the BNOC there is room for both, but the control should be under the Government and the BNOC.

I firmly oppose the policy. Future Labour Governments will reverse the present Government's policy, and certainly a future BNOC will be 100 per cent. publicly owned. As the Shadow Cabinet recently said, we wish to make public and plain to any outside interests contemplating the purchase of these shares our firm resolve to restore the assets to public ownership on terms that will ensure that no private speculative gains are made at the nation's expense. We will fight the Government on that at each stage because we believe that they are wrong.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy 4:43 pm, 10th November 1981

The right hon. Member for Leeds, South (Mr. Rees) said that he thought that it might be inappropriate to make a Second Reading speech on the forthcoming legislation envisaged in the Queen's Speech. Instead, he made a Committee stage speech. I hope that he will forgive me if I do not answer the many questions he asked. However, they will all be answered in the course of the debate. I shall attempt to answer his main points.

It might be appropriate for me to begin where the right hon. Gentleman left off, and to deal with the coal industry. The right hon. Gentleman's fears about the Government's plans for the coal industry are wholly unfounded. I have no doubt that the British coal industry has a golden future within its grasp. However, that future can be assured only if the coal board is successful in moving towards a sound and viable financial footing. That is, first and foremost, a challenge for the board and for all who work in the industry. I accept that the Government have an important role to play, and they are playing it. My predecessor firmly committed the Government in this context and—this answers the right hon. Gentleman's main point. I stand foursquare behind my right hon. Friend's commitment. These are not mere words; they are backed by hard cash. The Government have given the coal board an external financing limit this year of over ·1 billion—£1,117 million, to be precise—the highest EFL for any nationalised industry and more than the EFL for British Steel and British Telecom combined. The Government have also approved a massive capital investment programme for the modernisation of the coal industry which this year alone will total over £800 million.

No less than half of the vast external financing limit of over £1 billion takes the form not of loans but of outright grants at the taxpayers' expense, equivalent to a contribution of £27 from every household. That level of financial support represents, by anyone's standards, a substantial commitment by the Government and the taxpayer. It is so great that support on this scale cannot be accommodated within the existing statutory limits.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

What the Secretary of State for Energy has said is very interesting. He has said that the Government and the Department of which he is the Secretary of State are giving a financial commitment to coal. The Opposition welcome that. Is he saying that borrowing and the payment of interest on it constitute a subsidy to the National Coal Board? He must clear that up. The Opposition are extremely angry that the Prime Minister stated that the mining industry received £1,100 million in subsidy. That is untrue. The board borrows and it has to pay interest on its borrowings.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

That point was made by the right hon. Member for Leeds, South in a slightly calmer way. However, it is true, as I said, that the grants and subsidies amount to a little over £550 million during the current year. I do not want to go too far down this route, but it must also be said that if the Government had not stood behind the coal board it would not have been able to borrow on the terms that it has.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

The Government have announced in the Gracious Speech their intention to introduce legislation to increase the present statutory limit on the coal board's borrowing and to allow continuing grant support for its operations and revenues. That legislation will be introduced in the near future, and debates on the Bill will provide the best opportunity to debate the detail that the hon. Gentleman wishes to debate.

I have spoken of the challenge that the board must meet if it is to realise, as I am sure that the whole House wishes it to, the opportunities that the future holds. That is a formidable challenge, and I believe that this is recognised by both sides of the industry with which I have had discussions in recent weeks.

The coal industry has certainly been hard hit by the recession, with sales last year well down on the year before. However, that was by no means the only factor which contributed to the industry's problems and to the rise in its costs which was well above the general level of inflation. I am glad to say that in recent months the industry has shown a new determination to tackle these problems. After several years of very disappointing productivity, overall productivity so far this year has been running 4 per cent. above its level in the same period last year. Both sides of the industry must continue to pull together to improve efficiency and further improve productivity and reduce losses. The Government for their part have clearly demonstrated their commitment to help the board to achieve its goals of financial viability and genuine competitiveness.

I turn to the question of oil and gas. The right hon. Member for Leeds, South has complained on a number of occasions—it was implicit in his remarks today—that hon. Members have had difficulty in discovering what the Government are up to. That has not prevented him and his right hon. and hon. Friends from jumping up and down ever since I made my announcement on 19 October. For the life of me, I cannot see what all the fuss is about. As far back as last February, my predecessor, the present Secretary of State for Transport, introduced and published a Bill providing for the privatisation of the British National Oil Corporation and setting out the route that the Government proposed to take.

The Government subsequently made it clear—indeed, it was my right hon. Friend the Leader of the House who made it clear—that their intention was to reintroduce the proposals this Session, and to carry them through to the statute book. So the Opposition have had plenty of time to discover what we are up to—not that that has prevented them from launching an extraordinary campaign of misrepresentation and emotional poppycock.

Before I explain the Government's specific proposals and deal with the Opposition's somewhat hysterical campaign against them, it is important to be clear about the context. The Conservative Party has never believed that the business of government is the government of business. That philosophy has been amply vindicated in the hard school of practical experience.

We have now had over 30 years' experience of Morrisonian nationalised industries. Together they account for over a tenth of national output and over a sixth of total fixed investment. For some industries they are the only domestic customers; for some consumers they are the only suppliers. By any standard, these industries occupy a commanding position in the economy. Yet no Government of either party have found a satisfactory basis for running them. That is not for want of trying. The stream of White Papers, studies and reports of various sorts has been unending. Yet the problems have remained as acute as ever. Indeed, they have become more acute.

Five years ago the previous Labour Government, of whom the right hon. Member for Leeds, South was a distinguished ornament, asked the National Economic Development Office to undertake a special inquiry. The conclusion of the inquiry was unequivocal. It stated: Our inquiry has left us in no doubt that the existing framework of relationships developed under governments of both main political parties is unsatisfactory and in need of radical change". Particularly where—as so often—these industries are to a greater or lesser extent monopolies, we have created industrial fiefdoms accountable to no one: neither to market forces, nor to shareholders, nor to Parliament.

In theory they are accountable to Government. Yet even this, as the NEDO report found, is thoroughly blurred and marked by the most profound confusion about respective roles. As a result, no one is satisfied: neither those who manage the industries, who chafe at Government interference and constraints; nor Governments, who cannot even ensure that the industries operate efficiently; nor the consumer and taxpayer, who are left to foot the bill at the end of the day. To pretend otherwise really is the triumph of dogma over practical experience. My God, we have had plenty of that experience.

The conclusion is inescapable. No industry should remain under State ownership unless there is a positive and overwhelming case for it so doing. Inertia is not enough. As a nation, we simply cannot afford it.

One industry where no serious case whatever has been made out for State ownership is North Sea oil production. Indeed, how could it be when ever since the birth of this relatively new and highly successful industry and throughout the period of the previous Labour Government—including the period when the right hon. Member for Bristol, South-East (Mr. Benn) was Secretary of State for Energy—the overwhelming bulk of North Sea oil has been produced by private sector companies.

The oil-producing business of BNOC—which, as I shall explain later, is not the whole of BNOC by a long chalk—accounts for 7 per cent. of total North Sea oil production. The offshore oil interests of the British Gas Corporation account for a further 1 per cent. By no stretch of the most fertile or fevered imagination can it be argued that there is anything special about this particular 8 per cent. of North Sea oil output.

Perhaps it will help the House if I put the figures in perspective. In 1977, when the right hon. Member for Bristol, South-East was Secretary of State for Energy, the then Labour Government sold a substantial block of shares in BP representing—among many other assets—9 per cent. of total North Sea oil output at the time. Of course, the right hon. Gentleman has changed his tune since he was Secretary of State for Energy. He is now concerned not with the 8 per cent. of North Sea oil output at present owned by the State but with the other 92 per cent.

What the right hon. Member for Bristol, South-East is calling for is simple. It is a coherent policy, although I disagree with it. He is saying "Nationalise the lot". But is that really the policy of the official Opposition? The right hon. Member for Leeds, South indicates that it is not but we are given to understand that the Opposition spokesman who is to reply at a later stage holds a diametrically opposite view. In the light of that, what is the Opposition's policy? What is the policy of the right hon. Member for Leeds, South? The House is entitled to know.

Do Labour Members really believe that the future development of our offshore resources is best tackled by a single State corporation? Will the right hon. Gentleman confirm on behalf of the Opposition—if he wishes to do so, I shall gladly give way to him—that the successful development of these resources depends on the expertise and initiative of the private sector, which no Government in their senses would jeopardise by wholesale confiscation and nationalisation?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I have already said that we shall return to the position which now obtains, which was built up by my right hon. and hon. Friends. That is the Opposition's policy. I accept the right hon. Gentleman's contention that we must always be examining the public sector to ascertain whether changes should be made. It may be that the Labour Party when in Government will not return precisely to the position as it was originally established. For my part, I see no reason why BNOC should not move into the downstream sector, but that is my view. I am speaking on behalf of the Opposition when I say that what the Government are doing is wrong.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

The right hon. Gentleman may speak on behalf of the Opposition, but I understand that the Opposition spokesman who is to reply holds a totally different policy. The House was in the dark before the right hon. Gentleman intervened and it remains so.

The right hon. Member for Leeds, South referred to asset stripping. That charge contains not one grain of truth. Let me make it clear once again that we are not planning to break up BNOC's oil-producing business and sell off the assets one by one to foreign multinationals. The business will, quite simply, be floated intact on the Stock Exchange as an independent British oil company in which the people of Britain—including in particular BNOC's own employees—will be for the first time able to acquire a genuine stake.

Photo of Mr Douglas Jay Mr Douglas Jay , Wandsworth Battersea North

Will there be any safeguard in the right hon. Gentleman's proposals to prevent the shares falling into the hands of non-British owners?

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

The right hon. Gentleman does not know the answer.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

The answer is "Yes". I shall come to that issue later. I wish to make my speech in my own way. I have spoken about BNOC's oil producing business. The same argument applies to the offshore oil interests of the British Gas Corporation. There is no reason why they should be State owned, still less through the agency of a public gas utility. Indeed, the manifest anomaly is such that even the previous Labour Government in their Petroleum and Submarine Pipe-lines Act 1975 included powers to require the gas corporation to divest itself of these assets, although characteristically exclusively to BNOC. Even the Labour Government recognised that there was something odd about oil assets being held by a gas utility.

Understandably a great deal of concern has been expressed—the right hon. Member for Battersea, North (Mr. Jay)expressed this concern in his intervention—about a possible loss of British control over North Sea oil. In part, this reflects the simple and seemingly perennial Socialist confusion between the nation and the State. The MCC, for example, is not owned by the State, but it is nothing if not British.

I realise, of course, the genuine concern that control of the oil-producing business of BNOC, once privatised, might pass out of British hands altogether, although a substantial Government minority holding with the remainder of the shares very widely spread which is our intention would make that unlikely. But, beyond that, we shall ensure that written into the articles of association of the new company—this is what the right hon. Member for Leeds, South rightly suspected—will be effective safeguards against any undesirable change of control.

But what really matters to the preservation of the national interest in North Sea oil, which we all have at heart, is not the ownership of a company responsible for 7 per cent. of total North Sea oil output. What matters is the control we have over the industry as a whole. That control, which is far reaching and crucial, is wholly unaffected by the privatisation of the oil-producing business of BNOC.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

I have given way once to the right hon. Gentleman. He has had an innings.

I mentioned earlier that there was another side of BNOC which will remain 100 per cent. State owned after the offshore business has been floated off.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

Will we see the articles of association before the Bill is published, because they are germane to our discussions?

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

I cannot give an absolute undertaking that they will be available before the Bill is published. I do not know the date when the Bill will be published. However, the House will have a full opportunity to see and discuss them.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

I must move on as many hon. Members wish to speak.

The other part of the BNOC to which I was referring is the oil trading business, the heart of which is its unassailable right, via the system of participation agreements, to up to 51 per cent.—not 7 per cent.—of all United Kingdom North Sea oil whoever has produced it and brought it ashore. That is what matters. Again that is not the only way in which the national interest is protected.

There is the lax regime which at the margin may claim for the public coffers as against private profit—to use the words of the right hon. Member for Leeds, South—up to 90 per cent. or more of the oil revenues from individual fields. Incidentally, that is significantly more than when Labour were in office.

On top of the participation agreements and the tax regime there is a host of regulatory controls of one kind or another. These, too, are wholly untouched by privatisation of BNOC or BGC's oil assets. I shall not weary the House with a full catalogue, but if we are to have a sensible debate—which I know is the right hon. Gentleman's intention, even if it is not the intention of some other hon. Members—the myth of an abdication of national control must be nailed once and for all.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

I am trying to follow the Secretary of State on the issue of participation agreements. In the fifth and sixth rounds, the 51 per cent. participation agreements were in the form of equity—that is, BNOC owns 51 per cent. of the equity of the licences. How will the Secretary of State handle that in defending the participation arrangements?

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

BNOC's offshore equity interests will be treated in the same way as the oil producing interests of any other oil company. It will be an independent British oil company treated on all fours with all the rest of the North Sea oil producers. The Government have regulatory powers and I am responsible for exercising them. They are substantial powers.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

I am following up the point made by my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands). [Hon. Members: "Is the hon. Gentleman the right hon. Gentleman's hon. Friend?"] I have friends on both sides of the House. Those agreements, of which there were about 16, were negotiated by three parties. They are complex. I understood from the Minister's initial remarks that most of them would not need to be renegotiatiable. However, the ones mentioned by my hon. Friend, if they are to be split into a new part of BNOC, will require to be renegotiable. Is there not a great danger in that?

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

The participation agreements are with BNOC. They will remain with BNOC. They will not be a part of the new offshore oil company which is to be privatised.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

I cannot go on. There will be ample opportunities for hon. Members to speak, and I have made the position clear. I have great affection for the right hon. Gentleman, but he must calm down. I was about to remind the House—

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

No, I will not give way. I have made the position clear.

I was about to inform the House—so that the right hon. Gentleman can form a proper judgment on whether our national assets are in jeopardy—of some of the powers that I have as Secretary of State for Energy for the control of North Sea oil. I have powers to ensure that all developments are carried out in accordance with good oilfield practice, that recovery of oil and gas is maximised and that wasteful or inefficient development is avoided. I can set production limits for oil and gas in accordance with the national interest.

No submarine pipelines may be laid in United Kingdom territorial waters or designated areas without my authorisation. No drilling of exploration or development wells can take place without my approval. No development work may be carried out and no petroleum may be produced except with my consent or in accordance with a development programme approved by me. All petroleum produced from offshore fields must be landed in the United Kingdom unless I permit otherwise.

There can be no gas flaring without my consent. I address that point to the right hon. Member for Bristol. South-East, who said in a radio or television interview that privatisation of BNOC would result in all the gas being flared and wasted. That is absolute poppycock, and he should know that. He was Secretary of State for Energy, much to the nation's misfortune, for longer than anyone else. He should know that the gas flaring power under legislation resides with the Secretary of State for Energy and with the Department. It is interesting to know that since the Government came to office gas flaring has been roughly halved—that is, since the right hon. Gentleman was Secretary of State for Energy.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

Will the Secretary of State accept that in the first three months of the Conservative Government gas flaring in the North Sea was running at the highest level ever and was equivalent to 21 per cent. of the nation's total inland gas consumption?

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

It took a little time to clear up the mess that was left by the Labour Government. What I have listed today are merely some of the routine, everyday powers vested in me as Secretary of State for Energy. In an emergency, still further powers are available to protect the national interest.

In short, the existing North Sea oil regime, a regime which is wholly independent of the ownership of the oil-producing business of BNOC, far from being inadequate, is, if anything, more than adequate to protect our vital national and strategic interest.

As one distinguished former oil man put it, when asked by the BBC's "The World Tonight" programme whether my announcement on 19 October marked a black day for Britain, No, in no sense. I would say that with the tax regime as it is, with the political control as it is, with the participation agreements remaining in being, I think it'll go a long way to get the whole North Sea development given a new lease of life"—[Interruption.] The hon. Member for Merthyr Tydfil (Mr. Rowlands) scoffs, but the speaker was Lord Kearton, the first chairman of BNOC appointed by the right hon. Member for Bristol, South-East when he was Secretary of State for Energy. He was repeatedly praised by the right hon. Gentleman as being the ideal man for the job.

In the same interview Lord Kearton was also asked whether he felt that the Government plan to break the BGC's statutory monopoly of the supply of gas to industry and other large consumers was a severely damaging blow at nationalised industry. Opposition Members wish to protect nationalised industry. I shall save them from many further quotations by Lord Kearton, as I do not want to embarrass them too much, but it is worth giving this one. He replied: No, I think that the nationalised control of gas was essential in the early days, and I think it's been brilliantly successful and I think the Gas Corporation has been brilliantly led, not only by Sir Denis Rooke but by his predecessors, but I do think the time has now arrived where the control of complete monopoly buying, monopoly distribution and monopoly pricing, is, in fact bad both for the industry, both for the country and for the development of the North Sea. So I think to break up the Gas Corporation monopoly is extremely sensible". The proposals have been welcomed by the Chemical Industry Association and throughout British industry. I am not surprised that the idea of competition in place of monopoly is anathema to the Labour Party. It always has been. However, it will be interesting to see on both that issue and on the equally clear issue of private enterprise versus State ownership how the SDP and their Liberal bedfellows vote in the Lobby tonight.

The right hon. Member for Leeds, South mentioned that the chairman of the BGC had proposed his rival plan. He suggests that the whole corporation, with its oil assets and its statutory monopoly intact, might be privatised. As hon. Members know, I am always grateful for helpful suggestions. But this one really will not do. A privately-owned national statutory monopoly would be nothing less than a licence to print money—a licence of the most grotesque and irresponsible kind.

It is true, of course, that in some countries—the United States in particular—privately-owned gas utilities exist. For them to be workable, however, two conditions must be satisfied. First, there must be not one national utility, but a number of regional utilities—a fragmentation going far further than anything that I have so far proposed. Secondly, there must be a massive regulatory apparatus of a kind of which we have no experience in this country and which would take years to set up. Indeed, the regulatory framework which we shall be setting up to enable BGC's pipeline system to be used as a common carrier under the proposals that I have already announced is, I believe, enough to be going on with in this direction.

The truth is that Labour Members have a wholly irrational attachment to the public sector and to nationalised industries which ignores experience and defies analysis. They bandy words like "patriotic" and "birthright", but it is not patriotic to expand a sector of the economy which still suffers from so many intractable difficulties despite so many attempts over so many years to solve them. The birthright of this country does not lie in monopoly, inefficiency and State control. Nor, I remind the Opposition, are nationalised industries the nation.

Our proposals are in the interests of the consumer, the taxpayer and industry, and we are determined to press ahead with them this Session. I ask the House to reject the Opposition amendment.

Photo of Mr Bill Pitt Mr Bill Pitt , Croydon North West 5:11 pm, 10th November 1981

I am grateful to you, Mr. Speaker, for allowing me to catch your eye and to make my maiden speech at this important time in the life of this Parliament and in the political life of our Kingdom.

First, I pay tribute to my predecessor, Robert Taylor, whose untimely death led to the by-election which brought me here. He was, by all assessments, a good constituency man who worked diligently in the service of the people of Croydon, North-West and was widely respected throughout the constituency for so doing. Although our political views might best be described as "poles apart", our personal relations were cordial. Bob Taylor was a friendly man, liked and respected by his constituents and by his political opponents as an honourable man whose views came not from prejudice but from conviction. He served our constituency well as a Member of Parliament for 11 years and he left a legacy of contact with the people of Croydon, North-West of which I am the inheritor. He will be greatly missed by colleagues and opponents alike.

I gather that it is the form on these occasions to say something about one's constituency. First, I hope that if other hon. Members come to Croydon, North-West they will not trip over too many cracked paving stones. I cannot claim birth in my constituency—that doubtful honour falls to Brixton—but I can claim lifelong residence and knowledge of those among whom I live and whom I represent.

Croydon, North-West, like most South London constituencies, is largely a commuter constituency which carries its fair share of the burdens placed by our ailing suburban railway system upon those whose work requires them to travel to London daily. Twice a day, they are obliged to travel in rickety trains more suited to cattle than to human beings. They are tired when they reach their offices in the morning, and tireder still when they return home. Their plight is neither unique nor of recent origin. For far too long, British Rail has been underinvested and its vital commuter services in London strained to breaking point. Commuters in Croydon, North-West look forward to a commitment by the Government to reinvest in the railways and to relief from their daily torment.

In addition, through the spine of the constituency runs the A23. We therefore suffer daily from the dangers and the anti-social habits of juggernaut lorries carrying oranges from Spain to Nine Elms, where once stood one of the largest engine sheds of the Southern Railway. One wishes that that link had remained. Our children would be safer and our homes less prey to damage from vibrating diesel engines.

In my constituency, we have an increasing number of old-age pensioners whose incomes can little withstand the pressures of the present economic plight, and for whom such phrases as "the quality of life" have a hollow ring and little meaning. Pensioners in Croydon, North—West would have welcomed a commitment in the Gracious Speech to reverse their plight. As a nation, we are growing older, but we are providing fewer and fewer resources for our future old-age pensioners.

I apologise to the House for telling a tale of gloom, but sadly, for many Croydonians—and those in my constituency take their share—life is a gloomy prospect. The number of unemployed in this previously prosperous suburb rose steadily during the 1970s, but since 1979 it has shot up by more than 150 per cent., which is greater than the national average. That figure includes far too many young people whose work and training now represent the future of our country.

Moreover, the plight of our young people is not confined to the dole queue. To comply with Government policy on local government expenditure, Croydon council intends to close seven secondary schools in the north of the borough, three of them in my constituency, thus reducing choice in a vital part of children's education and forcing parents to bus their kids to other parts of the borough on an already overworked and unreliable system.

Members of the Asian and Afro-Caribbean communities in Croydon, North-West, where they form some 11 per cent. of the population, will be pleased and grateful for the Government's pledge in the Gracious Speech that all will have equal rights regardless of colour, race or creed. We live in a multiracial society and I heartily endorse all efforts towards its maintenance. I am a little saddened, however, that the Gracious Speech contains no specific proposals to reinforce that commitment. There is no reference to the measures required to promote racial equality in the aftermath of the British Nationality Bill and the summer riots. One would have expected the Gracious Speech to reaffirm the Government's commitment at a time when reassurances are necessary.

There is especially a need to counterbalance the harmful psychological effects of the British Nationality Bill. Lord Scarman is likely to recommend positive action and I hope that the Government will act promptly on that. Reforms are still required and positive action is needed to ensure equal opportunity for all citizens of our nation. Reform is needed, for instance, of section 11 of the Local Government Act 1972. We need a code of practice for public contractors. There is also the need to rebuild confidence in the police to deal with racialist attacks.

On the subject of this debate, the people of Croydon, North-West will watch with interest the progress of the Government's proposal to privatise the British National Oil Corporation. I understand that the Government intend, by encouraging private investment in BNOC, to sell off one of our most important national assets, the revenue from which could be used for further investment in jobs. It cannot be by way of encouraging competition, as in the oil business there is none—the prices are fixed by OPEC. The BNOC is a national asset and, as such, should remain in the hands of the nation. As we understand the proposal, it is unlikely that Liberals will support the Government in this move. It appears that in reality the sale is being made to pay for unemployment benefit and to keep down the public sector borrowing requirement, which is so high because there are now nearly 3 million people unemployed.

Finally, I bring a heartfelt plea from the people of Croydon, North-West to end the class war and political bickering, to end artificial differences between management and labour and to create a climate in our country in which voices of sense and consensus are heard loudly above the clamour of dogma and doctrine.

