Orders of the Day — Oil and Gas (Enterprise) Bill

– in the House of Commons at 4:11 pm on 19th January 1982.

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Order for Second Reading read.

Photo of Mr Nigel Lawson Mr Nigel Lawson Secretary of State for Energy 4:20 pm, 19th January 1982

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

The House will recall that, on 10 November, during the debate on the Address, I said that the Government were determined to press ahead this Session with our far-reaching proposals for the British National Oil Corporation and for the British Gas Corporation. The Bill fulfils that commitment. It will enable us to sell shares in the upstream oil-producing business of BNOC and to establish a new financial structure for the corporation which will continue in being after the upstream business has been floated off. It will provide new powers for the disposal of assets held by the gas corporation, subject to parliamentary approval in each case. It will permit for the first time competition in the supply of gas. It will also strengthen various aspects of existing petroleum legislation, in particular in regard to offshore safety. In short, the Bill will be a landmark in the history of national policy towards Britain's energy resources in the North Sea.

Part I deals with the sale of shares in BNOC's oil-producing business, with the establishment of a new financial structure for the corporation and with the abolition of the national oil account. There are three main reasons why we believe that the oil exploration and production interests of BNOC should be part of the private enterprise sector of the economy.

First, the proper business of Government is not the government of business. No industrial corporation should be owned and controlled by the State unless there is a positive and specific reason for such an arrangement. That is manifestly not so here. The successful development of our North Sea resources has been overwhelmingly the achievement of private enterprise. No Opposition Member can gainsay that. Our vital strategic and other national interests are fully safeguarded by the complex statutory framework of regulatory controls, participation agreements and taxation, all of which remain, and will remain, fully in force. Duplication by the State of the activities of the oil companies in the production of oil adds nothing to our security of supply or to any other national interest. It is our control over the British section of the North Sea and the powers that this gives us over all who operate there that matter, and not the ownership of one oil company which is responsible for 7 per cent. of United Kingdom North Sea output.

Secondly, privatisation will be in the best interests of BNOC itself. It has now been in existence for six years and has an oil-producing business with considerable expertise and potential. After a period of consolidation, it is rightly looking to expand. This calls for the freedom to seize opportunities as and when they arise, for investment and for the spirit of enterprise. While the business remains in the State sector, its activities will inevitably be subject to the politicisation and to the constraints that that entails. Its financial requirements, which will not for ever remain within the size of its own internally generated resources, must compete with other claims on the public purse and the spirit of enterprise will in time be stunted. Privatisation will be an act of liberation.

Thirdly, we believe that the British people should have a much better opportunity to share directly in the country's oil wealth. Symbolic ownership of BNOC as a State corporation is in no sense a satisfactory substitute. We wish to see public ownership in the true sense of the term, and I hope to see ownership of the shares in the new company spread as widely as possible. I also hope that the management will take advantage of the special provisions for employees' share schemes in the Bill.

BNOC as at present constituted conducts essentially two forms of business. The first is the production of oil. The second is trading in oil, based on the network of participation agreements. It is our intention to transfer the entire oil-producing business to a subsidiary formed under the Companies Act for that purpose. The transfer will be carried out by the method set out in clause 2 and schedule 1. This will leave the corporation with the trading business, and with the participation agreements, which will remain intact, with the small but expert staff, the rights and the assets needed to give effect to them.

The name of the new subsidiary will be Britoil. I have asked the corporation that it be registered in Scotland. The formation and the registration of Britoil could occur soon after Second Reading, although it could not become fully operational until the Bill is on the statute book. I notice that Opposition Members opposite are not interested in whether there is a Scottish dimension to this, but many hon. Members are.

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

May I congratulate the right hon. Gentleman on the statement he has just made that Britoil will be a Scottish registered company? That is a tremendous step forward, but shall we be told a little more about the articles of association, the distribution and dispersal of ownership and particularly foreign ownership?

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

The right hon. Gentleman has great charm, but he is always a little impetuous. If he can restrain himself and be patient, I shall come to that matter in due course.

Once reorganisation of the corporation's assets is complete, the Bill will enable the Government to take: possession of the corporation's shares in Britoil. This will be done.

Our initial aim is to sell 51 per cent. of the shares in Britoil. The Bill will keep open the way for a further sale from the Government's shareholding at some later date, when the Government of the day decided that it was in the national interest to do so. We shall make the position abundantly clear in the prospectus.

While the precise timing naturally remains subject to market conditions, my hope is that the sale of shares will take place before the end of this year. Immediately after Second Reading, I shall be asking the corporation, in close consultation with my Department, to take what steps it can to prepare the way for flotation. We would not, of course, go ahead with an offer for sale unless we were satisfied that the selling price represented fair value for the taxpayer, but I see no reason whatever to doubt that an acceptable price can be obtained. Certainly, the market will know how much weight to attach to the bluster of the official Opposition.

After the sale of 51 per cent. of its shares, Britoil will operate as a normal private sector company. The management and work force will be responsible under their directors for their own future.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

The right hon. Gentleman has referred to value for the taxpayer. Who is to judge that and how is it to be judged?

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

That is one of the many responsibilities of Government. The Government do not intend to control—

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

Before the right hon. Gentleman leaves the subject of the sale of the shares, will he say whether the purchasers, whether employees of the company or not, will be free to sell them on the Stock Exchange to anyone they wish?

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

Of course they will be free to sell them to anyone they wish, but the point at which the right hon. Gentleman is driving is rather similar to the point raised by the right hon. Member for Greenock and Port Glasgow (Dr. Mabon), a much disputed constituency these days, I understand. As I said, I shall be coming to that in due course.

The Government do not intend to control the company or to use their rights as a shareholder to intervene in the company's commercial decisions. The Government will retain special rights in the articles to prevent any unacceptable change in the future control of the company; I think this is the point the right hon. Member for Battersea, North (Mr. Jay) was raising. Except in these circumstances, the Government do not expect to vote their shareholding in opposition to resolutions supported by a majority of the board, although they retain the right to do so.

I have undertaken, as I said in answer to an intervention by the right hon. Member for Leeds, South (Mr. Rees) in the earlier debate on 10 November, to make available to the House the articles dealing with changes in control of the company in which a certain amount of interest has already been expressed elsewhere. Of course, I shall do so.

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

During the passage of the Bill. There will be ample opportunity—

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

The right hon. Gentleman said "during the passage of the Bill". He may recall what happened during the passage of the Wildlife and Countryside Act. It is unsatisfactory for any Government to come up with vital matters three-quarters of the way through the passage of a Bill. It makes a great difference to how we approach the Bill before us whether the information is published at an early stage. We should not start the Committee stage until we have the information.

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

I do not accept that for a moment, but if what the hon. Gentleman said earlier is correct, I shall try to do better in the provisions dealing with the flora and fauna of the oil industry.

It may be helpful if I say what we envisage will be in the articles. We envisage that in any situation in which there is an attempt to take over the company the shares held in my name as Secretary of State should carry a temporary majority of votes, whatever the nationalities of the parties involved. Similarly, in any situation in which there are attempts directly or indirectly to obtain control over the composition of the board the shares held in my name should carry a temporary majority of votes on any resolution to appoint, re-elect or remove any director. Those are very important powers. I believe that the articles will provide effective safeguards against unacceptable changes in control of Britoil.

We also intend that there should be two Government directors on the board of Britoil for as long as the size of the Government's shareholding warrants it.

BNOC itself will remain in existence as a State trading body dealing primarily in participation oil.

The Bill will also end the corporation's special access to interest-free money from the national oil account, an arrangement that has been much criticised by the Public Accounts Committee.

We shall naturally want Britoil, like any other oil company, to enter into a participation agreement with BNOC covering its existing licence interests, and the terms of this agreement will be settled well before the sale of shares. Hon. Members will want to know, in particular, how this will be applied to the fifth and sixth licensing rounds where there is no participation but where BNOC owns 51 per cent of the equity.

In general, I shall seek public sector access to about half the production from each licence, but without disturbing the present rights of private licensees. I shall not seek access to more than 51 per cent. of Britoil's oil from licences awarded in the first four rounds. But in the fifth and sixth rounds, depending on the detailed provisions applying to each separate licence—and they vary—this policy may require BNOC to have options to more than 51 per cent. of Britoil's oil. This is in no way unfair to Britoil, because in those licences BNOC's 51 per cent. equity share, which Britoil will inherit, was a substitute for participation. Nor, of course, will it in any way impair Britoil's profitability, since BNOC will have to purchase participation oil at the full market price.

I now turn to part II, which deals with the disposal of gas corporation assets and the breaking of its monopoly in the supply of gas. As the House knows, it is our intention to use the new disposal powers, in the first instance, to privatise the corporation's substantial investment in North Sea oil.

The existing Gas Act, accepted by Governments of both parties, contains a power of disposal—indeed, it is under the existing legislation that the corporation was required last year to dispose of its interest in the Wytch Farm oilfield. What the Bill does is to widen that power, while retaining, contrary to the claims of the hon. Member for Merthyr Tydfil (Mr. Rowlands) in The Observer last Sunday, the requirement for parliamentary approval in each and every case.

In any case, it really is the height of impertinence for the Opposition to complain of the scope of the powers that we are seeking, because, of course, they, when in office, wanted to go a good deal further. In their 1978 White Paper on the nationalised industries they stated their intention to take the power to give directions, general or specific, to any nationalised industry on virtually any matter that appeared to the Secretary of State to affect the national interest. Had the electorate not wisely removed them from office the following year, this power would already have been on the statute book.

But I have little doubt that, in the long run, the more important provisions of part II concern the breaking of the British Gas Corporation monopoly. By law the gas corporation enjoys unfettered ownership of the onshore pipeline grid, exempt from the regulatory provisions of the Pipe-lines Act 1962, which apply to private sector pipelines. And, above all, it possesses an effective monopoly of both the purchase and the supply of gas in the United Kingdom.

As a result, producers of gas inevitably see little incentive to explore for and develop gas reserves, because they know that, at best, they will be faced with a take-it-or-leave-it price offer from the corporation, and that at worst they may get no offer. It is hardly surprising that, in sharp contrast to the position with offshore oil, exploration for gas is minimal, and we do not even have a clear picture of what our total gas reserves amount to. Meanwhile, many industrialists throughout the country are deprived of the gas that they would like to buy.

We have therefore decided to break the monopoly and open the industry up to the spur of competition. British Gas will still retain its statutory monopoly, but only within that market which it has a statutory obligation to supply on demand all consumers— they of course include the vast bulk of ordinary households—whose premises take less than 25,000 therms a year and are no more than 25 yds from a gas main. But in all other cases the corporation's monopoly will cease to exist. Other suppliers will have a chance to compete, for the first time.

In the case of those consumers whose premises take less than I million therms a year, the supply of gas will still be by the Secretary of State's consent, but I would envisage granting such consent in all cases where I was satisfied that the safety arrangements proposed were adequate.

In the case of those consumers whose premises take over 1 million therms a year, freedom to compete for their custom will he absolute. This category represents roughly three quarters of all industrial and commercial gas sales.

However, the breaking of the statutory monopoly along the lines that I have just indicated will not of itself be enough to make competition a reality. The Bill therefore also makes provision for effective private access to the gas corporation's pipeline network.

In the first instance it will be up to other suppliers to negotiate with the corporation the terms on which it is prepared to transmit their gas through its grid, but, as is customary with common carrier arrangements, there will be a right of appeal—in this case to my Department, at least in the early years—against any refusal by the corporation to carry private gas on the grounds of, say, inadequate capacity, or against the terms quoted by the corporation for the carriage of gas.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

Does the right hon. Gentleman intend to prohibit the use of the gas grid for purposes other than the supply of United Kingdom industrialists and so on? In other words, will he prohibit the use of the gas grid for the export of gas?

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

The requirement that gas should be landed in the United Kingdom remains. It is unaffected by the Bill.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

The Secretary of State talks about the right of appeal to his Department. What technical facilities are there in the Department of Energy to pass judgment on these very complex, detailed issues? There may be such facilities, but I do not know of them.

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

There is considerable technical expertise in the Department. The particular technical expertise needed to fulfil that role and to process the appeals—I hope that in most cases agreement will be reached between the gas supplier and the gas corporation without the need to go to appeal, but there will be some that have to go to appeal, and there must be recourse to appeal—will require a small number of additional civil servants expert in this matter. However, the hon. Gentleman will be glad to know that I am confident that I can accommodate them within the declining numbers of civil servants to which ray Department, in common with all other Government Departments, is committed.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

My right hon. Friend has made a very important statement. He has said that in the earlier years the Department of Energy will look after the arrangements. Is he undertaking that at some future date an independent commission will be established to see that appeals go through with great justice to all sides?

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

My hon. Friend is on to a very good point. It is sensible to review the position after a few years of running the new system and it may be necessary and sensible to institute the sort of agency to which he has referred. But we do not need that in year one.

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

I am not giving way at this stage.

It has been alleged that the effect of introducing competition into the gas market will be to increase prices. That is stuff and nonsense. Competition here, as elsewhere, will tend to reduce prices below what they would otherwise have been, both by stimulating efficiency and by encouraging the provision of new and increased sources of supply. The proposals have been widely welcomed throughout British industry for that reason.

The new impetus for the exploration and discovery of gas in the North Sea will be one of the first benefits to flow from this part of the Bill.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

Does the right hon. Gentleman accept that what he has just said could cause considerable misgivings in the gas industry? Will he make it clear that he will not seek to create lower prices by forcing British Gas to act as a common carrier and provide, in effect, a subsidy for those who wish to use its pipelines?

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

I do not suggest anything other than that British Gas should run a common carrier service on a fully commercial basis.

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

I shall give way, as I am a man of charitable disposition.

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

Giving way gives the right hon. Gentleman an opportunity to show that he is not guilty of racial discrimination. In his answer to the hon. Member for Dunfermline (Mr. Douglas) about pipelines he said that there would still be an obligation to land gas in the United Kingdom. He did not say specifically that there might be some other extension of the pipeline to the Continent, after the gas has been landed in the United Kingdom. Will he kindly say that the Government have no intention of allowing the export of natural gas to the Continent?

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

The re-export of gas from the United Kingdom is permitted under existing arrangements. The requirement is merely that the gas should be landed in the United Kingdom, and that position is unaffected by the Bill. I am talking about the position under legislation introduced by the Labour Government.

Nor do I accept for one moment the claim that this means that our gas resources will be depleted at an excessive rate. The Government will retain the power to impose a depletion policy should that seem warranted, but, in general, market forces will provide a far more reliable guide to the optimum rate of depletion than central planning by a statutory monopoly.

In short, I am confident that the gas provisions of the Bill will revitalise the industry and foster the growth of private enterprise to the benefit of producers and consumers alike, and I commend them to the House accordingly.

Photo of Sir Albert Costain Sir Albert Costain , Folkestone and Hythe

Will my right hon. Friend make clear the position of a company building its own pipeline? I can visualise cases where companies will want to take gas from a gas field to a factory. Will the Bill give an enabling power to do that?

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

My hon. Friend is absolutely right. There will be nothing to stop a gas producer building his own pipeline straight to a large factory which happens to be by the shore and can take gas economically in that way, although I should think that in most cases the common carrier system is likely to be used. Nevertheless, there will be cases when producers will wish to build their own pipelines, and they will be perfectly free to do so.

I have concentrated on the provisions in parts I and II because I know that they will be of particular concern to the House, but I also commend to the House the remaining parts of the Bill, which are of importance, particularly as regards safety, and which all contribute to the proper and consistent regulation of activities on the United Kingdom continental shelf.

The last occasion on which the House debated the proposals now embodied in the Bill was notable for a remarkable speech by the right hon. Member for Bristol, South-East (Mr. Benn) from the Opposition Front Bench. I informed him that I would refer to it. [HON. MEMBERS: "Where is he?"] I do not know where the right hon. Gentleman is, but he conveyed his apologies to me for his inability to be present. However, I have a shrewd suspicion why he is not in the Chamber. The right hon. Gentleman's speech, on 10 November, was his first speech from the Opposition Front Bench in this Parliament. As it turns out, it looks likely to have been his last one too. Presumably, as one of the terms and conditions of the treaty of Bishop's Stortford, he has felt obliged to stay away from the House for this debate.

I take it that that means that we shall not be told today that official Labour Party policy is renationalisation without compensation, or, in plain English, theft, or that it embraces a commitment to nationalise the whole of the North Sea oil industry, lock, stock and barrel. But I hope that the right hon. Member for Leeds, South (Mr. Rees)—I know how pained he was at a certain point on that earlier occasion—will take this opportunity to disown, without equivocation, the irresponsible statements made by his right hon. Friend. If he does not do so, the House will know what to conclude. While he is about it, the right hon. Gentleman might also care to place a copy of the treaty of Bishop's Stortford in the Library. I am sure that many of his hon. Friends will be interested to discover its precise terms and conditions, if only because they wish to decide which of them to break first.

The policy of the right hon. Member for Bristol, South-East is at least coherent, which is more than can be said for what I understand to be the policy of the right hon. Member for Leeds, South. Nationalisation of the entire North Sea oil industry would be a national disaster, but at least the thinking behind it is reasonably clear. By contrast, what possible advantage or case can there be for State ownership of one company among many—and that, by no means the largest?

In his article in last Sunday's edition of The Observer —I was grateful for the opportunity to gain a little insight into the Opposition's thinking, if that is the right word—the hon. Member for Merthyr Tydfil advanced only two reasons for such ownership. The first was that without it, the Government would no longer know what was going on in the North Sea oil industry. That is sheer poppycock. As a direct result of the powers that the Government have in this field, the Government of the day acquire and will continue to acquire more information about the North Sea oil industry than about any other industry in the country. Like infantile Leftism, the Opposition's paranoid fear of the multinationals is a form of disease. It requires not so much rebuttal, as treatment.

The other argument advanced by the hon. Member for Merthyr Tydfil in his article in The Observer in favour of continued State ownership of BNOC in its present form, was that the first chairman of BNOC, Lord Kearton, was originally opposed to privatisation [Interruption.] I hope that the hon. Member for Merthyr Tydfil will have the courtesy to listen, rather than to chatter from a sedentary position, because I am referring to an article that he wrote, or had written for him.

Since, however, Lord Kearton has now come out publicly in support both of the ending of the gas monopoly and the privatisation of the upstream business of BNOC, that argument, too, is looking a trifle frayed. The truth is that the Opposition are still locked in the dogmas of the past. Their reflexes are still conditioned by the echoes of Clause Four. How else could they have failed to learn from the lessons of experience?

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

The unsatisfactory experience—

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

The unsatisfactory experience of 30 years of State ownership of a substantial section of our national economy is incontrovertible. Strenuous efforts by successive Governments over the decades have led to inumerable papers, reports and debates, but very little progress on the problems of running these industries. Indeed, if anything, the problems have grown in size and intractability.

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

I hope that the hon. Gentleman will listen to me and not interrupt because I am making a serious point. If the problems are less acute now with BNOC than with the gas corporation, that is partly because BNOC is one of the newest of the public corporations, and its spirit of enterprise has not yet been stifled by the bureaucratic embrace or perverted by immunity from bankruptcy. However, it is the widely acknowledged problems of the nationalised industries that the Government have, in a commonsense and undogmatic way, sought to tackle as well as the requirements of energy policy. It is in that spirit that we have sought sensible candidates for release from State ownership and the problems attendant on it, and ways of introducing competition and efficiency to the State-owned monopolies. The Bill seeks to achieve those results in one vitally important section of our economic life. It will benefit the oil and gas industries, their customers and the nation. I commend it to the House.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South 4:52 pm, 19th January 1982

The latter part of the speech of the Secretary of State for Energy was terribly amusing and the earlier part remarkably thin. It was not the speech of a Secretary of State giving information to the House of Commons.

If the parliamentary importance of a Bill is reflected in the amount of time given to it on the Floor of the House, we must consider that we have already had a debate in which a statement of clarity was made by the Secretary of State after he had briefed the press. Although parts of this debate give me no great hope of it, we should have a long Committee stage. In Committee we shall deal with the gas and oil aspects. On the most important aspect—safety—the Secretary of State has said not a word.

This is an important Bill and it will have a long Committee stage. The first question I shall raise is about parliamentary accountability in the sense of information. Can the Secretary of State provide the Committee with a deal of relevant information on all sections of the Bill? There is appropriate information such as policy documents and it would be much better if we had access to them in Committee.

On a Bill of this nature, Opposition parties find it extremely difficult to get the factual information that they require. I ask the Secretary of State to provide us with all the information that is available. It will be well received.

The same applies to the two corporations affected by the Bill—the gas corporation and BNOC. At one stage, BNOC was an adviser to the Government on the basis that, under all Governments, oil accumen could not come from any Department let alone from a Minister. The gas corporation has much technical information and experience and, since it has factual information, I wonder whether the Secretary of State could arrange for that information, from both corporations, in the same way to be provided to us in Committee. For example, as I understand it, the gas corporation disagreed with part VII of the explanatory and financial memorandum on the number of extra staff which will be required in the Department of Energy. The Secretary of State and the gas corporation may be right, but would it not be useful if we had the relevant information on which we could make up our minds? There is disagreement on that and I simply ask for the paperwork to enable us to make a judgment.

As I understand it, there is disagreement about the highly technical matters arising from the new arrangements for the carriage of private gas which, again as I understand it, has been done in a different way from that in the United States and other countries. A survey has been carried out in different countries, comparing methods of carriage of private gas, which has enabled other gas corporations to make assessments. Would it not be a good idea if that document were made available to us?

The points that I have raised are highly important and not political matters. In Committee, it would be much more sensible and practical if a deal of that information could be provided.

On the same aspect of information but in a different context, I shall deal with part IV of the Bill first. We have had two bites of the cherry on gas and oil. Part IV is really a separate Bill which has been included in the measure before us. Governments have done this before. May we have some information on that?

The Bill refers to the protection of installations, to safety and to new applications of criminal and civil law. Where can we be briefed on such highly complicated matters? To get it right it needs different treatments and I suggest to the Secretary of State—not in desire to waste time, as could easily be done if necessary—that we take part IV out of the Bill as it deals with other matters. Could we not have a Select Committee procedure whereby the gas, oil and shipowners in the North Sea could be asked questions so that we could get it right and so that the procedures on the safety section of the Bill would be very much shorter? It is important that we get it right.

As Home Secretary, I remember being involved in the security side. With no reflection on the Department of Energy, that is not its field. Security involves a responsibility on the police and security services which relate to the Home Secretary. There is a responsibility on the Navy, in particular, and, to some degree, on the Army. There is also a responsibility on the Department of Employment to issue work permits, for example. The Secretary of State did not refer to any of that this afternoon and I simply ask that we have a procedure of that kind. I do not do that to waste time. At the very least, if that is not possible, we shall require Home Office Ministers—not junior Ministers—to deal with security matters. If pan IV of the Bill is to get it right, we shall require senior Ministers from other Departments to be in Committee.

My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) and three of my colleagues are associated with a group which contains transport and general workers, seamen, British airline pilots, electricians, engineers, ASTMS and Merchant Navy officers. That group has produced a charter. I shall not go through it all because of the shortage of time, but I shall raise some points which will arise under part IV of the Bill.

The group's charter requests that the responsibility for the health and safety of offshore workers should go to the Health and Safety Commission. We shall discuss that aspect. The number of safety inspectors with access to all offshore installations is also questioned. British manning and safety standards and their application to all operations in the United Kingdom sector are also questioned, as are submersibles, helicopters and work permits; I recall the latter from my days at the Home Office. They will all require different treatment from that given to oil and gas, on which many hon. Members on both sides of the House have gathered their own experience over the years.

I confess that the offshore aspect was new to me but for the Home Office matters. When I put my mind to it this week, I discovered that since December 1981 there had been 111 offshore deaths and 426 serious accidents. This subject is not to be played with for the sake of the Committee stage of the Bill.

I have been told that a book has been written by Mr. Carson of Edinburgh university in which he concludes that those deaths are avoidable; that the accidents do not arise because the operators are at the frontiers of technology. The deaths and accidents arise because the safety arrangements are inadequate. The Secretary of State omitted to mention matters which may reflect his own interests or a matter of time, but when we come to part IV, we ask him to find a different arrangement. If we get it wrong in Committee, the numbers of deaths and accidents will increase because, perhaps, of a failure on our part. I suppose that deaths occur, as at sea and in the mines, because of the nature of the job. Clearly it is a dangerous job. We must put our minds to ensuring that the law is as well put together as possible and that we get all the necessary information.

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

I shall do my best to respond to the right hon. Gentleman. First, it is not true that I did not mention part IV. I said that it was important, especially the safety provisions. It is in the Bill because we consider it to be important. Some of the provisions are a specific response to the "Alexander L. Keilland" disaster. Other provisions clarify existing legislation. We shall provide such information as we can to help the right hon. Gentleman in his task. Notes on clauses are available in the Vote Office for the convenience of hon. Members. I cannot understand why the right hon. Gentleman does not believe that the proceedings in Committee, if they are taken in a sensible fashion, will provide an adequate opportunity to debate all the matters that concern him.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

Part IV is a disparate part of the Bill. It raises issues that come within the responsibility of other Departments. There are aspects of safety in the North Sea on which I cannot be briefed. I have no access to the necessary information except, in certain respects, through the results of the work of my hon. Friend the Member for West Lothian (Mr. Dalyell). That is why I am asking that information should be provided on part IV.

