Phasing Out of Aprt

Part of Orders of the Day — Finance Bill – in the House of Commons at 7:15 pm on 28th April 1983.

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Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland 7:15 pm, 28th April 1983

As the terminals at Flotta and Sullom Voe are in my constituency, the taxation of oil is of considerable importance to my constituency and to the country. The taxation of oil revenues is a highly complicated subject and, as with the rest of our taxation, it is not becoming less complicated. In addition, in many ways the activities of Governments are contradictory. It is only recently that a development grant of £61 million has been made to the consortium at Sullom Voe, at the same time as it is being taxed at almost 89 per cent. No Member of Parliament would complain about a development grant being made to his constituency, but, on the face of it, it is rather a curious contradiction.

I am afraid that that is rather typical of the way in which we run our affairs. As the hon. Member for Canterbury (Mr. Crouch) and my right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon) have pointed out, recent taxation has virtually put a stop to exploration in the North sea. In the fairly recent past, the rates of taxation have been altered about 11 times, thus making it extremely difficult for oil companies to plan ahead and causing considerable anxiety to those who are dependent on the industry. I welcome the fact that, as I understand it, these changes will greatly assist the smaller fields and encourage new exploration. I take the point made by the hon. Member for Canterbury, that, although they will encourage new exploration, the fields that have not yet come on stream will not gain, and may be faced with a difficult oil price when they begin to produce. There is strength in the hon. Gentleman's argument and it should be considered.

Naturally I am particularly concerned about the fields that feed directly into Sullom and Flotta. There has been some speculation about the future of Occidental Oil, which is engaged in very large operations in America and which, I understand, is running up a considerable debt. I imagine that these changes will not be so important in the fields that feed into Sullom Voe. Perhaps the Minister can give us a breakdown of the effect of the changes on the different North sea fields and can tell us of the effect on the new exploration round the Claymore field and to the west of Shetland. Obviously they will benefit the whole industry. We are grateful for that and hope that exploration will start up again.

Of course, oil is important to Great Britain, and the economy of Orkney and Shetland is now deeply affected by it. It would greatly help if the Government could give us some intimation of their expectations. I can hardly believe that the very optimistic forecasts that have been referred to in the Financial Times have any very solid foundation. Was it said that one new field would be opened up every six weeks? Surely that is optimistic. However, it would help if the Government said something about that. Some stability of outlook would also be of great advantage. May we take it that the Government — as long as they are still in office—will continue along the path that they have taken and that, as far as possible, there will not be any abrupt changes in the taxation of oil, although I appreciate that some may be necessary, due to the changing price of the economy? In general, the proposals are to be welcomed, especially by my constituency. I should imagine that they will be welcomed by the whole country, and certainly by the industry itself.