Photo of Mr John Hannam Mr John Hannam , Exeter 5:18 pm, 10th November 1981

First, I congratulate the hon. Member for Croydon, North-West (Mr. Pitt) on a most effective maiden speech. During his election campaign, he experienced a rather fuller blaze of publicity than most of us encounter at general elections. At least, however, coming to the House after a by-election, the hon. Gentleman has avoided the very long delay before making his maiden speech which many others, including myself, experienced when we were elected at general elections.

The hon. Gentleman follows a much liked Member of Parliament whom we all miss and to whom he paid due tribute, for which we are grateful. Having listened to the hon. Gentleman's first speech in the House, I am sure that he will enjoy his time here and will make many worthwhile contributions to our debates.

Today's debate, although in the context of energy matters, is also part of the general debate on the forthcoming programme of legislation. Therefore, although I wish to devote most of my speech to my right hon. Friend's very welcome proposals for de-monopolising British Gas and introducing real public investment into BNOC, I wish initially to comment on the general economic situation and also to describe how the Government could assist the disabled in a particular way.

As someone who has spent most of his life as a small business man, running a service industry and creating more than 100 jobs from scratch, I have long campaigned for a new approach to employment. Throughout the 1960s, we talked of a switch from manufacturing to service industries but did very little about it. Our education system dropped further behind our European rivals in providing vocational training, skills and apprenticeship schemes that did not follow outdated lines at a time in the 1970s when there were ominous signs of the effect of the second industrial revolution on unemployment, which doubled and doubled again under both political parties.

Little has happened in our employment strategies to counteract that dramatic change in the nature of employment. To give him credit, the hon. Member for Truro (Mr. Penhaligon) was alone among members of the "soft option" party to speak out against the belief that there was an easy answer to our present unemployment problems. At the Liberal Party conference, the hon. Gentleman outlined the problems that we all face in trying to overcome these difficulties.

But at a time in the last decade when we needed a coordinated approach to the new economic and industrial future, we had the same old resistance to change from the Labour Party and its allies, the trade unions. Restrictive practices, militant shop floor wage demands, employment protection measures taken to the absolute limit and opposition to the breaking of cumbersome State monopolies have all combined to land us in a position where even without a world recession strong measures were needed to make Britain's trading and manufacturing position comparable with our competitors in the wide world outside.

Of course, the recession has made the task of industrial reconstruction even more difficult. I well understand the worries of those who feel that because of the recession we should perhaps shelve any attempts to restructure our economy and that we should increase still further our overspending and subsequent borrowing. I have thought deeply about that and have come to the conclusion that we must follow the strategy adopted by the OECD, the IMF, the EEC and all the main international economic organisations. In other words, if the recession is to be overcome, inflation must be defeated by reductions in national spending budgets and by a lowering of wage demands and financial expectations. That strategy must be followed if we are not to see the whole world economy collapse.

Governments are now experiencing deep unpopularity as they struggle to achieve success against inflation and recession. It is interesting to note that in recent times no Government have survived a general election. Be they of the Right or Left, Governments in the United States, France, Greece and Norway have fallen in the wake of electoral unpopularity. If an election were now to be held in West Germany, Britain or any other country at this stage of the recession, I believe that the people would vote not for any alternative—I have yet to hear of one—but against the pain and unpleasantness of the illness and the medicine prescribed for it.

Having said that, it does not follow that Governments should forsake their responsibilities in the long-term national interest for short-term electoral gain. I therefore support the brave and determined fight being pursued by the Government. I believe that Britain will emerge from the recession in a better position on the world trade ladder than before.

France and Germany are experiencing all the difficulties that we have undergone, and only their higher productivity and lower levels of State spending have enabled them to achieve lower levels of unemployment. While we can all take issue with individual tactics pursued by various Government Departments in the overall approach to the battle against inflation, I cannot see a great deal of scope for substantial changes of course.

I now turn to more specific matters, one of which is an item of Treasury policy with which I beg to differ and which I believe needs adjustment. I am, of course, referring to VAT charges on charities. I wear my disablement hat to show that I take this matter seriously. In fact, during the Conservative Party conference in Blackpool I spoke at a fringe meeting on this subject. It was not one of those notorious fringe meetings that monopolised the media. It was organised by the Spastics Society and took place at the same time as that famous fringe meeting addressed by my right hon. Friend the Member for Sidcup (Mr. Heath).

Despite the fact that delegates had to walk three quarters of a mile along the seafront to find the hotel, and regardless of the fact that it took place at the same time as other widely-publicised fringe meetings, the room was packed with nearly 100 people. That shows that Conservative Party delegates considered this an important subject.

I put my views on the record and hope that they will be taken into account in the next Budget. The philosophy of the Government and my party is to help voluntary social service agencies so that they can work with the State bodies in providing maximum care services for the handicapped and disabled in our community. Much is being done in this regard, but it is being nullified by the effect of unrecoverable VAT at 15 per cent. A tremendous financial burden is crippling those very charities that we are asking to take up the extra burden during the recession.

I could go into great detail about the effects and anomalies of VAT on the fund-raising efforts of our voluntary organisations. If I merely say that during the last year our eight major disablement charities paid more than £1½ million in unrecoverable VAT—money that had been hard earned—and recouped only £ ½ million through the concessions announced in the last Budget, it is easy to understand why those vitally important organisations are facing grave financial difficulties. They have been caused not by the recession but by a counter-productive tax levy on services which, if provided by local authorities or health authorities, escape that 15 per cent. VAT levy.

This should not be regarded as a "wet" call for increased expenditure. This is another of those areas where, if such a service is not provided by a voluntary organisation, the cost of provision by the State will be much greater. On behalf of the many hundreds of thousands who give up their time and the millions who give up their money, I register this call for some alleviation of this tax impost, which was surely never meant to be applied in this way.

I turn to the proposals in the Gracious Speech for the raising of the NCB's borrowing limits and the changes in the financial structures of the British Gas Corporation and the British National Oil Corporation.

I congratulate the Minister on his realistic approach to the question of coal, which is a vital energy industry. The raising of the cash limit in June and the increased borrowing limits, in my view and that of my hon. Friend the Member for New Forest (Mr. McNair-Wilson), were inevitable, bearing in mind the impact of the recession upon coal demand and prices. Having sat on all the Committees throughout the 1970s that considered coal legislation, I can verify the Conservative Party's commitment to a competitive and thriving coal industry. That was reiterated today by my right hon. Friend the Secretary of State.

Capital investment has increased year by year and has now reached £800 million a year. New coalfields, and the continuing closure of old uneconomic pits, are resulting in substantial improvements in productivity. I for one wholeheartedly congratulate the industry and the miners on their achievements. But with 40 million tonnes of coal now lying on the surface, it must be obvious to the miners—even to Messrs. Scargill and McGahey—that if imports of cheaper coal are to be restrained and the large surpluses of coal stocks sold, wage demands in return must be in line with those in other industries.

Photo of Mr Lawrence Cunliffe Mr Lawrence Cunliffe , Leigh

I concede that huge coal stocks now exist. Is not the primary and cardinal reason the fact that the gravest recession that we have experienced for the last century is now upon us simply because of the Government's suicidal economic policies?

Photo of Mr John Hannam Mr John Hannam , Exeter

Not at all. The NCB does not make that point. It refers to falling demand throughout the Western world and to the fact that coal can be produced in other countries at much lower cost. The pressures have been building up for years, due to the overpricing of coal and huge wage demands. I am trying to make a sensible and constructive suggestion for overcoming this real problem. I should like to see the NCB offer those large stocks to the CEGB at reduced prices so that the electricity consumer could benefit. In addition, it would reduce the high cost—about £6 per tonne—of stockpiling that coal. We must look carefully at any proposal that will result in the reduction of these large stocks, as most other industries will be reflecting the pressures of the recession by reducing their prices in order to reduce their stockpiles and levels of stock.

The bureaucratic nationalised industries are slow to respond to these pressures. I should like to see a response from the National Coal Board to what I believe is becoming a major problem.

Photo of Mr George Grant Mr George Grant , Morpeth

Is the hon. Gentleman aware that an agreement already exists between the National Coal Board and the Central Electricity Generating Board that restricts increases in the price of coal? The agreement is that the price of coal will not exceed the rate of inflation, and it has worked well. However, while it is true that there are 42 million tonnes of coal stocked on the ground, the Government could do a lot more. What are they doing about the refurbishing of coal-fired power stations? They have announced the setting up of new coal-fired power stations, but if the statement of the EEC Ministers in Venice is true that coal will be important in the future that stock of 42 million tonnes should be a good insurance for the future, and it should be developed. We want decisions from the Government on new coal-fired power stations and on the refurbishing of the old stations.

Photo of Mr John Hannam Mr John Hannam , Exeter

The hon. Gentleman has made an interesting point. However, he must bear in mind the fact that 80 per cent. of our electricity is generated from the burning of coal. He cannot, therefore, expect an increase at this stage in the percentage of coalburn. We must adopt a system of reality in the industry to the pricing of coal and the disposal of surplus stocks. The hon. Gentleman, with his great experience of the industry, will no doubt wish to speak on the matter during the passage of the Coal Bill.

We must consider this as a major problem. The Government are playing their part in helping to reduce imports and in retaining the level of investment in the industry. We should like to see some reciprocation by members of the coal industry.

I come now to the two other controversial proposals in the Gracious Speech. I support the sale of BNOC's upstream business to the private sector, and it is right that the Government should retain a substantial minority interest. With the trading operation of BNOC's 51 per cent. oil participation in North Sea remaining under State control, the full control of this vital resource remains in the Government's hands. My right hon. Friend the Secretary of State outlined the various measures that lie at his disposal for maintaining full control over British oil.

The right hon. Member for Bristol, South-East (Mr. Benn), who so often accuses the oil industry of crying wolf over tax changes, is himself guilty of that in his smear campaign against any relaxation of the State sector stranglehold on the energy industries. As usual, he bends arguments to suit his own purposes. How can we be selling our North Sea birthright when BNOC holds only 17 per cent. of the currently licensed acreage? The North Sea has been developed to Britain's gain by the risk-taking private enterprise firms, not by bureaucratic State monopolies.

The selling of 51 per cent. of BNOC's exploration and development activity has lifted uncertainty in that company, and will now allow it to be free of Treasury spending controls. The chairman has welcomed those steps.

Photo of Mr John Hannam Mr John Hannam , Exeter

Opposition Members quote one chairman in aid of their argument, and I am quoting another chairman in aid of ours. Of course, a previous Labour Minister, Lord Kearton, has been quoted as being in favour of our argument, which puts us two to one up.

I come now to British Gas and to my right hon. Friend's proposals to take British Gas out of the offshore oil business and to open up the supply and purchase of gas to private sector companies. I fully support those proposals.

The delay—or the shelving—of the gas showrooms sale is no surprise to me. I expressed reservations about its implementation when we debated the matter earlier in the summer. I would rather see British Gas turned stage by stage into a major private investment company with full powers to compete in the market, whether in retailing, servicing or any other branch.

I shall welcome the day when my right hon. Friend announces a 51 per cent. disposal of shares to British Gas employees and to the public. However, I recognise that before that day arrives we must take all the necessary steps to break the monopoly that exists both in the buying and selling of gas. Of course, the present chairman of British Gas resists those changes. I should not expect him to do otherwise, being the "capitalist monopolist" that he is. He is in a very comfortable position. We can all be capitalist monopolists—as Sir Arnold Weinstock has been known to be in the past.

The chairman of British Gas can dictate the price that he pays to the oil companies, and no one can doubt that he has paid below the market price during the past decade. Consequently, therefore, we have been constantly threatened by a shortage of supply of gas to British industry. Those shortages would not exist if all available gas resources were developed and a proper price offered. The chairman can also dictate the selling price of gas, and although it can be of short-term advantage to the domestic consumer, eventually it creates over-demand in that sector as real energy prices rise steadily around gas.

The Chemical Industries Association issued a statement last week about the Government's proposals. In that statement, its director-general, Martin Trowbridge, said: In recent months a number of chemical firms have requested and have been refused additional or new supplies of gas even in cases where greatly improved energy efficiency would have been achieved. Thus we have a thoroughly unsatisfactory situation where additional or new industrial gas supplies are not available to companies despite a 10 per cent. fall in industrial gas sales due to the recession. We are told that new supplies will not be available until 1984/85. There is no doubt that the best way forward is to permit wider freedom of access to gas supplies. It is misleading to argue that a monopoly to purchase supplies ensures the best price and availability to the final industrial gas user, even though the position may be comfortable for the operator of the monopoly. World evidence does not support such an opinion. We need the fresh breeze of competition to keep the supply industry on its toes and to ensure that energy is available to industry at an internationally competitive price as the world market for our products recovers. Those are the people who are on the receiving end of gas supplies—the industrial users who have been going short because of the policies pursued by the industry. The days of low-priced, unprofitable energy are gone. There is no reason, therefore, why State control should continue to exist in these industries.

The chairman of British Gas and Opposition Members usually resent the mention of profitability in private firms, but they now quote the profit levels of British Gas as a bull point in favour of retaining the existing State industry's structure, together with its monopsony powers.

The figures in the 1980–81 annual report show a return on capital at "current cost retained" of 1·6 per cent. I recognise that it is nearly impossible to find accurate comparisons with other similar gas industries either here or elsewhere in the world. That is the problem with State monopolies. However, given the present level of energy prices, I believe that with competition and private equity introduced into the gas industry we would have higher output, lower costs, and a higher rate of return than the present 1·6 per cent. levels. I have looked at the figures from Germany and other European countries and there is evidence that a much higher return on capital can be achieved where there is some competition.

I support the imaginative proposals contained in the Gracious Speech. I deplore the stereotype pro-nationalisation arguments from the Labour Party and even from some of the soft option parties. We live in a rapidly changing world where new ideas are needed. New approaches will never be achieved through the mechanism of large State-controlled bureaucracies. If we are to provide new jobs and new technologies for the school leavers of the future, we must grapple with these outdated legacies of post-war Britain. The Gracious Speech shows that the Government are determined to face up to those changes, and I give it my full support.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline 5:39 pm, 10th November 1981

My first responsibility is to congratulate the hon. Member for Croydon, North-West (Mr. Pitt) on his maiden speech. I knew his predecessor, Bob Taylor, as a fellow member of the Public Accounts Committee and the hon. Gentleman paid a gracious tribute to him. We welcome the hon. Gentleman's participation in our debates. He will find the House a rough but warm place and we appreciate the way he put the case of his constituents.

I declare an interest in what the hon. Member for Exeter (Mr. Hannam) was saying about the Spastics Society. I welcome his comments because I have a young daughter at Beaumont College, Lancaster, who is a spastic. I know what the hon. Gentleman and others have been trying to do for spastics and other groups and I welcome his exhortation to the Government.

I welcome the opportunity to take part in the debate, but I believe that the proposals in the Queen's Speech are little more than camouflage dressed up as pageantry. The Speech is little more than a device to hide the poverty of the Government's thinking and action to deal with the plight of the economy as a whole. Most of the proposed measures are the price to be paid for doctrinaire Tories and have nothing to do with our real economic ills.

On the specific proposals that we are discussing, the Tories' dislike of the public sector and public enterprise is all too clear. They hate public corporations when they are loss makers and detest them when they make a surplus. That is the flexibility displayed by the Tories and it was evident in the Secretary of State's speech.

Time does not permit me to go into the history of the creation of the BNOC and our North Sea operations, but I suggest that they are a good example of a successful partnership between private and public enterprise. I was out of the House between 1974 and 1979 and was engaged in private industry, much of it associated with offshore oil. I have considerable respect for the technical ability of oil companies in their risk-taking efforts, but I recognise that the interests of the multinational oil companies are in harmony with the national interest only by accident and not by design.

Let us go back to the actions of a Tory Minister in 1914. Winston Churchill argued the case, in the national interest, for acquiring shares in the Anglo-Persian Oil Company. He proposed to do that, not only because the Government wanted to become the largest shareholder and predominant partner in the concern, but because they wanted to be the principal and most regular customer. So much for arm's-length market dealing. Winston Churchill saw the national interest clearly and went boldly to acquire a predominant stake in the enterprise.

The Public Accounts Committee report into North Sea oil and gas in 1973 showed clearly how the national interest was likely to be treated by the major oil companies. They were getting away with murder and Governments of both colours realised that. A Labour Government acted to secure that the fruits of the North Sea would be available to the people of this nation.

The views of various chairmen have been quoted and I should like to quote the chairman of BNOC. He said in a lecture to the Stock Exchange that the events of 1973 put into the mind of the then Conservative Prime Minister the idea that we must have a national oil company to deal with the North Sea. It is not a foul Socialist plot. The chairman states clearly that it was in the mind of the Conservative Government in 1973.

BNOC took off in technical terms because of the failure of private enterprise, particulary Burmah. I regret that Burmah failed, but it was a failure of private enterprise and BNOC and the Government had to step in and save the day.

Apart from political and economic considerations, four main factors make a national oil company essential. The first is the need for a proper appraisal of our oil and gas reserves. The second is the need accurately to assess the capital and current cost of field development. The third is the need to assess the profitability of various ventures for taxation purposes and the fourth is the need for a detailed view of depletion policy.

The Secretary of State outlined his armoury of powers, but all his powers—we gave him most of them in the Petroleum and Submarine Pipe-lines Act 1979—are considerably assisted by the existence of a direct national oil company. There is no gainsaying that. The stronger the national oil companies, the better for the British people.

I concede that some of the tasks to which I have referred could be performed by a regulatory commission, but I repeat that the major need is for a respected and integrated oil company. I know that it is not integrated at present, but I stress that the more that BNOC is respected by other oil companies, the better.

We have seen BNOC grow under Lord Kearton, develop under Mr. Utiger and develop further under Mr. Shelbourne. Behind that, the BNOC has built up major technical expertise, which should be enhanced by the Government and not diminished by the sale of assets in an attempt to reduce the public sector borrowing requirement.

Another reason for a national oil company different from BP or Shell that other nations have their own national oil companies and will wish to deal with intra-national oil companies. That is an important consideration. Hon. Members should consider how we would deal with the oil companies developing in Venezuela or the Middle East. We have seen how multinational companies have treated the resources of nations such as the OPEC members. Those nations naturally desire to put the oil companies aside and to deal with national oil companies that are similar to those created by the nations concerned.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Most of the State oil companies have been set up by OPEC countries and we have not found oil prices being lowered because the State oil companies are operating together. In addition, we may have considered that the North Sea gas-gathering pipeline was a good idea, but Statoil, a State company, was no help there.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

I shall deal with the gas-gathering system later. There are lessons to be learnt from that—and unhappily they have to be learnt at the nation's expense. Nothing that the hon. Member has said detracts from my major point. The OPEC cartel operates in a political-economic way which we may not like, but we have to come to terms with it. If we had a growing national oil company we would be in a better "honest broker" position than we shall be if we destroy or undermine BNOC.

I should like to consider the arguments relating to the abandonment of the monopoly powers of British Gas and I start by quoting what Mr. Shelbourne has said about Sir Denis Rooke: He is a great engineer; he is a great planner, and I think it is fair to say he is a great negotiator. He in his own lifetime has seen the gas industry, largely under his leadership, come from an early 19th Century outfit to an industry which is now right at the front of technology in the 20th Century. Ministers may disagree with the tough chairmen of nationalised industries, but they are showing the entrepreneurial skills and the adherence to the development of their organisations that Conservative Members admire so much in the captains of private industry. If public corporations are to be worth their salt, they must have men of that calibre leading them.

At the kernal of the argument for the destruction of the monopsonistic powers is the Secretary of State's argument that there will be much more gas. But where is that gas to come from? The hon. Member for Exeter spoke of the complaints of the Chemical Industries Association about the shortage of gas.

What is the shortage? Is it a shortage of methane, ethane, propane of butane? The industries would not be allowed to use methane in the processes to raise steam, and other types of gas are not at the moment available. There is nothing in the Secretary of State's proposals that will make any of these gases available for another five or ten years. Therefore, he is deluding the House because of his doctrinaire attitude.

If however, the argument is in relation to the price of gas—my right hon. Friend the Member for Leeds, South (Mr. Rees) dealt with this—a much better argument would be that the Secretary of State should not use his powers to intervene in the contracts. It is not an argument for breaking the monopsonistic powers, for if the powers are broken and BGC becomes a common carrier there will be huge technological details arising in regard to safety. There will be public inquiries about the type of gas running through the lines. Those matters will have to be examined carefully.

Photo of Mr Geoffrey Dickens Mr Geoffrey Dickens , Huddersfield West

Would you accept that, under the last Labour Government the British Gas Corporation, and the Government, were encouraging people and companies to switch to cheap North Sea gas? However, you are now saying that this gas is not available. Why did you falsely advertise that it was available when you were in power?

Mr. Deputy Speaker (Mr. Bryant Godman Irvine):

Order. I have nothing to do with those matters.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

I do not wish to become involved in a technical argument. A variety of gases may be needed, particularly by the chemical industry, and many are not available. Methane might be available but it would be wrong to allow methane to be used at the moment for raising steam. That is my argument. It is perhaps a little technical but I am sure that if the hon. Member for Huddersfield, West (Mr. Dickens) reads what I have said, he will grasp it. I do not mean that with any disrespect.

What a monstrous procedure we went through to bring about the gas-gathering pipeline. The Minister, hand on heart, Ross and Cromarty in his mind, said that we must have it—Mobil, British Gas, BP, all agreed that it was essential—that the ethane would come ashore, that the facilities at St. Fergus would be available, and that the banks would agree. Then suddenly, because we could not write a guarantee that would not appear in the public sector borrowing requirement, it was undermined.

We are told that all the gas will now come ashore through the private industries. We shall have to monitor them carefully, because we are dealing with a very scarce resource. I hope that the Minister of State will give us assurances that by some mystical process the national interest will be as well protected by the various consortia as it would have been if the British Gas Corporation had taken the lead and produced a transmission system and a wholesaling system which would have been to the national advantage.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

We are seeing doctrinaire Toryism at work. As one of the least doctrinaire people present on the Labour Benches, I emphasise to the Minister that one of the reasons why we have been able to calm the fears of the people of Scotland in particular is that they saw clearly that the public corporations, particularly BNOC, and the tax regime were working for the benefit of the nation. The Tory Government are now tearing down and undermining that bulwark. When the time comes, this House ought to oppose the Government's action.

Photo of Michael Ancram Michael Ancram , Edinburgh South 5:56 pm, 10th November 1981

I shall come eventually to some of the points made by the hon. Member for Dunfermline (Mr. Douglas), but I should like to start by saying how remarkable it is that this House can hold a debate on energy with not one Scottish National Party Member present. I recall the days when the Benches were full of Scottish National Party Members crying out about Scotland's oil. It would seem that that argument has been won in this House, and I hope that the people of Scotland will take note of the absence from the debate of any SNP Members.

I have been amazed at some of the arguments of Labour Members. I refer particularly to the last few flowery sentences of the hon. Member for Dunfermline, who seems to suggest, in the absence of any other arguments, that it is a matter of patriotism and that those who seek to denationalise are in some way acting unpatriotically.

Photo of Michael Ancram Michael Ancram , Edinburgh South

The hon. Member for Fife, Central (Mr. Hamilton) says "Hear, hear". That exemplifies—if it needs to be exemplified—the absence of any substance in the arguments of Labour Members against the Government's proposals. If ever proof were needed of the desperation with which they are now looking around for any argument with which to oppose the Government, surely the speeches that we have heard from them so far have given us that proof.