We wish to be able to put questions to trade union officials and to those who operate in the North Sea, including the "managers", if that is the right word, on the rigs. I have been on one or two rigs and the "boss men" have impressed me. We should be able to ask them, "What do you think is wrong with the procedures?" I hope that the right hon. Gentleman will consider that approach.

The Government's approach shows their worship of free market forces. They worship them in a way that would offend Adam Smith, just as those on the far Left of politics worship Karl Marx in a way that would offend him. The support given to free market forces and monetarism is the hallmark of the Government's policy. They support those concepts to the isolation of anything else. Of course market forces matter. Of course monetarism and the money supply matter, but they cannot be regarded in isolation. There is a Central European ideological tang about the Government's approach to economic policy. The Government seem to regard economic policy in a way that old Toryism had the good sense never to do. That laps over into the Bill.

We are dealing with two industries of different structures that in different ways have been highly successful. BNOC is not a statutory monopoly. It has been highly successful in production and trading and it is highly regarded in the industry. The proposed break-up of the corporation runs counter to the current trend that is followed by Governments of all political persuasions who have established State oil companies—Petrobras in Brazil, Petrocan in Canada, Deminex in West Germany and Hispanoil in Spain. OPEC is currently trying to reduce the influence of multinational oil companies in the oil market and to encourage State-to-State deals only through State oil companies. That may not be to the liking of the Secretary of State but that is a fact of life. State oil companies are being used to secure supplies by participating in overseas joint ventures—for example, Deminex and Svenska Petroleum. BNOC has been examining oil provinces in Malaysia and Venezuela with a view to securing supplies from the late 1980s onwards. Within the United Kingdom continental shelf a State oil company is necessary if the Government wish to have the capability to develop marginal fields for reasons of national interest.

One of the issues that we shall have to pursue in Committee is whether the Government believe that the oil companies will go to the marginal fields off the west of Scotland. These are fields to which BNOC would go, and Canada's experience is that it is the State companies that go to the marginal fields because the return of profit in the early days is not such as to attract ordinary companies. The Government have not learnt the lesson of 1973. The experience with Shell and BP in 1973 showed that multinationals are a poor alternative as guarantors of petroleum supplies.

The gas corporation has 15 million customers. It has about 500,000 industrial customers. It has changed from an old-fashioned, coal-gas, locally based industry to a modern, integrated national company. It is in the lead in research and in concern for the future as it is in concern for the present. It provides revenue for the Treasury and extra revenue by a levy. The Government have increased the price of gas as a deliberate act of policy.

Parliamentary accountability in its main sense is the control of the Executive by the House. The extent of the powers that are given to the Secretary of State in clauses 1 to 8 and 9 to 11 as well are very great. What control will the House have over the decisions that the right hon. Gentleman takes in the first instance, let alone those that are taken later? At the end of the day an order under the negative procedure will be brought forward to reveal all the great changes that will take place. Those changes should be set out in the Bill.

There is much talk about those on the left in politics and about the moderates, whatever those terms mean. It is said that we want to end parliamentary democracy. This Bill could appear before the East German Parliament—

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

It is not a bad start.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I have to argue with those on the far Left when I visit universities. They say, "We need a one-clause Bill. That is all we need. There will be no need for discussion afterwards". The mentor for the boys on the Left is the Secretary of State for Energy. They will be able to call him in aid. From now on I shall call him the East German Minister. I shall do so because of the powers that he seeks to take in the Bill.

There is a curious circularity in politics. The extreme Right and the extreme Left go round in circles until eventually they meet. The right hon. Gentleman loves to use the word "bluster" but I wish to tell him that I am offended by the Bill. We shall not know anything about the main parts of the Bill until we see the negative instrument, which will be unamendable. It will be brought forward and we shall not be able to discuss half the issues that feature in today's debate. We shall not know what the Government intend to do until the negative instrument appears before us. Will powers be taken to sell the oil interests or will they be used to break up the gas corporation? The Secretary of State will be able to do what he likes. He will not need a Bill in future to break up the corporation. The Bill will provide the powers that he needs.

There is talk about the sale of the oil assets of the gas corporation. We have heard about the articles of association, which we shall consider at an early stage in Committee. We shall direct our minds to the privatised Britoil. What steps does the right hon. Gentleman intend to take to ensure that the oil interests of British Gas in the North Sea are not snapped up by foreign interests? I was told some months ago that French oil companies are interested in going to Wytch Farm because the oil that is being tapped there is from the Channel quadrant. Apparently a considerable amount of oil will come from that part of the Channel. The question that I should like to be clear on is whether we shall have articles of association or the equivalent with the sale of British Gas Corporation oil.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The right hon. Gentleman mentioned the enormous powers given to the Secretary of State under the Bill. Is he aware that the Petroleum and Submarine Pipe-Lines Act 1975 gives vaster powers and that the Petroleum Production Regulations 1976, which give vaster powers than that were granted by his Government under the signature of the right hon. Member for Greenock and Port Glasgow (Dr. Mabon).

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

The point that I am making is that the powers are there but that in order to come back to the House of Commons, the Bill provides a negative order. We have heard about Britoil and the trading company today. That is not in the Bill. We shall not be able to make amendments on those matters. We shall have to find ways of making safeguards, although I cannot see how that can be done when the subject is not mentioned in the Bill but was mentioned on the Floor of the House on Second Reading and in the briefings to the press. We shall not be able to debate those major proposals properly in Committee.

The Secretary of State said that BNOC would be split two ways. Should we not see the communication that I understand was sent to the Secretary of State by the whole board of directors of BNOC? It said that the solution put forward by the Government would maximise the EEC threat to participation, assure the inefficiency of the trading operation, which would have less access to technical operating expertise, make difficult the retention of qualified staff and expose the trading company to heavy trading losses. That is a damning indictment of what the Government have put forward. We should know about that assessment and not just deal with it on the surface. The board of directors may be wrong but the House should know what it said. The members of that board were appointed by the Conservative Party.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

I do not know whether the right hon. Gentleman has read the same press articles that I have read. I understand that some directors of BNOC were against the trading arm of BNOC being kept under Government control. Would the right hon. Gentleman go along with that? Would he support those directors of BNOC?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I am talking about a decision taken by the whole board. However, if that is what happened, let us have the evidence. I completely agree with the hon. Gentleman. I am not selecting the evidence that I like. Let us have it in Committee.

I now turn to hybridity. This week I have consulted all the proper authorities. Perhaps there is no prima facie case of hybridity in the Bill. I am told that the reason is that the Bill says nothing. It would be difficult for it to be hybrid, because it does not say anything on the matters that arise. It simply says that we should hand over the powers to everybody else. My right hon. and learned Friend the Member for Warley, West (Mr. Archer), who was the former Solicitor-General, discussed the matter in the appropriate places. He and I found that there was a negative order, but under negative orders there are no safeguards to prevent the Minister's differentiating between the rights of a certain class of people. We found that the scheme is mini legislation at the discretion of the Minister. We cannot use the hybrid instruments committee of the House of Lords because it is a negative instrument. If it were an affirmative instrument, we should have the right automatically to discuss hybridity on the Floor of the House. That is wrong. It should be an affirmative order. If it is hybrid, let it be so considered.

It is wrong in principle that in gas the Secretary of State should have powers to prepare and dispose of schemes that will have a legal effect and in so doing modify and rewrite private contracts. If he wants to do it that way, there should be the parliamentary procedures to consider the matter. The Bill should not be drawn up to avoid a consideration of hybridity. That is a shabby sleight of parliamentary hand. We shall attempt to ensure that the affirmative procedures are put into the Bill.

How on earth shall we discuss the articles of association so that we can amend them? Will the articles be written in such a way that they are amendable by us? Shall we have to wait until the end of the day when the flaring order, which is unamendable, comes forward for an hour and a half—if it can proceed to the Floor of the House? When it reaches the House of Lords, the hybridity Committee will not be able to consider it, because of the way in which it is drawn.

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

I believe that the right hon. Gentleman's sense of outrage has got the better of him. Under the negative resolution procedure in the Gas Act 1972, the Wytch Farm order was made. Nevertheless, my right hon. Friends who were responsible for organising the Government's business ensured that there was an opportunity to debate that order. It was debated and voted upon. If the right hon. Gentleman is afraid that there will not be opportunities for debate on such orders, I am sure that in much the same way, according to the traditions of the House, there will be a full opportunity to debate and vote on the orders when they are made.

The right hon. Gentleman also referred to the split of BNOC into Britoil and what remains of the corporation. He attributed great powers of invention to me in devising a method of dealing with those matters. In all modesty, I must disavow that. That procedure has been used on a number of occasions. The first was in the Transport Act 1968. The inventor of that procedure, to whom I pay tribute, was Mrs. Barbara Castle.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

Perhaps that was so on the Transport Act, but whether Mrs. Barbara Castle or anyone else set up the procedure, it is wrong. I see no point in calling in aid the gods or goddesses of the past. I conducted an investigation into the legislation of recent years. There is no doubt that the procedure used by the Government at the moment is not the one with negative instruments, in the context of the powers that are taken, which is normally used.

I have asked about the articles of association and about foreign control of oil. Because of other happenings, I noticed this week that in the Independent Broadcasting Authority Act, which was put through by the Conservative Party, the powers to prevent a foreigner from taking over a television company were written into the legislation. If that can be done on the Independent Broadcasting Authority Act, it should be written into the Bill and not into the articles of association.

I accept what the right hon. Gentleman says—that the Government will have the same depletion policy as before.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

Therefore, I shall ask the question that I intended to ask before I misunderstood the right hon. Gentleman. Is depletion policy the same as it was? If the clear intention of the Government is a major and rapid increase in the industrial consumption of gas, surely that makes a nonsense of any proper depletion policy that we follow.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

Will my right hon. Friend concede that one cannot have a depletion policy in the context of the Bill as the House does not have full information about the Government's intentions on tax?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

That is another aspect. The Committee may still be sitting when the tax changes which are apparently coming from the Chancellor of the Exchequer are announced, so we shall be able to look at both.

I wish to ask a question about the EEC and the BNOC but I shall keep that until I ask exactly the same question about the British Gas Corporation.

In my view, the British Gas Corporation has been highly successful. I have made it clear that it is the Opposition's view, it is my view, that the effect of the ending of the monopsony will be to increase prices. It must so be. I am amazed at the right hon. Gentleman's belief in free market forces.

If there are free market forces in conditions of perfect competition, there is much justice in what he says, but perfect competition is in the textbooks, not in the real world of multinationals and so on. Those conditions do not prevail in practice or in the Government's overall policy now.

I do not know what will happen in the coal industry. The policy of "switch to coal" will take a hard knock from a policy of expanding the use of gas for non-premium uses, which I assume is involved in what the right hon. Gentleman says.

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

If the right hon. Gentleman is so convinced that the Bill will put up the price of gas, should he not tell the House what price per therm British Gas is paying for the one-third of our gas coming from the Norwegian sector and how much that gas could have been bought for if British gas producers had been given a fair opportunity to compete?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

The British Gas Corporation has to pay far more for Norwegian gas than that from the Southern sector. Whatever the figures, I accept what the hon. Gentleman says, but that does not mean that the companies from which the corporation purchases its North Sea gas do not do very well and do not make a sufficient profit, even with gas at a lower price.

Will the use of British Gas Corporation facilities reflect the public investment that has been made there? One of my hon. Friends asked that question. We need to know the range of prices or at least the principles upon which prices will be paid for the use of the corporation's pipes. The Bill transfers to the Secretary of State the control of planning and administration as opposed to the general supervision of the corporation's transmission and distribution system. I am advised that the need for extra staff in large numbers is conceived as arising out of the Bill. There will be great duplication of effort and a huge bill.

Moreover, there is a safety aspect. There are different types of gas. If the wrong gas is put into the wrong pipes, who will be responsible? Will it be the British Gas Corporation or the Department of Energy? Will the Department's inspectors go out into the field or will the matter be left to private companies?

Yesterday evening, I was talking, not on a narrow trade union point, to trade unionists who work in this industry. They were very worried about the safety aspects of the steps that the Government are taking.

Photo of Peter Viggers Peter Viggers , Gosport

The right hon. Gentleman said that he had consulted and talked with trade unionists about safety. Has he also spoken to gas and oil transmission company representatives? Have they given assurances about safety standards which apply in other countries and which seem to be complete?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I would willingly do that. I should like to consult the British Gas Corporation, with its expertise, if the Secretary of State would allow it. It would be a good idea if it gave its view on the matter. However, that is extremely difficult, particularly in view of what happened towards the end of last year. The hon. Gentleman makes a perfectly valid point. The only reason that I consulted trade unionists, who happened to have come for another meeting, was the problem in other directions. Certainly I should like the corporation to give its considered view to the Committee.

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

Following the interesting ideas that the right hon. Gentleman advances on that, would it not be a good idea if the Standing Committee on the Bill were to operate under the special arrangements allowing the interrogation of witnesses, who could be from the companies concerned or from the British Gas Corporation and, above all, from BNOC, so that the Committee would have their views on this?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I made that suggestion in relation to clause 4. I did not go wider because I did not want to push my luck, as the answer would be "No" on the major part of the Bill. As so little was said on clause 4 and because, with the best will on earth, so little is known about it in the Department of Energy because it is not the Department's subject, I suggested it in that one respect. It would be even better if it were applied to the whole Bill.

On the sale of assets in relation to gas, will the Minister confirm that none of the safety arrangements in the Bill deals with the necessary safety regulations required before the sale of the gas showrooms? It is most important to make that clear. I think that I have it clear, but others have not. It might be to the Government's advantage to make that clear.

With regard to our obligations to the EEC under articles 85 and 86, what is the Government's view on the policy of export oil and gas in relation to European law? Is it the view that has been put to me by others—that this will have to be tested in the courts? I read in The Guardian this morning: BP and Shell are mounting a campaign to show that the UK landing requirement conflicts with the Treaty of Rome. Their motive is unashamed: why should they not sell to the highest bidder, even if the highest bidder is located in West Germany rather than England? What is the Government's view about our commitment in relation to the EEC? Colleagues who were involved in this in the Labour Government tell me that EEC officials were chasing them all the time about this and that the break that the Government have made opens up the very firm possibility that we shall be in a position that is contrary to European law.

Finally, I turn to the financial arrangements. I shall pick up the comment that the right hon. Gentleman made at the end of his speech. Except to some degree in one Select Committee, I do not believe that the House has applied its mind to the financial arrangements for the raising of capital for publicly owned companies. All Governments have been hoisted by the petard of the public sector borrowing requirement convention that there is no distinction between revenue account and capital account. This can be overcome but it is not easy.

There is nothing wrong with looking afresh at the structure of the publicly owned industries. I for one do not believe that Herbert Morrison got it right in 1947–48, or that it was right in 1934 in relation to the old London Transport Board. All Governments should look afresh at structures. We should not be the prisoners of structures. I certainly have nothing against that being done. There are many working parties on this in the Labour Party. In Scandinavia there is a different arrangement for the railways, which have historically have been in public ownership and almost Civil Service-esque. On the other side, manufacturing industry is dealt with in a different way.

Much rethinking is taking place on this matter. In the TUC and the Labour Party there is consideration in a wider context of using oil revenues, as well as insurance company and pension funds, for industrial development. The whole matter is being considered. The national oil account has not worked in the way that was originally intended and the Government are removing it. Few people will weep over that, but that does not mean that we shall not seek a different way of using North Sea revenues to invest in industry in general and particularly on the model of the Norwegian policy.

I have taken too much time, but I wish to make two further points. Mr. Conti speaking at the Royal Institute of Public Administration, asked two question which are relevant to the Government's policy on oil: If on the other hand the idea of an administration were to allow the pension funds and similar financial institutions to Invest in BNOC is it axiomatic that these vast, somewhat impersonal and not too accountable institutions should thereby assume absolute control? Once again there is no reason not to consider charging forms. Might not institutions invest in BNOC through a trust relationship … in the course of which they might become more informative towards their shareholders and depositors? The Secretary of State looks at me questioningly. He may be right to do so. We are seeking alternative ways of raising private capital, which at the moment is used in this country in ways that are not beneficial to the community in order to find ways whereby it can be used in the public sector.

I am not against the employee scheme, but I would be interested to know what percentage of shares would be owned by the employees and what control they would have. It is only part of a wider issue. Whatever changes there may be in other industries, our view is that the control and ownership of oil and gas must remain with the nation. BNOC should be allowed to move upstream. Nationalisation of all the companies in the North Sea is not the policy of the Labour Party. In Norway there are French and American companies under the control of Statoil.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I am simply saying that that is what happens in Norway. It is not nationalisation of all the companies in the North Sea.

There were some local difficulties within the Labour Party during the last debate on gas, as the right hon. Gentleman pointed out. The Shadow Cabinet recently said: We wish to make public and plain to any outside interest 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. Speculative gains and how we deal with them are matters that we shall have to deal with when we see the nature of the shareholding that the Government sprock up once we discuss the order in an hour-and-a-half debate one wet Thursday night at 3 o'clock in the morning. We shall have to wait and see.

The Government won the last General Election. They are entitled to translate their promises into action but they are not entitled to do so in this hole-and-corner way without firm parliamentary control and without enabling hybridity to be investigated: that is a dodge.

Therefore, I hope that my hon. Friends will support as in the Lobby tonight. I also hope that in Committee we shall have a long, though not wasteful, investigation of every clause and schedule. We shall do that not to waste time but because it needs doing.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford 5:33 pm, 19th January 1982

The right hon. Member for Leeds, South (Mr. Rees) made an interesting speech and called upon my right hon. Friend to give full details in Committee. However, when he finished his speech on renationalisation the right hon. Gentleman said that the House would have to wait to see what the terms of compensation were. The right hon. Gentleman should give further and better particulars of the compensation to be paid to divested shareholders and we should have the details now, not later. It is all very well asking the Government for full details when the right hon. Gentleman is not prepared to give them himself.

There is another matter in which the right hon. Gentleman and I are both interested—public accountability. He referred to the matter and said that the powers given in the Oil and Gas (Enterprise) Bill were vast. They will enable the Secretary of State to do many things. I referred the right hon. Gentleman to the Petroleum and Submarine Pipe-Lines Act 1975, passed by the previous Labour Government. That Act gave the Government of the day enormous powers, which were supplemented by the Petroleum (Production) Regulations 1976, which were not considered in Committee, giving a further extension of powers to the Secretary of State. In particular, model clauses 15 and 16, to reduce the amount of production, drilling control, landing rights and so on, gave enormous powers. It is somewhat surprising that the Opposition are asking for further details of the Bill when we find that the Labour Government in their legislation gave the Government even vaster powers with little information.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

The legislation to which the hon. Gentleman referred was a long schedule that was, quite rightly and properly, subject to amendment, line by line and page by page. That is different from the proposition put forward in the Bill and the powers taken by it, which do not appear in the Bill.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The hon. Gentleman has put forward a misconceived argument. I was a member of the Committee dealing with the Petroleum and Submarine Pipe-lines Bill and I repeatedly asked the Minister for details of the regulations that he intended to lay before the House. However, the Minister rightly said that it was impossible in the circumstances, that the regulations would have to be considered by the Department and worked out in due course. That is paralleled in the Bill.

The right hon. Gentleman referred to the articles and memoranda of association. The right hon. Gentleman is specifically interested in whether there could be any foreign control of Britoil Ltd. There is surely a simple answer to this, which could be put in the memoranda and articles of association. For example, the Alberta Oil Company is owned 50 per cent. by the people of Canada and 50 per cent. by the Alberta Government. There are strict conditions that only Canadians can own the equity capital. If the Canadians can do that, there is no reason why we should not do it here and there should be no fear of alienation of a valuable asset.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

I think that my hon. Friend will find that provisions of the kind implemented in Canada would not be possible in this country because of the Treaty of Rome.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

I shall deal with the Treaty of Rome in a moment, but it is possible to have those provisions in the United Kingdom, because the Treaty of Rome will affect companies such as the British Gas Corporation but will not affect the Government.

The right hon. Gentleman made some points about articles 85 and 86. The British Gas Corporation is affected by article 90 of the Treaty of Rome, which embraces articles 85 to 94. The status of the British Gas Corporation would be changed by the partial reduction of an exclusive monopoly but that would not affect the powers of the Secretary of State under model clause 27 of the 1975 Act, or paragraph 28 of schedule 5 of the Seaward Areas Petroleum Production Regulations 1976—that is, to insist on natural gas being landed in the United Kingdom. On the other hand, the British Gas Corporation must not discriminate against EEC companies that may desire to purchase British gas in quantities above the required rate of 1 million therms per annum as opposed to companies in the United Kingdom.

The Secretary of State could thwart delivery to a United Kingdom exporter on three grounds. First, he could insist on the landing clause—the model clause to which I have referred—that is, the gas would have to be brought to the United Kingdom, thereby making it uneconomic to export. The Secretary of State has exercised his authority on several occasions, one of which was in the Acro case. Secondly, if the exporter proposes to liquefy the gas to deliver it as LNG, the Secretary of State could withhold his consent pursuant to paragraph 27 of the third schedule of the Bill, amending section 9 of the Energy Act 1976. Thirdly, the Secretary of State could also refuse to sanction the construction of an export pipeline through controlled waters under the Petroleum and Submarine Pipe-lines Act 1975. The landing clause could be challenged in the Community courts but it is worth noting that this has not been done since 1975.

The British Gas Corporation could be in difficulties, because, as with everybody else, it is part of the EEC, but the Government would not be curtailed in the responsibilities that they exercise in the model clauses. It would also be possible in the circumstances for an EEC company—say, for the sake of argument, Gasunie—to export gas to the United Kingdom, to industrial consumers at the required rate and move it through pipelines in accordance with the terms of the Bill. Feasibility would, of course, be determined by the economics of the project, which is, after all, what competition is all about.

The right hon. Gentleman went on to list State companies operating throughout the world and asked why we should want to break up our own. He mentioned Demimex which is owned by VEBA, which is, in turn, partly owned by the State and partly by the public.

The right hon. Gentleman talked about the advantages of State corporations. He must be aware that at the time when the Government had a shareholding of more than 50 per cent., BP faced difficulties in Libya when it was turned out of the Sarir field. It had difficulties in Nigeria, where its company was expropriated for a number of reasons that I shall not go into. It applied for concessions in Turkey and Venezuela but, because the State had an investment in the enterprise, it was not possible to get concessions in either place. It is not always an advantage to have a State investment.

Let me refer to the British Gas Corporation specifically and to the sale of assets. Of course, the Secretary of State has enormous powers under clauses 9, 10 and 11. We shall look at them carefully in Committee. I wonder whether the right hon. Member for Leeds, South is aware of the case under section 13 of the 1975 Act, when National Coal Board (Exploration) Ltd. was expropriated and transferred to the BNOC for a small amount of compensation. That was a case in which the Labour Government exercised their power.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

As I understand the hon. Gentleman, he is talking about what is in the Bill. I am saying that we shall not know what the Government are up to because they have handed the matter over to others, and it is not in the Bill. That is the difference.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Far from it. The BNOC is covered by part I. BNOC can set up subsidiaries and they can be transferred by vesting the Secretary of State. He would then hold the shares. That is already in the Bill. The case affecting the National Coal Board to which I have referred was covered by a section in the Act. The powers were vested there. What conceivable difference is there between a company being mentioned or the provision of general powers? I would have thought that either case was simple.

In another case, the Government shareholding in British Petroleum was reduced considerably. That was done by a Labour Government for economic reasons.

There is another point about gas that I consider important. If we are to divest all the oil interests of the British Gas Corporation, we should take into account the gas-oil ratio with regard to the several fields. This may be a Committee point, but I feel that my right hon. Friend should consider it. For example, in the Beryl field, the gas-oil ratio is 1,500. In Fulmar, it is 380. However, it is of no great consequence in the other three fields—Hutton, North-West Hutton and Montrose—which could be transferred immediately. If the first two are to be transferred, some provision should be made so that, in the first instance, the BGC should have an option to purchase the Gas.

It was the attitude of the British Gas Corporation, which paid such a poor price to the producers, that frustrated the development and discovery of gas supplies, and that led to a gas shortage. At the time, I can remember talking about 2.87p per therm. The other day, the chairman talked about an average price of roughly 10p per therm. For new contracts, if customers can get them, it is charging well over 40p per therm. On firm contracts, the price is 29.5p per therm. BGC is making an enormous profit.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

It is not necessarily for the right hon. Gentleman. This is a State corporation. I thought the right hon. Gentleman regarded the BGC as a commercial enterprise. He is only a 55-millionth part-owner. We are seeking to give it to the people who have put their money in it as well as to the employees. It is superior to do it that way.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

The hon. Gentleman is knowledgeable in these matters. Will he indicate an oil equivalent price for gas at present, if we take the price of oil at roughly $34 to $36 a barrel?

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

I dare say that if we compared an oil price equivalent with parity, it would be very much higher. The gas price approxiamates to that of gas oil, and it has been brought back to about 29·5p per therm, but for new contracts it is well over 40p per therm. That does not reach oil parity, but it is a high price to charge above that charged in Europe.

