Phasing Out of Aprt

Part of Orders of the Day — Finance Bill – in the House of Commons at 7:45 pm on 28th April 1983.

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Photo of Mr John Smith Mr John Smith , Lanarkshire North 7:45 pm, 28th April 1983

It is some time since I participated in debates on this subject. I remember the days of 1974–76 when the then Conservative Opposition were complaining about the taxation structure proposed by the then Labour Government, which in retrospect seems moderate. It was claimed the the Labour Government would over-tax North sea developments and drive oil companies from our waters. One develops an acute sense of irony in the House of Commons, but I feel that I have been restrained during the past two or three years, during which the Government have moved in to take a much larger share of profits from the North sea than the Conservative party had ever contemplated. We have seen that happen, in a reversal of Government policy. It is slightly odd for Ministers to take credit for removing burdens which they themselves imposed.

Since the Government took office in 1979, they have been the beneficiaries of the most fantastic bonus that any Government in our history have received. The Labour Government received revenues of about £800 million in 1978 and 1979, the two years when they first became available. This Government have received over £20 billion from North sea revenues. They have received about £20 billion more than their predecessors, £20 billion more than they would have had if the United Kingdom had not been the beneficiary of oil and gas revenues.

What have the Government done with the £20 billion? They have spent it all on paying for the extra unemployment that they have created. The cost to the Government of an unemployed person is about £6,000 a year. If the Government are responsible for creating only another 2 million unemployed, they have incurred the responsibility of finding another £12 billion a year. However, North sea oil revenues are running at about £8 billion a year. The total of North sea oil revenues does not equal the cost of the extra unemployment that the Government's economic policies have created.

When I had ministerial responsibilities in 1975–76, I often reflected on the use to which North sea revenues would be put. The Labour Government knew that they would be high, but they did not know that they would be as high as they have proved to be. However, we knew that they would constitute a windfall for whichever Government happened to be the beneficiary. I thought that if the beneficiary were a Government of the Left the revenue would be spent on social projects, Government pump-priming, and support for industry and social services. I thought that if it were a Government of the Right the revenue would be handed back in tax cuts and tax concessions. I thought that it might be argued by them that the latter course would be a better way of using the revenue because it would allow a series of individual and personal economic decisions to be made, rather than Government decisions.

I do not think that anyone ever dreamed—if anyone had done so and recounted the dream, he would have been treated as mad—that a Government would say, "We will not spend the revenue through the state and we will not spend it through individual choices or tax cuts. We will spend it on funding the extra unemployment that we shall manage to create at the same time as we receive the revenue." When the history of this country comes to be written, the public will wonder how it was possible for a Government to contrive to misspend the largest windfall the country had ever had.

The question which must insistently be put to the Government in the weeks or months that lie ahead is what happened to the £20 billion, what is happening to the £8 billion and what will happen to the money if they are returned at the next election? Not only are they misusing the revenues on a scale we never thought possible; they are pumping oil out of the North sea for all they are worth, far more than the nation needs, to try to satisfy the Government's addiction for North sea oil revenues. Because they have an enormous army of unemployed whom they must pay, they must pump the oil out as fast as possible, to maximise their revenues, and, at over 103 million tonnes a year, we now have the highest production ever.

We are exporting 60 per cent. of North sea oil. As we import 30 per cent., our net exports are 30 per cent., which is far more than we need to achieve. We are doing that exporting in an era of some uncertainty about oil prices, when there is not exactly a shortage of oil. It is being pumped out at such a rate that it will leave us with a sharp gap between supply and demand in only a few years. The Government must drain the oil out and squeeze the revenue out for all they are worth so that they get the maximum advantage, denying it to their successors and future generations.

8.30 pm

Any sensible depletion policy tries to match supply and demand for as long as possible. The Government are just raiding the funds of the country, misspending them in a tremendously stupid way and denying future generations the benefits of revenues which, if properly garnered, could be of enormous economic benefit to the nation. That is a staggering indictment of the Government.

Apart from that, the Government have managed the development of the North sea foolishly. The North sea oil industries have had to go from famine to feast, staggering from a surplus of orders at one stage to a terrible scramble for orders at the next. The latter has been the situation for some time; whenever there is a platform order, the companies scramble for the work. Instead of organising matters to achieve sustained development over the years, we have seen a crisis in the North sea, and that has happened in the last three or four years as a result of Government policy. Now, however, they say, "It will be all right. We have changed our policy and instead of having only a few fields coming forward, as has been the case in recent years, we have 17 coming forward."