Perhaps the right hon. Member for Leeds, South (Mr. Rees), who opened the debate, was merely the cellophane on the package. I am sure that we shall hear the real Labour Party policy when the right hon. Member for Bristol, South-East (Mr. Benn) winds up tonight.

But it is not with the content of the opposition to the measures that I want to deal, for in a way we are going over familiar ground, and familiarity, as ever, breeds contempt. It is the hidden cynicism behind the attack that is being made that must be exposed.

To hear Labour Members, one would imagine that the Government were deliberately setting out to destroy great benefits presently accruing to the British people. Indeed, the right hon. Member for Leeds, South referred to these assets as being owned by the community—a ringing phrase. I wonder how many of the right hon. Member's constituents, or the constituents of any Labour Members, can claim to have received, or to have seen themselves as receiving, any direct benefit from the present status of BNOC or BGC. In my constituency, the feeling is the opposite. The two corporations, for better or for worse, are regarded as remote, and the BGC is regarded as monopolistic. This may be somewhat unfair to the BNOC, but it is true nevertheless.

The real hidden cynicism of the Opposition's attack lies in their refusal to admit that what the Government are proposing will increase the participation of oil and gas in the economic life of the nation and that by freeing them from the admittedly different restrictions that they face at present we will allow them to play a greater role in the economy and to provide a greater number of jobs. As a Scottish Member of Parliament I have a special interest in this matter, because any development in these two fields is ultimately good for Scotland and for Scottish jobs.

The hon. Member for Dunfermline made much of the Government's decision on the gas-gathering pipeline. I remind him and other hon. Members that when the sad and probably inevitable decision on the gas-gathering pipeline was taken, one of the main contributors to that decision was the price of gas set monopsonistically by the British Gas Corporation. To suggest that it was anything other than the price setting by British Gas which eventually caused this scheme to fail would be to mislead the House.

It is worth asking ourselves how many other job-creating developments in gas and chemicals have been delayed or have never been started for the same reasons, and how much more gas Britain could have had if this monopsonistic powers had been removed earlier.

In Scotland we have never sought to claim these natural resources as our own. We have, however, rightly expected, from our geographical position, to benefit in terms of employment from the proper commercial exploitation of those resources. The BGC's monopsony has for too long stood in the way of this aspiration. I believe that people in Scotland will welcome its breaking and, together with the oil companies, will seek to ensure that gas will be exploited to the best advantage of all concerned in terms of a return on investment and the development of new jobs.

Indeed, it is arguable that if the private companies go ahead with gas gathering, this may ultimately provide more jobs in Scotland than the gas-gathering pipeline would have done in the first place. Those who oppose us should explain to the people of Scotland and the rest of the United Kingdom why they wish to stand in the way of this development. None of them has done so today.

As for BNOC, the same challenge applies. The Opposition know full well that BNOC—the chairman has said this in the past—has felt restricted in its operations by the financial constraints necessarily imposed on it by its public status. Indeed, Opposition Members know that the Clyde field development was delayed for two years because money for investment was not available. They know that BNOC believes that it is capable of faster expansion and development, given a freer hand in its investment decisions. They also know in their heart of hearts that this can create jobs in an industry which has already shown such benefit to Scotland.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Perhaps this is more properly a question for the Secretary of State rather than the hon. Gentleman. It will be understood that there is considerable concern about the future of the Glasgow office if the Bill becomes an Act. Perhaps there could be some statement in the winding-up speech about the future of those who work there.

Photo of Michael Ancram Michael Ancram , Edinburgh South

The hon. Gentleman is quite right. That is a matter for the winding-up speech. The Minister of State has heard the hon. Gentleman's question.

When Opposition Members talk about asset stripping, which is mentioned in their amendment, they are suggesting that in some way the Government's proposals will financially do down the taxpayer. That is the most extraordinary argument of the lot. Considering what the Government are trying to do, it seems to me that they are trying to sell off the income-yielding sections of this company.

At present, taking an average week such as last week, the yield on the five largest companies in Scotland was 6·12 per cent. In order to finance that, the Government are having to borrow money, under the PSBR, at 15 per cent. I do not believe that any Opposition Members can argue that that makes anything other than economic nonsense. Again, it takes the biscuit to argue that what the Government are doing is in some way doing down the taxpayer in the future.

Of course there must be controls on foreign ownership and on rates. I was grateful to hear my right hon. Friend give assurances on those matters. But in the oil context we are at a vital moment when future exploration and exploitation must be encouraged if we are to maximise our oil resources.

Perhaps I may digress from the main argument to make a brief point to my right hon. Friend. I agree that the Treasury, by all means, must take its share of the oil revenue for the British taxpayer. I do not believe the oil companies, particularly when they tell me that the present rates of taxation are the biggest disincentive that they face. However, I believe that there is a disincentive in the way in which the fiscal regime has been chopped and changed over the last few years.

In an industry in which long lead times between first exploration and final exploitation require careful forward planning and assessment, a lack of stability in the fiscal regime can and does act as a disincentive. I hope that my right hon. Friend will remind his Treasury colleagues that it is the uncertainty caused by an ever-altering fiscal regime that is the greatest disincentive, and that some assured stability will bring renewed confidence to the industry at this critical time in its history.

If this is done and if a new boost to exploration can be encouraged, BNOC must be ready to play its part. The Government's proposals will allow it to do so in a way that it could not do today. I believe that Scotland will benefit.

I hope that Scottish finance, among others, will put its money where its mouth has been when it can do so under the forthcoming Bill, and that in this way Scotland will see a direct return which it has hitherto not been able to see.

I welcome the Government's proposals. I believe that Scotland welcomes them, too, because Scots people are too canny, by and large, to be duped by the Opposition's arguments—or, I suspect, by the arguments, when we hear them, of any of the Opposition parties. Scots people know that there is no virtue in publicly owning assets which cannot be utilised to create the best returns in jobs and profits. They will not accept the Benn-in-the-manger attitudes of the right hon. Member for Bristol, South-East and his friends, for they will see them for the empty mouthings that they are.

These proposals are good for Scotland and good for Britain. They deserve our support.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford 6:08 pm, 10th November 1981

I shall limit my contribution by referring only to what I believe will be the effect on the gas industry of the Secretary of State's statement on 19 October of this year. Whatever Lord Kearton may believe, it was a black day for the British gas industry when the Secretary of State made that statement, but at least it alerted us, before the Gracious Speech, to what we could expect in the forthcoming Session.

Earlier today the Secretary of State said that he could not understand what all the fuss was about. Does he not realise the serious implications for British Gas? The present gas buying rights go hand in glove with the corporation's duty under the Gas Act 1972 to develop and maintain a co-ordinated, economic and efficient supply of gas for Great Britain, and any modification of its rights will make more difficult the planning of gas supplies and the direction of gas preferentially to the premium domestic market.

The level of competitive activity in the industrial energy market, taken as a whole, is more likely to be reduced than increased by the abolition of British Gas buying rights. Oil companies are already responsible for most of the production in the North Sea and for a substantial proportion of energy sales to non-domestic users in the United Kingdom. If the corporation's buying rights are abolished, the competition between gas and oil will be reduced, as the same companies will in many cases be responsible for both gas and oil sales. Gas prices to industry are currently well below market-related levels. One would not expect the oil companies to stick to those prices in competition with their own oil supplies.

If the abolition of the buying rights of British Gas leads effectively to an auction of gas at the beach, all the benefits of United Kingdom gas will flow to the producer, to the detriment of the gas consumer. Overall, the most likely result is that industrial gas customers will face significant price increases for firm supplies of gas. Nor will the domestic market emerge unscathed. Apart from the question of the price at which supplies will become available to British Gas, the sale of the corporation's oil assets will reduce cash flows and profit levels significantly.

When one considers that in 1980–81 British Gas added 250,000 more customers, sold more gas to domestic users than ever before, made a profit and lent money to the Government, laid the major part of a new pipeline through Scotland and supplied more than half the energy consumed in British homes, one wonders why a successful industry is being attacked and destroyed.

When the report of the Monopolies and Mergers Commission into the appliance retailing activities of British Gas appeared in July 1980, it suggested either that British Gas should withdraw entirely from retailing or that artificial constraints should be imposed. British Gas has achieved its leading role in gas appliance retailing by competing hard with other fuels and with anyone else who wanted to sell gas appliances. It would be a serious blow to British Gas if it were forced to withdraw from retailing. It would also be against the interests of employees, consumers and suppliers. Without British Gas, British appliance manufacturers would be threatened, standards of safety could drop, and the availability of gas appliances would, I believe, be reduced. Without its retailing activities, British Gas would be unable to maintain its network of showrooms. I am sure that British Gas welcomes fair competition and will continue to oppose attempts to curtail its freedom to compete.

British Gas has always met its financial targets and external financing limits set by the Government. In addition, it has been able to lend the Government £100 million, which will be used in future years to pay for the investment that is needed if the industry is to grow and thrive. As the House is aware, the Government imposed the gas levy—a new cost that took £129 million from the corporation in this financial year. This will escalate sharply in the next two years to represent an additional burden of about £1,300 million over the next three years.

This is the first of the three years covered by the Government's financial target period during which domestic gas tariffs are expected to rise by 10 per cent. more than the rate of inflation each year. In line with this pricing policy, domestic tariffs were increased by an average of 17 per cent. from 1 April 1980 and by 10 per cent. from 1 October.The succession of price increases has helped to create the misconception among some customers that gas is no longer a competitive domestic fuel.

In 1980–81 British Gas had to pay a new cost, the gas levy, for the first time. It had to pay the Government £129 million, and the amount of the levy is forecast to rise still further over the next two years. The levy is imposed on gas purchased from fields in the United Kingdom part of the North Sea under contracts not subject to petroleum revenue tax. In 1980–81 the levy was 1p a therm. In the following two years it rises to 3p and then 5p a therm. The way in which the levy is calculated may seem complicated. More simply, and more importantly, it means that over three years from April 1980 to March 1983 British Gas is expected to pay the Government £1,300 million. That sum would be enough to cover half of the cost of the gas-gathering system.

British Gas is Britain's ninth biggest company in terms of its assets. With 106,000 employees, it is also a major employer. An organisation of this size providing a service to nearly 15 million homes makes a major contribution to Britain's prosperity. As the House is aware, I think, in 1980–81 there was a pre-tax profit of £381 million. For the previous year the figure was £423 million. Figures of that nature, which the Government have always been happy and glad to cream off, point to a successful industry.

British Gas became a net receiver of interest in 1980–81 instead of a net payer as in previous years. It also lent the Government £100 million—almost enough to cover the whole of Government spending during the year on maintaining Britain's trunk roads and motorways, amounting to £102 million at 1980 prices.

Over the last few years British Gas has reaped the benefits of its investment in the natural gas supply system. It has been able to repay all the money that it borrowed from the Government and to build up its reserves to the level that a business of its size needs. The £100 million lent to the Government in 1980–81 brings the total deposits in the national loans fund to £300 million.

I come, back to my first question: Why destroy a successful industry? There must be a reason. One hopes that the Minister will be able to answer the question. There is a belief throughout the country that this newly formed word "privatisation", so popular with the Secretary of State, is merely an attempt to cream off the profit for loot for the boys. It is not beyond the bounds of possibility that some of the loot may find its way into Conservative Party funds.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

I have listened to a sufficient number of debates in the House to form the opinion that when some truth is uttered across the Floor one hears the sort of noise that has just been evident.

It will be noticed that I have spoken from a brief during my remarks relating to the gas industry. For the remarks that I intend to make about the coalmining industry, I do not need to rely so much on a brief. [Interruption.] I did not catch the remark of the Secretary of State. I shall treat it with the scorn that it deserves.

The mining industry finds itself in a difficult situation. I welcome the clarification supplied by my hon. Friend the Member for Midlothian (Mr. Eadie) following the impression given by the Secretary of State—I do not think that it was deliberate—that a sum in excess of £1 million authorised this year for the National Coal Board was something of a subsidy. I am glad that my hon. Friend made it clear that these were borrowing rights, on which interest was payable by the National Coal Board.

At the end of the day following the 1980 Coal Industry Act, the Government had to climb down over the pit closure programme because of pressure from the miners. Because of the cash limits—whatever the figure is—the National Coal Board finds itself in a position where it has had to cut back by 30 per cent. its orders for mining machinery needed to maintain the every-day running of pit production.

Most of the available finance, certainly in the part of Yorkshire that I represent, is used for capital schemes. I support this policy, for the sake of the future of the industry. We shall, however, find ourselves in a situation, brought about deliberately or not, in which the pits will become uneconomic because machinery has not been maintained and replaced as it should have been. Some people might want that to happen so that there can be another purge to close what the Government call uneconomic pits, even though it was done as an act of deliberate policy.

My final point, which perhaps the Secretary of State or one of his Ministers will clarify in winding up the debate, concerns the report in The Sun of 20 October. It said that the Ministers responsible for the mining industry were to instruct—or had already instructed—the Monopolies and Mergers Commission to consider the privatisation, or denationalisation, of the mines. I warn the Secretary of State and his Ministers—and, indeed, the Prime Minister and the Government—that if there is any attempt deliberately to run down pits to make them uneconomic and then sell off the profitable parts of the industry that will be resisted by the mining industry.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

It will be resisted because the mining industry is successful and hard-working and is needed by this country.

I shall refer briefly to the figure of 14 million tonnes that has been mentioned. I think that it was the Secretary of State—and probably the hon. Member for Exeter (Mr. Hannam)—who said that some of this was brought about by excessive wage demands. I want to put the record straight. Today, thousands of men work in the industry for a basic wage of less than £100 a week. How would hon. Members enjoy scrambling about in the bowels of the earth, in some cases for as many as seven days a week, for seven or eight hours a day, for less than a basic wage of £100 a week, with no chance to enjoy it? I spent 20 years at a coalface.

Miners are not being overpaid. Their demands for wages are not excessive. So I hope that there will be no attempt to denationalise or privatise the mining industry. If that is tried, it will be resisted.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford 6:22 pm, 10th November 1981

The hon. Member for Pontefract and Castleford (Mr. Lofthouse) always makes an interesting speech. A moment ago he said that the aid that is given to the coal industry is insufficient. He threatened that if there were any privatisation of the mines it would be the last thing for the miners.

I have worked out the figures. Between 1971 and 1982—the last decade—operational and other grants, including write-offs, and so on, totalled £1,736 million; the figures for social grants was £591 million, making a total of £2,328 million. The Conservatives have poured money into the mines. We have been losing millions of pounds, and the pits which are losing that money are those which have been worked out and are uneconomic, and which the National Union of Mineworkers will not allow to be closed. That is the money that has been poured in.

The hon. Member for Morpeth (Mr. Grant) said that stocks were high—42 million tonnes. I accept that they are high, but that is because of the recession, which is international. Let us consider the figures for the past two years: coal stocking, £26 million from the Government; coking coal, £9 million; grants to promote the sale of coal to electricity boards and deficit grants £293 million, making a total of £347 million.

Hon. Members should realise that the mines have been picking up money right, left and centre. Of course we are glad to give it, because we all realise that the coal industry has a great future—but not at any price. It cannot be run on the assumption that one can go on idefinitely pouring billions of pounds into the industry and hope to survive.

The hon. Member for Pontefract and Castleford made one or two excursions into the subject of gas. He talked about the implications for the gas industry. I shall couple his remarks with those of the right hon. Member for Leeds, South (Mr. Rees), who talked about the break-up of the integrated structure. He talked about destruction.

What does my right hon. Friend propose to do? First, there is the sale of oil assets. Gas is not oil in the true sense of the word. The gas industry's job is to buy and sell natural gas. Oil is at its periphery. It is only a few years ago that we sheared off the North Sea assests of the National Coal Board, and it is probably the right sequence of events to shear off the oil assets of the gas industry.

The next proposal is to divest the British Gas Corporation of its showrooms. We have already had a report in which it is stated very clearly—it is there for all to read—that the corporation has been abusing its monoply position.

When it comes to the crunch, I can see no breach in the integrated structure of the British Gas Corporation. Its right to purchase gas will be taken from it. It sells to industry about £1,103 million worth of gas per year. If the gas industry is to compete in this sector with other interests it will have no more than about £220 million at risk. That is a small fraction of its complete sales of £4,295 million. So when we hear the magic term "It is the break-up of an industry", we know that it is utter nonsense.

The hon. Member for Dunfermline (Mr. Douglas), who I am sorry is not present, talked about the need for a national oil company. The many things that he said are applicable to the private sector, too. But one needs only to look at the United States. It is one of the greatest producers and consumers of natural gas, but it has no State oil company. Moreover, it imports about 6½ million barrels of oil a clay. It can negotiate with Aramco in Saudi Arabia, the Emirates in the Middle East and elsewhere, but it has no nationalised oil company to do it. It manages perfectly successfully.

What my right hon. Friend is doing is comparable to the Alberta Energy Company, where 50 per cent. belongs to the people of Alberta, or the people of Canada, and 50 per cent. to the provincial state.

In 1975, I moved an amendment to provide that a company registered with limited liability under the Companies Act should be brought into being. The Minister of State said then: we believe that the participation which the Government desire for it should be seen to be among the people of this country. There is no way in which this can better be achieved than by having the company quoted on the Stock Exchange and having shares made available to those who care to participate". He continued: If I were the Under-Secretary at present, I should accept the amendment."—[Official Report, Standing Committee D, 22 May 1975; c. 196–97.] That was proposed as long ago as 1975. In 1981 the proposal has been accepted. Regrettably, BNOC will not be disposed of. In a minor way it will be affected. The production and exploration assets alone will be hived off, and BNOC's trading arm will remain in 100 per cent. State ownership. As has been asked, what will be the relationship between the exploration and production interests on the one hand and the BNOC parent body and its major subsidiary, the trading arm, on the other? At some stage in the proceedings it will be important to know the exact position.

Curiously, in 1981 the arguments have come hack to roost. It may be possible for everyone to buy shares in the enterprise now that it is proposed that they should be given the opportunity to do so.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

The hon. Gentleman is always careful about his facts. Was his reference to the proposed trading company as a "BNOC subsidiary" a slip of the tongue or is he privy to something that we do not know about?

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The right hon. Gentleman should read the Petroleum and Continental Shelf Bill, which has been before the House for more than a year. The right hon. Gentleman may have seen the answer to the question that I tabled to the Secretary of State. It rather confirms that the same Bill will be introduced, probably with some modifications. If the terms are closely examined, it will be seen that attention will be confined to the proposals. There is no doubt that the consideration is being given to that part of the undertaking that is concerned with the search for and getting of petroleum—Clause 1(4). I do not refer to the section concerned with trading.

Today, the Secretary of State indicated that BNOC' s trading arm will remain in the hands of the State. I was surprised by the remarks made by the right hon. Member for Leeds, South about the participating arrangements. If he had spoken to his colleague he would have discovered that many of the participation agreements will not require amending, because BNOC's trading arm will remain in the hands of the State. The agreements that need to be modified could be covered by provisions to be included in a measure that will probably be seen soon, or early in the new year. In the same way the Labour Party retrospectively dealt with provisions in the Petroleum and Submarine Pipe-lines Act 1975.

If my memory serves me correctly, sections 17 and 18 deal with the matter. The Labour Government wrote in certain provisions that we regarded as retrospective. If anything is required to be done through the participation arrangements, it can be done by means of such provisions.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Obviously the hon. Gentleman did not quite understand what I said. If we had to, we could use the same provisions as were used in the 1975 Act and read into agreements the same type of provisions as were included then.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

That brings me to a point that I made when I intervened in the Secretary of State's speech. In the fifth and sixth rounds the 51 per cent. participation arrangements involve not buying oil, but equity interests in every one of the licences. If we sell that equity interest, what will happen to control over the 51 per cent. of the oil that is derived from those licences?

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

That is an entirely different point. There are at least 65 participation agreements, and many of them will not require modification. We may have to examine the draft of the Bill and there may be some modifications to it, but we have not seen the exact terms of the Bill yet. The agreements that require modification can be dealt with by reading provisions into all the agreements by means of an Act of Parliament.

The right hon. Member for Leeds, South said that the buying rights of the British Gas Corporation were fundamental to the development of natural gas sales. However, the British Gas Corporation ran down the supply of natural gas coming from the continental shelf. It did not pay the oil companies enough money to fetch it. Those companies found such activities unprofitable. Initially, the British Gas Corporation paid the oil companies 2·87p per therm. As a result of inflation and escalation clauses, the amount was raised to about 4p to 6p per therm. It is now said that the amount is between 10p and 11p per therm. However, the BGC is making the public pay some 29p per therm and industry is paying 29·3p per therm on firm contract. Industries on interruptible contracts are paying 25·5p per therm. If it is possible to get a new supply of gas, the cost is as much as 46p per therm.

Therefore, the BGC has been fleecing the public, and it knows it. That is why the previous Secretary of State intervened with a levy. The British Gas Corporation was not paying petroleum revenue tax—[Interruption.] The House knows that my remarks are correct. We shall be able to debate any difficulties at length when the Bills come before the House.

The "Plan for Coal", which was brought out in 1974, contained a provision whereby Governments of the day would place considerable investment in the collieries. All hon. Members will agree that such investment was necessary. There was an agreement with the National Union of Mineworkers and other unions that pit closures would go ahead. They recognised that such pits were crippling the whole structure of the industry. The NUM has not complied.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The hon. Gentleman should contain himself. Only recently 23 pits were proposed for closure. Given the circumstances, the Prime Minister decided to withdraw the list. The hon. Gentleman will probably know that closures are taking place. When there is no glare of publicity, closures go ahead by agreement. Over the years, the closures necessary to turn the NCB round have not taken place. Therefore, it has proved impossible to achieve the all-essential viability.

We should recognise the problems that the NCB faces. Production stands at 126 million tonnes, but the market stands at 117 million tonnes. Therefore, the industry is over-producing. The electricity industry is the largest consumer of coal, and that industry consumes 83 million tonnes. The electricity industry is followed by the steel industry, other industries, domestic consumers and exports. They are small consumers and with electricity the consumption totals 118·6 million tonnes. Although it is anticipated that exports will increase considerably to about 9 million to 10 million tonnes this year, most coal is being sold at a loss. Therefore, the NCB is not getting richer.

The hon. Member for Morpeth (Mr. Grant) mentioned a scheme in the Budget involving £50 million. What has been the take-up? Twenty applications have been made involving not £50 million but £750,000. That is pitiful. Therefore industry has not been interested. It is cheaper to buy an oil plant and to keep it than to buy a coal plant, because a significant capital sum is required.

One of the NCB's problems is that its production is too great for demand and the market. There is unlikely to be an immediate improvement. A long lead time is involved and it is important to cover that time in the production of coal. The mining industry receives huge sums in grants from the Government, loans from the National Loans Fund and the EEC. Bearing all that in mind, it is right that a Bill should be put before the House to deal with the NCB's finances and borrowings.

A coal Bill is essential. At long last the Secretary of State has begun on the proposals to sell part of the BNOC. I am sorry that he does not intend to go further, but that can be discussed in Committee. Such a Bill will not impair the BNOC. It will strengthen it. It will return to the people that which they should hold rather than put it into the State's hands.

The British Gas Corporation is not being dismantled. Only a corner of it will be affected. The proposals will improve the corporation's structure, and the chairman knows that.

Dr. J. Dickson Mahon:

I join the hon. Member for Dunfermline (Mr. Douglas) and the hon. Member for Exeter (Mr. Hannam) in their congratulations to the hon. Member for Croydon, North-West (Mr. Pitt). I have no doubt that many more maiden speeches will be made from these Benches. Perhaps the speech on 1 December will not be a maiden speech, but will be made by a wonderful lady.