My general impression of part II, which deals with the gas industry, is that it is a catalyst for change, but care must be taken not to claim too much for what it will achieve. The size of the BGC monopoly affected is likely to be small, at most between 10 per cent. and 15 per cent. of the market—the lowest value sector of the interruptible market. An effective source of supply through aggregating gas fields and the development of a sales network through the pooling of company interests may take up to seven years to establish and in the absence of storage facilities fallback supplies may be required from the BGC.

It is important to recognise that the BGC is not without its defences. By using cheap gas, it could undercut its competitors. I refer the House to the report of the Monopolies and Mergers Commission for 1979–80, House of Commons Paper 703, where paragraph 13.63 on page 98 cites evidence that the corporation has subsidised the sale of appliances out of the gas account. On average, it is buying gas at roughly 10p per therm. If BGC were negotiating with the oil companies it could undercut them. Therefore, in the early stages of the game—in the first seven years—I do not envisage a great impact on this market.

The Pipe-lines Act 1962 and the Petroleum and Submarine Pipe-lines Act 1975 provided for the transport of gas and liquids by pipeline. There is further provision in this Bill. Care must be taken to ensure that we have a standard set of rules, not a specific set for the private sector and another for public enterprise.

We only have to look at clause 17. I take it that that clause will be used primarily. First, there will be negotiations with the BGC, with right to appeal to the Secretary of State, but there is no information provided by which the oil producers can establish the position, the character and detail of the corporation's own pipelines. There should be a statutory right to information by someone who wishes to make use of the clause.

I have in mind information about the corporation's trunk and secondary pipelines, identified on maps, relevant capacity of the lines, a choice of economic routes between key points and technical details of the pipeline system used. Tariffs should be published, otherwise it will not be possible for the intended user to quote a price to the customers.

None of those points is covered by clause 17, and there is no requirement that that should be so. Clause 17(2)(a) is interesting, and for the benefit of the House I shall read it out. It states that the directions must not prejudice the quantities of gas which the Gas Corporation requires or may reasonably be expected to require to be conveyed by the pipe-line in order to secure the performance by the Corporation of its statutory duties and contractual obligations". Who in private industry would put forward a case to the corporation when he does not have the remotest idea about the information involved and has no method of discovering it? On whose shoulder is the onus of proof? If it is on the company's, it will not have access to the information, and the BGC, which knows it all, can be sparing in giving details. It can filibuster for a considerable time, thereby holding up the application. As the clause stands it would be difficult for the Secretary of State to fault the case of the BGC. That should be looked into by the Department and there should be a standard set of rules.

Unfortunately, in this group of clauses, particularly in clause 17, there is a built-in delay period. Let us take the steps involved under clause 17, the one that is most likely to be used. Formal application under clause 17 could take anything up to three months, and probably longer. The opportunity for the British Gas Corporation to be heard will probably take six months. There are substantial hurdles, to which I have already referred, in clause 17(2)(a), the direction and notification by the Secretary of State under clause 17(3) and modifications, if necessary, in the earlier stages under clause 17(4). Next, there is the period by which the British Gas Corporation and/or applicant must comply with the terms—say, six months. All told, the time taken could be one and a half years or even more.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

It may sound like trunk roads, but these are trunk pipelines and the applications, simply to gain access to an existing pipeline that is owned by the British Gas Corporation, will take a considerable time.

The Secretary of State rightly said that he will be the arbiter. I am heartened by the fact that he said that the responsibility may not always be with the Department of Energy and that it may be hived off to an independent body. However, it is right to start with the Department of Energy because I do not believe that there will be many applications in the initial stages. If at a later stage there are more applications, perhaps a body analogous to the Texas Railroad Company or another similar body could be utilised.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Does the hon. Gentleman share the misgivings of some hon. Members about the shortage of skilled personnel who are able to do the work? There are not many people around who can do the task.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The Department is considerable, but in my judgment there will have to be a movement of personnel to deal with some of the work, depending on the number of applications. I do not assume that there will a great deal of work for the Department in the earlier stages. As I said, the British Gas Corporation in its negotiations with individual customers will have to do much of the weeding out in the first place, long before applications come to the Department on appeal.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

The hon. Gentleman talks about "weeding out". Weeding out of whom, by whom?

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The first application will be made to the British Gas Corporation, which will try to settle the arrangement. It may decide that there is nothing in the case, and the case may then go to appeal. However, the BGC may be able to settle some of the cases initially and grant access. That is what I mean by "weeding out" cases.

I come now to BNOC. I congratulate it on the way in which it has developed over the years and on its initial chairman, who has supported the Government's case under this Bill. I should like to put before the House what I consider to be the specifications of the new companies involved. BNOC would become a statutory corporation funded from the National Loans Fund. It would be a broker in crude oil and petroleum products. Although downstream powers would be retained, the use of them would probably lapse. The corporation would also establish posted prices for North Sea oil in conjunction with the other producers. Britoil Ltd. will be set up under the Companies Act with a memorandum and articles of association. The company would be involved with upstream operations for the industry—exploration and production—both in the United Kingdom and abroad.

As we have learnt today, Britoil would be obliged to enter into a participation agreement with the Department of Energy and BNOC covering 51 per cent. of its equity oil. We have learnt today that the figure may be even higher. The balance will be available for sale on the market. The company will be free to move downstream into refining and marketing, if so advised. The powers will be outlined in the memorandum and articles of association, which will make the company another integrated oil company, like many others which have share quotations. There would be no connection between BNOC and Britoil except through the Department of Energy. That relationship should be correctly stated.

Further, if there is to be departmental involvement, it is right that the shares of the company should be held by the Department of Energy. However, I believe that if detachment and financial rectitude is sought it should be for the Treasury to hold the shares. After all, fairly recently, the Bank of England transferred the shares in BP to the Treasury. Why could not the shares in Britoil be held by the Treasury? If they are held by the Department it will have every opportunity to intervene.

There are lapsed powers. BNOC will not need to go into exploration and production. The 1975 Act could be revised. Statutes have to be revised from time to time. One that is outstanding is the National Coal Board (Additional Powers) Act 1966, which still enables the National Coal Board to explore the North Sea, which it has not done for years. The Act should be amended. The Act under which the British Gas Corporation would have to sell its oil—in this case to BNOC—could also be revised.

I said in May 1975 that a better course would have been not to break up BNOC, but to privatise it as an entity. I realise that there are difficulties. The Treasury might oppose it. Why not privatise the entire company, not just an integral part of it? There are many analogies for that. There is VEBA in the Federal Republic of Germany, Elf Aquitaine in France, which has a part State shareholding, which is held by ERAP and a part shareholding held by the public, and is quoted on the French Bourse. There is also the CFP, which is 35 per cent. owned by the State, with the rest held by the market.

Let us consider the existing BNOC. It has recoverable reserves of 7 per cent. of the 11·5 billion barrels a day recoverable reserves from the 26 fields which are producing or under development. It is the largest holder of licences in the United Kingdom and has an equity interest in 165 blocks and is operator in 42. In production, BNOC trades in equity, royalty and participation, crude oil, which is a substantial part of the North Sea total, and petroleum products. That is the enterprise that is to be split.

The only difference between the Secretary of State and myself is that he would privatise an integral part of BNOC. I would privatise the lot, with the Government retaining a 49 per cent. share. I believe that that is an eminently reasonable suggestion and I commend it to my colleagues. I doubt whether it would commend itself to many Opposition Members. If, as I must, I accept the Government's judgment, let us look at the status of Britoil. Its crude oil availability becomes reduced to only 100,000 barrels a day from which both royalty and participation crude must be deducted. Thus, it would rank as a small North Sea oil company, like many others with growing potential.

Substantial liabilities or commitments remain, due to a large number of blocks under rounds five and six in which the company has an equity interest. BNOC is an equity partner in 165 blocks and an operator in no fewer than 42 of them. This will be a very expensive liability on Britoil unless ways can be found of hiving off or farming-in by third parties in some of the corporation's acreage.

I hope that the Minister of State will be able to give the House a good statement on what steps have been taken since the original commitment, which was undertaken by the Labour Government in both rounds five and six, to reduce this load. Otherwise this will be a disincentive to buy shares in the market.

The BNOC has been very active in oil exploration, ranking second after Shell. The corporation has made relatively few discoveries of any size. It has discovered no fields on any grand scale. The Thistle and Ninian fields were acquired from the Burmah Oil Company and others. Substantial exploration expenditure commitments remain and these could be aggravated by development commitments later on unless the system is suitably revised. I mention those points because I believe that there should be a clear understanding of what the case involves.

I support the Government in what they are doing. It is not exactly the way that I would do it, but it is privatising, it is giving to the public an interest in their own corporation, like many of the companies that are quoted now on the Stock Exchange. Many of them have been very successful in their own right. Let us make no mistake about that. But for the private sector the North Sea would never have been exploited and developed. It was only later on that the State came in and decided to acquire rights. Before hon. Members jump up with great enthusiasm, let me say that the Secretary of State has enormous controls already. He is not giving up any part of this. He is making certain modifications.

I make a final plea to the Secretary of State to give us a Keeling schedule to deal with the schedules, which are extremely complicated. I have put them together, but hon. Members should have a clear understanding of all the bits and pieces of schedules. The details should be shown where they slot in, if hon. Members are to treat them sensibly in Committee.

Photo of Mr Robert Brown Mr Robert Brown , Newcastle upon Tyne West 6:03 pm, 19th January 1982

The speech of the Secretary of State was unworthy of a holder of such high office. Workers in the North Sea oil industry, its suppliers and ancillaries will have taken note that such is the Government's attitude to industrial safety, the Secretary of State did not even deign to devote one paragraph of his speech to this most important issue, particularly in an area which has claimed so many lives and horrifically injured so many operatives.

I have a vested interest in the debate in that I am a Member sponsored by the General and Municipal Workers Union, which organises the bulk of the workers in the gas industry. I worked for 30 years in the industry before I entered the House. Secondly, my major vested interest is as a member of the British public, one of 15 million people who are gas consumers and have installed gas as a chosen fuel, firm in the knowledge that the British Gas Corporation has a statutory duty to maintain a constant supply.

The subject of rape has recently created a great furore in the media and among the public, and rightly so. Here is a Secretary of State, ready, able and willing to rape 15 million gas consumers. I hope that the media will express their outrage on behalf of gas consumers, but I harbour grave doubts. Indeed, tomorrow morning the media may seek to legitimise rape when the offender is a member of Her Majesty's Government.

The Bill is the greatest exercise in asset stripping ever seen. It is based on the political dogma that anything that is privately owned is bound to be more efficient than anything that is State owned. There is little doubt that the Government are determined to throw some carrots to the backwoodsmen below the Gangway.

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

Does the hon. Gentleman agree that the spur of competition makes industries more efficient?

Photo of Mr Robert Brown Mr Robert Brown , Newcastle upon Tyne West

That is a myth which I expect the hon. Gentleman to trot out. In spite of what the Secretary of State said about the Bill in his opening address, and the address that we shall have from the Minister of State in winding up, there is no doubt that hon. Members on the Government side are dearly anxious to have the complete dismantling of the nationalised British gas industry and no less is their aim. The hon. Member for Bedford (Mr. Skeet) clearly indicated his prejudice on that matter.

The mythology about competition flies in the face of experience, particularly with reference to the two corporations concerned in the Bill, BNOC and the British Gas Corporation, both of which have been highly efficient and have served the British public extremely well.

The Bill is so enormous that it is difficult to know at which point to start to attack it. All parts are equally bad. If the Bill becomes law unamended, it could be reasonably referred to as a major act of piracy against the British public. That is the way I see it.

My main interest is security of supply. No one can argue that the Bill does not fundamentally threaten the security of supply. It does so in a number of ways. First, effectively restricting the British Gas Corporation's role to one of a supplier of 25,000 therms or less, means that anyone who wishes to use gas for any purpose whatsoever, regardless of its efficient use, can do so irrespective of a sensible depletion policy. It is true that the Secretary of State must give permission for use between 25,000 therms and 1 million therms. The Bill does not say what criteria the Secretary of State will use to grant that permission. For example, will he allow his friends in Tory councils to come to cosy deals with the oil companies to supply gas for schools and hospitals, gas which may be cheaper at the beginning but then will soar in price? Will the Secretary of State allow gas to be used for bulk steam raising? There is nothing in the Bill which says that he will not do so.

It is not enough to say vaguely, as the Secretary of State has done, that he believes that he has the powers to deal with depletion. I do not believe that he has such powers. We need a firm and legally binding statement setting out the reasons why permission will be given or withheld.

The outlook becomes bleaker for quantities of over 1 million therms. Anyone wishing to use 1 million therms or more will be able to do so without any let, hindrance or restriction. It makes absolute nonsense of any sensible depletion policy and it is a sop to those industries which have sought to blame energy prices, and the gas industry in particular, for their financial difficulties, instead of putting the blame where it should lie—on high interest rates, and on the demand that gas prices should be increased by 10 per cent. more than the going rate of inflation. That is what industry should criticise, not the policy that I have just mentioned.

This mortgaging of our future would be disgraceful if we knew that the supplies of gas were infinite, but we know that they are not. We know that the upper range of supply is likely to last 25 years, but only if there is a sensible depletion policy. The Bill throws any depletion policy out of the window. The result is that, to maintain domestic supply, BGC will be forced to bid higher and higher prices for increasingly scarce gas supplies, and that must be reflected in higher and higher prices to the British gas consumer.

Another serious point emerges. The British Gas Corporation will be forced to carry the gas—on what terms we do not yet know; nor does the Secretary of State. What would happen if we had another winter like this? What would have happened in the past eight or nine weeks to the thousands of old people who are at risk? We know that already hundreds of old people have died of hypothermia. What would have happened to the thousands of old people, babies and extremely young children whose supplies were cut off when BGC could not maintain its supply because it had lost the use of the interruptible clauses in its supply contracts with industry? The Bill makes no provision for contracts from private suppliers to interrupt supply under these or other circumstances, such as a loss of a supply line from the North Sea. The Secretary of State has made no effort to respond to that urgent question.

What will happen when the gas runs out? The Secretary of State pretends that the Bill is a magic wand which, when waved over the appropriate parts of the North Sea, will produce unlimited new sources of gas. That is the essence of free competition to which the hon. Member for Bedford referred. I say to the Secretary of State that it is not as easy as that. Indeed, it is made more difficult by his confident assertion that, while the benefits of privatisation will mean that oil companies will have the incentive to explore, prices to the consumer, particularly industry, will fall. That is simply nonsense. All that will happen is that prices will rise, and the likelihood of further exploration—unless prices perhaps treble—is minimal. At the same time, supplies will deplete more rapidly, bringing closer the time when we are forced to abandon natural gas as a major contributor to the national energy balance.

The uncontrolled depletion will have a major effect on the coal industry—I come from a coalfield and I am not pleased about that. Major industries in this country are only just beginning to use coal for bulk steam raising, and flooding the market with unlimited supplies of gas will harm the industrial sales of coal quite appreciably. That, in turn, will force further pit closures and cause further unemployment in areas such as Scotland, the North-East, South Wales and Lancashire. When the gas runs out, it will be too late to start looking for coal to supply our energy needs, or for the large amount of coal that is required to manufacture synthetic natural gas.

I want to put five questions to the Secretary of State, and I hope that the Minister of State will answer them tonight. What happens to BGC's power to explore for gas and oil? If BGC explores for gas and finds oil, what happens? Is the Minister sure that prices to industry will fall? I suspect that the answer to that question will be that competition always cuts prices. If that is the answer, how does it square with the higher prices that the oil companies are bound to expect? What happens to the balance of peaks and troughs in demand? None of those questions is frivolous, and I hope that we shall be given answers to them tonight.

The policy of my union and of all the other unions in the gas industry is to recognise that gas supplies are finite and must be an integral part of a balanced energy policy, making the best use of all fuels for the longest possible period. All United Kingdom energy sources should be controlled by the Government in the national interest. Prices to the oil companies should be held down to protect the consumer, because Britain's economic difficulties will be worsened if the nation's assets are sold off at give-away prices. There can be no doubt about that. In short, the Bill sells our heritage for a pittance and ensures at the same time that the framework is established for squandering our energy future.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow 6:16 pm, 19th January 1982

I had expected another speech from a Government Member, with whom I should have been delighted to cross swords. However, no doubt that will happen on another occasion.

May I say, uncharitably, to the hon. Member for Bedford (Mr. Skeet) that I hope that he is not chosen by the Committee of Selection to serve on the Standing Committee, because I do not wish the Bill to be guillotined, because of his misbehaviour or that of anyone else. There are times for detailed arguments, but sometimes the hon. Gentleman tries even my inordinate patience.

The hon. Gentleman complained about the immense powers in the Petroleum and Submarine Pipe-lines Act 1975 and said that Opposition Members who had been associated with it could not complain about a Bill of this nature. The fact is that the powers in the 1975 Act are more or less retained. The Bill contains five or six substantial amendments to the 1975 Act, and on page 58 there are about 10 quite logical drafting amendments. I therefore insist that the 1975 Act, in that it is essentially retained, cannot be said to be all that bad. It had the merit of being specific whenever specific proposals were necessary. It is a somewhat twisted argument to complain that when BNOC was formed, somehow or other we raped the National Coal Board and stole several assets from the British Gas Corporation and put them into this monstrous new oil corporation. That is a fantasy. All that we did was to transfer one set of public assets from one form into another, to make the system more logical.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The right hon. Gentleman is not quite right. If he looks at pages 50 and 51 of the Bill, he will see that there are quite sizeable amendments to the regulations which were made under the 1975 Act. The Act is therefore not quite as acceptable as he says.

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

I do not complain about that criticism of what I said, but I maintain that essentially the Act is intact. There is one difference between the 1975 Act and the Bill, with which we profoundly disagree, and with which any parliamentarian of any party would disagree, although admittedly when one is in Government the temptations to original sin are sometimes overwhelming. However, a parliamentarian—Government Back Benchers certainly cannot exempt themselves—must not go along with the concept of negative procedure on matters of such substance. We must not rely on the Secretary of State's assurance—who would trust a Secretary of State on such a matter?—that successive Secretaries of State and Leaders of the House would also give the House time to debate every negative resolution. That is nonsense.

Furthermore, it is a fair criticism to say that these negative resolutions need not be specific. The monstrous part of the Bill—everyone with whom I have been in contact agrees with the point—is the complete opacity of clause 2. It may be a rather clever manoeuvre by the draftsmen of the Bill, who advised the Government that the way to escape the horrors of hybridity, such as we had on the Aircraft and Shipbuilding Industries Act 1977, was to disguise the whole intention in clause 2.

I submit that the Government will not get away with that. They will fall foul of themselves in Committee unless they are more specific. They will fall foul on Report and in the House of Lords. Even if the Bill is passed, they will fall foul of the Upper House and this House by the time they try to put through the so-called orders flowing from it.

In other words, by being too clever by half, as the late Mr. Macleod would have said, the Government are ensuring that they will not achieve what they set out to achieve. Perhaps that is a reason for saying that we welcome clause 2 and that we are glad that it is self-defeating in its purpose. However, the Government must take seriously the criticisms that are offered by many outside the House, quite apart from those inside the House, who complain about the nature of clause 2.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

The right hon. Gentleman should also draw the House's attention to the fact that clause 2 is not subject to any form of parliamentary approval. None of the orders—not even the negative procedure—applies to any aspect of clause 2.

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

I stand corrected. I accept that statement, which supports the criticism that I have made—that it is a bad Bill. The Bill must be considered carefully in Committee. I suspect that whole sections of the Bill will have to be taken away and rewritten. It will not be the first time that a Minister has done that: I have done so on occasion.

I remember listening earnestly to the hon. Member for Bedford and others like the hon. Member for Derbyshire South-East (Mr. Rost), in Committee on the Energy Act 1976. The Government were clearly wrong in what they were proposing, so they took away four clauses and rewrote them. Of course, that was a no-win situation. The fact that we saw the mistake and corrected it meant that we were blamed for the mistake in the first place. However, it was proper and prudent for the Government to make that correction and to suffer the indignity of doing right.

The Government will find the matter difficult in Committee. I do not know who is responsible for such matters, but I earnestly hope that I shall be on that Committee. It will be a long slog. It will be an interesting Committee that must consider carefully the sections of the Bill that deal with fundamentals. I shall deal with part IV in a moment.

Another criticism I have deals with the un-Conservative intervention of the Secretary of State into an arbitration involving anyone who proposes to use the national gas line system as a common carrier. If there is a dispute between the British Gas Corporation and someone who wishes to use the gas line grid, the arbitrator is to be the Secretary of State. That is most un-Conservative.

I believed that no one could be more Right-wing than the Secretary of State, but the hon. Member for Bedford has proved it. That is why the hon. Gentleman encourages the Secretary of State to set up another independent arbitration machine. That machinery will require more than 40 or 50 members, as stated in the section of the Bill that deals with manpower.

The Department of Energy is not a large Department by Whitehall standards. It is a highly efficient Department. I was proud to serve in it, as, I am sure, is the present Minister of State. The loss of 40 or 50 people would be a large one for that Department. If it means that 40 or 50 people must be sacked elsewhere, I wonder how the Department can carry on. Whole sections of the Bill deal with petroleum engineering and production licences, quite apart from the safety provisions, which to my mind imply that the Department must be substantially larger as a result of the Bill and all that it throws upon a responsible Secretary of State.

My major complaint—apart from the opacity of clause 2—is that the Secretary of State has not told us about the memorandum and articles of association of Britoil. I believed that today's debate would be a rerun of the old movie that we saw on 10 November and that we should hear the same speeches from hon. Members, including myself. However, that has not been the case. The Secretary of State has made major changes to that which he postulated on 10 November. He told us that he would have a temporary majority of 51 per cent., although he would hold only 49 per cent. of the shares. I do not know what the word "temporary" means. If it means that he moves decisively every time that an important change must be made, he has a permanent majority.

The idea of a temporary majority is nonsense. Either he has a majority or he has not. He will own 49 per cent. of the shares with a 51 per cent. right of decision. That is a major change. We were stunned when the Secretary of State in November proudly boasted that Britoil would be a corporation that had only 49 per cent. of the equity. I suppose that he was pushed hard in the Cabinet even to reach 49 per cent., but it is a major switch. That matter is not in the Bill.

The Secretary of State mentioned many other important matters. He said that there would be a take-up by Britoil of the equity given to BNOC in rounds five and six. We mentioned this point in the debate on 10 November and we received no answer from the Minister, although I do not complain about that. I share the scepticism of the hon. Member for Merthyr Tydfil (Mr. Rowlands): it is wrong that we must take the word of the Secretary of State tonight about what he believes will be in the memoranda of association. I have not been able to grasp the small print of what the Secretary of State said, because I was amazed by such a shift in position. Clearly, the Government have taken rather a different view when they are faced with the practicalities of dealing with the participation agreements.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

Is not the right hon. Gentleman grossly misrepresenting what the Secretary of State said? Did not the Secretary of State make it quite clear on 10 November that he would safeguard the British interest and control of Britoil? Did he not say earlier in that debate that the only circumstances in which the Government would take over the additional powers from 49 per cent. to 51 per cent. would be if British control was going to be lost, or if the directors were to be changed?

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

It is not a matter for me grossly to misrepresent the Secretary of State or for the hon. Gentleman to defend him wrongly. It is a matter for Parliament properly to decide in the full—

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

The hon. Gentleman must not be impatient and unparliamentary. He must listen. Parliament must endorse the nature of the articles of association, otherwise we are simply allowing the Secretary of State to decide to change his mind whenever he wants and to give us in the beginning articles of association which we have all presumed to be in a particular form but which turn out to be quite different. I suggest that that is wrong.

The Minister of State will have many things to answer at the end of the debate, and no doubt there will be the usual political punch-up, but there is one matter of substance with which I should like him to deal. I want him to give a solemn promise that we shall have the articles of association at the beginning of the Committee stage. That is a fair request. It is a matter of plain parliamentary fairness. We need to have the papers before us—as is said in the other place—together with the common facts on which hon. Members can base alternative arguments. It is unfair of the Government to advance the Bill without making the articles of association known in detail.

The hon. Member for Enfield, North (Mr. Eggar) chastised me on a previous occasion for talking about the prejudicial position in which the British people would be placed under the Treaty of Rome if we allowed the exclusive right to land oil in the United Kingdom to be challenged by our European partners. Indeed, the hon. Member for Enfield, North said that that was a Foreign Office argument, but sometimes the Foreign Office has good arguments, and this is one which deserves an answer.

It is possible that France might claim the same right, and might stand with us in the Council of Energy Ministers in resisting the claim that there is a breach of the understanding of our 1964 Act and of the treaty of 1972. That is an argument, incidentally, that the right hon. Member for Bristol, South-East (Mr. Benn) and I heard many times at the Council of Ministers when we served on it between 1976 and 1979. It is not a romantic, nonsensical or irrelevant argument; it is a real argument. I should like the Government to be sure of their position in this respect. I suspect that the Secretary of State's references to the memorandum relating to a certain paragraph were in order to defend the United Kingdom if we are attacked in the European Councils in regard to a change of circumstances.