The hon. Member for Bedford (Mr. Skeet) referred to the British National Oil Corporation. The hon. Member for Dunfermline referred to that amply. Let us stand the argument on its head. Every oil-producing country has a national oil company. There must be a reason for that. The only exception is the United States. That is because virtually every national oil company exists because of the United States. The United States is the world's major oil explorer and producer. It has so generated national antagonisms in other countries that national oil companies have had to be formed. Free enterprise Canada is no exception. Petrocan has had to try to hold off what it regards as the ravages of the American multinationals. I do not say that the American multinationals are that bad, but the five American sisters dominate the petroleum world.

There is even a move in the United States Congress to establish a national oil company in the United States to protect the American people from the depredations of Big Oil. Let us not say that there is something wrong with a national oil company. Indeed, our new extraordinary Right-wing Minister at the Department of Energy concedes that a national oil company must exist, even if it is weak and helpless and reduced to a miserable 49 per cent. holding—perhaps not even that. We shall see when the Bill is published.

I thought that the Secretary of State criticised the BNOC unfairly when he said that it was of no significance being involved in only 7 per cent. of production. I remind the Minister of the long lead time involved in a company discovering a field in the North Sea and producing. In the Forties field it took seven or eight years to produce. The BNOC began its operations in 1976, only five years ago. By statute it had inherited previous interest from the NCB and the British Gas Corporation. There is nothing wrong with that. It is sensible. We argued in the Wytch Farm debate that if the British Gas Corporation should not be in oil, but accidentally became involved in it, and if for administrative reasons it should not deal with oil, it would be logical to sell Wytch Farm to the BNOC. The Government could not concede that the Gas Corporation should sell it to the BNOC, because of the public sector borrowing requirement—that devil that constantly impedes the prospects of the commercial public sector.

The same applies to gas gathering. The hon. Member for Ross and Cromarty (Mr. Gray) has proved to be an excellent Minister. He was dedicated to a publicly owned and operated gas-gathering system. I shall not embarass him and his predecessors, but I know that they were defeated in the argument within their own Government. I have no doubt that the present Secretary of State did a hatchet job as expertly as usual. The failure to go ahead with the gas-gathering system represents the most serious reverse in energy policy for three years. A grave error has been committed and the country will regret it.

An accusation about excessive flaring has been made. The Gulf will be as nothing compared with the North Sea if we are obliged to flare the untransported gas. One of the consequences of licensing and restricting flaring is that oil production is reduced or stopped. If one wants to reduce the volume of gas from a field because one does not wish to flare it, one reduces the volume of production. That crisis will face the Government—perhaps not this Government, but the next one—when companies fail to be able to deliver the gas and have no choice but to flare it or reduce production drastically.

I am sorry that the hon. Member for Edinburgh, South (Mr. Ancram) has left the Chamber, because even if I were the most laissez-faire of Tories I could not believe that in some haphazard, accidental way, by a miracle almost, companies will get together and produce more jobs in a new private fragmented gas-gathering system or take ashore as much, if not more, gas than a common carrier.

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

The right hon. Gentleman knows a great deal about this subject, because he did my job before I did. He will realise that before an annexe B is granted to a company certain requirements must be met. The Government will refuse to grant annexe Bs to companies that wish to develop oilfields unless provision is made for getting the gas ashore. That takes care of the right hon. Gentleman's argument.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

That might be true in a comprehensive way, but it is not so in day-to-day, or more correctly in quarter-to-quarter, affairs. The Minister has enough experience to know how often companies, with the best will in world, complain that their production is inhibited by restrictions on flaring. I once had the unpleasant task, with Shell in particular and BP to a lesser extent, of saying "No. You must not continue flaring as you are". Gas pressurisation machines and other equipment that were subsequently installed are proof that we have prevented the companies from destroying the gas.

There is a natural bent in the oil industry in favour of disposing of the gas somehow or other. It is a damned nuisance. It is regarded as such, not only for economic reasons, but because of transportation and disposition. There is such a bias. I warn the Secretary of State not to be misled by the companies. He should be a stickler on flaring, even though he might put himself in a difficult position by not having a gas-gathering line guaranteed by the Treasury. He will regret that decision bitterly so long as he remains Secretary of State.

I return to the general argument about the public sector borrowing requirement. I am sorry that the right hon. Member for Bristol, South-East (Mr. Benn) is not here, because I remember that during the IMF crisis we had to find a way of financing the beginning of the BNOC's budget. There was a little money from Parliament. Lord Kearton had the good idea, which was successful, in the very month of the crisis, September 1976, of raising $800 million on Wall Street on the collateral of the oil that would be ours in three or four years' time. By that I mean BNOC oil. That was done. Then, to our astonishment, it was argued that that money had to be counted in the PSBR. I could not understand why. The right hon. Gentleman who was then the Secretary of State did not understand that either.

We fought very hard when in Government, not as a matter of doctrinaire conviction but as a matter of common sense, to prevent that. How could it be part of the public sector borrowing requirement when the money did not come from anyone in Britain? However, we were told by the Treasury that the money must be counted in the public sector borrowing requirement.

One of the revolutions that we must achieve in Britain—perhaps under a Social Democratic-Liberal Government or under a coalition with one or other of the traditional parties—is to divide the public sector borrowing requirement in the Treasury's mind. First, there should be the genuine public sector borrowing, which finances public services such as hospitals, schools and social services, and which does not and cannot make a profit. We should call it the public service section of that borrowing requirement. Secondly, we should leave alone industries that can finance themselves and call them part of the commercial public sector requirement. We would then not have to choose between a new coal mine or a new series of hospitals.

I was in Government for eight or nine years, and I have seen that sort of nonsense—in Cabinet committees and elsewhere—whereby we have to choose between the unchooseable. Yet the discipline continues. Old Nick himself, transferred from the Treasury, is now in charge of Energy. He has a coal mining industry that is beginning to flourish. Given a continuous reasonably good level of investment, the coal industry could move into surplus and pay off its debts by the end of the century. It could be a great credit to the country and be self-financing.

The oil industry returns money to the Treasury handsomely. About 83 or 84 per cent. of all profits in the North Sea go to the Treasury. For what more could we ask? That is the position now. We should leave the BNOC alone to make money and add to the 83 per cent. that is returnable to the State.

No one in the debate has said even in the most grudging way that the British Gas Corporation is not a highly successful industry. We must concede that it makes a lot of money. The Government tax it to death with a gas levy, and still it makes money.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

I agree that the corporation makes money, but even a fool could make money if he paid so little for the raw gas and charged so much for the end product.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

Perhaps the hon. Gentleman is offering himself as chairman of the British Gas Corporation at some time. His remark is not true. If the neatly negotiated prices of the corporation's gas extending over long contracts—the oil companies were not forced to sign the contracts—prove good for the corporation, they also prove good for the consumer. If there is a free price negotiating structure between the corporation and the gas supplier, in the end the consumer will pay. Then all the pleas of Conservative Members for subsidised energy for industry will boomerang in their faces. The Secretary of State said that if gas becomes too expensive market forces will work and industries can choose other fuels. What other fuels?

I concede that if the Government want to privatise they can take up the invitation of the chairman of the British Gas Corporation to leave the integrated system alone. It is then perhaps logical to offer shares in the corporation. The Government's original intention with the BNOC was to issue granny bonds and not to get into an argument about dismantling the corporation. I hope that the Minister of State will do his best, if not tonight, on the Second Reading of the proposed oil and gas Bill, to answer questions about the proposals advanced by the Secretary of State.

My colleagues and I do not share the doctrinaire prejudices held by others in the House. We prefer to look at the position as it is—a market economy as it should be and a fair division between the public and the private sectors. We believe that steps should be taken on the ground of obvious common sense. It is not common sense to dismantle the BNOC and the British Gas Corporation in the way suggested by the Government. We shall support the Opposition amendment, although it does not spell out their own particular present policy. I shall return to that matter.

The British National Oil Corporation has had three chairmen under the Conservative Government. Two were converted into pro-BNOC men and opposed any change in the structure, apart from granny bonds. The present chairman is a tame one, who says exactly what the Government expect him to.

The Secretary of State said that he would publish the articles of association of the proposed new BNOC. One of his colleagues said on the radio this morning that there would be some circumscription whereby 15 per cent. of the 51 per cent. block of shares would perhaps be allowed into the hands of foreign nationals. We are all concerned about that, and the five sisters are lurking—[Hon. MEMBERS: "Seven."] No, Shell and BP would not do such a dastardly thing. The five American sisters are lurking to see how much they can pick up. What restrictions will there be on the purchase and sale of shares by individuals? Is it not to be a freely tradeable stock? It is important that we see how that can be achieved in the articles of association.

There is another argument on the legal status of the United Kingdom in regard to the continental shelf if we dispose substantially of the corporation stock.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

Yes, but there is nothing wrong with the Foreign Office on occasions. There is a genuine concern about our legal status on the United Kingdom continental shelf.

Another argument that has been advanced is about participation. We have not yet had answers to the questions about the fifth and sixth rounds. I should have to take legal advice if I were the Minister, but I believe that the earlier participation agreements need not be altered. Tripartite agreements were signed by either the then Secretary of State or myself on behalf of the Labour Government. They were also signed by all the companies—in some cases as many as nine or 10—and by the BNOC. Therefore, if any of the signatories were to challenge us, it could land us in all sorts of legal complications and trouble.

Those were the easy agreements. There were others where a condition of the licence was that 51 per cent. of the equity of the consortia should be held by the BNOC. Will that 51 per cent. be sold back to the consortia so that the new shareholders will never get the advantage of many good prospects, as we have seen in the fifth and sixth rounds, or will we keep them? If so, all those agreements will have to be renegotiated. I spent three years negotiating 68 agreements, most of which were difficult. I do not know how many agreements there were under the fifth and sixth rounds, but it will not be an easy matter. The Secretary of State is entering a lion's den of complications and concerns.

As always, I was pleased with the speech of the right hon. Member for Leeds, South (Mr. Rees). When challenged, he said what would happen to the Bill, if it is passed, when a Labour Government took office. He said that the position would be restored. He used a better formula of words about compensation than has been used previously. He avoided saying that compensation would be on the basis of proven need. That is a little dubious. I doubt whether it is even legal under the international conventions that we have signed.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The right hon. Gentleman belongs to another party. Will he give the House and the country a clear view of his party's policy? He said that he sympathises with the Opposition's intention to repeal the Bill. Would the right hon. Gentleman pay compensation to those who buy shares?

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

I hope that it does not embarrass the right hon. Member for Leeds, South if I praise him for using words that the Social Democratic Party would use about seeking to redress the position if it were in Government, or if it were asked to support a Government. The argument put forward by the hon. Member for Dunfermline about the BNOC and foreign Governments is true. As the Minister knows, when I held office under the previous Labour Administration I had to deal with foreign Governments with national oil companies with which we wanted a formal trading arrangement. They did not want arrangements with British Petroleum, only with the BNOC. Certain countries with one-party Governments, collectivist Governments or Socialist Governments would not allow any drilling for exploration or production by the seven sisters or their allies, only by such State companies as the BNOC or Petrobras of Brazil. There is a role for a national oil corporation to deal with other oil-producing countries that take a different view of the economy and politics from that of the Conservative Party. I found it useful to wheel in the BNOC if BP were refused.

The Labour Party is tinkering with the idea of nationalising BP if it returns to office. BP has oil stakes in Alaska, which would be discriminated against if it were 100 per cent. State-owned. It might not even be granted licences. Only the British could accidently fall into our present desirable position. The existence of two companies—a 100 per cent.-owned BNOC and a 50 per cent.-owned BP—gives us two abilities that are denied to most other petroleum-interested nations. We should not proceed any further. I am not saying that the regime left by the previous Labour Administration was perfect. However, it was a good concept of a marriage between enterprise and a proper return to the people for what is justly theirs.

The oil in the North Sea belongs not to the companies but to the British people. It was nationalised in 1964 by a Conservative-dominated House of Commons. I hope that it will remain that way. The argument should be about that. The official Opposition have a tendency to go too far. They want to nationalise everything in the North Sea. That would cost five years' revenue in compensation, which would take away the profits from the North Sea. It would also end the technological expertise of companies. It would slow the advancement of petroleum production. Many hard-working people in Britain are involved in that. Their future employment depends upon continuing developments in the North Sea.

We do not want to have to choose between the doctrinaire prejudices of the present day Labour Party and the doctrinaire foolishness of the Conservative Party. The lesson is obvious.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North 7:05 pm, 10th November 1981

The cat is out of the bag. The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) has produced the oil policy of the Social Democratic Party. What is it? It is simply a repetition of the same old-fangled, disastrous lines that he followed when he was under the control of the right hon. Member for Bristol, South-East (Mr. Benn).

The right hon. Member for Leeds, South (Mr. Rees) spent a great deal of time asking questions of the Secretary of State, yet he took only half a minute to explain the Labour Party's policies on the future of BNOC. He was looking nervously over his shoulder wondering where the right hon. Member for Bristol, South-East was. Indeed, where has he been for the past two hours? He has not been sitting on the Opposition Front Bench. He has probably been running between at least half of the Tribune Group at one end of the Corridor and the Leader of the Opposition at the other end, desperately working out what he should say. Should he put forward the proposals of the Labour Party conference? Are there any proposals covering this area? Should he put forward the proposals of the NEC? What does the Shadow Cabinet think?

The right hon. Gentleman is in a difficult position. We must sympathise with him as he tries to fight through the myriad of different strands of Labour Party and Social Democratic Party policy. He is in a difficult position not only because of what he has been saying publicly since he left office, but because of what he did when he was in office. He permitted his Government to sell a large share of BP. He introduced a Bill that forced the NCB to sell to BNOC for £50,000 oil assets valued at £100 million. He will have to defend his record this afternoon.

The Gracious Speech was a relief to many Conservative Members. Since entering office we have looked forward to the time when BNOC would be denationalised and privatised. We congratulate my right hon. Friend the Secretary of State on the speed with which he has built on the foundation left by his predecessor, now the Secretary of State for Transport. However, it is unfortunate that we shall not sell shares in BNOC until the Government have been in office for three and a half years. It is unfortunate that the measure announced in the Gracious Speech did not form part of the first Gracious Speech and was not legislated for during the first Session of Parliament.

I hope that my right hon. Friend is giving careful consideration to the selling of shares. It is important that share ownership of BNOC should be spread as widely as possible among the people. I wish to see shares given to the people, but I recognise that that may not be possible at this stage. Perhaps we should investigate the possibility of making shares available at discount prices through the Post Office network. There are a number of economic and political advantages in having share ownership spread as widely as possible throughout the country.

Before passing on to British Gas, I wish to say something about the National Coal Board. I am worried about our policy in that area. I recognise that we must put investment into the NCB and that that should be part of a long-term commitment. Nevertheless, I and my hon. Friends will study the Bill with some care once it has been published. The Government appear slightly to lack a longterm strategy on exactly where they are going to take the National Coal Board, which is presently producing too much coal too expensively. We cannot add indefinitely to the stockpile which stands at about 42 million tonnes

The Government should do two things. First, they should say quite clearly to the National Union of Mineworkers that it has not stood by its part in "Plan for Coal" while the Government have stood by their part of the bargain. There have not been the pit closures implicitly promised by the NUM in "Plan for Coal". [Interruption.] There is no point Labour Members muttering—that simply has not happened. They must face that and be honest with themselves and the NUM.

Photo of Mr Allen McKay Mr Allen McKay , Penistone

Will the hon. Gentleman tell me who has promised the pit closures?

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

If the hon. Gentleman turns to "Plan for Coal" he will see provision for annual closures that would result in a reduced output of about 4 million tonnes over the relevant period. That has not happened and the figures are nothing like that. Quoting from memory, I believe that, in the years up to the end of 1978–79 the total closures amounted to a reduced output of 4 million tonnes capacity whereas, in that period, there should have been a reduction of about 12 to 15 million tonnes. That is the order of magnitude.

There is another matter that I hope my right hon. Friend the Secretary of State for Energy will examine carefully. It seems absurd to me—when we have some great mining houses and a major commitment by British Petroleum to coal development in Australia and Canada—that they should be effectively debarred from investment in the British coal industry.

I do not believe that it is feasible to sell off parts of the National Coal Board's existing facilities and pits. I agree with Labour Members on that score. However, we should be examining the feasibility of private companies, if necessary in conjunction with the NCB and, at least, with the attempted compliance of the NUM, with a view to developing some interesting prospects. I have the Vale of Belvoir in mind. I throw out that suggestion as something to which we should be looking and working. I hope that Labour Members will not reject that option out of hand.

I shall confine the rest of my remarks to the gas industry. The decision of my right hon. Friend to sell off the British Gas Corporation's oil interests is clearly justifiable and desirable. I have a preference that the oil interests of the British Gas Corporation should be formed into a separate company and that that company should be floated on the Stock Exchange. I am not clear whether that is what my right hon. Friend has in mind, but I dare say he will clarify that issue when the Bill is discussed. That course seems desirable to me if at all possible.

I share Sir Denis Rooke's view that the most important aspect of my right hon. Friend's announcement is the decision to end the monopoly purchase powers of the British Gas Corporation. I believe that it is the monopoly purchase power and the monopoly distribution power that have led over a period to the present absurd pricing structure for gas, to the lack of an available gas supply and, in particular, to the inability of this country to secure the large supplies of Norwegian gas which should be rightly coming into the United Kingdom.

I was delighted by the speed with which my right hon. Friend responded to the statement released by the British Gas Corporation following the Gracious Speech. Although I have had many reservations since I entered the House about the way in which the British Gas Corporation has been managed, I have never had anything but respect for Sir Denis Rooke, the British Gas Corporation's chairman. He is a formidable, extremely competent and able manager. I never shared the view that was expressed by my hon. Friend the Member for Knutsford (Mr. BruceGardyne), the Minister of State, Treasury, that Sir Denis should not have been reappointed by the present Secretary of State for Transport.

I hope that my right hon. Friend the Secretary of State made it quite clear to Sir Denis that while he should be able to put forward his views and the views of his board—it would be wrong for anybody to try to stop that—any attempt by the corporation to obstruct the will of the House, as shown in the Lobbies, would be met with instant dismissal whatever the consequences, compensation or public outcry. The House cannot have the chairman of a nationalised industry dictating to Government actions that govern a particular industry.

The statement issued by the British Gas Corporation to which I have referred claims that the shortage of gas was due not to the British Gas Corporation's policy but to the rise in the price of oil. The British Gas Corporation controls the supply of gas and statute gives it considerable control over the demand for gas. In relation to industry, the gas corporation simply abuses its monopoly by deciding who in industry would get gas. The gas corporation's press release claims that its policy has been consistently to direct industrial gas selectively to industrial applications where its intrinsic qualities as a fuel are highly valued and can best be applied.

The corporation is suspending the law of supply and demand. It says that supply is what it has available and demand is what it thinks its customers should use. In other words, hang the fact that a particular company wants to use gas—if British Gas, in its wisdom, decides that a company should not use gas, it will not use it.

The belief that the British Gas Corporation can suspend the law of supply and demand has arisen only through years and years of arrogant misuse of its monopoly position. That is the insidious and serious damage that British Gas, using its statutory position, has done to the country and economy over a period. The damage that the corporation has done in that area has had an effect on the availability of supply to industry and on the form of the supply of gas to the industry. That is because British Gas has always recognised that it is expensive for it to provide gas storage facilities.

Of course it is too expensive—it has to meet peak demand. What does the BGC do? It has the bright idea that industry will provide the equivalent of the storage to meet peak demand. Industry would be forced to take interruptible supply contracts so that when British Gas was unable to supply enough gas, industry would simply switch to oil. That would be very nice for the corporation. It would benefit from the capital investment that is so necessary and such an integral part of a proper gas storage system to meet peak supply.

It is crazy that our industry is paying roughly the same for industrial gas as industries on the Continent while consumers are paying roughly half the tariff that consumers are paying on the Continent. Why has this happened? The Governments of 1970–74 and 1974–79 were prepared to buy reductions in the retail price index in exchange for the development of an energy pricing system for gas that made no economic sense. Both sides of the House must recognise that and take some responsibility for it. The British Gas Corporation encouraged us to take that view. It was aware that artificially low gas prices for domestic consumers would give it political leverage over whichever Government were in power.

There is one paragraph in the British Gas Corporation's statement that I welcome unreservedly. In the final paragraph Sir Denis said that he would welcome privatisation into British Gas. I admit that he said that he would welcome that in the context of the corporation in its present form. If he accepts the principle of privatisation and private ownership, he can have no objection if private equity in a new form is introduced into the corporation. At least we have jumped the hurdle of principle that I thought Sir Denis would rule out completely. I thought that he would rule out any private ownership in the corporation at any time.

Slightly over a year ago my hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury) and I produced a pamphlet entitled "British Gas: A Prospectus". The pamphlet contained 10 recommendations. I am delighted that the Government have moved at least some way on eight of the recommendations. I look forward to some movement on the two outstanding recommendations between now and the Bill's Second Reading.

First, I hope that my right hon. Friend will ensure that he has some control over the way in which tariffs are charged on any common carrier pipeline that is operated by the corporation. I am delighted to see him nodding in assent. Secondly, I can only assume that independent companies will have a right to build their own pipelines if they so wish. Thirdly, I hope that the Government will make clear that should companies wish to build pipelines that connect the United Kingdom and the Continent that development will be encouraged.

I accept that it would be wrong for Britain to accept a net export of gas from the British sector of the North Sea to the Continent over a long period. However, it would be possible to reach arrangements with Continental purchasers whereby gas delivered to them now would be repaid over a period by the gas that they deliver to us. Such a system would ensure that any reserves that we deplete now to benefit those on the Continent would be the subject of compensation in future. That is a common arrangement in the United States and Canada and we could enter into similar arrangements.

I hope that my right hon. Friend will make it clear that he will encourage companies to negotiate with the Norwegians to ensure that Norwegian gas comes through the United Kingdom to the Continent. The cheapest way of transporting northern Norwegian gas to the Continent is not, as is presently planned, by taking it twice over the Norwegian trench or down the median line. The cheapest way is to pipe it into the United Kingdom and thereafter to take it across land to a short cross-Channel pipeline. I hope that the Government will give impetus to such a scheme. I am convinced that we lost the Norwegian gas from Statfjord, Heindahl and East Frigg because of the high-handed attitude that was adopted by the British Gas Corporation during the negotiations. That happened this time round and it happened on the previous occasion when we were successful in getting Frigg gas.

As my right hon. Friend is familiar with oil taxation, I do not wish to dwell too much on the encouragement of gas fields from the point of view of taxation. I am concerned about the way in which petroleum revenue tax hits the marginal pure gas fields and not the associated fields. Secondly, I am concerned that the Inland Revenue is reported to be thinking about charging PRT on companies that are using pipelines provided by other companies. The PRT complications could make tariff costs prohibitively high for third party carriers. I am delighted to see that my right hon. Friend is nodding to indicate that he denies that that will happen.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

No. I was talking to my hon. Friend the Under-Secretary of State.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

It seems that that is still a possibility. I hope that my right hon Friend will use his best endeavours with the Treasury as only he knows how.

I am concerned about the future share ownership of the British Gas Corporation. My right hon. Friend has said that it is not intended to introduce private share capital into the British Gas Corporation. I urge him to think again. It is desirable that the proposed legislation should contain powers for the Secretary of State to sell shares in the corporation. I would go further than that. I would like to see shares in the corporation given away to the public—it was done successfully in British Columbia—on the lines sketched out in the Financial Times by Mr. Sam Brittan, who was directing his attention to the British National Oil Corporation.