The Minister of State has had a hell of a time. I hope that you will forgive the language, Mr. Speaker, but it can only be described—

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. It is the second time today that the expression has been used. We must maintain our parliamentary standards.

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

I agree, Mr. Speaker. The Minister has had an infernal time in his own constituency and elsewhere. He has lost the gas-gathering pipeline, although that was not entirely his fault. He has lost the Invergordon smelter—again, not entirely his fault, but there we are. But I give him credit for scoring a bull point in having Britoil—if it is ever created—established as a Scottish-based company. Scotland is part of Great Britain, and if Britoil is registered in Scotland, it will not only bring administrative work to Scotland—where a large claim is made concerning the origin of the oil—but will allow contracts to be made and litigation to be heard under Scots law. The case for that is well argued in page 84 of the report on the proposed merger or bids by two banks for the Royal Bank of Scotland. Therefore, in a completely non-partisan way, I say "Good luck" to the Government in having made the right decision, and I hope that they will stick to it.

If Britoil emerges as a company, I hope that BNOC will still remain in Glasgow, even though it is a State trading company, and that Britoil will be based in Edinburgh, in Aberdeen, or somewhere else in Scotland. The important point is that the company should be registered in Scotland. I do not make this point as a nationalist; I am an internationalist. When BNOC was created, it operated under English law, and a great deal of work was naturally taken to English lawyers and to English courts, whereas Scottish lawyers needed more assistance in this respect.

I agree wholeheartedly with what the right hon. Member for Leeds, South said concerning safety. I recall the setting up of the Burgoyne committee, the work of which has probably contributed largely to part IV of the Bill. Earnest work has been done by the much-criticised multi-national oil companies in regard to the blow-out in Ekofisk. That was not in our United Kingdom sector but we had the knowledge that mathematically it was more likely to happen in our sector than again in the Norwegian sector. We took steps, and with enthusiasm the oil companies helped to create and build the emergency support vessels, one of which has just been built in my constituency. The Government gave the Shell one away to Finland, but our Government were able to make sure—[Interruption.] I was not in the Government at the time. The order for the Shell vessel was dispatched in 1979 by the then Secretary of State for Industry, who is now the Secretary of State for Education and Science, but the other vessel has been built in Britain. We now have the safety zone principle, which is rehearsed in the Bill. It was known and recognised earlier by the oil companies in their plan for five sectors. In making these points I refer also to the trade union committee and to the work done by many other people in regard to safety.

It is wrong that part IV should be in the Bill. It should be in a separate Bill that would be less contentious than this one will be, by its nature. The Government are muddling matters by including part IV in the Bill. It may be that if the hon. Member for Bedford and certain other hon. Members are appointed to the Committee, the Bill will be guillotined at round about part III, so that in effect the axe will fall on part IV. That will be tragic. I hope that the suggestion about taking out part IV or having a new procedure will be looked at carefully. I respectfully suggest to the Minister that he should take out part IV and make a separate Bill of it.

As the House will have gathered, I and my right hon. Friends disagree profoundly with the Bill, and I hope that it will be defeated.

Photo of Mr Peter Rost Mr Peter Rost , Derbyshire South East 6:38 pm, 19th January 1982

The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) has clearly learnt fast since his promotion as a spokesman for the Social Democratic Party. He has revealed about as much of that party's energy policy as we know about any of its other policies. There has been a little nit-picking but no substantive argument against the Bill. After listening to him carefully, I am thoroughly confused as to why he concluded his remarks by saying that he would oppose the Bill in principle.

The other Opposition Members who have spoken seemed to be struggling hard to find any argument against the Bill. There has been the most extraordinary inconsistency. The hon. Member for Newcastle upon Tyne, West (Mr. Brown)—in a speech which attracted my sympathy and, to some extent, my support—argued the case for gas depletion in the national interest. I would go along with him. Surely, however, it is rather inconsistent to suggest that with legislation, by introducing more competition, we will deplete our gas reserves more quickly on the one hand, and then for the right hon. Member for Leeds, South (Mr. Rees) to argue from the Front Bench that this Bill, by introducing more competition, will raise prices. Hon. Gentlemen cannot have it both ways. The hon. Member for Newcastle upon Tyne, West is suggesting that gas will be used up more quickly because competition will reduce prices and therefore expand the market even faster than it is already expanding, and his right hon. Friend is saying the opposite, that prices will rise as a result of this Bill, presumably leading to less consumption. Which is it to be?

Photo of Mr Robert Brown Mr Robert Brown , Newcastle upon Tyne West

Clearly the hon. Gentleman was not listening to the nub of my argument very keenly, or he would have understood. I am against depletion. He said I was advocating it. I was advocating a depletion policy whereby we could control the rate at which our North Sea gas is dispensed. Once we introduce this million net therm provision for industry, inevitably the price will rise and the rich resource of North Sea gas is bound to be depleted more rapidly.

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

I certainly understood the hon. Gentleman's argument, but I fundamentally disagree with him. If British Gas had really been concerned about conserving finite gas resources, if it had really been concerned about a depletion policy, it would not have over-exploited the market, particularly the domestic market, by under-pricing gas in the early years and deliberately knocking out competitor fuels, such as oil, coal and electricity. In fact, British Gas went through the pretence of propounding a depletion policy by saying that it was preserving gas as a premium fuel, whereas in reality it exploited the monopoly that Parliament gave it by a ruthless and aggressive marketing policy that so rapidly developed the market for gas that anyone who was not a complete idiot turned off any other fuel and demanded gas, until the market had developed so rapidly and the incentive for the development of our own gas reserves was so diminished, because British Gas was not prepared to pay a fair price, that it was forced to buy gas from the Norwegian sector at much higher prices. So much for the British Gas depletion policy.

My argument in support of this Bill centres around what I regard as the most important section of it—the long-overdue breaking up of the British Gas monopoly. We cannot blame the British Gas management for having exploited and abused that monopoly against the national and consumer interests; we should be blaming ourselves. It was here in Parliament that the powers were given to British Gas to exercise that monopoly, and, of course, it was the last Conservative Government who were responsible.

At least we are now repenting, which is more than previous Governments have been prepared to do. We are prepared to admit that the powers given to British Gas were too great and have worked against the national and consumer interests, and we are now prepared to put this right.

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

I do not think that the hon. Gentleman was in the House at the time, but the Labour Opposition opposed that Bill very strongly.

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

I am well aware of that. I was on the Committee myself and was one of those obliged, somewhat reluctantly, to support it. As a new boy I was, perhaps, not mature enough to have sufficient reservations. I admit that I am just as much to blame as the others who created that British Gas monopoly.

The argument I wish to develop in my case, that British Gas has abused its monopoly and that, therefore, this legislation is long overdue, can be made on several points. It is without question a fact—the evidence is there—that because it had the monopoly power to buy gas from producers and, of course, the monopoly power to sell and distribute, British Gas was able to purchase and subsequently sell gas, particularly to the domestic consumer at far lower prices than would have been the case

It may be said that that was to the benefit of the consumers in the early years, and indeed it was. However, it has led to the deception of consumers because they were led to believe that gas would be cheap and plentiful. They invested in gas domestic heating and are now finding that, as with other commodities, a market price, a world price, eventually has to assert itself, based upon supply and demand. Simply because we are already having to buy one third of our gas from the Norwegian sector—and they are not letting us have it at below market prices—we are already finding that those cheap and plentiful supplies of gas that we were promised are no longer a reality.

Of course, there is still plenty of gas. We have barely started developing it within our own North Sea and this too is because of the British Gas monopoly, because, in order to try to over-develop, over-exploit, the market for gas, British Gas was more concerned with screwing down the price to our own British North Sea field producers than with paying a rising price that would have provided the reward—or at least, a return—for the high investment that would have been required to bring that gas home.

The monopoly has been abused in this sense, that we have neglected to develop our own North Sea gas. There is plenty there. It is an embarrassment. There is probably enough for up to a hundred years, and, as the Norwegians have found, there are very substantial reserves of North Sea gas available. However, it is an embarrassment at the moment because the oil companies have not been offered a fair price for it.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

Would not my hon. Friend agree that one of the deepest concerns and one of the results of the BGC monopoly is that some private oil companies now predict that we will run out of gas or cease to be self-sufficient by the end of the 1980s?

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

Undoubtedly this is accepted, and this is why my right hon. Friend and the Government have brought forward this legislation. I have no doubt at all that incentives will quickly be created for the development of more supplies. I would further suggest that one of the main reasons why British Gas is opposed to this legislation is that it is afraid that so much gas will come forward from the incentive that will be provided that it will undermine the long-term contracts that it has with Norway because it will be seen that British gas will be offered in competition perhaps at a lower price than British Gas has had to pay in the Norwegian sector. I have no doubt at all that if British Gas had not exercised its monopoly power to hold down the price it was prepared to offer to producers in the British continental shelf, we would now be flooded with sources of gas at prices somewhere between those paid in the early development of the southern North Sea basin and the price we are now having to pay the Norwegians, prices that would have offered a good return to the producers and a much fairer deal to the consumers than we are faced with now in having to import so much of our gas.

I also believe that British Gas has to answer for the under-development of our continental, offshore energy resources with regard to associated gas. If this legislation had come forward some years ago, or if British Gas had not been given the power to use its monopoly, I believe that pipelines would now have been built by the oil companies and more associated gas would have come ashore rather than being flared. Why is the gas flared? The reason is that it does not pay to pipe it ashore.

Why have our petrochemical and other high-energy consumers suffered? Why have other consumers who use gas as a feedstock suffered and gone out of business? Why have we lost to foreign competition? The reason is that we have not used the abundant gas associated with oil production in the North Sea. British Gas has held down the price so that it does not pay the private sector to build pipelines and sell the gas to our petrochemical industry and other feedstock users. Competition is desperately overdue. We need the petrochemical industry. There is no reason why it should be outpriced against European petrochemical firms when we have the resources. We are not marketing and exploiting those resources. They are waiting for us, if we can provide a reasonable incentive.

British Gas has rationed industry and overcharged at the same time. The arbitrary decisions that a monopoly is allowed to take about who it supplies and at what price have not been in the best interests of the British economy. The domestic consumer has been subsidised. The domestic consumer might believe that he has had a good deal, but that he is not getting such a good deal now because prices are rising. Domestic consumers have a better deal than industry, which has been deprived and messed around because British gas has not developed the reserves as it could if it had had more competition.

There is shortage amid plenty. That is always so when nationalised enterprises or State corporations intervene. As with food production in. Russia, shortages exist amid plenty. The exploitation and exploration of North Sea gas have been frustrated unnecessarily and now need an important boost if we are to maintain our supplies.

The monopoly has abused its powers in another way. In the long term it is perhaps more serious than the aspects that I have already discussed. British Gas, along with the electricity supply industry monopoly, has abused its powers in a way that has damaged the consumer far more seriously than the nation realises. By its pricing policies British Gas has sabotaged the development of district heating and combined heat and power schemes. It has deliberately frustrated the development of co-generation in industry, which could be doing for us what it is achieving in many European countries, where people do not have to shiver and freeze in their homes because they cannot afford enough heat.

About 3,000 district heating schemes exist in Western Europe alone. Many are fired by gas. It is a premium fuel but it has a higher efficiency than gas burned in boilers. The electricity by-product reduces the price of that heat and also reduces the cost of electricity production.

The Select Committee on Energy is investigating why combined heat and power in Britain is lagging behind and why our people are suffering from high energy costs when consumers in other countries benefit from cheaper energy. There is no doubt, according to the evidence, that one of the major factors is the British Gas monopoly.

If proof of that is required I hope that my right hon. and hon. Friends on the Front Bench will refer again to the report of Dr. Walter Marshall to the Department of Energy. I refer to Energy Paper 35 on the prospects and potential for combined heat and power in the United Kingdom. That report said that one of the major reasons why the United Kingdom was bottom of the league for district heating and the co-generation of heat was the monopoly competition of British Gas. It recommended that British Gas be more sensitive to the need to encourage combined heat and power, which would result in energy savings and probably cheaper energy for the consumer, instead of allowing British Gas to continue to develop its market almost exclusively in the domestic area for heat-only burning in boilers.

A number of cases have been brought to my attention of British Gas deliberately trying to frustrate the development of district heating and combined heat and power which could benefit millions of consumers. In the Midlands, Mr. Geoffrey Shepherd has developed with industry a combined heat and power station at Hereford. Bulmers benefit from the heat and electricity is made available to the grid at a lower price than the Midlands electricity board has to pay for electricity from the national grid.

A number of similar schemes for combined heat and power have been proposed but British Gas has refused to quote to supply gas. It decided that it did not want to provide the fuel. That was an arbitrary decision. As a result, several schemes—one of them at Telford new town—did not go ahead. In its wisdom British Gas decided that it would not provide the gas. It wanted to be excused from quoting. I could give other examples.

It would be reasonable if the people developing the combined heat and power scheme at Telford have somewhere else to go, but they do not. Other schemes are going ahead but they are not using gas.

The scheme at Hereford is already working and supplies Bulmer with heat. The go-ahead has been given for a scheme for Dunlop. That will be partly coal-fired. Gas is ideal for some schemes. Although gas is a premium fuel, burning it in a combined heat and power cycle is more efficient than selling it individually for homes and burning it to provide heat only. British Gas has deliberately tried to prevent that. Its sales effort has concentrated on selling gas selectively to industry and aggressively to the domestic consumer.

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

Does the hon. Member agree that Conservative Ministers or their civil servants have frustrated combined heat and power schemes, particularly that at Hereford? That was the evidence given to the Select Committee.

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

It is true that in so far as Ministers at the Department of Energy are responsible for national energy strategy they have not taken the action that should have been taken over the years to see that the institutional restraints, such as the monopoly powers of British Gas or of the electricity supply industry, were removed. Some hon. Members—the hon. Member for Bristol, North-East (Mr. Palmer) is one of them, as am I—have argued for some time that this must be done. I hope that the Select Committee's inquiry will prove fruitful in drawing further attention to this matter.

It is crucial that the monopoly powers of British Gas are broken as proposed in the legislation so that alternative sources of North Sea gas can be made available at competitive market prices. Nobody is asking for discounts or subsidies, but at least it should be made available. Industry should have the choice whether to take it. There would probably be more gas available at lower prices than British Gas is prepared to offer to industry in its arbitrary way.

I reiterate that the most important part of the legislation is the competition that it will introduce into the supply and marketing of North Sea gas. I have no doubt that the reserves are much more substantial than is thought because there has not been the incentive to develop. Nor do I have any doubt about the benefits to the British economy, to our standard of living and to the millions suffering from inadequate heating availability. They could have benefited already if we had not mismanaged our energy strategies by failing to deal earlier with the monopoly abuses that the Government are now bravely tackling.

Labour Members should not approach the legislation in the doctrinaire way in which they suggest we are approaching it. It is all very well to get het up about this being denationalisation or massive asset stripping, as has been suggested. No doubt we shall hear this again during the debate. But it was the Labour Government who asset-stripped the BP shares. A huge block was sold, which resulted in control on behalf of the Government being lost. They reduced a majority State holding into a minority holding. Not only that, but they sold the shares at Stock Exchange prices so that there was a huge profit for all the speculators and capitalists who had put £100 into a few shares. What is even worse, they squandered the proceeds. So let us hear less humbug and hypocrisy about privatisation and selling off State assets. Let us concentrate on the issues of principle. Will this legislation, by introducing more competition, serve the consumer and the national interest better than we have been served in the past?

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East 7:03 pm, 19th January 1982

I certainly agree with the hon. Member for Derbyshire, South-East (Mr. Rost) that the previous Government got involved in asset stripping but, contrary to his view, it was Scottish assets which were stripped and put into a United Kingdom oil corporation even though it was of a public nature. It is some consolation to me that the new company will have a Scottish registered office; it will be much easier for a Scottish Parliament to take it into public ownership in due course.

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

What role does the hon. Gentleman think the Shetland part of these assets play? I gather that Shetland is not so keen on them being thrown in with the Scottish ones.

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

If the hon. Gentleman cares to go to Shetland he will find considerable opposition to the way in which unemployment is rising sharply now that the construction boom at Sullom Voe is over. I think he will find that opinion has changed.

Certainly in relation to oil assets the British Government of the day decided to take these out of Scottish ownership and that will be put right. Unfortunately, we are not dealing with that but with the Oil and Gas (Enterprise) Bill. It is a somewhat flawed piece of legislation. There are some good things in the safety aspects which will be discussed later in Committee.

I am surprised at the way in which the Conservative Party has gone about its vaunted claim that it is in favour of a property-owning democracy. If it wanted to bring that about it could have taken the radical solution of issuing debenture or other bonds to every citizen, constituting a share either in revenue terms or in capital terms. That would have fitted into its philosophy much better, but it has sought to take a profit-making combine, which has already been given preferential access to oil territory, and sell it off to those who can afford to buy shares but who are unwilling to risk their money in the risky business of exploration and development. That is not the best way to deal with an asset, be it British or Scottish.

It would have been much more rational for the Government to give smaller oil companies an opportunity to compete with the big boys for some of the juicier golden blocks, because it is through the smaller companies that they could have built up the United Kingdom share in the exploitation of oil. In the Brown Book which was published in 1981, although all the companies are British because those were the terms under which they got licences, we see that their parentage is mainly of trans-Atlantic origin—Hamilton Brothers, Esso, Mobil, Amarada; Shell is largely owned by the Dutch and Occidental. If hon. Members go through the list they will find that the United Kingdom equity share is smaller than many people would like.

A possible criticism of the Bill is that it will do nothing to spread the development and exploitation of oil on a national basis. More likely it will lead to the loss of existing United Kingdom control over the oil if and when some of the shares manage to pass abroad through transactions on the Stock Exchange or whatever.

As the Secretary of State has said, protection may well be built in by virtue of the mysterious articles of association which will give majority voting rights to the Government to prevent a takeover, particularly in relation to appointments to the board. Nobody can argue that the Bill will per se spread the benefits of the oil which has been discovered to anyone other than those who have interests abroad. I should have thought that the Government have made a mistake because some foreign control will still remain.

The hon. Member for Derbyshire, South-East mentioned dogma. I had always thought that the Conservative Party was a believer in the mixed economy. The companies that are active in exploration and development in the oil industry are almost entirely in the private sector. The only company now involved in the public sector is BNOC, although the British Gas Corporation still has rights to explore and develop. I am not sure of the statutory position of the National Coal Board but I suspect its powers for exploration for oil and gas have been stripped away; certainly they are not used. So BNOC is the only public sector element in the industry, unless one argues that British Petroleum serves a role. That might have been a stronger argument if there had still been Government control over BP, but BP is now largely operated as a private company and is regarded by everybody as being within the private sector.

The argument then arises as to why it is necessary to take this action in relation to BNOC, which is one part of the mixed economy. In 1975, when the Petroleum and Submarine Pipe-lines Bill was before the House, examples were produced of State oil companies, publicly controlled oil companies, operating in such diverse countries as Finland, France, Austria, Italy, Spain, Germany, Ireland and the Netherlands, not to mention the Middle Eastern countries and those across the Atlantic. It was argued that there was a protection in having a State oil company to look after the national interest.

What were the benefits? The first would be the audit of expenditure if BNOC was a silent partner—that is, if the operating rights were held by other companies—to see that the tax loss expenditure was minimised, or that the number and location of platforms were so arranged as to maximise oil production, when the inclination of companies under certain configurations in oilfields might be to go for the least capital-intensive scheme to maximise the return of profit.

The second benefit was the monitoring of purchases of equipment. In the earlier days of oil exploration and development it was patently clear that a large proportion of the purchases was from abroad, particularly from the United States of America. It took time for the United Kingdom component in purchasing to rise. The work of BNOC in that direction was a very useful addition to the role performed by the Offshore Supplies Office.

Even though the component of United Kingdom supplies has risen, there is still doubt in my mind, as there always has been, about the accuracy of the figures when it comes to subcontracts, because what could have been placed in the main contract through a United Kingdom supplier could filter down and go outside the country. Therefore, BNOC, being involved in the investment decisions as an operator or as a silent partner in some of the consortiums, would be there to argue the case for the purchase of Scottish, English, Welsh or Northern Irish equipment wherever possible.

The third benefit was competition with the majors and an assurance of supply, which in a way was a strategic interest. That was largely taken care of through the participation arrangements, but as the oil fields in the North Sea move from their present stage into a more mature one, return territory may become available—territory which is given up—and there may be a role for a State oil corporation in developing those areas that may not have been attractive at first volley to some of the major oil companies. That is a role that it would be much more unlikely for Britoil to carry out, if its main responsibility were to shareholders and not to the public interest.

If it is necessary in the Government's eyes, whether through dogma or desirability, to put the shares of Britoil on the market—accepting the cautionary words of the Secretary of State—is now the time to rush these proposals through the House? The Government may find themselves running out of time if they do not enforce these provisions fairly quickly.

Will the Treasury stand by and allow the market to improve if it wants to curtail the borrowing requirement? I should think not. The Treasury might well like to get in large quantities of money from the sale of the assets, even if it might obtain a better price if it waited two or three years, as I think would be the case.

The International Energy Agency figures show that petroleum products supplies dropped in the past year by 5 per cent. to 7 per cent. The Petroleum Economist gives a drop of 6½ per cent. There have been significant drops in the supply of crude oil from the OPEC countries, even though there has been a considerable top-up from Mexico, the North Sea and India. It was reported in the Petroleum Times of 15 January that there had been a drop in United Kingdom demand, which is now at its lowest for many years. Between 1980 and 1981 there was a drop of 9·3 per cent. in demand for petroleum products.

Oil shares are standing at historically very low levels. There has recently been an improvement in those of Shell, but largely through an improvement in the downstream sector, in petrochemicals and refining, and not necessarily its handling of crude oil.

Britoil will be going into the market as a supplier of crude oil. It will have the attraction of having some good investments in that direction, but the market is soft. I should not be surprised if, were an offer to be made in the next year or year and a half, those market conditions prevailed, and the price achieved was well under the asking price.

I do not. think it right and proper in such circumstances that the House should be asked to consent to a scheme which would seem to be financially problematical, one that could cause the loss of an asset. Therefore, I counsel the Government that the best thing would be to put the whole matter in cold storage. I cannot foresee any real improvement in the next year or two.

I should like to ask the Government one question about Britoil. If it is established on the basis that is intended, will it, like BNOC, be given a favourable disposition or preference in future licensing rounds? If it is not, the price of its shares may be less substantial than it would otherwise be.

Promises have been made that the jobs in Glasgow will be maintained. I am glad that those assurances have been given, but they are good only so long as the Government have control of the company. The Bill says that there will be an increase in the number of jobs in the Department of Energy. The explanatory and financial memorandum says that the administration of certain clauses could require a total of eight to ten staff in the Department, with an increase to 40 or 50 in due course. Any benefit is certainly not coming to Glasgow or Scotland as a whole.

I turn to the argument about the disposal of BNOC and the head office. For me, the headquarters have always been Stornoway House in London, where the main control was exercised. Glasgow, although staffed with many people performing very useful jobs, has not had complete control over policy, except when the directors travelled up from London to take over.

I should like to say a brief word about gas. British Gas has been no great respecter of the interests of Scotland. It was set up only when gas was discovered in Scottish waters and the then Scottish Gas Board was abolished. In Scotland we found that the gas from southern waters came up slowly, with the grid. I can understand why. It was a matter of development and of tapping the grid as it came up, but there is no doubt that it took many years for natural gas to reach Scotland.

One of the significant effects is that in the industrial sector Scotland received only half the share of gas to which it would be entitled proportionately, despite the huge production that is now beginning to come from Scotland, both from the Norwegian suppliers in Frigg and from the Forties.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

Is it not also true that Scottish industry benefits considerably from electricity that is much cheaper than that available in the rest of the United Kingdom?

Photo of Mr Gordon Wilson Mr Gordon Wilson , Dundee East

The hon. Gentleman touches on a difficult and dangerous point. I counsel him to come into our debate on Thursday about what has happened to the Invergordon smelter. He will then be treated to a number of hours of critical examination of electricity prices in Scotland. I can give the hon. Gentleman one example, which bears some relation to another provided by the hon. Member for Derbyshire, South-East. There is an industrial estate in Aberdeenshire which, although it is very close to St. Fergus, where the gas is landed, was refused access to gas by the British Gas Corporation on the grounds of expense. As a result, that estate had difficulty in development. Obviously, the proximity to gas supplies does not automatically mean preference in supply. That disparity inclines me against the British Gas Corporation.

According to the Petroleum Times, AMOCO is supposed to have two or three projects that it would like to push forward and it would be looking for a price of between 26p and 35p per therm. That is a wide gap between the minimum and maximum limits. According to the report, the BGC is currently paying 16p or 17p per therm and those developments have not been going ahead. Therefore, if one argues in favour of additional supplies of gas, the price of gas might rocket. The advantage would be more gas, but the consumer would have to pay a considerable amount. As I understood the Secretary of State, we are mainly dealing with industrial consumers. The domestic side of the industry will remain with the BGC. Many industries and large gas consumers argue that they are already paying more than their business competitors on the Continent. Therefore, there are difficulties. I am worried that the break-up of the monopoly could lead to considerable gas price inflation.

The Government made a better start than their predecessors, when they substantially increased oil taxes and the restrictions on flaring. I have already commended the Minister on his actions. However, in the past year, the Government's energy policies have virtually collapsed. The gas-gathering pipeline has gone and has left a substantial gap in Scotland. There was a bungled deal with Norway over the price of gas and there was the loss of Norwegian gas. The Norwegians have their own system, which will come into operation in 1986. The cost of energy to industry has affected Corpach and Invergordon. There is an absence of work on the depletion strategy. Indeed, the Labour Party's restrictions were quite injudicious and the Government have still done nothing about that. In addition, this Bill has been introduced. Therefore, although the Government started well, they are certainty making—to use a good Scots word—a bourack of the whole affair. I shall certainly vote against the Bill, because of the dangers that it involves and because, ultimately, the provisions relating to the sale of BNOC will lead to a loss rather than a gain.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South 7:22 pm, 19th January 1982

Most Opposition Members have said that, with the exception of part IV, the Bill is based on dogma. When I sat down last night to prepare some comments, I was moved by a letter that I had received from a constituent, Mr. Elliott of Trubend Ltd. I shall quote from that letter. He referred co the plight facing his company and said: Apart from the lack of orders my greatest problem has been with rising costs that are out of my control. No matter how disciplined we become, the public sector costs could not be contained. The electric, gas, coal, telephone, post, rail (goods deliveries), fuel, local authority charges, rents, rates and especially water, which will soon be as expensive as fuel, continue to rise incessantly. It is against that background that we must view the generic side of the Bill, in addition to the specific proposals as they affect BNOC and the BGC.

On the generic side, I have the utmost sympathy with my right hon. Friend the Secretary of State. Last week, the chairman of British Telecom said that the company had not only failed to hit its target of a 5 per cent. increase in productivity, but had fallen back 5 per cent. He said that his prices had gone up twice as fast as the national rise in prices. That was achieved solely by increasing the price to the consumer.

As someone new to the industry, it seems to me no different from the rest of the public sector. It faces the same tragic position. Much of it is run for the benefit and convenience of those who work in it. Far too little is run for the benefit of the customer, the final consumer or the taxpayer. My right hon. Friend the Secretary of State is doing the nation a great service by introducing such a Bill.

I came fresh to the industry, and the first aspect that I considered was an assertion that seemed illogical and that has been repeated by, among others, the hon. Member for Dundee, East (Mr. Wilson) and the right hon. Member for Leeds, South (Mr. Rees). They assert that if the pipelines are made available to outside producers and gas production is increased, the automatic response will be an increased price to the final consumer. There is no economic fact to suggest that that has to happen. However, it could happen. I suggest that it depends upon which of the four elements becomes the dominate one. Is the dominant element to be the livelihood and future prosperity of gas producers, of the BGC, of the final consumer—whether industrial or domestic—or of the Government, in the form of the Treasury?

There seems to be some debate about whether producers will get a higher price or, indeed, need one. However, let us assume that they receive a higher price for the gas than they are offered at present. A higher price for the gas from the fields does not necessarily mean that there will ultimately be a higher price. Two elements will have a bearing. I refer first to the monopoly costs of the BGC and, secondly, to the monopoly profits. The Government could have some effect in those two areas and we, as parliamentarians, should do some hard questioning there.

Let us consider the Treasury's influence. It specifies financial targets and cash limits, and, more recently, there has been the gas levy. That is one area of variability that can affect the price to the consumer. However, another area is much more interesting. Let us consider the London Electricity Board's recent report and the fact that its showrooms have achieved a £5 million loss. Who can achieve that on retailing domestic appliances? It is no mean achievement. Therefore, monopoly profits and the inefficiency of the nationalised sector are significant.

The point of the Bill, and of the dogma and drive from this side of the House to achieve competition, is to remove public sector monopoly inefficiencies. Some progress will be made. However, that is not the complete answer. It will take us a long way. All the evidence from the public sector that I have considered as a member of the Public Accounts Committee shows, without exception, that there is vast potential for saving money.

In his opening speech, the right hon. Member for Leeds, South mentioned pricing policy. My hon. Friend the Member for Bedford (Mr. Skeet) mentioned that and said that there must be some published price or tariff for the distribution pipeline. However, we must go further than that. There must be a monitoring of operating efficiency. Monitoring of public sector efficiency combined with the other two areas means that we should discover whether the net result to the consumer would be higher prices. I believe that they will not arise, and that more gas will be supplied to British industry at a competitive rather than a higher price.

It is a pity that the hon. Member for Dundee, East (Mr. Wilson) has left the Chamber because I shall comment on his statement that the most opportune time to lodge stock would be in the latter half of the financial year. In the sale of any public asset there are many times when it is most opportune to obtain the highest price for it. That is not the sole question to be asked. The issue must be considered in the context of the Government's requirements for revenue and of whether it is most cost efficient to sell stock in the autumn or early winter or, alternatively, to raise money from other areas.

It must be the right of any Government—it is logical and reasonable—to liquidate public assets when they believe it to be necessary. My hon. Friend the Member for Derbyshire, South-East (Mr. Rost) commented that a previous Government liquidated a section of British Petroleum.

The Bill has additional benefits. A primary benefit will accrue to new industrialists in my constituency and elsewhere in the heartland of the Midlands, who are now unable to obtain new gas contracts. I very much hope that as a result of the Bill the combination of increased gas supplies and competition will at least mean that those industrialists wanting gas supplies can get them.

The right hon. Member for Leeds, South (Mr. Rees) talked about great difficulties with the transmission, control and monitoring of gas. They do not seem to me likely to arise. I worked in Canada for two years. There was no great difficulty there for the private sector in working many of those areas and deciding how to monitor one against the other. I do not see any horrendous problems in that area.

I hope that my right hon. Friend the Secretary of State for Energy will give us some reassurance on the worries of the farming community about whether any special powers will be given to the private sector for the laying down of pipelines across farming land. I assume that no extra powers will be given, but it would be helpful to have an assurance about that.

The second key area that I shall probe is public accountability. I listened carefully to the right hon. Member of Leeds, South. It will be helpful to those hon. Members who will serve on the Committee—as I hope to—if the right hon. Member differentiates between what might be called "the party political area" of deciding whether negative resolutions are appropriate to all areas of the Bill and those areas where it is right that there should be parliamentary accountability. I agree with the right hon. Gentleman and with other hon. Members that too often in Bills—this applied when I sat on the Committee considering the Community Land Bill—accountability is non-existent. It is important that hon. Members ensure, not on policy areas, because it is the right of the Secretary of State of any Government to dictate what the policy shall be, but where public money is involved that there are proper procedures for accountability. Instead of taking a very broad brush to that, I hope that he will consider the matter logically and that he might in certain areas make some sympathetic response.

The Bill offers a golden opportunity to make properly accountable this part of the public sector—it will still remain a 45 to 49 per cent. shareholding. I hope that we take the opportunity of the Bill to lay down what should be the rightful area of parliamentary responsibility into the future and not just in Committee.

In four or five years' time, hon. Members will want to analyse what has happened to Britoil. We must give time for such an analysis. At some time—probably towards the end of the next Parliament—it is right that hon. Members should seek and obtain, through some independent body, an assessment of what Britoil has achieved and is achieving. Arising from that point, hon. Members should have the right to question the results and decide accordingly. There should be deep questioning into those two areas of the Bill. The Bill is essentially about the public sector and, by taking the boldest and largest decision about denationalisation, the Secretary of State for Energy is paving the way.

I hope that Parliament, the Secretary of State for Energy and other Front Bench Members are clear that we see this as paving the way and that we expect others to follow. We owe the Secretary of State, as does the nation, real thanks for establishing a blueprint for this area. If that is dogma, I am prepared to accept it as such.

Photo of Mr Ernest Armstrong Mr Ernest Armstrong , North West Durham

It might help the House if I remind hon. Members that there are eight hon. Members trying to catch my eye, and that there are just 80 minutes before the Front Benches hope to do so.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline 7:37 pm, 19th January 1982

I shall try to be brief because much of my criticism of the Bill was contained in my remarks on 10 November 1980. However, I have no objection to an intervention in terms of policy by the Secretary of State for Energy in the energy provision overall. Therefore, in strict dogmatic theory, following the hon. Member for Northampton, South (Mr. Morris), when he said that we should have an answer to dogma, I do not object to the Secretary of State taking on himself certain powers. However, if we consider how he might use those powers, Parliament has a right to question the exact nature of the orders, particularly when it comes to the view that we should accept a mere allocation of time under the negative procedure.

The Secretary of State disgracefully omitted from his speech the fact that we have the Burgoyne report on offshore safety and the whole basis of the argument behind that. During the period that Burgoyne and his colleagues were investigating, the "Alexander L. Keilland" incident occurred and. recently, there have been other incidents in the North Sea. Those incidents question certain aspects of the use of semi-submersibles. [Interruption.] I hope that I have the Secretary of State's attention. They are being used, not in the drilling mode, but in accommodation or other modes, for example, production platforms.

My right hon. Friend the Member for Leeds, South (Mr. Rees) was right when he spoke about part IV. Technical arguments should apply and political dogma should not intervene. The technical arguments require detailed investigation and detailed information. Will the Secretary of State make available, through his discussions with the Norwegians, their detailed report on what happened to the "Alexander L. Keilland" and the consequences for other rigs, especially semi-submersibles, that are being used in the United Kingdom sector of the continental shelf?

The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) was wrong when he talked about the relationship between the safety zones and the sector clubs that have been agreed between the Government and United Kingdom offshore operators. The right hon. Gentleman said that certain emergency support vessels would be made available. A fine vessel is being built by Scott Lithgow—I declare an interest—for BP. There is the "Occidental Thoras". There is the Shell vessel that is being built in Finland, the building of which has been severely delayed. Theoretically there are some deficiencies in that type of cover.

I have some interest in diving. My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), who has great knowledge of the subject, has promoted with others a charter on trade union activities in North Sea operations. I have received somewhat confidential information from some of my constituents that many of the young people, especially from the United States, who are taking part in North Sea diving, are insufficiently trained.

I have corresponded with the Home Office and the Department of Employment and it seems that it is difficult adequately to control these activities by the use of work permits and the implementation of international legislation. However, we should receive assurances from the Department of Energy, bearing in mind its relationship with the Health and Safety Executive, that it is pursuing these matters with a view to ensuring that those who undertake diving and other activities in the North Sea are sufficiently trained and certificated. That was one of the recommendations in the Burgoyne report. In his great sweep of these areas the Secretary of State omitted any reference to these important ingredients.

We get oil from the North Sea and it is obtained in hazardous conditions. Men risk their lives—very few women are employed in North Sea activities because of the nature of the employment and the restrictions imposed by employment legislation—to extract the oil, and it will do the Secretary of State no good to sit in the comfort of the House and almost completely ignore them. It will do him no good if he visits the rigs and talks about health and safety with those who work on them when he ignores them while speaking on the Floor of the House.

I turn to the parts of the Bill that refer to BNOC and British Gas. First, we are not clear about the nature of the articles of association. It is all very well for the right hon. Member for Greenock and Port Glasgow to emphasise that Britoil will be registered in Scotland. It is made clear in BNOC's annual report that 18 associated companies are registered by the corporation and that 12 of them are registered in England and only six in Scotland. If a company is registered in Scotland, that does not mean that contracts will be subject to Scottish law. They will be subject to interpretation under any law that the parties to the contracts choose to apply. The fact that Britoil will be registered in Scotland is a mere sop.

The people of Scotland were and are concerned about the benefits from North Sea oil and gas that will flow to the people of the United Kingdom as a whole. The last Labour Government—unhappily the hon. Member for Dundee, East (Mr. Wilson) is not in his place—confirmed some of the fears that the Scots had that the assets would be misused by the multinational oil companies. The Labour Government created BNOC under the Petroleum and Submarine Pipe-lines Act 1975. That measure is being destroyed for doctrinaire reasons. If BNOC has such a small share of the oil reserves in the North Sea—it is said that it is about 7 per cent—what is all the fuss about?

If the Secretary of State says "To safeguard the national interest, I shall doctor the articles of association so that whenever there looks like being trouble I or my successors can intervene, even though we might have only 10 per cent. of the shares", he will be able to claim that he has a duty to protect the national interest because of his responsibilities that are set out in the articles of association.

What will that mean in market terms? Conservative Members are much more conversant with them than I am. The valuation of the shares will be diminished because those who buy shares will not be completely free. The shares will be rather like class A shares. I understand that the television companies are having some difficulties for similar reasons. The market will not value shares in intrinsic terms in the same way as the nation. Therefore, we have an obligation to ensure that the national interest is protected by ensuring that the nation has control over these assets and can obtain information on the profitability of the exploitation of the resources. Protection does not lie in merely doctoring the articles of association. I canvassed this argument on 10 November and I shall not take it any further. I merely say that the Secretary of State is denying himself a source of valuable information. He denies it to himself and to the nation on nothing else than doctrinaire grounds.

Much criticism has been levelled at the British Gas Corporation because it has monopolistic powers vis-a-vis the oil companies. The corporation carries out explorations and produces gas on its own. It has more than a shrewd idea of the production costs of that gas. The hon. Member for Derbyshire, South-East (Mr. Rost) has argued that there is a great deal of gas available in the North Sea. At what depth is that gas and what will be the production costs? I suspect that he is partially right in his contention. If he has knowledge of where the reserves are, is he saying that the Brown Book's estimate of the reserves is completely wrong? Is he claiming that he has deep seismic information? In the southern sector of the southern gas basin we are talking about drilling at 6,000 ft. In the other pockets of gas it will be necessary to go down to 11,000 ft. or 12,000 ft. That will make the operations more costly.

Paragraph 4 of the brief from the Library reads: When the relaxation of supply legislation was announced last October oil companies mentioned two possible new supply lines, to Teeside and the North-West, which would be privately owned. Such additional provision, laid through heavily developed areas, would hardly be likely to make gas supplies to industry any cheaper than BGC's prices. If energy prices are to be interrelated, it is hardly feasible to suggest, especially in the Bill, that gas prices will be cheaper. Those who juggle with the argument and suggest that gas prices will be cheaper are misleading the House, gas customers and potential customers.

I now turn to one or two brief technicalities. We are talking about the British Gas Corporation grid, which is a 36-in line—at high pressure—that can be used for methane plus additional ethane. Therefore, the argument of the hon. Member for Derbyshire, South-East about other associated gas does not prevail. The companies always have total use of other associated gas. There is nothing in the BGC's powers to prohibit the use of that gas for petrochemical and other purposes.

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

In associated gases I include methane.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

That is a reasonable argument. We are not suggesting that the Brent line was held up because the BGC would not negotiate a methane price and that the propane, butane and ethane was being denied for a long time to the petrochemical facilities coming to my constituency. That argument does not hold water.

An argument was put forward in The Economist about a week ago that one could use the land line for ethane and methane for export to the Continent. It would be attractive to obtain a continental price for gas. That interferes directly with the overall view that the Department of Energy should have for a four-fuel managed economy for the United Kingdom. I asked the Secretary of State about that in my initial remarks.

The North Sea gas-gathering system has been lost. I am sorry that the Minister of State for the Department of Energy is not here. He has lost the gas-gathering system. We shall discuss that on Thursday. He has lost the aluminium smelter. To coin a contemporary advertisement in Scotland, he shall have a terrible job getting "the Ross back in his Cromarties."

We lost that system because the Government failed to take an overall view and to impose their will on the oil companies. I shall not talk about bits and pieces such as the £100 million development that British Petroleum and other companies have announced. I shall not say that that will not take place and that we will not get all the gas eventually. We are looking for an overall structure. It behoves the Secretary of State to impose his will on the oil companies.

In the Bill we see a doctrinaire approach to a complex energy problem. In his wisdom the Secretary of State thinks that the addition of 40 or 50 people to his Department will be all that is required to provide expertise. A rough estimate of the cost to the Department is £¾ million to £1 million. He can obtain similar expertise and a similar outlook by leaving the matter alone. I do not suggest that it is perfect, but I am deeply suspicious of the present Secretary of State as he seems to argue all the time that he will know best about being the arbitrator between the interests of the oil companies and of BNOC.

In a speech on 7 December, when he was talking about the onshore lines, the Secretary of State said: Similarly, in the case of BGC's onshore pipelines, I envisage that private gas suppliers will negotiate with the Corporation. I have already said that these negotiations must be effective. To ensure that private suppliers can get access to BGC's pipelines on reasonable terms, there will be legislative provision for bringing any dispute to the Government for determination. So when agreement is not possible in normal negotiations, private suppliers will ineffect be able to call on the Government to arbitrate on the points of difference and the Government will have powers to require BGC to make capacity available and to specify the terms. So much for arm's-length dealing. The Secretary of State is the referee. He is telling the multinational oil companies that if they do not get what they want, they should come to him and he will tell British Gas how to behave. Is that the free market operating?

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

My goodness, there are some funny boys in this school. The referee is cooking the books. It is as if Glasgow Rangers were playing Celtic and saying that it would board up the Copland Road end of the pitch and Celtic could shoot that way.

That was a shocking admission by a Secretary of State for Energy. It makes us distrustful. The Secretary of State comes from the Treasury with a Treasury view. He knows that something must be done about taxation. If he makes a concession, what concessions will the Governmen make on the tax? That is part of a total package. It will have enormous political repercussions, particularly in Scotland. The Scots have suffered no more than other parts of the United Kingdom, such as the North-East and Wales. The argument was put forward that the smelter failed because it was not in the right geographical situation. However, much of the oil has been found off the shores of Scotland. Therefore, the Scots have a right to see that the benefits accrue to them and not to the multinational oil companies.

For that and other reasons, I wholeheartedly support my colleagues in opposing the Bill.

Photo of Peter Viggers Peter Viggers , Gosport 7:57 pm, 19th January 1982

It is a pleasure to follow the hon. Member for Dunfermline (Mr. Douglas) whose contributions are always knowledgeable and considered. I share his concern about safety in the North Sea. Bearing in mind the scope of industrial development there, the accidents and deaths have been comparatively few. However, that is not a fair argument. One injury or death is too many. The terrible tragedy of the "Alexander L. Keilland" shows how near we are to the frontiers of knowledge in the North Sea. I declare interests relating to the oil and gas industry, which predate my time in the House of Commons. If I am tainted by a little knowledge of the industry, I plead guilty.

On my interests in conservation of oil and gas I claim to yield to no one. It is vital that we should properly use the hydrocarbon reserves that are given to us. The casual terms that are often used about spending the oil revenues are totally misleading—almost as misleading as Voltaire's comment on the Holy Roman Empire as being neither holy, Roman nor an empire. Not just oil revenues are concerned, but both oil and gas. It is not revenues, but capital.

The oil and gas in the North Sea are minerals. By depleting those minerals we are depleting a capital asset as completely as if we were dumping good agricultural land back into the North Sea. The assets should be regarded as capital assets and we should draw a prudent line between the use of capital reserves, which we are depleting by using the oil and gas reserves, and the use of revenues.

It is important that we should draw that line. The oil and gas reserves have taken millions of years to be built up. It would be wrong and history would never forgive us if we used those resources too quickly. Future generations would not forgive us.

I am not at all averse to the concept of a separate fund for the spending of oil and gas revenues. There is a great deal to be said in cosmetic presentational terms for showing the public that the funds available from oil and gas have been used and invested prudently for future generations and have not simply become part of the Treasury's expenditure. I know that this flies clean contrary to the virtue of Treasury thinking, which is that hypothecation is quite wrong—that being the term used to describe funds being spent on the source whence they came. The public are entitled to see where the North Sea money has gone. At the moment they cannot see that it is being used prudently. The present Government, like the Labour Government, are simply including the revenues as if they were part of Government income.

What should our depletion policy be and how can the public best benefit from development?

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

I was following the hon. Gentleman's first point closely and with some sympathy. Unfortunately, immediately after this debate, the House will be asked to pass a money resolution which, as far as I understand it, will prevent us from debating those issues and will bind the House to put all the money from the assets into the Consolidated Fund or the National Loans Fund.

Photo of Peter Viggers Peter Viggers , Gosport

I am fully aware of the hon. Gentleman's point. It is a fair point for him to make to me. I am urging a view which I consistently urged on the Labour Government, and which I continue to hold. I do not think that a massive change in the way that the money is spent is necessary, because the present Government, like the previous one, are spending thousands of millions of pounds investing in the public sector and elsewhere.

I am anxious that a presentational point should be made so that the public can see that as capital assets are being depreciated the money from those assets is being reinvested in capital projects. The point is presentational rather than one of major substance.

It is my personal and subjective judgment that the depletion rate should be aimed roughly at the level of national net self-sufficiency. there is nothing sacred about that figure, but it is difficult to argue that we should deplete faster than is necessary for national net self-sufficiency because if we do that, we shall run down our resources at a rate which would cause us to see the end of our reserves at the end of the century, give or take a few years.

Who should be responsible for depletion? Who should be responsible for producing oil and gas? I totally agree, with the Secretary of State that the business of Government is not the government of business. Indeed, I believe that the Government are uniquely unsuited to adjusting themselves to the risk element of the oil and gas industries. Moreover, the Government do not need to be in that position since they have, and will continue to have, a wide range of controls over the gas and oil industries. They have controls over tax, depletion, allocation of licences, and controls through their trading business and participation agreements. There is no need, therefore, for the Government to continue to be in the commodity business and owning the oil itself.

Of course, there is a risk of politicisation of the oil and gas industries. I have heard Opposition Members call for BNOC to spend more money exploring for oil in different sectors of the North Sea adjacent, perhaps, to the constituencies that they represent, as if by those calls on the Secretary of State they can cause the oil and gas reserves to be created. The Government are not suited to being in the major business of oil and gas exploration. I strongly support the view that we should now devolve and introduce private capital into this sector.

Part II of the Bill is extremely important. It chips away at the monopoly of the British Gas Corporation. The gas corporation thinks that it has done well in producing gas from the North Sea, and I do not disagree. It has indeed done well. In exactly the same way, the BBC, when it had the sole franchise for television, no doubt believed that it was doing well, but it has improved beyond all recognition since it has been subject to competition from the independent television companies. With all respect to the talents of those involved, the gas corporation's success in the North Sea was not much more difficult than running a successful party in a brewery. It had access to massive funds in money and in oil and gas from the North Sea and it has of course done well, but I still believe that it will do better when it is subject to competition.

The BGC's monopoly of purchase and supply has undoubtedly grossly distorted the pattern of development of North Sea oil and gas. That point has been made by my hon. Friends, notably my hon. Friend the Member for Derbyshire, South-East (Mr. Rost), so I shall not repeat it.

The right hon. Member for Leeds, South (Mr. Rees) expressed concern about safety if other enterprises were allowed access to transmission systems. Here I repeat the point that I made in an intervention in his speech. There is no reason why the safety standards which apply successfully in other countries where many companies are involved in the transmission of oil and gas should not be equally successful here. I therefore do not share his apprehension, which is based apparently on discussions with trade union leaders.

The significance of the Bill is perhaps not so great as it has been described in some quarters. The hon. Member for Merthyr Tydfil (Mr. Rowlands), who will be winding up for the Opposition, used terms such as "wholly invidious", "weakened and vulnerable", "sweeping", "grubbier" and "unfettered", to draw just a few adjectives from his article in The Observer last Sunday. As its main thrust, the Bill will result in about 8 per cent. of North Sea oil becoming available for private investment. That is a smaller percentage than the 9 per cent. which the Labour Government themselves passed to private hands when they needed the money because they were under attack from the International Monetary Fund, so in that sense the Bill is not so important as it has been billed to be.

Nevertheless, the Bill is important. It will promote efficiency and competition, and I support it wholeheartedly.

Photo of Mr David Penhaligon Mr David Penhaligon , Truro 8:08 pm, 19th January 1982

We have before us an important piece of legislation and the debate has gone as might have been predicted. To be fair, there has been slightly less of the usual swopping of dogma on the issue than I had expected. Nevertheless, I think that we would all admit that one's party's attitudes and one's basic view of life clearly influence one's appreciation or otherwise of the Bill, and one's views regarding monopolies deserve to be spelt out in the debate as that is the subject that we are discussing.

I take the view that monopolies by definition exploit their position—sometimes with real malice, sometimes by accident, but mostly just because they are monopolies. For that reason, I do not entirely dismiss the Government's proposals for the British Gas Corporation. In principle—I use that word with care—I see nothing desperately wrong with the proposal that it may be possible so to organise things that others may have access to the national grid apart from the British Gas Corporation monopoly. Even without claiming any expertise in this, I can envisage some not insignificant problems as to how that will be done in practice even if I am prepared to examine it in principle.

There is the problem of how one allocates historic costs and also the effect upon the British Gas Corporation and its ability to satisfy peak domestic demand if other people are pushing their own gas through the same pipeline. Anyone living in a part of the country that has been affected by electricity cuts will know that Governments must be extremely careful to ensure that domestic supplies do not fail during a period of great stress such as most hon. Members have known recently in their areas. I live in a part of the country that has had no snow, but those hon. Members who have will know of the stress caused by cuts in domestic heating supplies. In some circumstances it can be fatal, but in any circumstances it would be something any Government would wish to avoid.