I remind my right hon. and hon. Friends of a phrase that appeared in "The Right Approach to the Economy", a document to which the Conservative Party should pay rather more attention while in Government than it has so far. Part of that document stated: Ownership by the State is not the same as ownership by the people. That is especially true when we consider whether to sell shares to those in the corporation or to give them away.

The forthcoming Bill will provide a golden opportunity for which many of us feel we have been waiting too long. I hope that my right hon. Friend will seize the opportunities that the Bill will give him in the future ownership of the corporation and in the way in which distribution rights and the distribution of gas is controlled both by him and by the introduction of the private sector. We cannot afford not to proceed to the fullest extent possible and we cannot afford to make mistakes.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley 7:29 pm, 10th November 1981

I hope that the hon. Member for Enfield, North (Mr. Eggar) will forgive me if I do not pursue his arguments. It is interesting to hear his confession that he serves as a sort of mini-Rasputin of Conservative Party energy policy. I do not wish to make a long speech, but, in view of the Secretary of State's comments about flaring, it might be useful to set the record straight.

The hon. Member for Ross and Cromarty (Mr. Gray) perhaps would agree that the situation in summer 1970 changed with the development of the Brent field. There was a scandalous flaring of gas in that field and others. There was a public outcry. The Minister will recall questions asked in the House and concern expressed by hon. Members on both sides. In autumn 1979 the Minister acted by reducing the pace of extraction of oil in Brent to reduce the scandalous flaring that had taken place. It was unfortunate that the Secretary of State should seek to make a partisan and ill-founded comment on that. Perhaps the Minister will comment on it to clear the record.

I am concerned about flaring, but also about the fact that the absence of the gas-gathering pipeline will sterilise substantial quantities of gas which will either have to stay in the ground or be flared. It might be gas of substantial value which could pay for some of the things that we in Britain need.

I shall trespass from energy for one moment because of a serious threat to the quality of life that is now developing in my constituency. My parish councils are receiving letters demanding, or suggesting, that they make substantial payments towards the retention of public telephone kiosks. The Minister is not responsible for that, but he may recognise that in the thinly-populated areas of Britain which are supposed to be represented by Conservative Members that threat to the public telephone kiosk is alarming and frightening.

Mr. Deputy Speaker:

I remind the hon. Gentleman that we are discussing the amendment. This is not a general debate on the Queen's Speech.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

I am illustrating the point by saying what some of the revenues could be used for if the Opposition's view prevailed, Mr. Deputy Speaker. The quality of life in many parts of England will be affected simply because the Government have no sense of the sensible priorities. If they used some of our offshore resources, we could have such decency. However, all we are likely to have are enormous profits which continue to flow out of Britain.

It is said that every time an office block or a block of super flats comes on the market in Europe or North America, British investment buys it. Perhaps profits from our offshore fields provide the vehicle for such an acquisition. The people who are responsible for the economy there are happy to let us finance their commercial and property speculation while they develop the industries which, in fact, are declining rapidly.

It is all very well Conservative Members complaining about the level of coal stocks. They are high because the level of industrial activity is low. The problem will remain severe and become worse until we have an entirely different approach to that matter. Perhaps it would be relevant if the gas-gathering pipeline were to proceed and thus avoided wasteful flaring and sterilisation and created 35,000 jobs in British Steel and the engineering industry. The Minister may know that the smaller and less adequate pipeline system which will develop as a consequence of the decision will cost the Treasury as much as the sensible and progressive decision that we should have.

Conservative Members, who know nothing about the mining industry, imagine that pits have not closed. Only six months ago there was a considerable hoo-ha about the collieries in the North of England which were supposed to close. They have closed. Orgreave in my constituency

closed. Although the National Coal Board had been saying for a long time that there was little coal there, later boring suggested that there was still some coal which could be mined from a drift development. Orgreave, the oldest pit in my constituency, was sunk in 1868 and is now closed.

However, at the same time Maltby will become a super £2 million pit. There will be an enormous capital programme. I pay tribute to the Minister who approved it. Perhaps the decision took a few months longer than it should have. It is sad that the moment that decision was announced the media engaged in ballyhoo and the lives of the management, the branch secretary and other union officials at the pit were made wretched because it was announced on television that there were to be 600 new jobs immediately at Maltby colliery. It will take about eight years for the jobs to materialise. We need more jobs than that now, not in eight years' time.

I suggest to the Minister that the public alarm that changed the Government's attitude on flaring and on gas showrooms should be applied to some of the proposals in the impending legislation. The hon. Member for Sheffield, Hallam (Mr. Osborn) may know of this event. A public meeting was held in my constituency during the recess to consider the closure of gas showrooms and the dreadful, unfeeling attitude of the Government to the Wytch Farm oil field. I set off to Rawmarsh leisure centre in my constituency expecting to find about 40 or 50 people. When I arrived, I could find nowhere to park my car in the car park. There were 800 people there. They were united in anger and enthusiasm, and protested strongly about the Government's policies. It was the biggest public meeting that we have had in Rother Valley for a long time.

I suggested that such action should be emulated and that we should give everyone the opportunity to express their indignation. The Government's antennae appear to have been operating. It has probably not been necessary to repeat how large that meeting was. It was entirely and astonishingly spontaneous. Perhaps many of the people were there to express their support for the chairman of British Gas. I do not like some of the attitudes of Conservative Members who criticise a splendid, first-class public servant. The chairmen of such organisations should not be appointed just because they will do anything a Minister tells them. That appears to be the suggestion which some Conservative Members are making.

There is one other reason why it is so important to support Sir Denis Rooke. He is not a lawyer, an accountant, a merchant banker or a salesman. He is an engineer. Unlike engineers in most of our competing countries, the British engineer has too low a regard. It is perhaps useful to have someone such as Sir Denis Rooke to illustrate that at least there is hope of advancement for people in the engineering profession.

The Government should attend to one or two other things before messing about and wasting the time of the country and the House in the way that they propose. During the recess I made a large number of visits in my enormous constituency. I went to both private and public sector steel and engineering establishments. It is clear that there are grounds for two areas of enormous concern to which the Government should begin to respond.

The first is energy prices. I noticed during the recess, as during the previous recess, that the public and private sectors of the steel industry in South Yorkshire were once more sent a detailed case on energy prices. The last one did not have enough effect. It is now essential that greater attention should be paid to energy prices, particularly in steel, chemicals, glass and paper. Perhaps the Government should say to British Gas that it should not continue to make payments to the Treasury, which the Treasury seems to want. We should take urgent action to ensure that British industry is not priced out of markets by subsidised foreign competition. The argument advanced by the Minister's predecessor, that because of French nuclear policy French electricity prices are justifiably lower, will not wash. There is no adequate justification for that.

The second item which gives concern is the frightening situation which is developing in connection with our supply of offshore equipment. About a year ago I made representations to the Government about a company in my constituency which had been priced out of a contract in the North Sea by foreign competition. It was obvious that the price that the foreign competitor was asking was negligible and perhaps below the cost of the steel of which the equipment was composed. The British firm lost that contract. The Government may feel that justice was done. The foreign competitor did not supply on time. We are always hearing about British industry's failures but we did not hear about that. The Government may say that a

penalty clause was imposed. Nevertheless, that was work which could have been done by the skilled people of Britain.

I am not sure that the figures relating to our input into North Sea activity are as accurate as some people seem to imagine. I suggest that the Government look should at this urgently to ensure that British industry is used to service and prepare for the offshore oil and gas extraction that we need.

Today's debate illustrates what a dreadful Government we have. They are a disgrace. They are concerned about profits rather than people. It is essential that they be replaced by the only sensible and radical alternative. I see that there are no members of the Alliance parties present, although, morally, perhaps a few of them should be here. I hope that in winding up the debate my right hon. Friend the Member for Bristol, South-East (Mr. Benn) will spell out how we intend to command the public support which the Labour movement must command if we are to replace the present Government and give Britain a chance.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam 7:41 pm, 10th November 1981

First, I welcome the assurances and the explanation given by my right hon. Friend the Secretary of State for Energy. I note that he is not in his place now, but I recognise that he has to leave the Chamber occasionally. I wish him well and I congratulate him on the sound stand that he took not just today but in the statement of 19 October.

I was indeed invited to the constituency of the hon. Member for Rother Valley (Mr. Hardy), but the warning came too late on that occasion. I still maintain, however, that there are ways of servicing and handling consumer equipment, whether it be gas, electricity or other domestic equipment, other than through a State system. I therefore hope that my right hon. Friend the Secretary of State for Energy and my right hon. Friend the Minister for Consumer Affairs will go ahead as promised in due course, because ultimately the consumer would benefit.

I have listened to a very interesting and well-informed debate so far today about the Government's proposals to deal with a real problem. Industry in Sheffield and South Yorkshire, for instance, is still concerned at the high price that it has to pay for energy, whether it be electricity, gas or other forms of energy. As the hon. Member for Rother Valley said, in the South Yorkshire and Sheffield area many firms that have been high energy users—not so much in the total sum involved as in the proportion of energy costs, often 20 to 25 per cent., to their total costs represented by energy bills—are finding it difficult to stay in business.

I recognise that there have been many closures and further redundancies and unemployment in my area. There are various reasons for that, but one is certainly the high price of energy. I have attended many meetings on this subject. We are dependent for our energy upon State monopolies run by successive Governments—over the past 15 years mainly Labour Governments—who have perhaps been too inflexible to realise that it is the market place that establishes where demand lies.

I am aware that the NEDC is looking into this matter. I asked some questions two weeks ago, and I welcome the fact that we have a report from the Commission of the EEC. One of the hard factors, however, is that industry in Sheffield—particularly electrical steel making—is heavily dependent upon electricity. I have made this point many times. In this country, 80 per cent. of our electricity comes from coal-fired power stations. We recognise that the annual rate of grants is about £550 million. My hon. Friend the Member for Bedford (Mr. Skeet) substantiated further subsidies to the coal industry, and my right hon. Friend the Prime Minister has stated the annual figure as a £1,100 million subsidy. Whatever the figure, a heavy subsidy has gone into coal. Yet coal for electricity in this country is still expensive.

Those in charge of all of our State industries—and I have never thought that Governments of whatever complexion were particularly good at this—must provide competitive energy as quickly as possible if our industries are to survive. In due time, the clause 4 Labour Party doctrine that Hugh Gaitskell tried to keep out has become part of its national executive's policy. The sacred cow of the right hon. Member for Bristol, South-East (Mr. Benn) has proved to be an albatross in energy matters. I therefore welcome the fact that steps are now being taken to privatise or unscramble one catastrophe perhaps arising from the amnesia of 1974—the ill-conceived BNOC—although, like my hon. Friend the Member for Enfield, North (Mr. Eggar), I wish that the Government had gone further.

In my early industrial days, when I was mainly supplying the coal industry, I found that a monopoly buyer was very difficult for private enterprise to supply. My experience was in the provision of pit tub wheels, pedestals and buffers to the National Coal Board for its underground equipment before conveyor belts were introduced. The power of a big buyer, let alone of a big State buyer, is a matter of concern to small and medium-sized businesses, and that has always been the case.

When I entered the House and made my maiden speech on the subject of gas, the ball game was entirely different from the situation today. In 1963, when Sir Alec Douglas-Home became Prime Minister, I visited the United States and chose as my theme "Capitalism at the crossroads: can East and West co-exist? Britain: a case history". I put forward a case for nationalisation—and particularly in relation to gas—as a means of rationalising the many small gas works and the basis for a grid.

That was then the subject of what we call the North Sea Act, introduced by Lord Erroll when he had ministerial responsibility for this matter. Because I understood the role of the State intervention at that time, I left the economic club of Detroit as the pinkest Conservative that they had ever seen. They were visited a month later by the then right hon. Member for Belper, now Lord George Brown, who left the same club as the bluest Labour Member of Parliament that they had ever seen.

The large industrial organisation, private or public, if it is not careful, may lack flexibility. It may become insensitive to the needs of the customer. In a private sector activity, however, if it continues to show inflexibility, there will be no customers and those in charge have to take drastic action. The firm may even sell some assets to satisfy cash flow needs. There are examples of this every day in this and other countries. It may also acquire the art of subcontracting work to others who may be better fitted to deal with it.

That brings me back to the role of gas showrooms and the fitting of gas equipment, although the principle applies equally to electricity. That work is perhaps better given to the private business man as a subcontractor working to standards than forming part of the big organisation. That is why I hope that the proposals of my right hon. Friend the Minister for Consumer Affairs will not be dropped. A public sector company in that position is really a bloodsucker of taxpayers' money. It does not have to react when those circumstances arise. I suggest that that might have been our difficulty with regard to North Sea oil had action not been taken, and it is certainly becoming our difficulty in relation to gas.

The North Sea has been a huge absorber of capital investment—£20 billion so far, with another £60 billion over the next 20 years or so. Investment is running at more than £2 billion a year, although that may fall off if the other criteria are not acceptable.

In the 1970s the Government and state of the country were such that Scottish nationalism was very strong. North Sea oil was referred to as "Scottish oil", rather than British oil. To some extent the same can be said about gas. It was considered that those resources belonged to our shores and should be used by all of us. During the mid-1970s I attended energy committees in Brussels as a member of the European Parliament. The political leadership at that time, particularly when there was a British President in office as is the case at present, was such that the oil and gas were always referred to as British. As a result, other European countries looked for other sources of energy, whereas they should have been considered as potential customers of Great Britain.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

I hope that the Government and Conservative Members realise that by dismantling the BNOC they will give a breath of life to the Scottish National Party. If that is what they want, very well, but they had better be clear that that is what they will do.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam

I think that the hon. Gentleman attended the meeting of the energy committee that was addressed by the right hon. Member for Bristol, South-East. He gave the impression that that asset was ours and that Great Britain would decide how to use it. To be fair, my right hon. Friend the Member for Bridgwater (Mr. King), the Minister for Local Government and Environmental Services, who was then shadow energy spokesman, also took that view. Therefore, the chairman of British Gas, Sir Denis Rooke, did not take seriously the idea of a gas pipeline across the Channel to buy and sell gas. In recent years he has concentrated on his statutory obligation to supply Britain's domestic needs.

One feature of North Sea oil and gas has been the costs of extraction and the capital investment per cubic foot or cubic metre of gas or barrel of oil. It has been said that investment in the North Sea is 10 to 15 times that of similar operations in the Middle East. That is immaterial if world market prices cover that differential. But if the differential between North Sea costs and the world market price were eroded by various forms of petrol tax, such as PRT, operators might well move away from the North Sea. I am sure that the Treasury, like many of us, has received representations from the operators that the North Sea should remain profitable to encourage them to stay.

The Norwegian situation has been referred to. I was in Norway 18 months ago, and I have attended all-party meetings in the House at which representatives of Statoil have been present. I have kept in close touch with some Norwegian parliamentary colleagues, through the Council of Europe. There is no doubt, even with a new

Government, that the Norwegians will go ahead with a new gas line from Bergen to Emden in order to have an alternative option to dealing with British Gas.

That brings me to the security of energy supply, be it gas or North Sea oil. I have raised this in previous debates. Five or 10 years ago Britain could have promoted the concept of security of supply. We could have persuaded other Community countries that using British gas and oil to a greater extent could help that security. But people in other EEC countries and the rest of Europe have looked to other alternatives. Obviously, it makes sense for them to obtain their supplies from Norway. One project that I have discussed with Soviet representatives and European colleagues is the concept of the Siberian pipeline in respect of which British firms will be subcontractors. Another possibility is to bring natural gas from North Africa to the Mediterranean.

I shall not touch on the nuclear argument, except to say that energy is cheaper to our European competitors when there is a large hydro and nuclear content in electrcity generation.

I come back to the concept of self-sufficiency in gas. Great Britain has security of supply, but at an increasing cost. Marginal fields will be operated only if prices of between 30p to 46p per therm are offered. There is, therfore, a certain amount of unease. On the one hand, the Government may have taken too much of the margin, and, on the other, the incentive to extract gas from marginal fields may be too low.

There has been discussion about the flaring of gas. My information—perhaps the Minister can confirm it—is that flaring is now at a low level and that gas is pumped back. However, there is still the saga of the gas-gathering pipeline. I genuinely thought that the Government would be able to go ahead with this concept with good will from all parties concerned. However, there was the problem of Government guarantees and the possibility that it would involve the PSBR.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

A lot is made of the PSBR, but the House must know that this is entirely within the discretion of the Treasury. British Nuclear Fuels, which is 100 per cent. Government-owned, has never borrowed within the PSBR. Therefore, the theory that there is some absolute limit on public investment for essential purposes is a Treasury notion that we accept all too uncritically. I say that in case it helps the hon. Gentleman to stiffen his support for the gas-gathering pipeline and the investment necessary for it.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam

I was expressing regret that it did not go ahead at the time, and I said that I understood the problem. My hope and belief is that the industry will sort out its own method of collecting the gas. There is no doubt that the proposed Bill will give it greater encouragement, particularly if British Gas is used as a common carrier.

Oil industry spokesmen whom I have met feel that British Gas is a monopoly buyer. To bring in the funds with a monopoly buyer that could not give them enough guarantee was an obstacle that I believe drove my right hon. Friend to proceed with the proposed Bill, which I welcome.

The right hon. Member for Leeds, South (Mr. Rees) spoke about monopsony. I have attended many conferences, and the general feeling is that gas prices should be related to international oil prices. My own view is that perhaps we could circulate oil in Britain at preferential prices. However, everywhere I go I find an acceptance that oil from the North Sea must be bought and sold, and that upstream activities should be subject to international pricing. I accept that the pace is obviously set by OPEC. But, whatever happens, unless the prices and margins are adequate, there is a danger that operators will be driven away from the North Sea.

Sheffield industrialists have asked me whether we would be able to buy Siberian or North African natural gas it it were to become available to EEC countries. I regret that Britain is not part of a much wider grid, so that when prices are favourable outside the North Sea there is a chance to buy some of that gas, which is probably shortlived—and risky in the case of Siberia. Business operators in this country are seeking every option to get energy at competitive prices.

Obviously, we are concerned about the coal industry. I mentioned the fact that electricity is 80 per cent. dependent—not the 64 per cent. that I used to quote—on coal from our own resources. Coal-fired electricity is, however, proving expensive, and I therefore hope that we can move into nuclear energy and go ahead with the programme that has already been outlined, so that industry and the domestic consumer can look forward to cheaper supplies.

My hon. Friend the Member for Enfield, North regretted that there was not room in the newer coal mining areas for private sector activity. He has also mentioned the matter during Question Time. Many of our mining companies and some of the big oil companies are involved in open-cast extraction all over the world and in the deep mining of coal, and have become energy companies. I therefore hope that Opposition Members will not close their minds to the possibility—perhaps with open-cast mining as a start—of this being a free enterprise operation with greater marketability and flexibility than has been shown during the last 35 years.

I welcome this step, even though it is but a tentative one in the right direction. It must be pushed forward with responsibility, and I look forward to reading the Bills on the matter in due course when the Secretary of State publishes them.

Photo of Mr Lawrence Cunliffe Mr Lawrence Cunliffe , Leigh 8:03 pm, 10th November 1981

I always relish the opportunity to participate in debates of this character, especially when they concern energy. I declare an interest as a mining engineer with 30 years' experience in the industry, an ex-NUM official and, currently, a part-time adviser to the National Union of Mineworkers.

My first duty is obviously to set the record straight and to try to dot the i's and cross the t's on some of the astonishing comments that have been made in reference to the relevance of the Government's financial assistance to the mining industry. First, I wish to deal with the challenge that the National Union of Mineworkers has been disloyal to the nation in its dealings with the Administration and that certain undertakings and obligations were given that were not fulfilled by the employees. I totally refute that.

Anyone who has experience of negotiating in the mining industry knows that there has always been a set procedure for colliery closures. There has always been an agreement where all parties involved in an industry—from the executives to the junior members of the industry—fulfil their role within the consolidated machinery and participate in it. It is not 100 per cent. perfect. It needs to be altered, and will be altered within the industrial democratic framework when we have the opportunity to do so.

There is at present a planned, progressive procedure for colliery closures in my area in the North-West of England. The NUM undertook to carry out that exercise. It has its own mining engineers who, together with the board representatives, go down the mines and examine the potential in terms of resources of coal, cost viability and manpower requirements, and an honest and commercial assessment is made by NUM engineers.

It was stated today that 21 pits would close. but an agreement had already been reached that 10 of those pits would close because no resources would have been available within the next two to five years. The National Union of Mineworkers, and, I am pleased to say, the board, which stood up to the Government when the challenge was made, said that the pits would have to be closed in a humane and compassionate way. They said that the collieries could be carried until a breathing space was found to produce job opportunities or alternative jobs, the transfer of men to more modern and fruitful pits. and so on. That is the normal procedure that the two parties adopt.

It is wrong to make accusations of the sort that have been made. Examples of progressive pit closures were quoted by my hon. Friend the Member for Rother Valley (Mr. Hardy). A pit in my constituency and another in North Lancashire, in the Harpton Valley, were closed progressively and half the manpower was transferred to other collieries.

Some hon. Members asked what will be done with the 42 million tonnes of coal on the ground. When the Government set out their financial objectives, whose fulfilment would require greater effort from everyone in the industry, there was a recognition—tantamount to an admission—that they were partly responsible for the recession in the industry and that they would accept their responsibility. It was clearly stated that the £300 million increase in grants—from £250 million in 1980–81 to £550 million in 1981–82—would go a long way to help the NCB offset the effects of the recession. Under pressure from the National Union of Mineworkers, the Government accepted that they had an obligation.

I should like to know whether the hon. Member for Bedford (Mr. Skeet) accepts the responsibilities, as did the Secretary of State today. I welcome the Secretary of State's comments. It would be helpful if, during the delicate negotiations that are taking place between the National Union of Mineworkers and the board on a future wage increase the Secretary of State could reassure the miners that he stands four square behind "Plan for Coal" and future investment in this long-life industry.

Do Conservative Members accept the remarks of their Secretary of State today on that issue? If we were to get rid of some of the coal stocks and if the Government accept the principle that they acknowledged under pressure, they should set an example and substitute more British coal. for imports. That is the way to reduce coal stocks.

The team spirit in the mining industry is better than it has been for many years. The board intends, with the co- operation of the NUM, to try to increase exports from 4½ million tonnes last year to 9 million tonnes by 1982 and to 15 million tonnes by 1985.

It is worth considering the achievements of British miners and the mining industry over the past decade. The Secretary of State accepted, albeit grudgingly, that there had been an improvement in productivity norms, though he added that they had been disappointing for several years. The truth is that since the strikes of 1972 and 1974 productivity in the industry has risen every year and there will be further increases this year of 5 per cent. in collieries generally and 6 per cent. at the coal face. If the same sort of productivity increases had taken place in private industry the public sector borrowing problems would not have arisen.

However, because of the Government's crazy monetarist policies we have seen the recession spread like a cancer throughout British industry. I shall suggest later what we should do about the anxiety that is shared by many organisations, from the CBI to local gas consumer councils.

The Opposition's amendment has been framed in the light of certain elements in the Queen's Speech, including the proposals on the financing of the NCB, the hiving off of our oil assets and the placing of the gas industry in a straitjacket. Those proposals are the usual Tory menu—a mixed grill of monetarist measures which will prove to be another recipe for disaster.