I have some sympathy with the proposal, but given the better definition that may be discovered in Committee of how the Government hope to overcome the difficulties, I would not like to predict whether there may be some support from the Liberal Party for the Government.

The problems cannot be covered up by simply saying that the Secretary of State will sort it out. I do not have much faith in the Secretary of State. I have no doubt that he is one of the country's great technologists, who understands the problems of passing gas down pipes and so on, but Conservative Members can argue that with more conviction than I can. If the proposals can be achieved there may be some advantage to United Kingdom manufacturers, and anything that can do that must be welcomed by us all if we wish to see a growth in our GNP and an increase in our living standards.

is a part of the Bill with which I have some sympathy, but I have very little sympathy with the proposals relating to BNOC. The newspapers claim that the sale of BNOC will produce £1 billion. That is a great deal of money, but it will build only one of the nuclear power stations which I know the Minister is so much in favour of—[Horn. MEMBERS: "Only a half."] That was my view, but I was trying not to get involved in nuclear power, something in which I tend to get involved.

One billion pounds is still a great deal of money though it will not put the British economy right at one stroke. One has the impression that the main attraction for the Government of selling BNOC is the money and the one-year effect that the sale will have on the PSBR, because there have been few other strong arguments.

The argument of monopoly does not apply in the case of BNOC. Nobody is suggesting that BNOC is of sufficient significance to affect international competition in the production of oil. I am somewhat cynical about how much competition there is in the production of oil today, given that the price of the product is not based on manufacturing cost but appears to be based on the decision of the OPEC committee. Therefore, the sale of BNOC will have no significant effect on competition in general, and because that business can be judged only in comparison with others—and there are others—I do not see any great advantage to that trading company in selling it off.

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

If the policy of the Liberal Party is not to denationalise BNOC, is it then to nationalise further into the oil industry?

Photo of Mr David Penhaligon Mr David Penhaligon , Truro

Certainly not. I have never become worked up about arguments on nationalisation and denationalisation. If the Government look up the records of this Parliament they will find that they have received much support from the Liberal Party for various denationalisation schemes. I can think of one that I did not support, but if I mention that we shall be back to the argument of a moment ago. In some circumstances, I could be convinced into supporting the denationalisation of BNOC. I just do not see how that fits in to any real ore necessary criteria.

The real reason I am against denationalisation is that I regard BNOC as peculiar and unique in that it holds a percentage of one of our great national resources. By implication, a great national resource is something that from time to time the nation will wish to use so that it can derive the benefit. The argument is not so much whether the oil owned by BNOC should be used to the national advantage. Clearly, if we can raise £1 billion by selling it, that money could be used to the national advantage. Equally, if the company is allowed to trade profitably, its profits could be used to the national advantage.

The real decision for the House is whether it sees any great advantage in using that national resource immediately. We should remember that it is only a percentage of North Sea oil and it is not a monopoly of North Sea oil. We must consider whether it should not be used later for the general good of the country while at the same time having a trading company in the North Sea oil market which can glean some information about what is going on in that important sector of our economy.

I come to the conclusion that I am against the denationalisation of BNOC. I confess that if the Government's plan goes through and it is denationalised, we are dealing with a new situation. I do not for a moment suggest that votes will be forthcoming from the Liberal Bench to renationalise BNOC after the next election—[HON. MEMBERS: "Ah."] I see nothing illogical about that. At present BNOC is nationalised. I am talking about changing that situation, and I see no advantage in doing so. If in five years' time, when BNOC is denationalised and someone proposes to renationalise it, we shall have to make a judgment on that basis. I therefore see no reason to give a carte blanche guarantee that the parliamentary Liberal Party will use its votes in that direction.

It is not difficult for the Government to raise money against North Sea oil, if that is what they wish to do. They could issue bonds against the value of that oil. If the bonds were sold at $33 each, which is the approximate price of a barrel of oil, and the Government promised to redeem those bonds at whatever was the going price for North Sea oil at the time of cashing in, I have no doubt that a large number of people would be attracted by such an investment. Of course, if the value of North Sea oil decreased, they would lose money, but I suspect that a large number of people would be interested in such an investment. I also suspect that that would raise the quantity of money about which we are talking without losing control of the company, as the Government partially wish to do.

Clauses 20 to 27 deal with safety. The right hon. Member for Leeds, South (Mr. Rees) raised a valid point which had not occurred to me before the debate started. Given that it sounded credible, I should like to give it some weight.

These clauses, though important, appear late in the Bill. I am fearful of the filibuster that the Bill will undoubtedly cause in Committee. That could lead to these important clauses being guillotined. I do not see how anyone in his right mind could believe that clauses 20 to 27 should be guillotined. It would be a great tragedy if that were the net result. I see no real problem with the suggestion to take those clauses out of the Bill so that they find their way through the other processes of the House. After all, we do not have a desperately hard legislative programme in front of us.

By adopting that suggestion, we could say with some confidence that the clauses were not dealt with by a tired Committee at the end of a filibuster when great pressure was on it, but that a Committee of the whole House had given the clauses full and total thought. No one outside the House will thank us if we do otherwise.

My party will vote against the Bill tonight. I confess that it is not as bad as I had expected and, in his opening remarks, the Secretary of State made one or two comments that led me to believe that it may not be as bad as I had feared. No logical reason has been given to the House today for selling BNOC.

The main argument will not take place in the House. It will take place in the country. Those concerned with industry will decide whether the Government are right to sell BNOC to those who can afford to buy the shares in it. If the Government had put forward a wider scheme in which everyone could have an active participation in this great asset that luck has given us in the North Sea, we could see some sense in it. They are not doing that. They are selling off a great national resource without having given any logical reason. There will be no support from this Bench for the Bill.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North 8:21 pm, 19th January 1982

The House is always grateful to the hon. Member for Truro (Mr. Penhaligon) for the light relief that he brings to our debates and for his and his party's ability to see all sides of all arguments at all times. [Interruption.] I do not wish to engage badinage with the hon. Gentleman's colleagues who seem to be merely compounding his errors rather than adding clarification to his policies.

In many ways this debate has been a re-run of the debate on 10 November. I have desperately been trying to look for similarities and dissimilarities. There is one clear similarity. It is becoming ever more difficult to differentiate between the energy policy of the SDP and that of the official Opposition. I cannot quite make up my mind whether the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) is advising the right hon. Member for Leeds, South (Mr. Rees), or whether the two right hon. Gentlemen share the same research adviser who is peculiarly devoid of arguments. I understand now. The right hon. Member for Greenock and Port Glasgow takes the advice of the research assistant of the right hon. Member for Leeds, South.

It is remarkable that we have with us the hon. Member for Merthyr Tydfil (Mr. Rowlands), and we are extremely grateful for that. I was wondering how I could describe him. Could he be described as the victor of Bishop's Stortford or, alternatively, the symbol of another false dawn for Labour Party reunification? We are to be spared the spectre of the horrified face of the right hon. Member for Leeds, South as he listens to the pearls of wisdom that flow from the right hon. Member for Bristol, South-East (Mr. Benn), so we shall be noting with interest tilt expression on the right hon. Gentleman's face as he listens to the comments of his hon. Friend the Member for Merthyr Tydfil tonight.

The wait for this Bill has been well worth while. The Bill is long overdue. It tackles two basic problems that have bedevilled this country's energy policy. The first has been the stifling effect that State ownership has had on the conduct of BNOC's affairs. It was most vividly illustrated by the decision that BNOC was forced to take, I believe under Treasury pressure, not to go ahead with the development of the Clyde field. That was a development that made economic sense in all ways except from the point of view of the PSBR. That is an illustration of the sort of freedom that BNOC will be given once it is out of State ownership.

The other great achievement, as my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) and others have said, is the decision to break once and for all the monopoly and monopsony power of the British Gas Corporation. I do not wish to dwell on the severe damage that that monopoly has done to this country over a period of time. The importance of the measure in the Bill to break that monopoly cannot be over-estimated.

Another factor bears repetition. There is nothing in the Bill that reduces in any way the Government's and the country's ability to control the exploration, development and production of hydrocarbons, both offshore and onshore. To argue otherwise is to have no regard for the facts and clearly shows that the person who put forward the argument has not studied the Bill in sufficient detail.

I am sure that my right hon. Friend the Secretary of State will not be in any way surprised when I express regret and disappointment that he was not able to announce this afternoon that he would be selling shares in the British Gas Corporation. I hope that before the end of the Committee stage we shall have a clear statement from my right hon. Friend that it is his ultimate intention to privatise BGC in the same way as he has decided to proceed with the privatisation of BNOC.

The Bill should be seen only as one leg of our new energy policy. The other leg, which is as important, would be the decision to alter the taxation regime in the North Sea, particularly as it affects marginal gas fields and satellite oil fields. I am sure that the House will turn its attention to that matter when the Finance Bill is introduced.

I ask my hon. Friend the Minister of State, Department of Energy to comment on the Government's intention with regard to the showrooms. We know that disposal of them will not proceed during this Session of Parliament. I hope, however, that even at this stage efforts will be made to persuade BGC to allocate costs properly to the showrooms so that we can see whether they are making a profit or a loss.

I am disappointed that we have not yet had a clear statement from the Secretary of State about his policies in regard to the export of gas from the United Kingdom. I am not necessarily talking about exports from British waters. I am also talking about the export of gas from Norwegian waters because there will be considerable economic advantages to this country of using high pressure mains throughout the United Kingdom, taking gas from Norwegian waters through to the Continent. We need a clear statement from the Secretary of State that, in the long term and under strictly controlled conditions, he will be prepared to give permission for the export of gas. Only in that way can we get real competition and demand for the significant supplies of gas that will be necessary to have an effect on industrial gas prices in this country.

Despite those two reservations, I have no hesitation in commending the Bill to the House. I am sure that it will be seen as a major step forward in providing a sensible and useful energy policy.

Photo of Mr Lawrence Cunliffe Mr Lawrence Cunliffe , Leigh 8:30 pm, 19th January 1982

I shall speak rapidly in order to let other hon. Members take part in the debate.

First, I wish to deal with the point made by the hon. Member for Derbyshire, South-East (Mr. Rost). He constantly raises the hardy annual about the flaring of gas in the North Sea. What he says on this problem is more fiction than fact. It is an indictment against the Government that £1 million worth of gas per day is burnt and wasted away in the North Sea. Yet the Government had their opportunity, when they were asked, by a kind of tripartite axis or agreement about the pipeline only a few months ago, to bring British gas ashore here, to participate, to finance and to give certain assurances to the British Gas Corporation and to a mix of private firms, and to be directly involved in a participation and partnership agreement. The Government turned their back completely on that offer.

Three thousand jobs could have been created in the British steel industry. At the same time, the Government paid lip service to the idea of creating new jobs and reneged unashamedly when they were challenged and presented with the opportunity to show good faith in respect of the words in their manifesto.

Photo of Mr Lawrence Cunliffe Mr Lawrence Cunliffe , Leigh

The hon. Member spoke for 10 minutes and made two interventions. Other hon. Members wish to speak.

As I have said, the pipeline was to have been financed by a mix of private investors, the British Gas Corporation and the Government. It fell through because the Government refused to give assurances to the private companies. The real reason was not that the Government did not want an involvement and control in that situation. The reason for the Government's withdrawal seems to have been the Treasury's fear of the scheme's impact on the public sector borrowing requirement. That was the Government's motivation. That was their conviction and it remains so. There is no doubt that the Government took a senseless and indifferent attitude.

The decision is incomprehensible in energy terms. It is estimated that in terms of return on investment, the gas pipeline is eight to 12 times more cost effective than the Government's proposed nuclear power programme, which on present plans will cost up to £20 billion over a 10-year period. That is a correct assessment and assimilation of the facts as they have been found to be and as British public opinion believes them to be.

I wish to put the Bill into context as it is seen within the framework of a balanced fuel policy and a pricing system. The Bill militates against a decent pricing system. It seems to me that it will imperil our long-term energy needs up to the end of the present century.

I participated recently in an international seminar on energy. Many of the world's energy experts were present. Regardless of political disposition or scientific opinion or any other form of public opinion expressed there, there was a consensus among some of the world's best scientists and energy forecasters that the energy requirements for the future would be met only by a large degree of State intervention. The experts were convinced that the market mechanism in many respects had failed miserably over the last 20 or 30 years, and they included people from the most advanced industrial nations.

We have a Government who are completely insulating themselves from long-term energy planning and price fixing. There has been an imbalance in energy planning and price fixing. There has been an imbalance in energy pricing under previous Governments for the last 20 years. It was sensible to have a good look.

As a nation, we are getting fairly complacent about our energy. We honestly believe that we shall have endless sources of energy, simply because of the bonanza in coal and oil that has arisen in the last decade. That is not so. We have large reserves of coal. As the House is aware, I have an interest in oil and gas. Britain is better placed than most countries in Europe to cope with what will remain a difficult energy position in the future.

How long will the benefits last? Our oil and gas resources have a limited life span. It was said at the international conference that by the 1990s—it is a revelation to find this out—the whole oil glut of OPEC countries will be just three weeks' strategic reserves to feed world supplies. In my opinion, it is quite reckless to introduce a Bill of this character unless it is viewed within the perspective of total energy planning for the future.

When it comes to guaranteeing supplies, we have huge reserves of coal, which should be used sensibly and discreetly. We must get oil out of our power stations. It is a policy that many nations are finding prudent. We must alternate as quickly as possible, going for maximum conversion from oil, which is too precious to use, and supplementing it by our coal. The demand for electricity supplies will be satisfied mainly from feeding coal into our power stations during the next 20 to 30 years.

Our boom days are ending. It is time for vision and foresight. We must consider this subject in the overall context of full and comprehensive energy planning. I believe that the Bill will have an adverse effect in that respect. Prices will fluctuate according to supply and demand. It is not a practical proposition to risk energy sources that can be calculated and make them unpredictable. We shall never be certain that our energy supplies are safe for the next 20 or 30 years.

I wish to underline two matters. I am concerned about oil supplies and the depletion that has been mentioned in this debate. What alternative options are open to the United Kingdom's oil strategy in the light of the uncertainty about international developments in the supply and price of world oil? How can British oil wells be protected? They cannot be protected by floating shares internationally. No one can tell me that part of our 3 million unemployed people will queue up and scramble for oil shares. The mighty moguls will move in again. At the end of the day, those who have most will acquire most. That is common logic.

We must protect British oil wells against possible continued deterioration in world oil prices generally and the attempts by other producing countries to corner the market. That technique can be used here to get part of the market, and in my opinion it is obviously necessary to ensure the viability of the British oil industry. Even the oil sheikhs are worried about what is happening in the world energy scenario. It is a distressing scenario, if one is to believe what most experts say about our energy needs to the end of the century.

The last issue that I wish to raise is safety. It has been mentioned in our debate, and it is an important subject. I suggest to the Secretary of State that it is high time that we had a North Sea oil charter. It is high time that we consolidated the existing legislation. The legislation should be tightened and scrutinised. We must cross the t's and dot the i's when it comes to safety requirements. I believe, as do many organisations, especially trade unions, that responsibility for the health and safety of offshore workers should be transferred from the respective departments to the Health and Safety Commission. All trade unions should have a statutory right to nominate safety representatives to their appropriate safety committees. The number of safety inspectors should be increased, and they should have access to offshore installations without prior notice. We should have a 14 or 15 point charter.

In conclusion, the Bill will have grave repercussions on our energy demands and requirements for the future. I am not certain that the powers that the Secretary of State seeks will give him ample control over the situation. There is some speculation about this. I do not believe that he can dot the i's and cross the t's in this connection. It will be imperative that the Labour party should scrutinise every word in Committee. At the end of the day we can come back to the House and say that the Labour Party has attempted to carry out the most penetrating investigation into what the Secretary of State and the Government are trying to do—hiving off Britain's priceless assets during the next 40 years.

Photo of Sir Archie Hamilton Sir Archie Hamilton , Epsom and Ewell 8:40 pm, 19th January 1982

I welcome the Bill because I believe that it is designed to roll back the powers of the State. I welcome any Bill that is designed to do that, because we must accept that the public sector is much too large and that it dominates much too large a percentage of our gross national product. Our oil industry is basically the product of the success of the private sector, as my right hon. Friend the Secretary of State has already said. It should be returned to the private sector from where it came originally.

As long as profitable companies such as BNOC remain in the public sector, they remain open to political interference. I have yet to meet any politician who does not believe that the re-election of his party is not in the national interest. I can see that the commercial aims of BNOC might well be perverted by people trying to buy popularity in an election. Therefore, the sooner BNOC. gets back into the private sector the better.

It is probably true that the employees of BNOC were initially rather unenthusiastic about being denationalised. They felt that their cosy relationship with the Department of Energy—perhaps even an incestuous relationship—rather suited them. However, as my hon. Friend the Member for Enfield, North (Mr. Eggar) said, when BNOC discovered that it could not get the money that it wished to develop the Clyde field, it suddenly realised that there were great disadvantages in being tied so close to the Treasury's apron strings. At that moment BNOC realised that if the company were to expand and realise its potential as an international oil company it had to get out from under the Treasury.

It is all very well for a nationalised company to say that it will produce huge profits. That means only that those profits will become consolidated in the Treasury forecast and it must apply to get the money back to invest in any form of expansion. That would never happen to a private sector company.

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

I cannot give way because we are short of time and I know that other hon. Members wish to speak.

If we consider a company such as British Petroleum, it does not allow its profits to be paid out. Most of its profits are ploughed back into the company. The shareholders receive only the dividends, which are a small percentage of the company's profits. We must have a BNOC that can raise capital on the private market and expand as it wishes into other markets.

My hon. Friend the Member for Bedford (Mr. Skeet) said that we should privatise all of BNOC including the 51 per cent. participation options that it has on all the oil fields in the North Sea. I do not agree with that because I do not believe that the participation options are a commercial activity. They are merely an activity by the Government to guarantee our supply and they should not be put into a commercial company. One can argue about whether those 51 per cent. participation options are a necessary function for the Government because the Government have extensive powers in case of emergency.

When we consider the British Gas Corporation's oil interests, we see a tragic and sad story. When BNOC is floated off we shall have another independent, private, British oil company, of which we do not have many now. There was an opportunity for about £500 million worth of the oil interests of the British Gas Corporation also to form the nucleus of another independent oil company. It would have offered the opportunity of employment in management by employees of the British Gas Corporation. It was a great tragedy that for a long time the BGC sat on the proposal that it should form a separate subsidiary into which private capital could be introduced and then, after a long period of deliberation, said that the proposal was unacceptable.

The result that then followed was that Wytch Farm was taken out of BGC's interests and sold separately, and I doubt whether we shall see a new company emerging from the BGC interests. We shall merely see the oil fields being sold off piecemeal, and an opportunity to form another British oil company will have been lost. That is a great tragedy.

I strongly support the breaking of the BGC monopoly but I see this as being, unfortunately, only a gradual process. The right hon. Member for Leeds, South (Mr. Rees) said that it would be a disaster and would lead to the breaking up of BGC. If that were the case, I should be delighted, because the problem is that we have no way of judging the performance of the British Gas Corporation. It makes profits, but is has exploited as far as it can its monopoly buying powers, and it also has a virtually captive market.

There is the question whether the price of gas will go up once the effects of denationalisation work through. There is a still greater demand for gas than there are supplies, so that there is a shortage of gas. If demand is in excess of supply, initially the result must be that the price will go up. After a time more supplies will become available, and in those circumstances we shall see the market even off as supply and demand get into equilibrium.

We have large nationalised monopolies and they, in their turn, have monopoly unions. These organisations are capable of holding the country to ransom. They do not have to worry whether they keep their customers happy. They are in a very strong position. It is essential that the Government should continue to carry out a programme, wherever possible, of breaking the monopolies, restoring market forces, and giving customers the products they want at prices they are prepared to pay.

Photo of Dennis Canavan Dennis Canavan , Stirlingshire West 8:47 pm, 19th January 1982

When the Secretary of State first announced these measures he said that without doubt they amounted to the biggest programme of privatisation ever to come before Parliament. If I may change his words slightly, I think that the measures amount to one of the biggest programmes of plundering of the public purse ever to come before Parliament. Tonight we are discussing an attempt at an unprecedented exercise in public asset stripping.

I have never claimed—and I do not think that any Labour Member has claimed during the debate—that our nationalised industries are perfect in every respect. I did not hear any Labour Member give simply a doctrinaire defence of public ownership or of the public sector in general. Socialists are often accused by the Tories of being doctrinaire in their approach and in their arguments, yet now it is the Tories who seem to be hell-bent on a doctrinaire attack on two of our most successful public enterprises, which are serving the needs of the nation.

Historically, many of the successful publicly owned enterprises in Britain—this applies particularly to the energy industries—did not come about for doctrinaire reasons. Indeed, much of the legislation was not implemented by people who called themselves Socialist or Left-wing politicians. Early in this century it was that well-known 'Left-winger', Winston Churchill, who took the public stake in BP. The reason then was to ensure a constant supply of energy to the Armed Forces of the British Empire.

Later, in the 1960s, the Continental Shelf Act 1964, which took all the oil under the seabed within the British sector of the North Sea into public ownership, was carried through, not by a member of the Labour Party but by that well known 'revolutionary', Lord Home, at that time Sir Alec Douglas Home. We then come to the 1970s when the very setting up of the British Gas Corporation was carried out by a Tory Prime Minister, that well known 'extremist', the right hon. Member for Sidcup (Mr. Heath).

Every time, they argued, as we are arguing now, that these examples of public ownership and enterprise were in the national interest. The underlying reason for that was that they believed, as we believe, that energy is far too important a matter to be left simply to free market forces. That, too, was the basic reason why the last Labour Government set up the British National Oil Corporation. I was on the Standing Committee which dealt with the BNOC legislation. Before we did so, we were the only major oil-producing country—or potentially major oil-producing country—in the world without a national oil corporation, with the exception of the United States of America and, of course, we can see the shambles of their energy policy.

We had to fight hard to set up the British National Oil Corporation against opposition not just from the Tory Party but from the Scottish National Party, whose spokesman, I am sorry to see, is not with us just now. The SNP voted against the Bill on Third Reading, supporting the Tories, even though the headquarters of the new national oil corporation were to be based in Scotland, as they now are, providing work for more than 1,100 employees. That number of jobs would have increased, but for this legislation, to about 2,000 in the near future.

Despite the opposition we enacted that Bill, and the corporation's profits are now about £300 million a year, and likely to rise to £500 million the next financial year.

If we made any mistake about extending public ownership into profitable enterprise it was that we did not go far enough. We should have nationalised the whole North Sea oil industry and that would have made this Government's job even more difficult in their attempts to dismantle existing public ownership. I hope that we shall bear that mistake in mind so that we can remedy it the next time we are in Government.

Photo of Dennis Canavan Dennis Canavan , Stirlingshire West

No, I am sorry. If I do I shall just prevent other hon. Members on that side from speaking in the debate.

By the time we are next in Government, the people will see much of the damage that this Government will have done in their public asset stripping exercises. They will see it in real terms, in terms of prices and jobs, not just in oil but also in gas. For example, the ending of the so-called monopoly or monopsony powers of the British Gas Corporation will mean a virtual auction for gas which will jack up the price, not just for domestic consumers but also for many industrial consumers who are already complaining that the price of gas is too high.

I think, too, of the example of the gas gathering pipeline project, a mixture of public and private enterprise, which was abandoned by this Government of which the hon. Member for Ross and Cromarty (Mr. Gray) is still a member. The abandonment of that pipeline project meant the destrcution of jobs in his constituency and, taking into account also the Invergordon disaster, I do not know how he has the brass neck to sit there on the Front Bench defending the indefensible policies of his Government, policies that are destroying jobs in his constituency and in other areas of Scotland. I have in mind the Grangemouth petrochemical complex, which is quite near my constituency. That gas pipeline would have brought not just gas from the North Sea but jobs down to Central Scotland and other areas of mass unemployment—jobs for my constituents and those of the Minister. The Minister is content for the Government to permit valuable energy resources to go up in smoke. That is what is literally happening under the crazy policy which allows gas to be flared instead of being piped ashore by public enterprise.

I turn to the important aspect of safety which was discussed only briefly by the Secretary of State but which, rightly, was dealt with by other hon. Members. The Secretary of State said that success in the North Sea was due almost entirely to private enterprise and the risks taken by it. I remind him that success in the North Sea is due largely to the efforts of workers and the risks that they take.

North Sea workers live and work in some of the most dangerous offshore working conditions in the world. It is a pity that the Secretary of State did not pay tribute to the workers' efforts. Safety standards in the North Sea leave much to be desired. The health and safety legislation should be extended to cover the North Sea. The employment protection legislation should also be extended to cover workers in the North Sea along the lines of the charter that has been drawn up in draft by the trade unions and some of my hon. Friends.

I have drawn the Minister's attention to instances of unscrupulous, faceless multinational companies acting like pirates by exploiting cheap labour—often foreign—offering the workers miserable wages, hellish and unsafe working conditions and very little, if any, job security. I hope that in Committee amendments will be passed to tighten up the legislation in that respect. The absence of job security and decent safety conditions in the offshore oil and related industries is yet another reason for an extension rather than a reduction in public ownership.

We can compare the offshore oil industry with the coal industry before it was nationalised. Working conditions, the standards of health and safety and job security were deplorable. Only since the nationalisation of the coal industry have miners experienced a significant improvement in job security and in health and safety. That in turn has resulted in improvements in productivity.

The Minister and his henchmen seem to be content to allow the North Sea oil industry to be governed by multinational oil companies which are motivated simply by the desire to maximise profits, sometimes ruthlessly encouraging their workers to take more risks. Unfortunately that sometimes has fatal consequences.

The debate is not simply about public enterprise and private enterprise. It is about whether the rights and aspirations of individuals, whether workers or consumers, should be subordinate to the greedy aspirations of huge multinational companies which are accountable to no one. The debate is about not only the restructuring of the economy, but the restructuring of our society and whether our national assets should be used for the benefit of the whole nation or for the benefit of a privileged few. I hope that hon. Members will vote for the former proposition rather than the latter. Perhaps that is a forlorn hope.

A more realistic hope might be that the next Labour Government implements Labour Party policy, not only by taking back into public ownership the assets that this Government are irresponsibly selling, but by extending the frontiers of public ownership and public enterprise to bring about the industrial, economic and social regeneration that the people want.

9 pm

Photo of Mr John Hannam Mr John Hannam , Exeter

The hon. Member for West Stirlingshire (Mr. Canavan) has spoken strongly in support of extended nationalisation. I wish to put a few arguments against that proposition. First, I should like to congratulate my right hon. Friend the Secretary of State on the case he presented in support of the Bill. I should also like to declare an interest in the oil industry.

I strongly support the measures proposed for BNOC and BGC. I reject the arguments of the Opposition that the Government are in some way selling out British interests. The reverse is the case. The strength of our industrial society in the past has been through the pursuit of innovative change and improvement which has taken place year by year with new technologies and new industries replacing old unprofitable ones, and with new managements replacing older, less imaginative administrations.

The doctrinaire Socialist belief in centralised State control, which unfortunately appears today to be supported by the SDP, means that they have to oppose any form of denationalisation even if it makes sense to restore areas of the public sector to private competition. At least, they pretend to oppose it but their principles are often bent to suit expediency, as happened in 1977 when the Labour Government sold off the majority shareholding in BP.

I should like to comment briefly on the BNOC parts of the Bill. After the Labour Government came to power in 1974, I was on the Committee when the BNOC legislation was going through. Members of my party argued then that it was totally unnecessary to set up such a gigantic, interventionist, State corporation to safeguard the security of supply of North Sea oil and gas. We considered that the requirement to land it here, together with controls over development and depletion operated through a trading arm of the Department of Energy, plus an excess of profits tax system and certain emergency powers in the hands of the Secretary of State would ensure required protection for the British people.

With the creation of BNOC we saw increasing bureaucratic intervention in North Sea activities and subsequently the use of BNOC for political purposes by the right hon. Member for Bristol, South-East (Mr. Benn), who is not present today but who then held the post of Secretary of State for Energy. I believe on principle that where competitive private enterprise can operate profitably the State should stay out of those operations. Only where social conditions necessitate the maintenance of a public service should State-owned corporations exist, if possible in a devolved regional shape rather than as a vast monolithic monopoly. If we had patterned smaller units of administration for electricity and coal we would not be facing the problems of low investment, low productivity and extremely high price increases in the public sector.

I agree with The Times editorial of 15 January headed "Public inefficiency" which pointed out the disastrous record in nationalised industries where, with no market disciplines operating, unit costs have been allowed to increase during the recession, with the result that the consumer has been clobbered by price increases double those of the private sector. If the public sector had contained its price and wage inflation during the last year to the level in private industry, we should certainly be in single figure inflation by now.

I agreed with the Labour Government in 1977 when they disposed of a totally unnecessary majority stake in BP. Incidentally, that sale represented 9 per cent. of North Sea oil production, whereas the sale currently proposed of the 51 per cent. of BNOC shares represents only 3·5 per cent. of North Sea oil production. Therefore, the Opposition clamour about selling off our birthright is pure hypocrisy.

The fact is that, as my right hon. Friend the Secretary of State said in his opening speech, the control of North Sea oil does not rest in BNOC's minor, 7 per cent. share of North Sea oil production. It lies in the trading arm, with its access to 51 per cent. of oil produced in the North Sea, and this will remain in the public sector.

Controls over depletion and development do not lie with BNOC anyway. They are applied by the Department of Energy. Here I should like to pay tribute to the experts in the Department for the extremely efficient way in which they administer the complex and difficult job of issuing oil licences, production licences and gas licences. All the oil companies that I have met—I am sure that my hon. Friends have had the same experience—have been full of praise for the attention and courtesy that they have received at the Department.

I should like my hon. Friend the Minister of State to deal with the composition of the newly separated trading arm of BNOC. There is always the complicated and delicate responsibility of setting the price structure of North Sea oil. At present the expertise lies in that part of BNOC which will be hived off into the new Britoil company. What does my hon. Friend envisage as the staff structure for the State trading corporation, which he will be setting up and which will continue to be under State control? Will there be a joint working committee, for example, between Britoil and the BNOC trading arm to maintain the level of competence in this vital pricing operation? It is very important that the correct expertise is applied.

Putting the BNOC sale into perspective, I should say that the Government are putting into real public ownership, as distinct from pseudo-public State ownership, about 3·5 per cent. of North Sea oil production. The Government will still retain the largest shareholding and will exert all the necessary controls over oil and gas production to safeguard Britain's interests.

The worry that control of Britoil could pass to a foreign country is countered by the safeguards that my right hon. Friend intends to write into the articles of association. Presumably, the same could have applied to BP in 1977, but I do not recall the Opposition making a song and dance about that requirement then. I shall be interested to hear whether they did.

Britoil is to explore for, find and produce the oil and gas that we need to maintain self-sufficiency through the 1990s. We need to give a major fillip to exploitation and development activity during the coming years. We need to find half as much gas and oil again as have already been discovered. With costs escalating and the size of fields diminishing rapidly, the risk becomes much greater week by week and month by month.

It is interesting to note that, whereas the first 25 commercial fields had an average size of 447 million barrels the following 11 fields discovered and developed were down to 91 million barrels, and the next 37 potentially commercial fields are expected to have only 62 million barrels per field. Therefore, a stable tax regime and a settled depletion policy are essential if we are to regain the momentum of the early 1970s. I believe that the Bill will encourage exploration for oil and gas. If the Government take into account the need to encourage smaller British companies as well as establishing this new, major British oil company, the target of self-sufficiency through the 1990s is eminently attainable.

I turn to British Gas and the proposals for selling off its oil business. It is understandable that its directors and employees are opposed to the proposals, though I regret the manner in which that opposition is being expressed. I see no reason of principle why a monopoly State industry making substantial profits out of low buying and high selling prices should be allowed to diversify into all sorts of other activities, as British Gas is now trying to do. If the gas market is fully opened to competition, and British Gas like Britoil, becomes a minority State shareholding company, competing fairly and squarely with other companies in the gas buying and selling market, diversification can of course be allowed in a fair, normal way. But British Gas turned down the suggestion of my right hon. Friend the previous Secretary of State of a new oil company in which it would hold a 40 per cent. stake. Therefore, the selling off of the onshore oil interests is perfectly reasonable.

We hear screams of protest from the Opposition, but what did the Labour Government do to the National Coal Board oil interests? They forced the NCB to sell to BNOC assets estimated to be worth about £100 million for a nominal £50,000. The Opposition's evident hypocrisy in arguing their case is borne out again and again in examples taken from their last period in office.

In conclusion, I fully support the Bill and congratulate my right hon. Friend on introducing it so quickly in the Session. I hope that the various points raised will receive close attention in Committee and that the Bill will be put into legislative form so that the new major British oil company will be operating successfully by the end of the year.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil 9:11 pm, 19th January 1982

The quality of the speech made by the hon. Member for Exeter (Mr. Hannam) was such that he gave clear expression to Conservative Party doctrine about public ownership. That doctrine is that public ownership must be unprofitable and, therefore, that all profitable public ownership must be sold to private enterprise. That is a "no lose" situation from his ideological point of view and he will not be surprised if we do not support such nonsense.

I shall refer to the whole character and nature of the Secretary of State's speech. In some ways his values, interests, attitude and approach were reflected in the balance of that speech. There were three times as many cheap personal gibes as there were references to the problems of offshore safety in the North Sea. There was not one reference—except to say that part IV existed—to the problems of the diving industry in the North Sea, the problems of safety zones and the problems that have arisen over the safety of rigs. There was nothing in his speech about the terrible problems of safety in the North Sea.

There is no point in the right hon. Gentleman indicating that the Minister of State has yet to speak. He managed to waste 10 minutes on personal political gibes when he could have spent them telling us more about the Government's plans on offshore safety.

The second fact to emerge is that the Bill is an affront to every tradition of parliamentary accountability and legislative scrutiny. That affront is compounded by the fact—which I do not think any hon. Member is aware of other than the Minister and the hon. Member who received the answer—that while we have been debating the Bill, a significant answer has been given to a written question and it is of considerable relevance to the issues that we are now debating. No doubt no one on the Back benches has seen the answer given by the Minister to the hon. Member for Banff (Mr. Myles) on the issue of BNOC's role in LPG supplies, which sets out a policy statement that could affect the ability, viability and the role of the State trading company. That is indicative of the insulting manner in which the right hon. Gentleman and the Minister are treating this House. The character and nature of the Bill, and the way in which major policy statements are given in written answers on the day that we are debating the relevant issues, illustrate that.

As my hon. Friends and others have said, the Bill provides no safeguards or assurances. We have had only the say-so of the Secretary of State. All he has given is a half revelation about the way in which he intends to tackle the problem of foreign control through the articles of association. There is nothing in the Bill to prevent foreigners taking over the assets. There are no draft measures or articles of association in any legislative form that can be debated and subjected to amendment. The Bill contains no provisions to guarantee the participation agreement to which he referred and which I shall deal with in a few moments. As the hon. Member for Exeter pointed out there is no provision describing the nature of the new State trading company. That company is not the same as the old BNOC, which is being split up. All that will be left is the State trading company. What will be its composition and its duties? There is nothing in the Bill to show what those responsibilities and duties will be, or the composition of the new board or corporation. Will that be put in yet another regulation, subject to annulment under clause 31? There is nothing in the Bill to restrict the Secretary of State's right in respect of any aspect of the sale of BNOC, the oil assets or the equity shares in the subsidiaries. Under clause 2, the Secretary of State takes tremendous power to amend, alter, approve or disapprove any scheme proposed by the BNOC. He also has such power in relation to any schemes proposed by the British Gas Corporation. According to clause 2, not one of the schemes will be subject to any parliamentary approval, amendment or scrutiny. That is the legislation's character and nature.

It is little wonder that my right hon. Friend the Member for Leeds, South (Mr. Rees) and others pointed out that the Bill is nothing but a crude enabling measure that has more affinity with the attitude to Parliament of the extreme Left and Right than with anything else. The Bill seeks to short-circuit parliamentary procedures and accountability.

The Bill's objective is to dismantle and disintegrate BNOC. BNOC has been a remarkable success story. In a curious, grudging way, the Secretary of State had to admit that. He cannot claim that it has a monopoly in the North Sea. Indeed, he has been boasting that private enterprise has dominated North Sea development. He cannot claim that it is unprofitable. Even in its first two years, it has made considerable sums of money. Its cash flow and profitability have made a massive contribution to the public sector borrowing requirement. Several hon Members, including the hon. Member for Epsom and Ewell (Mr. Hamilton) and, in a way, the Secretary of State have argued that BNOC will soon become a burden on the public sector borrowing requirement because of its capital development programme. They argue that it must be freed from the public sector in order to borrow on the private market. That is exactly what it has been doing. Insultingly, the Secretary of State now attributes the name Britoil to the new company. However, it was the name of a loan that a 100 per cent. nationalised oil corporation obtained from the American market. A nationalised corporation has not found any difficulty in borrowing from the private market to finance and support its capital development programme. That is not the reason for denationalising the company and for splitting off its equity interests.

No hon. Member has claimed that BNOC has been inefficient. Not even the Secretary of State has claimed that. His attitude is that it will become inefficient one day, because it will become bureaucratic. However, there is no sign of that. What arguments have been put forward to justify the proposal? In November, and again today, the Secretary of State said that we should equate national interest not with a national corporation but with the interests of the multinationals in the North Sea. He said that what is good for Texaco and Mobil in the North Sea is good for Britain. Is that his case? Is he arguing that there is a natural equation between the national interest and that of the multinationals? If so, he is almost alone in his naivety.

We are told that the purpose of privatisation is to allow the great British public to obtain a widespread shareholding in the North Sea's assets. That is a cruel deception to perpetrate. The right hon. Gentleman is perpetrating the myth that the average working man, sitting with his broker, will buy or invest in North Sea oil shares. Those institutions and people who buy shares today, will buy these shares as well. It is nonsense that individual working people will somehow invest in the shares and it is a myth that is perpetrated by those who wish to popularise the concept of buying shares.

The idea would be for the pension funds and the financial institutions to take up most of the shares, and we contest the argument that somehow individuals would feel more closely identified with them and have some sort of personal relationship with the development of North Sea oil, if that happened rather than reinvesting in an anonymous pension fund, which subsequently bought a few shares in a privatised company somewhere down the line. The idea that we shall get a popular concept of share-owning capital in the North Sea as a result of these measures is a myth perpetrated by the Secretary of State and the Government.

The shares will end up being owned by the same individuals and institutions that own other shares and who are already the major share buyers in the market.

The most dishonest aspect of the presentation of the case against BNOC and about the issue of privatisation on the oil side has been the Secretary of State's denial that there will be any loss of control—any real loss to the nation's control of supply—and his claim that everything will be all right. The Secretary of State said that the privatising of exploration and production capacity will not mean a loss of control of the nation's oil supplies and that it will be safeguarded by the State oil trading companies and participation agreements. He said that his officials in the Department of Energy, only a handful of whom have any direct experience in the oil industry, will be the front and back lines in the Government's defence of the national oil assets.

No self-respecting oil man would believe the Secretary of State's nonsense. No significant oil company has not, understandably, striven for and achieved integration. The belief that one has to be in exploration, production and the distribution side has been common in the development of every major oil company in the western world. I found no one in the oil industry who believed that a company did not have to be in the process of exploration and production and that it was sufficient merely to explore or to sell. Integration has been a crucial and an essential asset in the development of oil companies. The Government are now breaking up an integrated national oil corporation.

No major oil developing nation fails to recognise the necessity for direct ownership and involvement in exploration and production as a crucial part of national control of a nation's oil assets. Only fools, clowns and the Government would reduce control or ownership of their national oil assets, especially with the many issues now arising in future oil supply and development.

The Secretary of State's policy will create—we heard nothing about the nature or character of a new State trading oil company—a company that will be weak and vulnerable, divorced from the real action in the North Sea and not serving on any of the vital committees managing the North Sea oilfields. Therefore, it will learn very little about what is happening in the oilfields. It will be trading on the narrowest of margins and buying and selling oil at market price. It will be nothing more than a 10-cent company.

In his opening speech my right hon. Friend the Member for Leeds, South claimed that BNOC members and the board had unanimously said in the past that the establishment of a State trading oil company would be vulnerable, weak and financially unviable. There is no reason to believe that that assessment is wrong.

The Government, Treasury and the Secretary of State are obviously worried that the State trading oil company will be financially weak and vulnerable. That is the reason for this afternoon's announcement about liquefied petroleum gas. The announcement in a written answer states that BNOC and, therefore, the new State trading oil company, should not continue to get involved with the trading in LPG, although that has been one of BNOC's most profitable key markets. The reason for that, of course, is that the Treasury is scared stiff at the prospect of a trading company losing money. If the trading group is divorced from exploration and production it will have to live on the narrowest of margins and it will be an extremely vulnerable outfit. That view is shared by many. I shall be interested to know whether the Minister of State thinks that that is a possible danger.

The danger will be even greater if the Secretary of State dilutes the State corporations's rights in oil participation. I raised the issue in the article to which the right hon. Gentleman referred that appeared in The Observer. I noted with interest his comments and observations today. However he juggles with the privatised Britoil company, I suspect that he will loosen and sell short control over participation oil, especially in the fifth and sixth rounds. Unless he states that the State oil company has 100 per cent. control over all the oil deriving from the fifth and sixth rounds, he will have lost control of a percentage of national oil.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

The right hon. Gentleman has said that that will not happen. This will be a crucial issue and he fudged it again this afternoon. He said that he would take 50 per cent. control with the option of a higher percentage of control under the fifth and sixth round licences. Unless it is 100 per cent. it will be a loss of control over participation oil. Every one of the licences for the participation oil is guaranteed by the 51 per cent. equity interest under the licences.

Rumours have it that the Government are increasingly likely to take royalty oil in cash and not in kind. That will deprive—

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

How would the hon. Gentleman take it?

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

That will deprive a State oil trading company of one of its most important sources of oil, which is now worth about 250,000 barrels a day. That is the quantity that now passes through BNOC. It would matter less if it were an integrated company with its own equity interest and its own control over its own oil supply. However, the Government visualise a State trading company that will have no equity interest and no control over its own supply. To deprive the company of another 250,000 barrels a day by taking royalty in cash and not in kind—I am interested that the right hon. Gentleman is not contesting the proposition that that is now the likelihood—will create an even more vulnerable and weaker State trading corporation.

This will be the Government who will create a lame duck out of a national oil corporation. It will be an incredible feat but the right hon. Gentleman is planning just that in his proposals for the State trading oil company. What has come across throughout the speeches that we have heard from Conservative Members is a special sort of bilious prejudice against the public sector. It is directed especially against the oil and gas corporations. That is chiefly because they are profitable, and that is contrary to Conservative law on public enterprises.

The Government have worked up a special hatred of British Gas that is even greater than their hatred of BNOC. The most remarkable allegations have been made against British Gas. I have heard the speech of the hon. Member for Derbyshire, South-East (Mr. Rost) on this issue five or six times and each time I find it even less credible. It was repeated by the hon. Member for Exeter and it has been given credence by those on the Government Front Bench.

We have heard that somehow British Gas sold the nation short by forcing from the poor multinational oil companies a ridiculously low price in the southern gas basin that has been crippling to the national interest. It has been forgotten that British Gas offered all the international oil companies an escalation clause that was based on the increase in the price of oil. The oil companies turned that down because they did not believe that oil prices would rise.

We are told that the British Gas Corporation, by serving Britain well, by negotiating fairly and firmly a range of good prices for the whole of southern gas, has somehow betrayed gas development in the North Sea.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Is not the hon. Gentleman misleading the House? The original price was 2·87 old pence per therm. With escalation clauses it went up to about 6p per therm. We were told in the recent report that the average price paid by British Gas is 10p per therm. Surely, if up to 29p is saved, BGC is making an enormous profit. It is not paying the producers enough.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

I shall discuss who is responsible for high energy prices in a minute. It is not necessarily British Gas.

The real cause of higher prices in the last 18 months to two years are the villains who sit on the Conservative Front Bench. Who told British Gas that it must raise gas prices by 10 per cent. in real terms? It was not Sir Denis Rooke of British Gas, but the Government. The Secretary of State's predecessor went to the Select Committee and confessed as much.

The reason the Government have been pushing up energy prices is that they have been using them as a source of revenue for the Government and as a form of direct and indirect taxation. They have deliberately jacked up both electricity and gas prices. The idea that British Gas is responsible for the decisions taken by the Secretary of State and his predecessor is shameful.

However, even worse is the argument that the Government now deploy that allowing the oil companies to sell and breaking up British Gas's right of first purchase of all gas landed in Britain will lead to cheaper prices for the industrial consumer. The major demand for that change has come from the oil companies, which want higher prices for their gas from British Gas. They want to use that power as a negotiating lever on British Gas.

The idea that the separation of the oil companies from the BGC will lead to a large-scale gas supply that is cheaper to industry is interesting. I hear through the grapevine that the Secretary of State briefed the press recently to say that he did not think that there would be much in that—about 2 per cent. He told the journalists that, but he did not repeat it in the House today. He said that about 2 per cent. of the market would be taken up.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

It must be pure invention by a large number of journalists.

The end game is not to provide the British industrial consumer with an alternative supply more cheaply than that offered by British Gas, but to make possible the export of gas, whether it was landed first in Britain or whether control of the landing rights provisions was removed. The right hon. Gentleman said that it was already possible for countries to re-export gas once it had been landed in Britain. Does he support that view? Will that be a part of the policy? When gas is landed in the United Kingdom, will he stand by and allow the re-export of gas in a free market way? The Minister of State should say whether that is the policy. If he removes the barrier to such exports, what action will he take? That is one of the consequences of the provision in the Bill to remove the rights of British Gas to first purchase.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil

No, I shall not give way. The hon. Gentleman has not been in the Chamber all day and I want to bring my remarks to a conclusion.

As many Opposition Members have said, if the provisions in the Bill on gas prices and the removal of the right of British Gas to first purchase are implemented, the ultimate loser will be the industrial and domestic consumer in Britain. They will be forced to pay higher prices because the British Gas Corporation will be forced to pay higher prices in the North Sea auction that will follow these proposals.

The Bill is an absolute disgrace to every tradition of parliamentary accountability. It will lead to higher, not lower, gas prices for both domestic and industrial consumers. It will lead to the squandering of vital gas assets by the removal of the distinction between premium and non-premium uses. It will lead to a lack of control over the loss of oil assets and a reduction in the overall control of the nation's oil supplies, and it will lead to the sale of precious national assets at prices far below their real value. [Interruption.] The Secretary of State has scarcely been here throughout the debate. I have at least listened to all of it.

Labour Members are therefore committed, as my right hon. Friend the Member for Leeds, South has said, to restore the assets sold off to other interests. No one who speculates or dabbles in this sale will gain a penny from it. That is our message.

Secondly, we shall construct a new and more powerful national oil corporation which, through ownership and involvement in exploration, production and development in the North Sea, will provide the real safeguards and protection for the nation's most precious assets.

That is why I ask my hon. Friends to vote against the Bill today.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty 9:37 pm, 19th January 1982

The hon. Member for Merthyr Tydfil (Mr. Rowlands) has a fairly low boiling point, but tonight even he was stretched to work up any real hostility to the proposals in the Bill. His right hon. Friend the Member for Leeds, South (Mr. Rees) mentioned his anxiety about part IV. My right hon. Friend the Secretary of State said that parts III, IV and V made some useful amendments which both he and I fully expect to be non-controversial, so it is hardly surprising that the hon. Gentleman did not devote much time to part IV.

I must emphasise, however, that Conservative Members are every bit as anxious as the Opposition about safety in the North Sea. The hon. Member for West Stirlingshire (Mr. Canavan) also mentioned safety and I thank him for his, as always, sympathetic remarks. What neither he nor any Opposition Member pointed out is that we enjoy an extremely good safety record in the North Sea as compared with that of others.

We have much to be thankful for and much on which to congratulate those who operate in the North Sea in their willingness to co-operate where we have not legislated to any great extent. We have worked on guidelines and achieved co-operation from both sides. Nevertheless, it is as a result of the recommendations of the Burgoyne committee, responsibility for which I inherited from the right hon. Member for Greenock and Port Glasgow (Dr. Mabon), that some of these provisions are included in the Bill.

The right hon. Member for Leeds, South asked why we were including safety in the Bill rather than dealing with it separately. The reason is quite simple. It is in response to many representations received about implementing the recommendations of the Burgoyne committee that the provisions are included in the Bill. The right hon. Gentleman suggested that part IV be taken out of the Bill and dealt with separately. I must make it quite clear that that is unacceptable to the Government. However, at the beginning of every Committee, consideration is given to the order in which clauses will be taken. If the right hon. Gentleman cares to make representations to us then, we shall consider taking part IV out of sequence and discussing where it can conveniently be taken. We could have talks about where it could conveniently be taken in the debates.

If the right hon. Gentleman is afraid of possible guillotines, I remind him that that is not our responsibility—it is entirely up to the Opposition to ensure that we make progress. Provided that we make reasonable progress, the last thing that the Government want is a guillotine. When the Leader of the Opposition was Leader of the House, we had five guillotines in one afternoon. The Government are not thinking in terms of guillotines because we are sure that we will make suitable progress.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I am grateful that the hon. Gentleman has said that we can discuss the matter. I am not suggesting that part IV should go into another Bill, although it is a different subject. I am suggesting that because of the lack of information on it, despite the Burgoyne committee, we should treat it in a different way. This was not suggested to waste time but merely to obtain a different procedure. I hope that the Secretary of State will look at that point.

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

We are only too pleased to co-operate with the Opposition in making reasonable progress on the Bill.

The right hon. Gentleman seemed genuinely disappointed that we had managed to produce a Bill that was not hybrid. That problem has been overcome.

As to information, as far as the Committee is concerned we have already made available the comments on the clauses and we shall continue to make information available as fully as possible. We hope to co-operate with the Opposition in this provided that the information is factual and not confidential.

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

As the hon. Gentleman has offered to co-operate in giving information to the House, will he give two figures? First, what is the total capital value of the public assets to be sold under the Bill and, secondly, what is the future annual revenue loss to the Exchequer?