The Secretary of State asked what all the fuss was about. I will tell him. I thought that even in the energy industries it would be reasonable to predict that it might be possible to make monetarism work. The opportunity presented itself with the £2·7 billion plan for a pipeline to bring gas ashore. That would have provided 3,000 jobs in the steel industry. The project was abandoned in September because of the lack of Government support. The figures can be challenged, but the information available to some of us connected with the energy industries is clear. Natural gas worth £1 million is being burnt off every day in the North Sea. That is a scandal.

The pipeline, which would have been financed by a mix of private investors, British Gas and the Government, fell through because the Government refused to give the assurances required by the private firms. The reason for the Government's withdrawal seems to have been the Treasury's fears about the scheme's impact on the public sector borrowing requirement. In energy terms that decision is incomprehensible. The British people certainly do not understand it. Letters from our constituents are piling up. They are expressing concern about the assets that belong exclusively to the British people.

It is estimated that in terms of return on investment the gas pipeline would have proved to be eight to 12 times more cost effective than the Government's proposed nuclear power programme, which will cost up to £20 billion over a 10-year period. It called for boldness, imagination and an entrepreneurial spirit by the Government. They had a glorious opportunity. Instead of paying lip service to the PSBR, and the arguments about inflation and spending more than we earn, they could have invested in the industry to produce the goods. But they have adopted a philosophical approach and we have finished up with the sale of the century. The arch strippers and manipulators are out to get rid of our national assets. It is the same old story.

The amendment is part of our warning to the Government and those who want to invest in the British people's oil assets. It is becoming clear that when gas supplies go to private operators they will barter and bargain and will be able to sell gas cheaper than the State is able to sell it. In addition, they will be allowed to use the British Gas pipleline in order to do so.

It is inevitable that at some stage industrial consumers will get cheaper energy and domestic consumers, who have already been hit by the 17 per cent. price increase in April, will have to face massive and soaring price increases. I received a letter recently from a 70-year-old pensioner in my constituency who has given great service to the nation. I sent the letter to the new Secretary of State three days after he had been appointed. I have received an acknowledgement, but no detailed reply. My constituent writes: I am writing to you on behalf of myself and many more people like me. As a single pensioner on the Basic Rate of £27·15p and some interest from savings, but no secondary pension or Social Security, could you please speak up for us in the House of Commons to the Minister of Energy? We find these constant increases in standing charges for Gas and Electricity almost unbearable, plus Telephone accounts. She asks why, since two of the industries make profits, one person living alone should have to pay such heavy charges and adds: It is not the Gas Corporation who is to blame, but the Government. My constituent goes on to say that as a result of housing subsidies being transferred from the Government to tenants she has had to pay a much higher rent. She adds: I am 70 years of age, and this is my first home. I do get a rent rebate and for that I am thankful. All my life I have been a Conservative, delivered pamphlets, etc., but not any more. This Government has clobbered us more than any other, during the past year, and I say enough is enough. So this winter I will wear two coats instead of one, I do not intend to spend my hard-earned savings in paying more than I need to in gas bills to pour into the coffers of the Government. She gave me permission to read the letter. She says that she has worked for the Conservative Party for 46 years.

The Minister has had the letter for two and a half weeks. I am sure that he will have the common courtesy to deal with it sooner or later and write to me.

Photo of Mr Donald Dixon Mr Donald Dixon , Jarrow

My hon. Friend has told us that that old-age pensioner is receiving a pension of £27·15 a week. Does he realise that two years ago the spending power of her pension was £29·50, and that she is now £2·35 per week worse off than she was then?

Photo of Mr Lawrence Cunliffe Mr Lawrence Cunliffe , Leigh

I agree with my hon. Friend. It shows the plight of the pensioner. Had the Government indexed average earnings to pensions, she might not have suffered in the way that I have shown.

The issue of gas showrooms has been an extremely controversial one. I understand that many Conservative Back Benchers have expressed deep concern about it to the appropriate Ministers. It is remarkable that Mr. Woodrow Wyatt, a former Member of this House, wrote an article in the Sunday Mirror saying that he could not understand what all the fuss was about. I understand that the Secretary of State has made the same comment. But I can think of 30,000 good reasons for retaining the gas showrooms, because there will be 30,000 jobs at stake if the gas showrooms and the retail services are hived off by the Government as they get even more reckless and desperate in their desire to meet their financial commitments.

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

The hon. Gentleman appears to be arguing that 30,000 gas showroom employees will be made redundant if the showrooms change hands. Is he suggesting that there is overmanning to the extent of 30,000 jobs, or is he assuming that no one will supply gas appliances or install them in the future?

Photo of Mr Lawrence Cunliffe Mr Lawrence Cunliffe , Leigh

The gas showrooms have given outstanding service in terms of expertise and safety and have given the most honourable commitment that any service industry could give to its customers. If the Government go ahead with their plan, 30,000 people will be uncertain of their jobs. Knowing how private enterprise functions, I would expect at least two thirds of them to have to join the dole queue.

Not only the showroom staff are involved. There are the people in the stores where the appliances are kept, the people who deliver them, and the service engineers who install them. There are the people who check the materials, the quality control people, the supervisors, the administrative staff, and so on. With their insatiable appetite, the Government are adding more people to the ever-increasing dole queues. There is no doubt that the British Gas employees all do a specific job within a most successful, modern and efficient industry.

Many hon. Members will remember when the service side of the industry was a dying industry. The small companies had proved to be inefficient. They were selling what would be regarded today as old-fashioned and out-of-date appliances. The modernisation of the service industry is a wonderful example of what can be done if adequate resources are made available. The industry has had impeccable industrial relations—better than in many private industries. It is no use suggesting that anyone can invest in this kind of service industry and be able to guarantee that everything will be correct in terms of service and safety standards.

I hope that, for the reasons I have given, the Government will abandon their plan, because it will not find favour with the British people.

The Government have stated that their main policy is to conquer inflation. It is in the Conservative Party manifesto. It comes out in public statements from the Prime Minister down to the messenger boys at Downing Street. The Government say that they want to conquer inflation and create jobs that will produce the goods that the British nation needs. But the people will judge those promises for themselves. We should be moving towards a position where the North Sea oil revenues are providing the necessary financial aid to stimulate and rejuvenate the British economy. That was the principal objective. Keeping control of resources of this kind is the only way in which we can guarantee that investment will be pumped into the right places at the right times to create the right jobs.

Our economy is going through a critical period. If further permanent damage is to be avoided, we should take steps immediately to increase public investment in transport, sewers, hospitals, telecommunications, industrial estates and so on. That will stimulate public demand in the private sector and it will bring much needed jobs. We can create real jobs if there is a will and determination on the part of the Government to do that.

Furthermore, we would be getting a return in the form of increased production, lower unit costs and increased productivity. We could reduce Government expenditure on unemployment benefits, temporary job provision and support for industry. If we have the will to do so, we can strengthen the industrial and social infrastructure that is so imperative to building up a new economy for a new Britain.

If the Government show some boldness and imagination, and if they accept the exhortations of Opposition Members, we can surely help to renew the confidence and hope of the sorely pressed people of the North-West, whence I come, and the British people as a whole.

The selling off of essential assets of this sort will be a gross betrayal of the British people, and it will be an act of criminal folly—as in the past—if the Government carry on with this sale of the century.

I hope that in his winding-up speech my right hon. Friend the Member for Bristol, South-East (Mr. Benn) will say clearly that we shall take back the oil assets that are to be sold off and replace the present policy with a bolder and more imaginative scheme of public investment that can flow forward to create jobs.

Photo of Mr Peter Rost Mr Peter Rost , Derbyshire South East 8:31 pm, 10th November 1981

If the hon. Member for Leigh (Mr. Cunliffe) and some of his colleagues were really concerned about the problems of consumers and of pensioners facing ever-rising fuel bills and struggling to pay them, they would be more sympathetic to the Government's tentative and perhaps rather timid move towards improving the efficiency of the nationalised industries. However, from what we have heard 'from Opposition Members, they are not interested in that. They are far more concerned, as no doubt the right hon. Member for Bristol, South-East (Mr. Benn) will remind us shortly, with airing their blind passion for the virtues of the nationalised monopolies and exercising their obsessive prejudice against private enterprise. So far the oil industry has been the only energy industry that has delivered the goods.

The hon. Member for Leigh, for example, referred to flaring and told us what a scandal it was. I agree about that. That is why the present Government have cut the amount of gas that has been allowed to be flared in the North Sea. In the context of flaring, the hon. Member told us what a tragedy it was that the proposal to construct the joint gas-gathering pipeline fell through. He blamed the present Government for that, saying that they were not prepared to back it. If it were such a profitable worthwhile venture, private enterprise would have been only too ready to back it. After all, private enterprise is investing more than £2 billion a year in the North Sea, including investment in the construction of pipelines. Private enterprise would have been quite happy to have built that North Sea joint gas-gathering pipeline years ago, and British industry and the consumer would have had the benefit of the gas.

Why did that not happen? It was because of the British Gas monopoly. British Gas was not prepared to guarantee to offer a fair price to the North Sea oil companies for the gas once it was landed. Moreover, because British Gas had its monopoly powers to buy and to market all gas, there was nothing that the private oil industry could do about it—except to make a plea to the Government, which is what it has done, in the interests of the consumer.

That is why we are now, at long last, somewhere near to getting legislation that will deal with the monopoly powers of British Gas to buy gas and its exclusive powers to distribute and sell it. I thoroughly support that. I am not happy, however, about the rest of the Government's contribution towards dealing with the nationalised energy industries. We are not yet getting near to the real problems. There is still apparently no intention to change the nationalised energy monopoly that exists in coal and in electricity. Until those two industries are dealt with structurally, we shall not get better prices for the consumer through greater competition and greater efficiency.

The long-suffering consumer is not only paying higher world energy prices but is also paying more than is necessary because we have nationalised energy monopolies. This burden on industry has made it difficult for us to remain competitive. It has also lowered the standard of life for millions of our people. It is a scandal that we should be the only country in Europe where millions of citizens cannot afford enough heat for comfort. That does not happen in Europe where there has been a more competitive development of energy industries. There, 3,000 combined heat and power district schemes provide heat to the consumer, heat that in this country is thrown away from our CEGB nationalised industry power stations, warming the rivers and polluting the atmosphere.

On the Continent, there has been the development of independent utility systems that provide some yardstick of competition. The same happens in the United States. Until the electricity industry is at least developed into autonomous regional authorities so that one region's performance can be judged against another's and its efficiency assessed, no form of commercial or competitive disciplines will be introduced to that industry.

It is a nonsense that the coal industry today should still be a 100 per cent. nationalised monopoly. Few hon. Members would argue that there was not full justification on political, social and even economic grounds for nationalising the coal industry in 1946. Those arguments no longer stand up to investigation. It is nonsense that companies like BP should have to buy coal reserves and assets in the United States and Australia in order to use their expertise to mine coal, and that they should be prohibited from doing so in this country. It is nonsense that companies like ICI that might want to be major consumers of coal are priced out of the coal market because the National Coal Board, as monopoly supplier, is not prepared or able to supply large potential customers at reasonable prices. It has to subsidise the low-cost coalfields with their uneconomic pits in order to average up the price, which means that it is higher than the price at which our competitors can obtain coal. The result is that the market for coal is not expanding as it should.

There has been mention during the debate of the coal stocks that exist in this country. This is not an argument for reducing the production of coal. It is an argument for reducing the price of coal. If the price of coal was reduced through allowing more competition, we would get greater efficiency and higher productivity. The economy as a whole would benefit. Anyone who disputes that argument will also no doubt dispute that competition in airway tickets has produced lower air fares. It is unacceptable today that the National Coal Board should have a stranglehold over the mining and marketing of coal. That is not in the interests of miners, although they may think that it is. They may have been indoctrinated by Left-wing politicians into believing so. It is no more in their interests than it was in the interests of people working for the BBC to believe that the BBC monopoly was in their interests. They now know better, because they have an alternative independent employer to go to.

The same argument applies to the whole range of our economic activity. Where there is a monopoly there is a monopoly employer, too. That is not in the best interests of the employees. Some of our new coal reserves should at least be allowed to be explored in the same way as oil companies can explore for oil reserves in the North Sea. They could then be licensed and developed by those mining companies which have world-wide expertise and believe that they can do a good job and perhaps produce the coal more cheaply than the National Coal Board—possibly paying the miners a higher wage than the coal board can because of its high overheads and, to put it politely, its slightly bureaucratic structure.

What applies to the National Coal Board also applies to the electricity industry and British Gas. Until we tackle these nationalised monopolies, instead of just selling off a little bit of the British National Oil Corporation's oil interests and just taking away the oil from British Gas, and until we tackle the fundamental structures and restore genuine commercial disciplines through competition, we shall not give the consumer competitive energy prices, and our industry will continue to be penalised compared with other countries which have adopted a more radical approach to the problem.

Although many of my colleagues have spoken about some of the problems of British Gas, it has probably not been realised that those of us who believe that breaking the monopoly powers will benefit the consumer are assaulted from the Opposition Benches with the argument that all it will mean is a higher price for gas. That is absolute nonsense. The price that the consumer is paying for gas is higher now than is necessary. If British Gas had not had such a monopoly power to buy, there would have been an incentive to develop more gas in the North sea. What happened? British Gas was not prepared to pay a fair price to stimulate that investment. The fields have been discovered, and there are masses of the stuff, but no one wants to invest in bringing it ashore because British Gas has not been prepared to pay the price.

Now there is a shortage of gas. Industry is being rationed on a very selective basis, and we are importing one-third of our gas from Norway. We are not getting that gas cheaply. We are having to pay the world price for it. It is costing us many hundreds of millions of pounds.

Meanwhile, we could have developed gas more cheaply in our own North Sea sector, and the consumer would have benefited. There would have been more competition because alternative sources of supply would have been opened up. In my view, that would have been to the advantage of the consumer and of the North Sea oil and gas development industry as a whole.

The Government should consider again the alternative proposal that was suggested by Sir Denis Rooke. We understand why he wants to preserve his monopoly, but that monopoly must not be allowed to buy exclusively. Once British Gas trades in a competitive and commercial climate, which could happen if the monopoly were broken, there is an argument for saying that British Gas should be allowed to make its own commercial decisions about whether it wants to sell assets, whether those assets are to be the showrooms, and whether it wants to keep some of its oil interests or trade them off for gasfields.

If part of the equity of British Gas were sold to the public in the same way as half of British Aerospace and half of Cable and Wireless have been sold—and as we shall sell half of BNOC—the management of the BGC would be forced by commercial considerations to use its assets to the best advantage. If 900 showrooms did not produce a good return, shareholders would soon demand that some of them were sold. Shareholders would ask whether it would not be more profitable to sell the oil interests in the North Sea and buy more gasfields. As a result of the profit motive, shareholders and management together would decide how best to maximise the efficiency of the operation.

No doubt the right hon. Member for Bristol, South-East will tell us that that will benefit only a minority of asset strippers. However, it would benefit the consumer and the public. In addition, it would benefit those who could buy shares in British Gas, including its employees and many hundreds of thousands of people in Britain. The taxpayer would also benefit because, as a commercial operation, the BGC would pay a proper share of taxation, just as the oil companies do. The Government would benefit because, as a 50 per cent. shareholder, they would receive not only their share of taxation but their share of dividend as a proportion of profit.

I hope that the Secretary of State will reconsider that solution, even at some later stage. I hope that we shall privatise the British Gas Corporation as we shall privatise other companies. Unless we tackle the other nationalised energy monopolies—coal and electricity—we shall be only starting on the problem of providing our energy at a competitive price and of securing adequate supplies through fair commercial disciplines and proper competition. Unless we do that, the economy, consumers and industry will be penalised through energy prices that are higher than necessary. Goodness knows, our competitive position has enough handicaps without landing ourselves with the additional unnecessary handicap of higher energy prices than our competitors merely because we refuse to face up to the structural changes needed in those energy monopolies.

Photo of Mr Frank Haynes Mr Frank Haynes , Ashfield 8:47 pm, 10th November 1981

At the beginning of the day the Secretary of State wanted to know what all the fuss was about. From this side of the House the message has gone out loud and clear. There is no doubt that the Government are suggesting the privatisation of certain energy industries. It is obvious that the Secretary of State will not come clean tonight. He says that we shall have to wait until the Committee stage to find out the details.

I am a little incensed at some of the things that Conservative Members have said, particularly about the mining industry. Many Conservative Members contribute to every energy debate and talk about the mining industry, but they do not have a clue what they are talking about. If they had used a shovel for a year or two they might understand what pit work was all about. I shall give Conservative Members an opportunity if they want to chuck a stint on. I shall work alongside and show them how to do it.

The Bill will rape the British people. The Government are once again selling off the assets of the British people. Yes, they are asset-stripping. Does the privatisation of oil mean that if the Russians make the highest bid they will get it? That would take the smiles off the faces of Conservative Members. We must be sensible about this. I do not believe that the Government are being sensible about it. The profit motive always operates when a Conservative Administration are in office. They are raping the British people in the interests of a few and lining their own pockets.

Photo of Mr George Foulkes Mr George Foulkes , Ayrshire South

Is my hon. Friend aware that the hon. Member for Gosport (Mr. Viggers), who asked the question on 19 October, and to whom the Secretary of State announced his sell-off., is a director of an oil company and therefore has a vested interest? Is that not typical of Conservative hon. Members?

Photo of Mr Frank Haynes Mr Frank Haynes , Ashfield

I agree with my hon. Friend, although he has gone further than I wanted to go. There are a number of oil barons on the Government side. We have talked about the oil barons for a long time in the mining industry, and in my constituency. They are raping the British people. One has only to look at petrol prices to see the profits that the oil companies make, but prices continue to rise.

The argument about energy prices put forward by the Government Front Bench is a fallacy. I met representatives this week from a firm in my constituency which Is in serious difficulty because of energy prices—not oil or coal prices, but gas prices. The Government have been responsible for shoving up those prices every year that they have been in office, and that will continue until we get rid of them.

The Government thrash the mining industry at every opportunity. I worked in that industry for many years. When I joined, it had a work force of 1¼ million. The miners have always made their contribution when the nation has called upon them, and they will continue to do so. It is wrong to stand up in the House and criticise the mining industry after the marvellous efforts made by the people in it. They will not like it when they read about it. It is unfair to criticise them when we should be giving them all the encouragement in the world to produce more coal. They do that anyway, although numbers in the industry continue to fall. Despite that, productivity increases. It has increased twofold, and more coal is being produced with less manpower.

Nobody mentions the restrictions on finance for the National Coal Board. During the recess I visited a pit in my constituency. On the day of my visit no coal was produced from the coal face because of restrictions forced on the management by a lack of spare parts. A machine was broken and there were no spares to enable it to be put right. The management had to go to another pit to find the necessary spare parts. The parts had to be transported to the face before the conveyor could be restarted.

We are not fair to the mining industry. I hope to serve on the Committee when the Bill goes upstairs—although I am not making a bid for that. The Secretary of State will probably not be there. He will leave that task to the Under-Secretary of State for Energy, the hon. Member for Croydon, Central (Mr. Moore). The hon. Gentleman has a real understanding of energy. He has a particular understanding of the mining industry. He makes it his job to find out what that industry is about. I know from what he has said to me that he understands. I have no doubt that he will have the responsibility in Committee.

We want some answers. We have been told that we shall not have those answers tonight. Because of what has been said today I have an awful feeling that privatisation of the mining industry will occur. If that is so, I give fair warning to the Secretary of State that he must look out. Members of the British Association of Colliery Management and the National Association of Colliery Overmen, Deputies and Shotfirers will stand four-square with the National Union of Mineworkers to beat the Government in their proposals for privatisation. The message is loud and clear to the people in the industry. The message is "Watch what is going on and at the appropriate time the Government will have to change their mind."

Today's debate has been good. The Opposition Front Bench has the opportunity tonight to tell the. Government in no uncertain terms what we mean to do about the situation. Let the Government make no mistake. We shall fight tooth and nail to beat the Government in Committee.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South 8:56 pm, 10th November 1981

I have listened to many useful contributions by hon. Members with a deep knowledge of the industry. I shall make three points in the few minutes available. I come from industry and I view energy policy in relation to how it affects British industry. Like it or not, in his energy policy the Secretary of State has to create a price level for British industry which leaves it competitive with the rest of the world. I do not mind which way my right hon. Friend achieves that. He has a responsibility to ensure longevity in the use of our natural resources. If we are to price ourselves in relation to world markets my right hon. Friend must find a reduction in taxation to ensure that heavy users of energy can buy their energy at a price which is competitive with prices charged to their competitors in the Western world. In that context, I hope that the Secretary of State will not forget the examples of Germany, France and Italy where incentives are given to industries which save energy. It would be a welcome change if some incentive were given to industry which saves energy here.

The multinationals serve a useful purpose. They are a dynamic element in our society. What they do is of great benefit to the capitalist world. They look for a consistency of policy and a clear strategy from Government. The Secretary of State's proposals represent the beginnings of a consistent and clear policy. I commend them wholeheartedly to the House and the multinationals. I speak as a representative of an East Midlands industrial town and I believe that the British Gas Corporation has not served well the major industries in my constituency. British Gas has failed to supply those industries with gas at a price that they believe is competitive with their other units in Western Europe. In that context, the comment of the right hon. Member for Leeds, South (Mr. Rees) that privatisation of gas supplies will put prices up is unrealistic. No industrialist believes that that will be future policy.

The Secretary of State should go forward with his policies. Those policies, provided they give us competitively priced energy, are the sort of policies that British industries want. I give him my fullest support.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East 9:01 pm, 10th November 1981

I congratulate the hon. Member for Croydon, North-West (Mr. Pitt) on his maiden speech, which was well received by the House. It was clear from what he said about unemployment and the problems of the area that he represents that his main interest, like the interest of the official Opposition, is to use the revenues to try to restore full employment in our public services.

I wish to make one point clear at the outset, lest the debate leave it out of account. The Government's proposals to sell key parts of the nation's precious oil and gas reserves and any proposals they may have for the mining industry will be bitterly resisted by the Labour Party and the trade union movement, both inside and outside Parliament. The General and Municipal Workers Union made that clear about the proposed sale of the gas showrooms. The Cabinet's plans pose a grave threat to the national interest, and to Britain's long-term industrial and economic future.

The Secretary of State asked what all the fuss was about. I can answer that by trying to compensate for one of the thinnest speeches I have ever heard from a senior Minister on a major subject.

I begin by setting the argument in its proper historical context. I do not know what the Secretary of State has been doing during the past few years, but has he not noticed that the energy crisis has dominated world politics for 25 years since Abadan, Suez, the Six-Day War and the OPEC price increases which introduced great economic instability? There is an enormous American build-up in the Middle East because they need Saudi Arabian oil. We read today that Mrs. Gandhi has been driven to the International Monetary Fund by the high price of imported energy. Does the Secretary of State not understand that the British saw and see in North Sea oil and gas a hope for Britain's security, for supplies at a favourable price and for the enjoyment of the benefits of those revenues? That is what lies behind the Opposition's amendment. I shall come to the right hon. Gentleman's speech in so far as it merits an answer.

Britain is in a unique position in that it is the only country in the Western world—not just in Europe—that is self-sufficient in coal, oil and gas, and has unrivalled skill in the deployment of those resources. For 70 years successive Governments of different political persuasions have gradually developed a consistent energy policy.

That policy did not begin with the Labour Party conference. It began in the House of Commons on 17 June 1914, when Winston Churchill brought the Anglo-Persian oil company into public ownership. He was then a member of the Liberal Party. I shall tell the new hon. Member for Croydon, North-West what Winston Churchill said on that occasion. He was talking about oil. At that time Britain had no oil, but there were oil concessions in Persia. He said: We recognise in it"— that is, the concessions— the best source from which we could obtain the best kind of oil. We knew that it was in constant danger of being absorbed by some other combination and welded into an ever-widening price ring. We knew that by our contract we should confer upon the Anglo-Persian Company an immense advantage which, added to their concession, would enormously strengthen the company and increase the value of their property. If this consequence arose from the necessary action of the State, why should not the State share in the advantage which we created? If, in any case, we had to go so far, why should we not go a step further? Was it not wiser, was it not more profitable on every ground, naval, financial, and indeed equitable, to acquire control of an enterprise which we were bound to help and bound to enrich, which we alone could sustain, and on which, to a large extent, we must rely?"—[Official Report, 17 June 1914; Vol. LXIII, c. 1140.] That is the case for the public ownership of our resources. Every Government, whether Labour or Conservative, have followed that line and brought into public ownership electricity, gas, and coal. Conservative Members talk about private enterprise. The atomic energy industry would not have built a single power station in Britain if it had to rely on the profitability of its investments. There has been a progressive expansion of national ownership in gas and oil. There have been huge investment programmes and the necessary legislation.

I turn to the three industries whose futures we are discussing. First, I shall deal with the coal industry—the foundation of the first industrial revolution. There are 300 years of coal reserves at our present rate of consumption and with existing technology. There is a possibility of 1,000 years of reserves with further developments. We need coal for the new technologies of fluidised bed combustion, for conversion to electricity, gas and oil, and for feed stock.

I hear Conservative Members speak, without anyone gainsaying them, about nationalised industries. I shall give the House the latest figures. The cost of production of coal in the nationalised British pits is £35 per tonne. It is £44 in the private pits of West Germany, £45 in the private pits of France and £61 in the private pits of Belgium.—[Interruption.] Let me develop my argument. Belgium pays a subsidy of £27 per tonne, France £15 per tonne, West Germany £12 per tonne and Great Britain £1·40 per tonne. We have the most efficient mining industry in Europe. Our productivity has been rising consistently. As my hon. Friends the Members for Leigh (Mr. Cunliffe) and Ashfield (Mr. Haynes) said, the anxiety of the mining industry is that there will be a desire to privatise the open-cast coal mining. That would be resisted by the whole of the mining industry, and rightly so.

The reason that there is a great deal of coal on the ground is that the Government have solved the energy crisis by mass unemployment. If there is no demand for energy, there will be an accumulation of unused coal on the ground. It is absolutely essential to maintain a strong and powerful mining industry.

I turn to the gas industry. The British Gas Corporation was established not by a Labour Government, but by the Conservative Government headed by the right hon. Member for Sidcup (Mr. Heath). The BGC converted Britain to natural gas from town gas. Pipelines were built and contracts that were highly favourable to our consumers were signed with oil companies. We have heard much talk of monopsony in the debate. During the past 10 years world gas prices have risen 300 per cent. in real terms. The 550,000 British industrial consumers have had a price increase of 25 per cent.—not 300 per cent. The 15 million domestic consumers have had a 25 per cent. reduction in real gas prices simply because British Gas has been able to buy all the gas from the oil companies.

The introduction of oil and gas for premium purposes was phased to correspond with supply. There has been a careful depletion policy for the security of supplies. There has been successful exploration as a North Sea partner and on-shore at Wytch Farm, which is now to be sold. British

Gas is highly profitable to the Revenue in an age when the Government say money is supposed to be so important. The BGC has immense skill and expertise.

I wish to show the safety record of British Gas in the installation of gas equipment. The published figures for domestic installations reveal that if consumers choose private contractors to install their gas appliances the risk of accidents is 15 times greater for gas fires, 30 times as great for water heaters and 36 times as great from faulty workmanship. The Government are perfectly happy to sell off to private "cowboys" and to disregard the safety factors which make British Gas so highly regarded.

If the assets are sold as a forced sale with a value of £300 million to £500 million, they will appreciate substantially as gas prices rise. The oil companies are now demanding from British Gas a 36 per cent. increase. Once they have the right to hold the British consumer to ransom, they can impose that 36 per cent. increase and further rapidly deplete the fields. There will also be increased exports of gas for short-term gain and a loss of revenue abroad. The problem of shared pipelines poses serious problems for the British Gas Corporation.

When the previous Conservative Government were in power they handed over enormous blocks of North Sea oil. That damaged our chances of developing the supplies fully. The Government granted 46-year licences without capacity to recall them for renegotiation. They introduced such poor petroleum revenue tax provisions that the Public Accounts Committee estimated that £1 billion was lost.

The last Labour Government set up—it was started by my right hon. Friend the Member for Chesterfield (Mr. Varley) and continued by myself—BNOC. We uprated the petroleum revenue tax, developed the participation oil scheme and arranged for BNOC to advise us in our conduct of relations with the multinationals, which are powerful organisations. BNOC now controls two-thirds of oil disposal and 70 per cent. of oil is delivered while only 40 per cent. in general goes to refineries. The BNOC is a partner in 45 per cent. of the operations. Its profits are over £300 million this year and are due to rise to £500 million.

Enormous revenues will accrue to the State as a result of the oil policy of the previous Labour Government. Let us not think that to have private capital it is necessary to have private ownership. BNOC floated the most successful Britoil issue as part of a 100 per cent. company. Do not tell us that the PSBR requires that ownership because BNFL, which is 100 per cent. State owned, has never been within the PSBR. It would be perfectly possible for BNOC to be exempted.

BNOC is now to be split. Its advisory role has gone and its exploration side, which used to be the most profitable, is to be made a private majority holding. The trading side, which is most uncertain, is to remain within the State area. I warn the House of the value of the assets that we are being invited to alienate. I invite the House to consider what has happened to the price of oil over the past 10 or 11 years. In 1970 oil was $1·80 a barrel and today it is $32·50. In real terms, allowing for inflation, the real price of oil has increased 613 per cent. in 11 years.

The recession has slowed down the growth in the oil price. However, does any hon. Member, when looking at the Middle East and considering the consequences in Saudi Arabia should one prince die, appreciate the effect on the supply of oil? Can anyone be sure that the oil assets to be sold next year will not appreciate by the same percentage in the next 10 years, with all the speculative gain to be handed over to those who buy them? That is why we are against this policy. We have a responsiblity to ensure that we do not deplete the oil too rapidly.

The forecast consumption of oil in the 1980s is about 90 million tonnes a year. Production could rise to 150 million tonnes a year. If we deplete rapidly, there will be enormous profits for the oil companies but the oil will run out in 30 years instead of 50 years. Any OPEC oil Minister will say that the oil that is left in the ground will form the true future assets that will be developed later and used for industrial development.

The Secretary of State talked about wasteful flaring in 1979. He knows—if he does not, perhaps his office will tell him—why flaring increased in 1979. With the disappearance of Iranian oil it was necessary to go for maximum North Sea production. The right hon. Gentleman was badly briefed or he poorly understood the brief that was given to him.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

It is the right hon. Gentleman who is poorly briefed. He said on some radio or television programme, I am not quite sure which—[Interruption.] I am not sure whether it is being alleged that he tells one story on one programme and another on another programme. He said to the British people—this was untrue and he knew it so to be—that the sale of BNOC would remove controls on flaring. He made absurd suggestions to the effect that the situation would be rather like that which prevails in Iran if we were to sell BNOC. He knows that the control of flaring had nothing to do with the ownership of BNOC.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The right hon. Gentleman has been caught out and he does not put it right by misquoting me on radio or television. The purpose of setting up the gas-gathering pipeline committee was to collect and to use the gas that would otherwise be flared. When I warned that by cancelling the gas-gathering pipeline we would burn gas that we needed—

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

No. I have already given way on several occasions and I have many more issues to raise.

The right hon. Gentleman has never told us who he thinks will buy the oil and gas. The idea is floated that grannies will go to post offices and trade in their pensions for a few oil-linked bonds. I will tell the right hon. Gentleman who will buy what he is about to sell. Our oil will be bought by American multinationals. They will want to buy because they cannot rely on Saudi Arabian supplies given the uncertainty in the Middle East. Secondly, the oil will be bought by Common Market countries which have little oil of their own. They will invest heavily in the North Sea. Thirdly, the Arabs, with billions of petrodollars at their disposal, will buy the North Sea for themselves.

The right hon. Gentleman has misled the House. He has read an article that appeared in the Financial Times by Sam Brittan and he seems to think that if he gives away or sells oil-linked bonds the oil will be ours. The oil will be bought by those who need it and who have the resources to buy it. They will then be able to control a great deal of the disposal of the oil.

Our oil refineries will be further threatened. We have seen the closure of the Isle of Grain refinery and the closure of Ellesmere Port. Only 40 per cent. of the oil is refined in the United Kingdom. We are importing refined products already. We need downstream development. More refining should be done in the United Kingdom. We want the jobs that would go with it as we need the jobs associated with the gas-gathering pipeline.

The right hon. Gentleman should tell the House more candidly the true nature of the multinationals' role. Winston Churchill was ahead of OPEC in his purchase of an oil company. Why is it that the OPEC countries—for example, Saudie Arabia, Iran, Iraq, Qatar, Nigeria, Mexico, Norway, Denmark and France—have State oil companies? They know what the right hon. Gentleman will not admit, that security of supply is of critical importance to every modern industrial country.

When I heard the right hon. Gentleman reciting his statutory powers and asking us to believe that no oil could be found, dug up, landed and exported without his permission, he reminded me of King Canute with the Royal Charter, sitting by the Channel and saying that he could control it, although allegedly in the story he said that he could not do it. The statutory powers of the Secretary of State for Energy mean absolutely nothing if he does not have a powerful public sector to advise and defend him.

The right hon. Gentleman never mentioned the role of the Common Market. Under the Treaty of Rome, as he must know well, he will have no powers to prevent the sale of those assets to any Common Market country. When I was Secretary of State for Energy three years ago, the Commission challenged under the Treaty the landing right for oil that we insisted on and that the right hon. Gentleman said he would maintain. Viscount Davignon challenged the right of British Gas to have a monopoly of gas operations here. The Common Market tried to force refinery closures. The plain truth is that the right hon. Gentleman is putting our oil on the market. It will be bought primarily by Common Market countries which do not have their own oil.

Before I come to my proposals, I shall summarise what the right hon. Gentleman is doing. He is threatening our supplies, pushing up the price, undermining our depletion policy, costing us jobs, losing us revenue and threatening the money that we need for reindustrialisation. The reason why he is doing it is evident. The other part of the policy is to sell our assets for private profit, including the National Freight Company, British Airways, British Aerospace and Cable and Wireless. On what will the Government spend the money? If they raise £2 billion, that will pay only one fifth of their Trident nuclear programme. That is where the money that they raise may go.

As a major energy producer, this country needs a long-term, integrated national energy policy to safeguard—[Laughter.] The hon. Member for Enfield, North (Mr. Eggar) laughs, but there is not an oil producer in the world which has not already worked out such a policy. We need to safeguard and develop our reserves, harmonise investment and use the revenues to build up manufacturing industry so that, when the oil runs out, there will be an industry to sustain our living standards. We should re-establish the Energy Commission, provide the necessary statutory powers, reacquire without compensation all the assets to be alienated by the Government—

Several hon. Members:


Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. It is clear that the right hon. Gentleman wants to continue his speech without giving way.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

It can hardly be a point of order at this stage.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

That is the policy of the Labour Party on the question of the reacquisition of the assets. Both at the TUC congress and the Labour Party conference last year, when the right hon. Member for Plymouth, Devonport (Dr. Owen) was our energy spokesman, we—[Interruption.] The right hon. Member has move, to what he thinks are richer fields, but at any rate as recently as last year he warmly welcomed what he called the new and exciting policies contained in the document that called for the reacquisition of public assets without compensation. That is the policy of the Labour Party.

I further add, as the right hon. Gentleman properly raised the matter in his speech, that it is the long-term policy of the Labour Party to bring all oil into public ownership, including BP. That is the commitment that I accepted as Secretary of State for Energy. Many of the OPEC countries converted the oil companies from being concessionaires to being contractors. As a result, they own the reserves, have the oil supplies and can guarantee that they will be used.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The hon. Gentleman will forgive me if I do not give way. I am anxious to respond to the remarks of the hon. Member for Leigh and others. I wish to present the alternative view that we support, and particularly to deal with a maiden speech in which a clear appeal was made by a new Member for a return to full employment and the development of our services.

We shall establish an investment fund, built up from North Sea revenues, money from the financial institutions and defence savings. It will be devoted to energy investment, to downstream investment in petrochemicals and manufacture, to the development of public investment with public accountability and appropriate public ownership, and to the development of essential services in housing, schools and hospitals.

Anyone who talks about full employment, knowing that we shall inherit a total of 5 million people out of work, without contemplating the enormity of the investment required to return to full employment is simply misleading the public. As our strategy has made clear, this will be buttressed by price controls, exchange controls, the planning of our trade, and withdrawal from the Common Market which is a threat to the development of those strategies.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy

The right hon. Gentleman has made a number of very important statements. As I understand it, he has committed his party to renationalisation without compensation of all assets that are privatised and to the total nationalisation of the oil companies and a number of other things. Is that the position of the Opposition? Is that the policy of his right hon. Friends on the Opposition Front Bench?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The right hon. Gentleman asked me to tell the House in winding up the debate what is the policy of the Labour Party on these matters. Every one of the policies that I have cited today is a published statement of the Labour Party to which I as a Member of Parliament subscribe and which I support.

Finally, I believe that the Government proposals are a massive betrayal of our national interest, against which the activities of Burgess, Maclean, Philby and Blunt are very minor matters. That is the strength of our feeling on this matter. I hope that those who have seen in North Sea oil a chance to escape from the recession and the tragedy of our destroyed manufacturing industry will help us to protect the nation's future. It is no source of pride to any Member of the House that in the past week British Leyland workers have been blackmailed into accepting a wage cut while in the City of London shares in Cable and Wireless, which was built up by public money, were being sold at a premium of 37p.

I do not believe that the hon. Member for Enfield, North is in any way doctrinaire. He would not understand a doctrine if it were shown to him. If he were shown the Ten Commandments, he would close five of them. We are witnessing from the Government class politics of a kind not seen in Britain for 50 years. We shall fight that policy. We shall campaign on the alternative that I have described and we shall reverse the Government's policy in favour of constructive policies for our people.

The people of Britain, the oldest industrial country in the world, deserve better than they are getting from the present Cabinet. We shall ensure that they get a system of control of their assets that allows us to develop our country for the benefit of ourselves and our children.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty 9:30 pm, 10th November 1981

I join the right hon. Member for Bristol, South-East (Mr. Benn) and others who have offered congratulations to the hon. Member for Croydon, North-West (Mr. Pitt) on his maiden speech. The hon. Gentleman is indeed acceptable to the House. However, having listened to the debate I am sure that he will find it extremely difficult to go into the Lobby with the right hon. Gentleman. We are, however, in some difficulty. For example, for whom does the right hon. Gentleman speak? Is he speaking for himself, the Labour Party, the national executive of the Labour Party or is he just having a general kick-around?

I congratulate the right hon. Member for Bristol, SouthEast—I get my priorities right—on overcoming the serious illness that laid him low earlier this year. I suggest that we also welcome his return to the Opposition Front Bench.—[HON. MEMBERS: "Hear, hear."] I am sure, Mr. Speaker, that you will agree that the right hon. Gentleman has lost none of his eloquence or charm, but he said nothing that any other member of the Shadow Cabinet could not have said.

Why is the right hon. Gentleman there? We all know that the Leader of the Opposition has had a rough week. My goodness, opinion polls and flag poles have not been his best moment. But we can understand his problems. It is not flattering for a Leader of the Opposition to trail a miserable third in the opinion polls. That hardly suggests that there is any great enthusiasm in the country either for his policies or his generalship. Perhaps I should not call him a general, becuase with the current rate of desertions from his party, who would want to be be a general?

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

At least I am being more flattering to the right hon. Gentleman than some of his hon. Friends have been. Obviously, he does not think much of his Front Bench support when he decides to recall the right hon. Member for Bristol, South-East.

It is good and right that the right hon. Gentleman is there. It is right that the country should know exactly what the Oppostion Front Bench thinks and says. Whatever criticism we may make of the right hon. Member for Bristol, South-East, we can never accuse him of being anything other than frank. He has certainly been frank tonight. His former threats to nationalise North Sea resources are as real today as they ever were. It is little wonder that so many of his erstwhile friends have decided to join another party.

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

The right hon. Gentleman was rightly concerned about the "Britishness" of the new BNOC exploration company. Our aim is to establish a dynamic new British exploration company in which the British public will have a real share. We shall ensure that the new company's articles of association contain such safeguards as are necessary to prevent a takeover bid that would not be in the national interest.

The right hon. Member for Leeds, South (Mr. Rees) and the hon. Member for Dunfermline (Mr. Douglas) raised several points. The right hon. Member for Bristol, South-East was a member of a Labour Government who sold no less than 17·3 per cent. of BP shares in 1977, and he was also a member of an earlier Labour Government who reduced their holding in BP to 48 per cent.—a holding below the 51 per cent. that has been so close to the right hon. Gentleman's heart. We must assume that that was one of those occasions on which he found that collective responsibility was acceptable.

My right hon. Friend the Secretary of State has described the Government's plans for the North Sea oil interests of the BNOC and the BGC. He has set out the facts—facts that answer many of the criticisms levelled against our proposals. It is unfortunate that Labour Members have chosen to ignore those facts, and have persisted in pursuing ill-founded arguments.

Much discussion has centred on the BNOC, so let me begin there. The legislation that we shall introduce has straightforward objectives. It will allow the introduction of private capital into the corporation's oil-producing business, the transfer of that business from the public to the private sector and the creation of a new, independent oil company based on the North Sea. Our purpose is to fulfil the pledge given to the British people that they should have the chance to share directly in the oil wealth of the country. My hon. Friend the Member for Enfield, North (Mr. Eggar) rightly suggested that there should be the widest possible distribution. Of course we agree with what he said. By doing that we shall remove another large area of unnecessary State involvement in the economy.

My hon. Friend the Member for Exeter (Mr. Hannam) supports reliance on private capital rather than on the Treasury. The defenders of State intervention and State monopoly would like the Government to have a finger in every pie. They wish to preserve and expand the public sector, with its stifling influence and inevitable inefficiencies. An industry that is successful—as is the BNOC—is thought to vindicate all those that are not.

We disagree. There is no room for State ownership in industries that are already doing a good job. The oil industry is a classic example. It was private enterprise—the right hon. Member for Bristol, South-East should realise it, because he was Secretary of State during much of the time when the first oil came ashore, and thereafter—that discovered the potential of the North Sea, and it was private capital that brought the oil ashore. The private sector oil companies have invested billions of pounds in the United Kingdom, both offshore and onshore. They have created many thousands of jobs—there are at present more than 100,000 jobs connected with the North Sea—and they have paid fair wages and fair taxes in support of the public sector. Above all, they have made this country self-sufficient in oil, working in one of the most hostile environments in the world. Yet we are supposed to believe—if we listen to the right hon. Gentleman—that all this time the private sector has been working against the national interest.

The private sector continues to be the decisive factor in the North Sea. Indeed, it virtually is the North Sea. [Interruption.] Opposition Members would laugh on the other side of their faces if the jobs in their constituencies were not there—jobs that are provided by the private sector. It provides 90 per cent. of current oil production and holds nearly 80 per cent. of licensed exploration acreage. It is by far the major source of our oil wealth.

My hon. Friend the Member for Bedford (Mr. Skeet) reminded the House of his participation in the Petroleum and Submarine Pipe-lines Bill 1975. Although the amendment to which he referred was not accepted at the time, he will be delighted that we are now going some way towards doing what he wished.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

As private enterprise has been so successful, why does my hon. Friend not follow the French experiment—CFP and Elf Aquitaine both have private investment—and allow private investment in the parent company, the BNOC?

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

I remind my hon. Friend that the object of the parent company is to ensure our security of supply and to act as the trading arm. I shall say more about that later.

The BNOC's equity share of our oil resources is relatively small, representing no more than the production of one medium-sized oilfield. Considering that we have 17 fields in production, it is nonsense to talk of selling the North Sea, let alone the nation's birthright.

We see no reason why the BNOC's oil-producing business should remain in the public sector. On the contrary, there are good reasons why it should be trasferred to the private sector. The corporation has been in existence for nearly six years. In that time many teething problems have been overcome and it is now an established oil company, with skills and potential. I, too, pay tribute to the corporation and its staff. It has had three distinguished chairmen, Lord Kearton, Mr. Utiger and Mr. Shelbourne. Each in his own way has made a vital contribution. I know the high esteem in which the right hon. Member for Bristol, South-East holds Lord Kearton, and it is significant that Lord Kearton feels that the steps that we are taking are right and are the best way of furthering our interests in the North Sea.

After a period of consolidation, the corporation is rightly looking to expand. In common with any other oil company in the same position, it wants to build on success and to see its potential fully realised. That calls for investment and the freedom to seize opportunities when they arise.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

The Minister rightly paid tribute to the staff of the BNOC, and we have come to admire their expertise. But the hon. Gentleman was asked for an assurance about the future of those who have made their homes in Glasgow. Can he give that assurance?

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

I am coming to that. There is no reason why the future of those people should not be extremely rosy. The new company will have a great future and will have all the enthusiasm of the private sector. The hon. Gentleman needs only to look around Scotland to see the jobs that have already been created by the private sector. Those jobs will be added to by the new company.

While the BNOC remains in the public sector its financing requirements must compete with other demands on the public purse. Not all those demands can be satisfied. There are inevitable financial constraints, as well as the statutory framework imposed on the corporation by the previous Government, that cut across its commercial freedom. Clear of the public sector, the new company will be backed by individual investors and be able to borrow freely and fulfil its prospects.

I regret that the Opposition have not welcomed our intention to remove the British Gas Corporation's statutory purchasing privileges and to curtail its monopoly of supply. That is a highly beneficial step in many ways, but I shall mention just two of the benefits. First, we shall encourage both exploration for, and development of, our gas reserves. For too long the positive and vigorous activity in the search for oil has contrasted pitifully with the air of stagnation surrounding gas.

Licensees have shown no great interest in exploring for gas. Where they have found gas there has often been no development. There can be no doubt that a major factor in this negative attitude has been the existence of an effective monopoly in the purchase of gas. Licensees often take the view that the price offered by British Gas is too low. We shall remove that inhibition, because British Gas will henceforth be bidding in a competitive market, and licensees dissatisfied with the British Gas price will be free to explore the alternative of marketing their gas direct. Sometimes, it is suggested, British Gas has not wished to offer a price, preferring to take other gas first and forcing the licensees to postpone development. That, too, will change. British Gas will no longer be in a position to hold back developments, because if the corporation does not wish to purchase the gas there will be the opportunity to find others who do. Indeed, gas that might have been left undeveloped may now be produced as a result of our proposals.

Photo of Mr Michael English Mr Michael English , Nottingham West

It is important that the hon. Gentleman should state his view of the Government's policy. He will recall that both gas and electricity have been directed to increase their prices to consumers by more than the rate of inflation year by year.

The Minister will agree that the implicit corollary of Lord Denning's judgment that prices cannot be reduced for political reasons is that prices cannot be increased for political reasons. Will he therefore reduce the price of gas and electricity to the consumer?