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

The right hon. Gentleman is aware that I cannot give him the first figure. We do not expect that there will be a loss to the Exchequer. We believe that the ultimate result of these steps will be of benefit to the Exchequer.

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

The hon. Gentleman has only just arrived, so he should not make such a noise.

We have had a mixed debate. On this side of this House there have been, I am glad to say, constructive comments that show an appreciation of the need for change in our nationalised industries and an appreciation that the dinosaur of State ownership has outgrown the ability of taxpayers and consumers to support it.

Few doubt the problems posed by nationalised industries. They command a strategic place in the economy but are too often unyielding, unmanageable, unresponsive and unable to adapt to changing circumstances. They are too often protected from the challenge of competition by monopoly and subsidy. Their economic privileges secure them against the need for efficiency and lead to stagnation. They have grown irrespective of the costs to the country—like the dinosaur, they face extinction through their own excesses.

The Government have come forward with constructive proposals. The Bill is a major step forward. It provides for two fundamental remedies. The first is to end unnecessary State involvement in North Sea exploration, an area where there was no justification for State ownership in the first place.

The success of the North Sea belongs to private enterprise, which accepted the risks and realised the potential. State oil interests were grafted on at a later date only after success had been guaranteed by others. Even then, the lure of public sector privilege was too strong for the Socialists to resist. Not content with State involvement on equal terms, BNOC was created with privileged access to information and given special treatment in licensing rounds.

Secondly, the Bill breaks the BGC's monopoly in the purchase and supply of gas. This unique position was again secured through special privileges. The results are predictable—a stagnant gas market, a reluctance to explore for and to develop gas resources, and complaints about the ability to supply. In an excellent speech, my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) highlighted the difficulties that that presents.

I turn to our proposals for BNOC. Let me deal with some of the accusations that have been levelled against us. The right hon. Member for Greenock and Port Glasgow (Dr. Mabon) questioned the validity of clause 2. I remind him that the clause is in no way new. Similar provisions have appeared in other Acts on many occasions. Indeed, some of the provisions of the Petroleum and Submarine Pipe-lines Act 1975 could have been subject to the same criticism.

It has been said that we are throwing away our controls over the rate at which oil is consumed, and at which gas is flared as well as controls over exploration and development. There is no truth in that. The most charitable explanation I can offer is that perhaps our critics fail to understand exactly what our proposals are. It is hard to see why that should be, because we have made the position abundantly clear. Let me say it all again.

Our regulatory controls will remain exactly the same after the sale of shares in Britoil as they are now. These controls are not vested in BNOC, nor are they exercised by the corporation. They rest with the Government and will be unaffected by the introduction of private capital into BNOC's oil-producing business. Together with our taxation regime they are fully adequate to ensure that the nation derives the greatest benefit from our oil, both in the short and long term.

We have been accused of wanting to sell all our oil interests to foreign multinationals. Here again, the charge is false. My right hon. Friend the Secretary of State has set out our plans to establish Britoil as an independent British oil company, with a wide spread of ownership among the public. I was glad to have the support of the right hon. Member for Greenock and Port Glasgow and the hon. Member for Dundee, East (Mr. Wilson) for this being a company registered in Scotland.

My right hon. Friend has assured the House that safeguards dealing with changes in control of the company will be written into the articles of association and that these articles will be made available to the House. I was asked when. It is our intention to make them available during the progress of the Bill.

Our critics claim that we shall be weakening our control over the destination of North Sea oil. Again that is wrong. We have been at pains to point out that the participation agreements designed to strengthen the security of our oil supplies will not be affected by our proposals. BNOC will remain wholly Government controlled, trading primarily in participation oil. Of course, the landing requirements for North Sea oil will not be changed.

Put simply, these criticisms, purported to be made in the national interest, serve only the narrow interest of those who wish to see the public sector expand at any cost. The reality is that our plans for BNOC will not diminish the benefits of North Sea oil to the British people but will enhance them. The full potential of BNOC's oil-producing business can best be realised once it is free of the inevitable financial and statutory constraints inherent in Government control. We are determined to press ahead with these plans.

My hon. Friend the Member for Bedford (Mr. Skeet)—there can be few hon. Members with more knowledge of the industry than he—asked questions relating to the fifth and sixth rounds. He has also asked an extensive series of written questions, which I shall answer in due course.

From Opposition Members we have heard a predictable dirge of complaints. Their response to our proposals for competition, efficiency and enterprise was totally unimaginative. They can offer only State control, monopoly and the stifling of initiative. They are engaged in a desperate defence of the public sector, right or wrong, but they do not know how to make the public sector a success.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline

The Minister is saying that a reconverted BNOC would be more enterprising. Let me take a concrete example. BNOC could place an order for an advanced drilling plant with Scott Lithgow of Port Glasgow in association with Ben Line and Odeco, because it knows that it has access to blocks in the North Sea that can use the rig. Under the Bill it could not do that because it would not have access to the field.

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

Not for the first time, the hon. Gentleman has got it quite wrong. BNOC is no different from any other company. The other companies that operate in the North Sea are still subject to the same pressures as BNOC in placing orders in this country.

Although the Opposition constantly defend the public sector, they still have not found the secret of making it a success. I quote one of their leading thinkers who, in a recent book, recognised the problem frankly, to his credit. He said: The Labour constitution calls for common ownership—not nationalisation—and for the achievement of 'the best obtainable system of popular administration and control of each industry or service'. In that sense the nationalised industries established after the war have been a great disappointment. It is true that they have proved that investment can be channelled in to equip basic industries such as railways, coal, electricity and gas. But the huge state corporations, run on the very same economic criteria as private corporations under authoritarian management, have altogether failed to realise the hopes of those who campaigned for public ownership". Those remarks, which have a ring of honesty, are the views of the right hon. Member for Bristol, South-East (Mr. Benn), writing last year. He says a lot more: Common ownership has been confined to one form of bureaucratic nationalisation, which has destroyed many of the purposes for which it was developed and alienated the whole system in the public mind". How right he is. It is that bureaucratic nationalisation that we wish to fight and which we shall fight through the Bill.

I come now to part II, which deals with gas. I regret that Opposition Members have not supported our proposals for the gas industry. I believe that they will prove highly beneficial and that many of the fears that have been expressed are misconceived.

Natural gas is a valuable and important commodity. It is therefore essential that the Government set the right framework for encouraging the most efficient development and use of this resource. We take the view that the best way to do this is to introduce competition wherever possible, so that initiative and enterprise are encouraged and rewarded. The gas market is at present almost totally dominated by the British Gas Corporation as a result of special privileges conferred on it by statute. It is effectively a monopoly supplier to all types of consumers and the operator and sole user of the national pipeline system, as well as having monopoly buyer's rights of offshore natural gas.

The hon. Member for Newcastle upon Tyne, West (Mr. Brown) was worried about security of supply. I can confirm to him that the BGC position regarding domestic supply is unchanged. Lack of competition has resulted in some industrialists being unable to obtain supplies even though they are willing and able to pay for them. Of course, the BGC has had considerable achievements in the development of the gas industry, but we believe that this has now reached a point where excessive monopoly power will continue to be damaging and stifling.

Furthermore, we believe that the British Gas Corporation should no longer be involved in the production of oil when this work could be better done by the private sector. We are therefore taking powers to privatise BGC's offshore oil interests so that these assets can be developed by the private sector which has been the driving force behind the successful development of the North Sea.

We believe that these policies will inject the same vigour into future exploration as has been evident in the dynamic entrepreneurial activity displayed in the search for oil. Licensees have shown reluctance to search for gas, and even when this has been found it has all too often been left in the ground. The culprit is not the BGC: it is the system of monopoly purchase, which gives the producers just one outlet for their gas. Should British Gas decide not even to offer a bid for a certain field, preferring to take other gas first, the producer is absolutely powerless. I do not blame the BGC for decisions that it has taken in a monopoly context, because it could be to its advantage to delay purchase—but only a very short-term advantage. We believe that the existing structure is no longer adequate. Our legislation will ensure that the BGC will in future be bidding in a competitive market and that licensees shall in future have a choice of more than one purchaser.

Another serious disadvantage of the present regime is that a number of large, particularly industrial, consumers, which are willing and able to pay for gas supplies, cannot obtain them from the BGC. At the moment, they have nowhere else to turn, but in future we shall be giving them the opportunity of negotiating private supplies of gas. Our measures will ensure that prices in the future are set in a competitive environment and that an industrialist who thinks that BGC's price is too high will have the option of looking elsewhere.

It has been suggested that liberating the market will result in gas being used in ways which do not reflect its full value.

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

In my view, these dangers arise where there is a monopoly and where market forces cannot operate. Allowing industry to decide in the market place what is the value of gas will ensure that the gas flows to those places where it has the highest value. At the moment, BGC chooses the uses best suited for it. This policy is bound to involve guesswork and is no substitute for allowing the market to decide where gas can be put to the best use.

Several Hon. Members:

rose

Photo of Mr Robert Brown Mr Robert Brown , Newcastle upon Tyne West

On a point of order, Mr. Deputy Speaker. I asked the Minister five precise questions and I did not get an answer to any of those five questions. That is a gross discourtesy to the House.

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

That shows, if any proof were needed, that if the Labour Party is really opposed to the Bill, it has a strange way of going about it.

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

The House divided: Ayes 300, Noes 247.

Division No. 40][9.59 pm
AYES
Adley, RobertChurchill, W.S.
Aitken, JonathanClark, Hon A. (Plym'th, S'n)
Alexander, RichardClarke, Kenneth(Rushcliffe)
Alison, Rt Hon MichaelClegg, Sir Walter
Amery, Rt Hon JulianCockeram, Eric
Ancram, MichaelColvin, Michael
Arnold, TomCope, John
Aspinwall, JackCormack, Patrick
Atkins, Rt Hon H.(S'thorne)Corrie, John
Atkins, Robert(PrestonN)Costain, SirAlbert
Atkinson, David (B'm'th, E)Cranborne, Viscount
Baker, Nicholas (N Dorset)Critchley, Julian
Beaumont-Dark, AnthonyCrouch, David
Bell, SirRonaldDean, Paul(North Somerset)
Bendall, VivianDickens, Geoffrey
Benyon, Thomas(A'don)Dorrell, Stephen
Benyon, W.(Buckingham)Douglas-Hamilton, LordJ.
Best, KeithDover, Denshore
Bevan, David Gilroydu Cann, Rt Hon Edward
Biffen, Rt HonJohnDunn, Robert(Dartford)
Biggs-Davison, SirJohnDurant, Tony
Blackburn, JohnDykes, Hugh
Blaker, PeterEden, Rt Hon SirJohn
Body, RichardEdwards, Rt Hon N. (P'broke)
Bonsor, SirNicholasEggar, Tim
Bottomley, Peter(W'wichW)Elliott, SirWilliam
Bowden, AndrewEmery, Sir Peter
Boyson, Dr RhodesEyre, Reginald
Braine, SirBernardFairbairn, Nicholas
Bright, GrahamFairgrieve, SirRussell
Brinton, TimFaith, Mrs Sheila
Brittan, Rt. Hon. LeonFarr, John
Brooke, Hon PeterFell, SirAnthony
Brotherton, MichaelFenner, Mrs Peggy
Brown, Michael(Brigg&Sc'n)Finsberg, Geoffrey
Browne, John(Winchester)Fisher, Sir Nigel
Bruce-Gardyne, JohnFletcher, A.(Ed'nb'gh N)
Bryan, Sir PaulFletcher-Cooke, SirCharles
Buchanan-Smith, Rt. Hon.A.Fookes, Miss Janet
Buck, AntonyForman, Nigel
Budgen, NickFowler, Rt Hon Norman
Bulmer, EsmondFox, Marcus
Burden, SirFrederickFraser, Peter (South Angus)
Butcher, JohnFry, Peter
Cadbury, JocelynGardner, Edward(S Fylde)
Carlisle, John (Luton West)Garel-Jones, Tristan
Carlisle, Kenneth (Lincoln)Gilmour, Rt Hon Sir Ian
Chalker, Mrs. LyndaGlyn, Dr Alan
Channon, Rt. Hon. PaulGoodhart, SirPhilip
Chapman, SydneyGoodhew, SirVictor
Goodlad, AlastairMaxwell-Hyslop, Robin
Gorst, JohnMayhew, Patrick
Gow, IanMellor, David
Grant, Anthony (HarrowC)Meyer, SirAnthony
Gray, HamishMiller, Hal (B'grove)
Greenway, HarryMills, lain (Meriden)
Grieve, PercyMills, Peter (West Devon)
Griffiths, E.(B'y St. Edm'ds)Miscampbell, Norman
Griffiths, Peter Portsm'thN)Moate, Roger
Grist, IanMonro, SirHector
Grylls, MichaelMontgomery, Fergus
Gummer, JohnSelwynMoore, John
Hamilton, HonA.Morris, M. (N'hamptonS)
Hamilton, Michael (Salisbury)Morrison, HonC. (Devizes)
Hampson, Dr KeithMorrison, Hon P. (Chester)
Hannam, JohnMudd, David
Haselhurst, AlanMurphy, Christopher
Hastings, StephenMyles, David
Havers, Rt Hon Sir MichaelNeale, Gerrard
Hawkins, PaulNeedham, Richard
Hawksley, WarrenNelson, Anthony
Heath, Rt Hon EdwardNeubert, Michael
Heddle, JohnNewton, Tony
Henderson, BarryNott, Rt Hon John
Heseltine, Rt Hon MichaelOnslow, Cranley
Hicks, RobertOppenheim, Rt Hon Mrs S.
Higgins, Rt Hon Terence L.Osborn, John
Hill, JamesPage, John (Harrow, West)
Hogg, HonDouglas (Gr'th'm)Page, Richard (SW Herts)
Holland, Philip (Carlton)Parkinson, Rt Hon Cecil
Hooson, TomParris, Matthew
Hordern, PeterPatten, Christopher (Bath)
Howe, Rt Hon Sir GeoffreyPatten, John (Oxford)
Howell, Rt Hon D.(G'ldf'd)Pattie, Geoffrey
Howell, Ralph (NNorfolk)Pawsey, James
Hunt, David (Wirral)Percival, Sir Ian
Irving, Charles(Cheltenham)Peyton, Rt Hon John
Jenkin, Rt Hon PatrickPink, R.Bonner
Jessel, TobyPollock, Alexander
JohnsonSmith, GeoffreyPorter, Barry
Jopling, Rt Hon MichaelPrentice, Rt Hon Reg
Joseph, Rt Hon Sir KeithPrice, Sir David (Eastleigh)
Kaberry, SirDonaldPrior, Rt Hon James
Kershaw, Sir AnthonyProctor, K. Harvey
Kimball, Sir MarcusPym, Rt Hon Francis
King, Rt Hon TomRaison, Timothy
Knox, DavidRathbone, Tim
Lamont, NormanRees, Peter (Dover and Deal)
Lang, IanRhodesJames, Robert
Langford-Holt, SirJohnRidley, Hon Nicholas
Latham, MichaelRidsdale, Sir Julian
Lawrence, IvanRifkind, Malcolm
Lawson, Rt Hon NigelRoberts, M. (Cardiff NW)
Lee, JohnRoberts, Wyn (Conway)
LeMarchant, SpencerRossi, Hugh
Lennox-Boyd, HonMarkRost, Peter
Lester, Jim (Beeston)Royle, SirAnthony
Lewis, Kenneth (Rutland)Sainsbury, Hon Timotny
Lloyd, Ian (Havant & W'loo)St. John-Stevas, Rt Hon N.
Lloyd, Peter (Fareham)Scott, Nicholas
Loveridge, JohnShaw, Giles (Pudsey)
Lyell, NicholasShaw, Michael (Scarborough)
McCrindle, RobertShelton, William (Streatham)
Macfarlane, NeilShepherd, Colin (Herefbrd)
MacGregor, JohnShepherd, Richard
MacKay, John (Argyll)Shersby, Michael
Macmillan, Rt Hon M.Silvester, Fred
McNair-Wilson, M. (N'bury)Sims, Roger
McNair-Wilson, P. (NewF'st)Skeet, T. H. H.
McQuarrie, AlbertSmith, Dudley
Madel, DavidSpeed, Keith
Major, JohnSpeller, Tony
Marland, PaulSpence, John
Marlow, AntonySpicer, Michael (S Worcs)
Marshall, Michael (Arundel)Sproat, Iain
Marten, Rt Hon NeilSquire, Robin
Mates, MichaelStainton, Keith
Maude, Rt Hon Sir AngusStanbrook, lvor
Mawby, RayStanley, John
Mawhinney, DrBrianSteen, Anthony
Stewart, A. (ERenfrewshire)Walker, B. (Perth)
Stewart, Ian (Hitchin)Walker-Smith, Rt Hon Sir D.
Stokes, JohnWaller, Gary
Stradling Thomas, J.Walters, Dennis
Taylor, Teddy (S'end E)Ward, John
Tebbit, Rt Hon NormanWarren, Kenneth
Temple-Morris, PeterWatson, John
Thatcher, Rt Hon Mrs M.Wells, Bowen
Thomas, Rt Hon PeterWells, John (Maidstone)
Thompson, DonaldWhitelaw, Rt Hon William
Thorne, Neil (llfordSouth)Whitney, Raymond
Thornton, MalcolmWickenden, Keith
Townsend, Cyril D, (B'heath)Wilkinson, John
Trippier, DavidWilliams, D. (Montgomery)
Trotter, NevilleWinterton, Nicholas
van Straubenzee, Sir W.Wolfson, Mark
Vaughan, Dr GerardYoung, SirGeorge (Acton)
Viggers, PeterYounger, Rt Hon George
Waddington, David
Wakeham, JohnTellers for the Ayes:
Waldegrave, Hon WilliamMr. Anthony Berry and
Walker, Rt Hon P.(W'cester)Mr. Carol Mather.
NOES
Abse, LeoDobson, Frank
Adams, AllenDormand, Jack
Allaun, FrankDouglas, Dick
Alton, DavidDunlop, John
Anderson, DonaldDunnett, Jack
Archer, Rt Hon PeterDunwoody, Hon Mrs G.
Ashley, Rt Hon JackEadie, Alex
Ashton, JoeEastham, Ken
Atkinson, N.(H'gey)Edwards, R. (W'hampt'n S E)
Bagier, Gordon AT.Ellis, R.(NED'bysh're)
Barnett, Guy (Greenwich)Ellis, Tom (Wrexham)
Barnett, Rt Hon Joel (H'wd)Ennals, Rt Hon David
Beith, A.J.Evans, Ioan (Aberdare)
Benn, Rt Hon TonyEvans, John (Newton)
Bennett, Andrew(St'kp'tN)Ewing, Harry
Bidwell, SydneyFaulds, Andrew
Booth, Rt Hon AlbertField, Frank
Boothroyd, MissBettyFlannery, Martin
Bottomley, RtHonA, (M'b'ro)Fletcher, L. R. (IIkeston)
Bradley, TomFletcher, Ted (Darlington)
Bray, Dr JeremyFoot, Rt Hon Michael
Brown, R. C. (N'castle W)Ford, Ben
Brown, Ronald W. (H'ckn'yS)Forrester, John
Brown, Ron (E'burgh, Leith)Foster, Derek
Buchan, NormanFoulkes, George
Callaghan, Jim (Mdd't'n & S)Fraser, J. (Lamb'th, N'w'd)
Campbell, IanFreeson, Rt Hon Reginald
Campbell-Savours, DaleFreud, Clement
Canavan, DennisGarrett, John (Norwich S)
Cant, R. B.Garrett, W. E. (Wallsend)
Carmichael, NeilGeorge, Bruce
Carter-Jones, LewisGilbert, Rt Hon Dr John
Cartwright, JohnGinsburg, David
Clark, Dr David (S Shields)Golding, John
Cocks, Rt Hon M. (B'stolS)Graham, Ted
Coleman, DonaldGrant, George (Morpeth)
Concannon, Rt Hon J. D.Grant, John (Islington C)
Conlan, BernardHamilton, James (Bothwell)
Cook, Robin F.Hamilton, W. W. (C'tral Fife)
Cowans, HarryHarrison, Rt Hon Walter
Cox,.T. (W'dsw'th, Toot'g)Hattersley, Rt Hon Roy
Craigen, J.M.(G'gow, M'hill)Haynes, Frank
Crawshaw, RichardHealey, Rt Hon Denis
Crowther, StanHeffer, Eric S.
Cryer, BobHolland, S.(L'b'th, Vauxh'll)
Cunningham, G.(IslingtonS)HomeRobertson, John
Dalyell, TamHomewood, William
Davidson, ArthurHooley, Frank
Davies, Rt Hon Denzil (L'lli)Horam, John
Davies, Ifor (Gower)Howell, Rt Hon D.
Davis, Clinton (Hackney C)Howells, Geraint
Davis, T. (B'ham, Stechf'd)Hoyle, Douglas
Deakins, EricHuckfield, Les
Dean, Joseph (Leeds West)Hudson Davies, Gwilym E.
Dewar, DonaldHughes, Mark (Durham)
Dixon, DonaldHughes, Robert (Aberdeen N)
Hughes, Roy (Newport)Race, Reg
Janner, HonGrevilleRees, Rt Hon M (Leeds S)
Jay, Rt Hon DouglasRichardson, Jo
John, BrynmorRoberts, Albert (Normanton)
Johnson, James (Hull West)Roberts, Ernest (Hackney N)
Johnson, Walter (Derby S)Roberts, Gwilym (Cannock)
Johnston, Russell (Inverness)Robertson, George
Jones, Rt Hon Alec (Rh'dda)Robinson, G. (Coventry NW)
Jones, Barry (East Flint)Rooker, J. W.
Jones, Dan (Burnley)Roper, John
Kaufman, Rt Hon GeraldRoss, Ernest (Dundee West)
Kerr, RussellRoss, Stephen (Isle of Wight)
Kilroy-Silk, RobertRowlands, Ted
Lambie, DavidRyman, John
Lamborn, HarrySandelson, Neville
Lamond, JamesSever, John
Leadbitter, TedSheerman, Barry
Leighton, RonaldSheldon, Rt Hon R.
Lewis, Arthur (N'hamNW)Shore, Rt Hon Peter
Lewis, Ron (Carlisle)Short, Mrs Renée
Litherland, RobertSilkin, Rt Hon J. (Deptford)
Lofthouse, GeoffreySilkin, Rt Hon S. C. (Dulwich)
Lyons, Edward (Bradf'd W)Silverman, Julius
Mabon, Rt Hon Dr J. DicksonSkinner, Dennis
McCartney, HughSmith, Rt Hon J. (N Lanark)
McDonald, DrOonaghSnape, Peter
McKay, Allen (Penistone)Soley, Clive
McKelvey, WilliamSpearing, Nigel
MacKenzie, Rt Hon GregorSpriggs, Leslie
Maclennan, RobertStallard, A.W.
McMahon, AndrewSteel, Rt Hon David
McNally, ThomasStewart, Rt Hon D. (W Isles)
McNamara, KevinStoddart, David
McTaggart, RobertStott, Roger
McWilliam, JohnStrang, Gavin
Magee, BryanStraw, Jack
Marshall, D (G'gowS'ton)Summerskill, Hon Dr Shirley
Marshall, Dr Edmund (Goole)Thomas, Dafydd (Merioneth)
Marshall, Jim (LeicesterS)Tbomas, Jetirey (Abertillery)
Martin, M (G'gowS'burn)Thomas, DrR. (Carmartrten)
Maxton, JohnThorne, Stan (Preston South)
Maynard, Miss JoanTilley, John
Meacher, MichaelTinn, James
Mellish, Rt Hon RobertTorney, Tom
Mikardo, IanVarley, Rt Hon Eric G.
Millan, Rt Hon BruceWainwright, E. (DearneV)
Miller, Dr M.S. (E Kilbride)Wainwright, R. (Colne V)
Mitchell, Austin (Grimsby)Walker, Rt Hon H. (D'caster)
Mitchell, R.C. (Soton Itchen)Watkins, David
Morris, Rt Hon A. (W'shawe)Weetch, Ken
Morris, Rt Hon C. (O'shaw)Wellbeloved, James
Moyle, Rt Hon RolandWelsh, Michael
Mulley, Rt Hon FrederickWhite, Frank R.
Newens, StanleyWhitehead, Phillip
Oakes, Rt Hon GordonWhitlock, William
Ogden, EricWilley, Rt Hon Frederick
O'Halloran, MichaelWilliams, Rt Hon A. (S'sea W)
O'Neill, MartinWilliams, Rt Hon Mrs (Crosby)
Orme, Rt Hon StanleyWilson, Gordon (Dundee E)
Owen, Rt Hon Dr DavidWilson, Rt Hon Sir H. (H'ton)
Palmer, ArthurWinnick, David
Park, GeorgeWoodall, Alec
Parker, JohnWoolmer, Kenneth
Pavitt, LaurieWrigglesworth, Ian
Pendry, TomWright, Sheila
Penhaligon, David
Pitt, William HenryTellers for the Noes:
Powell, Raymond (Ogmore)Mr. Lawrence Cunliffe and
Prescott, JohnMr. George Morton.
Price, C. (Lewisham W)

Question accordingly agreed to.

Bill read a Second time.

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