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

No, I will not. [HON. MEMBERS: "Why not?"] "Secondly, by opening up the gas market we shall give firms the chance to obtain the gas that they require. At present, a number of would-be gas consumers cannot get supplies from the BGC, and they have nowhere else to turn. We shall be giving them the opportunity to obtain private supplies of gas. Industry has been concerned that the prices charged by the BGC have been too high. Henceforth, prices will be set in a competitive environment, and a firm that thinks the BGC price excessive will be free to look elsewhere.

Sometimes it is suggested that this freeing of the market will lead to gas being used in applications that do not realise the full value of gas. On the contrary, it is where there is a monopoly that the danger of misallocation arises, because market forces are unable to operate. It is because of the monopoly that British Gas has had to operate a policy of attempting to select the uses best suited for gas. We shall free industry to signal to the market place the value that it ascribes to gas. This will ensure that gas flows to the markets where it has the highest value. At present, British Gas has to guess how the market would have operated given the chance. We shall be much more confident that we are making the best use of our gas if we stop guessing and let the market work.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

If the Minister is arguing that we should stop guessing about the future supply of gas—presumably that from the southern basin—can he give a time scale by which he expects such gas to come on the market?

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

The hon. Gentleman knows perfectly well that in a debate of this kind it is impossible to give an estimate of a time scale. One can never win. There is little doubt that there is gas in the southern basin which will certainly be searched for and, we hope, found and won. This would not have happened under monopolistic and monopsonistic conditions.

Allowing competition in the gas market is, therefore, our primary aim in breaking the BGC's purchasing monopoly and allowing private supplies to industrial consumers. This will ensure that the gas industry, both onshore and offshore, is structured to a much greater extent than at present by market forces. It will also allow freedom of choice for the industrial consumer, and, most important of all, it will ensure that our valuable heritage of North Sea gas is used to the greatest possible benefit of the nation.

My hon. Friend the Mernber for Edingburgh, South (Mr. Ancram), the hon. Member for Dunfermline, the hon. Member for Rother Valley (Mr. Hardy), and the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) all mentioned the gas-gathering pipeline, and all, in their own little ways, had a dig at me. I shall not duck the question. What they all failed to point out was that there was no indication at any time that the Government were prepared to finance the operation by more than the 30 per cent. equity holding that we envisaged for the British Gas Corporation. When we were unable to interest the private companies in coming in, it meant that we would be faced with a possible underwriting of £2·7 billion. The Government felt that that was not justified, in view of the fact that the vast majority of the gas would be brought ashore in the same way as oil had been brought ashore.

The Government have reaffirmed today our commitments on major aspects of coal policy. We shall be introducing in the near future a coal industry Bill that will increase the existing statutory limit on the board's borrowing and enable continuing grant support for its operations and revenues.

In this context I remind the House, and especially Labour Members, of the support that the Conservative Opposition gave to the Labour Government, when they were in office, in their measures to provide continuing support for the coal industry. In that regard, I pay tribute to the hon. Member for Midlothian (Mr. Eadie) for the work that he has done for the industry over the years. I am sure that he will readily acknowledge the support that he received from the Conservative Opposition.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

I am grateful to the Minister for his comments. As his right hon. Friend the Secretary of State for Energy is sitting beside him, perhaps he will get him to understand that the Government are not giving the coal mining industry a subsidy of £1,100 million. Borrowings from the Public Works Loan Board are made at a certain rate of interest. Will the Minister make it clear to the House that, by however much the Government claim to be supporting the mining industry, his right hon. Friend is wrong and misled the House in saying that the coal industry has received £1,100 million by way of subsidy?

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

I think that my right hon. Friend dealt very effectively with that question this afternoon. But I can confirm to the hon. Gentleman that the external financing limit for 1981–82 has risen from £886 million to £1,117 million, and that grant payments to support the board's revenue position have risen from £250 million to £550 million. My right hon. Friend made that clear this afternoon.

The industry faces real problems, but we are encouraged that those involved in the coal industry are demonstrating their determination to tackle them. The need to continue to progress is clear—to sustain recent productivity gains, to improve efficiency further, to reduce losses and to move towards greater competitiveness.

There are real opportunities for the industry to take. Industrial and commercial markets in particular provide new openings provided that the coal industry is reliable and competitive. Coal will maintain its vital role in the economic and industrial life of the nation only if the industry can produce the coal that we need efficiently and at competitive prices. Whether present customers and potential new customers choose to burn coal will depend almost entirely on pricing signals and on confidence in the industry's reliability and in its long-term ability to produce coal efficiently and competitively.

I very much hope that the industry will be able to put itself in a position to make the most of these opportunities. An efficient, competitive, financially sound coal industry can also be a successful and prosperous one, with good employment opportunities. Our aim is to see the development of a successful coal industry that will be able to provide those good employment opportunities, as well as supporting the competitive position of British industry.

Sometimes we may forget that when the 1945 Labour Government embarked on their programme of nationalisation they did so not just for doctrinal reasons but to help to rescue many of these industries from the ravages of war. Little did they think that in doing so they would create, for themselves and their successors, great monsters, super-powerful against all but the most courageous Governments, accountable only in a most superficial way and certainly not comparable in terms of accountability with the average private sector company, which must withstand the scrutiny of its shareholders regularly The dangers of an inbuilt inefficiency are immense.

I should be surprised if even the right hon. Member for Bristol, South-East was satisfied that the nationalised industries for which he was accountable, and others, were as accountable as he would have wished. This afternoon my right hon. Friend referred to some of those problems. So now we are putting into practice our philosophy, which is that the State should disengage from areas in which there is scope for the private sector to provide the investment.

It is our belief that the BNOC is now at a stage in its development at which not to release it from the strictures of Government control would be a serious error. The distinguished former chairman of the board, Lord Kearton, believes that our proposals will go a long way, as my right hon. Friend said, to give the North Sea a new lease of life. He should know what he is talking about, because he has had to put up with the meddling of the right hon. Gentleman from time to time.

The Opposition's amendment is confused and misconceived. Private profit is certainly not being put before national interest. Indeed, private profit is an essential part of the national interest. We have only to look back over the last decade to see that it was from the private sector that we, the nation, reaped the reward of the private investment that it made in the North Sea. We reaped that through the normal tax system. If Lord Kearton has one criticism of the right hon. Gentleman, it is that his Government undertaxed the oil industry. It took a Conservative Government—for whom it was much more difficult to do—to tax the oil industry as perhaps it had never been taxed before.

A Government who are proposing to support the coal industry to the tune of £550 million and to extend its external financing limit to £1,117 million can hardly be accused of creating great uncertainty in that industry, and the suggestion that our proposals wreck any prospect of having an overall energy policy makes the feeble attempts of our predecessors to have any energy policy look even more pathetic.

Let us look for a moment at the inheritance that was handed to us by the former Secretary of State for Energy. It was a nuclear industry weak-kneed and crumbling because of the neglect of the right hon. Gentleman, and we had to start from scratch to rebuild morale. It is now regenerated by the tonic of an assured ordering programme. It was a coal industry for which we had strived to give constructive help during our years in Opposition, but where again major problems had been left over.

It was a North Sea oil industry where companies' spending plans were being held back and some reassessed altogether for fear of what the right hon. Gentleman and his right hon. Friends might do if they were re-elected in 1979. Development expenditure was increased by £160 million between 1976 and 1979, whereas in 1979–80 the increase was more than doubled, to £330 million. Happily, these figures have risen now. We have had 44 starts in new exploration wells in 1980, and 54 in 1981—a 20 per cent. increase year on year. The Opposition left behind a shambles of an energy policy, which we have tried to build upon and which now, we hope, we shall see succeed. I ask my right hon. and hon. Friends to oppose the amendment vigorously.

Question put, That the amendment be made:

The House divided: Ayes 249, Noes 298.

Division No. 1][10.00 pm
Abse, LeoDunwoody, Hon Mrs G.
Adams, AllenEadie, Alex
Allaun, FrankEdwards, R. (W'hampt'n S E)
Anderson, DonaldEllis, R. (NED'bysh're)
Archer, Rt Hon PeterEllis, Tom (Wrexham)
Ashley, Rt Hon JackEnglish, Michael
Ashton, JoeEnnals, Rt Hon David
Atkinson, N. (H'gey,)Evans, Ioan (Aberdare)
Bagier, Gordon A.T.Evans, John (Newton)
Barnett, Guy (Greenwich)Ewing, Harry
Barnett, Rt Hon Joel (H'wd)Faulds, Andrew
Benn, Rt Hon TonyField, Frank
Bennett, Andrew(St'kp'tN)Fitch, Alan
Bidwell, SydneyFitt, Gerard
Booth, Rt Hon AlbertFlannery, Martin
Boothroyd, MissBettyFletcher, L. R. (Ilkeston)
Bottomley, Rt HonA.(M'b'ro)Fletcher, Ted (Darlington)
Bradley, TomFoot, Rt Hon Michael
Bray, Dr JeremyFord, Ben
Brown, Hugh D. (Provan)Forrester,John
Brown, R. C. (N'castle W)Foulkes, George
Brown, Ronald W. (H'ckn'y S)Fraser, J. (Lamb'th, N'w'd)
Brown, Ron (E'burgh, Leith)Freeson, Rt Hon Reginald
Buchan, NormanGarrett, John (Norwich S)
Callaghan, Rt Hon J.Garrett, W. E. (Wallsend)
Callaghan, Jim (Midd't'n&P)George, Bruce
Campbell,IanGilbert, Rt Hon Dr John
Campbell-Savours, DaleGolding,John
Canavan, DennisGrant, George(Morpeth)
Cant, R. B.Grant, John (Islington C)
Carmichael, NeilHamilton, W. W. (C'tral Fife)
Carter-Jones, LewisHardy, Peter
Clark, Dr David (S Shields)Harrison, Rt Hon Walter
Cocks, Rt Hon M. (B'stol S)Hart, Rt Hon Dame Judith
Cohen, StanleyHattersley, Rt Hon Roy
Concannon, Rt Hon J. D.Healey, Rt Hon Denis
Conlan, BernardHeffer, Eric S.
Cook, Robin F.Hogg, N. (E Dunb't'nshire)
Cowans, HarryHomeRobertson, John
Cox, T. (W'dsw'th, Toot'g)Homewood, William
Craigen, J. M. (G'gow, M'hill)Hooley, Frank
Crawshaw, RichardHoyle, Douglas
Crowther, StanHuckfield, Les
Cryer, BobHughes, Mark(Durham)
Cunliffe, LawrenceHughes, Robert (Aberdeen N)
Cunningham, G. (Islington S)Hughes, Roy(Newport)
Cunningham, Dr J. (W'h'n)Janner, Hon Greville
Dalyell, TamJay, Rt Hon Douglas
Davidson, ArthurJohn, Brynmor
Davies, Rt Hon Denzil (L'lli)Johnson, James (Hull West)
Davies, Ifor (Gower)Johnson, Walter (Derby S)
Davis, Clinton (Hackney C)Jones, Rt Hon Alec (Rh'dda)
Davis, T. (B'ham, Stechf'd)Jones, Barry (East Flint)
Deakins, EricJones, Dan (Burnley)
Dean, Joseph (Leeds West)Kaufman, Rt Hon Gerald
Dempsey, JamesKerr, Russell
Dewar, DonaldKilfedder, James A.
Dixon, DonaldKilroy-Silk, Robert
Dobson, FrankLambie, David
Dormand, JackLamborn, Harry
Douglas, DickLamond,James
Douglas-Mann, BruceLeadbitter, Ted
Dubs, AlfredLeighton, Ronald
Duffy, A. E. P.Lestor, Miss Joan
Dunnett, JackLewis, Arthur (N'ham NW)
Lewis, Ron (Carlisle)Robertson, George
Lofthouse, GeoffreyRobinson, G. (Coventry NW)
Lyon, Alexander(York)Rodgers, Rt Hon William
Lyons, Edward (Bradf'dW)Rooker, J. W.
Mabon, Rt Hon Dr J. DicksonRoper, John
McCartney, HughRoss, Ernest (Dundee West)
McDonald, DrOonaghRowlands, Ted
McElhone, FrankRyman, John
McGuire, Michael(Ince)Sandelson, Neville
McKay, Allen(Penistone)Sever, John
McKelvey, WilliamSheerman, Barry
MacKenzie, RtHon GregorSheldon, Rt Hon R.
Maclennan, RobertShore, Rt Hon Peter
McMahon, AndrewShort, Mrs Renée
McNally, ThomasSilkin, Rt Hon J. (Deptford)
McNamara, KevinSilkin, Rt Hon S. C. (Dulwich)
McTaggart, RobertSilverman, Julius
McWilliam, JohnSkinner, Dennis
Magee, BryanSmith, Rt Hon J. (N Lanark)
Marks, KennethSnape, Peter
Marshall, D(G'gowS'ton)Soley, Clive
Marshall, DrEdmund (Goole)Spearing, Nigel
Marshall, Jim (Leicester S)Spriggs, Leslie
Martin, M(G'gowS'burn)Stewart, Rt Hon D. (W Isles)
Mason, Rt Hon RoyStoddart, David
Maxton, JohnStott, Roger
Maynard, Miss JoanStrang, Gavin
Meacher, MichaelStraw, Jack
Mellish, Rt Hon RobertSummerskill, HonDrShirley
Mikardo,IanTaylor, Mrs Ann (Bolton W)
Millan, Rt Hon BruceThomas, Dafydd (Merioneth)
Miller, Dr M. S. (E Kilbride)Thomas, Jeffrey(Abertillery)
Mitchell, R.C. (Soton Itchen)Thomas, DrR. (Carmarthen)
Morris, Rt Hon A. (W'shawe)Thorne, Stan (Preston South)
Morris, Rt Hon C. (O'shaw)Tilley, John
Morris, Rt Hon J. (Aberavon)Tinn, James
Moyle, Rt Hon RolandTorney, Tom
Mulley, Rt Hon FrederickVarley, Rt Hon Eric G.
Newens, StanleyWainwright, E. (Dearne V)
Oakes, Rt Hon GordonWatkins, David
Ogden, EricWeetch, Ken
O'Halloran, MichaelWellbeloved, James
O'Neill, MartinWelsh, Michael
Orme, Rt Hon StanleyWhite, J. (G'gow Pollok)
Owen, Rt Hon Dr DavidWhitehead, Phillip
Palmer, ArthurWhitlock, William
Park, GeorgeWigley, Dafydd
Parker, JohnWilley, Rt Hon Frederick
Parry, RobertWilliams, Rt Hon A. (S'sea W)
Pavitt, LaurieWilson, Gordon (Dundee E)
Pendry, TomWilson, William (C'try SE)
Powell,Raymond(Ogmore)Winnick, David
Prescott, JohnWoodall, Alec
Price, C. (Lewisham W)Woolmer, Kenneth
Race, RegWrigglesworth,Ian
Radice, GilesWright, Sheila
Rees, Rt Hon M (Leeds S)Young, David (Bolton E)
Roberts,Albert(Normanton)Tellers for the Ayes:
Roberts, Allan (Bootle)Mr. George Morton and Mr. Frank Haynes.
Roberts, Ernest (Hackney N)
Roberts, Gwilym (Cannock)
Adley, RobertBenyon, W.(Buckingham)
Aitken, JonathanBest, Keith
Alexander, RichardBevan, David Gilroy
Alison, Rt Hon MichaelBiggs-Davison, Sir John
Amery, Rt Hon JulianBlackburn,John
Ancram, MichaelBlaker, Peter
Arnold, TomBody, Richard
Aspinwall, JackBonsor, SirNicholas
Atkins,Robert(PrestonN)Boscawen, HonRobert
Baker, Kenneth(St. M'bone)Bottomley, Peter(W'wichW)
Baker, Nicholas (N Dorset)Bowden, Andrew
Banks, RobertBoyson, Dr Rhodes
Beaumont-Dark, AnthonyBraine, SirBernard
Bell, SirRonaldBright, Graham
Bennett, SirFrederic(T'bay)Brinton, Tim
Benyon, Thomas(A'don)Brittan, Rt.Hon.Leon
Brooke, Hon PeterGray, Hamish
Brotherton, MichaelGreenway, Harry
Brown, Michael(Brigg&Sc'n)Griffiths, E. (B'ySt. Edm'ds)
Browne, John(Winchester)Griffiths, Peter Portsm'th N)
Bruce-Gardyne, JohnGrist, Ian
Bryan, Sir PaulGrylls, Michael
Buchanan-Smith, Rt. Hon. A.Gummer,JohnSelwyn
Buck, AntonyHamilton, HonA.
Budgen, NickHamilton, Michael (Salisbury)
Bulmer, EsmondHampson, Dr Keith
Burden, SirFrederickHannam, John
Butcher, JohnHaselhurst, Alan
Cadbury,JocelynHastings, Stephen
Carlisle, Kenneth(Lincoln)Hawkins, Paul
Carlisle, Rt Hon M. (R'c'n)Hawksley, Warren
Chalker, Mrs.LyndaHayhoe, Barney
Channon, Rt. Hon. PaulHeath, Rt Hon Edward
Chapman, SydneyHeddle,John
Churchill, W.S.Henderson, Barry
Clark, Hon A. (Plym'th, S'n)Heseltine, Rt Hon Michael
Clark, Sir W. (Croydon S)Higgins, Rt Hon Terence L.
Clarke, Kenneth (Rushcliffe)Hill,james
Clegg, Sir WalterHogg, Hon Douglas(Gr'th'm)
Cockeram, EricHolland, Philip(Carlton)
Colvin, MichaelHooson, Tom
Cope, JohnHordern, Peter
Cormack, PatrickHowe, Rt Hon Sir Geoffrey
Corrie, JohnHowell, Rt Hon D. (G'ldf'd)
Costain, Sir AlbertHowell, Ralph (N Norfolk)
Cranborne, ViscountHunt, David (Wirral)
Critchley,JulianHunt, John(Ravensbourne)
Crouch, DavidHurd, Hon Douglas
Dean, Paul (North Somerset)Irving, Charles(Cheltenham)
Dickens, GeoffreyJenkin, Rt Hon Patrick
Dorrell, StephenJessel, Toby
Dover, DenshoreJohnsonSmith, Geoffrey
du Cann, Rt Hon EdwardJopling, Rt Hon Michael
Dunn, Robert (Dartford)Joseph, Rt Hon Sir Keith
Durant, TonyKaberry, SirDonald
Dykes, HughKellett-Bowman, MrsElaine
Eden, Rt Hon Sir JohnKimball, SirMarcus
Edwards, Rt Hon N. (P'broke)King, Rt Hon Tom
Eggar, TimKitson, Sir Timothy
Elliott, SirWilliamKnight, Mrs Jill
Emery, PeterKnox, David
Eyre, ReginaldLamont, Norman
Fairbairn, NicholasLang,Ian
Fairgrieve, SirRussellLatham, Michael
Faith, Mrs SheilaLawrence, Ivan
Farr, JohnLawson, Rt Hon Nigel
Fell, AnthonyLee, John
Fenner, Mrs PeggyLeMarchant,Spencer
Fisher, Sir NigelLennox-Boyd, Hon Mark
Fletcher, A. (Ed'nb'gh N)Lewis, Kenneth(Rutland)
Fletcher-Cooke, SirCharlesLloyd, Ian (Havant & W'loo)
Fookes, Miss JanetLoveridge, John
Forman, NigelLuce, Richard
Fowler, Rt Hon NormanLyell, Nicholas
Fox, MarcusMacfarlane, Neil
Fraser, Rt Hon Sir HughMacGregor,John
Fraser, Peter (South Angus)MacKay, John (Argyll)
Fry, PeterMacmillan, Rt Hon M.
Gardiner, George(Reigate)McNair-Wilson, M. (N'bury)
Gardner, Edward (S Fylde)McNair-Wilson, P. (NewF'st)
Garel-Jones, TristanMadel, David
Gilmour, Rt Hon Sir IanMajor, John
Glyn, Dr AlanMarland, Paul
Goodhart, SirPhilipMarlow, Antony
Goodhew, VictorMarshall, Michael(Arundel)
Goodlad, AlastairMates, Michael
Gorst, JohnMaude, Rt Hon Sir Angus
Gow, IanMawby, Ray
Gower, SirRaymondMawhinney, DrBrian
Grant, Anthony (Harrow C)Maxwell-Hyslop, Robin
Mayhew, PatrickShepherd, Richard
Mellor, DavidShersby, Michael
Meyer, Sir AnthonySilvester, Fred
Miller, Hal(B'grove)Sims, Roger
Mills, Iain(Meriden)Skeet, T. H. H.
Mills, Peter (West Devon)Speed, Keith
Miscampbell, NormanSpeller,Tony
Moate, RogerSpence, John
Monro, Sir HectorSpicer, Jim (West Dorset)
Montgomery, FergusSpicer, Michael (S Worcs)
Moore, JohnSproat,Iain
Morgan, GeraintSquire, Robin
Morris, M. (N'hampton S)Stanbrook, Ivor
Morrison, Hon C. (Devizes)Stanley, John
Morrison, Hon P. (Chester)Steen, Anthony
Mudd, DavidStevens, Martin
Murphy, ChristopherStewart, Ian (Hitchin)
Myles, DavidStewart, A. (ERenfrewshire)
Neale, GerrardStokes,John
Nelson, AnthonyStradling Thomas, J.
Neubert, MichaelTapsell, Peter
Newton, TonyTaylor, Teddy (S'end E)
Nott, Rt Hon JohnTemple-Morris, Peter
Onslow, CranleyThatcher, Rt Hon Mrs M.
Oppenheim, Rt Hon Mrs S.Thomas, Rt Hon Peter
Osborn, JohnThompson, Donald
Page, John (Harrow, West)Thorne, Neil(IlfordSouth)
Page, Richard (SW Herts)Townend, John(Bridlington)
Parkinson, Rt Hon CecilTownsend, CyrilD, (B'heath)
Parris, MatthewTrippier, David
Patten, Christopher(Bath)Trotter, Neville
Patten,John(Oxford)van Straubenzee, Sir W.
Pattie, GeoffreyViggers, Peter
Pawsey, JamesWaddington, David
Pink, R. BonnerWakeham, John
Pollock, AlexanderWaldegrave, HonWilliam
Porter, BarryWalker, Rt Hon P. (W'cester)
Prentice, Rt Hon RegWalker, B. (Perth)
Price, SirDavid (Eastleigh)Walker-Smith, Rt Hon Sir D.
Proctor, K. HarveyWall, SirPatrick
Pym, Rt Hon FrancisWalters, Dennis
Raison, TimothyWard, John
Rathbone, TimWarren, Kenneth
Rees, Peter (Dover and Deal)Watson, John
Rees-Davies, W. R.Wells, John(Maidstone)
Renton, TimWells, Bowen
Rhodes James, RobertWheeler,john
RhysWilliams, SirBrandonWhitelaw, Rt Hon William
Ridley, Hon NicholasWhitney, Raymond
Rifkind, MalcolmWickenden, Keith
Roberts, M. (Cardiff NW)Wiggin, Jerry
Roberts, Wyn (Conway)Wilkinson,john
Rossi, HughWilliams, D.(Montgomery)
Rost, PeterWinterton, Nicholas
Royle, SirAnthonyWolfson, Mark
Sainsbury, Hon TimothyYoung, SirGeorge(Acton)
St. John-Stevas, Rt Hon N.Younger, Rt Hon George
Shaw, Giles (Pudsey)
Shaw, Michael (Scarborough)Tellers for the Noes:
Shelton, William(Streatham)Mr. Anthony Berry and Mr. Carol Mather.
Shepherd, Colin(Hereford)

Question accordingly negatived.

It being after Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.