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I understand that it will be convenient to take at the same time the following motions:
That an humble Address be presented to Her Majesty, praying that the Gas Act 1972 (Modifications) Order 1983 (S.I., 1983, No. 968), dated 5th July 1983, a copy of which was laid before this House on 7th July, be annulled.
That an humble Address be presented to Her Majesty, praying that the British Gas Corporation (Further Disposal of Offshore Interests) Directions 1983 (S.I., 1983, No. 1096), dated 26th July 1983, a copy of which was laid before this House on 26th July, be annulled.
The orders which the Opposition pray against are directions and a further step in the process of forcing the British Gas Corporation to sell off all its oil interests and some of its gas interests on the continental shelf.
The British Gas Corporation has a minority but substantial interest in several fields in the North sea— Beryl A, Beryl B, Hutton, North West Hutton, Montrose and Fulmar. For years the envious eyes of the Tory asset strippers have been fixed upon them.
The Opposition resolutely oppose the entire privatisation process, both in principle and in practice, and therefore we oppose the orders. We must consider what is involved. It is axiomatic that every company which is searching for hydrocarbons on our continental shelf often finds oil and gas together. The British Gas Corporation, in the course of its very successful development of our gas resources, has become involved in oil discoveries in the fields which I have mentioned. That has been done in the same way as private sector oil companies find gas. Acting within statutory powers conferred by the Conservative Government of 1972, the British Gas Corporation has developed its oil interest commercially. Until now, successive Governments have viewed such action with favour and encouragement. Both the corporation's onshore interests and its offshore interest at Wytch Farm in Dorset have been developed successfully. The corporation's geologists and production engineers have a success story to report, but what is their reward for their commercial inventiveness and ingenuity in developing these important new resources for the United Kingdom and the taxpayers whom they serve?
At one time it was thought to be the responsibility of Ministers in the Department of Energy and other Departments to develop and encourage the public sector industries which were in their sphere of responsibility. However, the reward of the British Gas Corporation for its success and endeavour was to be told that it must disgorge those assets, sack the staff who were responsible for the exploitation and development, and hand over the proceeds of its commercial flair and success to the Treasury.
Again, the Tory attitude to public enterprise is simple: if the public enterprise is making a loss it is to be derided; if it is making a profit it has to be sold off. This case, involving North Sea oil interests, has even worse features.
It is clear, as a result of the forced sale of those oil interests in the North sea, that the British Gas Corporation will lose income of £100 million each year. Over the next three years, that is £300 million of which the British Gas Corporation will be deprived. That will have an immediate and direct effect on the corporation's finances, and unless the Government compensate it in some way by altering its financial targets or in some other way moderating the obligations placed upon it, the cost of this £100 million per year will fall directly on the gas consumer. That will be a further burden which this Government have put on the gas consumer.
We already have the gas levy, under which large sums of money are raised—a direct tax on gas users in this country. This tax is raised in a skilful political way, without anyone being aware that it is a tax, and in respect of which the odium is deposited at the doorstep of the publicly owned industry. That satisfies many of the Government's purposes. That £100 million a year of which the British Gas Corporation is deprived will have to be made up by the gas consumers — the domestic or industrial users—who will have to find an extra £100 million every year as a result of the Government's proposals. This Government have a unique talent for expropriation without compensation—and that is what is involved in robbing the British Gas Corporation's assets in the way proposed.
Secondly, these proposals are positively harmful to the British Gas Corporation. Not only is it losing valuable assets of about £500 million in the asset-stripping that is involved here, but it will also be deprived of the skills, knowledge and expertise that have been built up by its staff over the years in the development of these fields. In the North sea, knowledge is valuable, and the knowledge of skilled personnel is particularly valuable. Basically, the same skills are used in the exploitation of oil reserves as of gas reserves. The corporation will have to get rid of some of the staff who have been involved in that exploitation, because the asset has been taken away.
Of course, it is no incentive to the geologists, engineers and managers of the British Gas Corporation to know that whenever they discover oil in the course of their search and exploitation of gas, they will eventually be deprived of it, because the Government make this arbitrary line that the corporation is never to be allowed to develop any ancillary oil interests. We should remember that not an extra barrel of oil will be recovered as a result of these proposals.
Thirdly, apparently not just oil interests will be included in these instruments. It is clear that gas also will be excluded, and that the British Gas Corporation will lose any gas that it discovers in the fields that I mentioned. Methane is excluded from the participation arrangements, but it is not excluded from the transfer of ownership. I understand that the corporation sought the minor concession that it be allowed to keep any gas there but that the Secretary of State refused.
This is a particularly bad case of the nation selling off its seed corn. It is profligate financing to attempt to hold down the public sector borrowing requirement by selling capital assets on the scale indulged in by the Government, and they are selling them so as to raise about £500 million. It is a classic case of selling the silver to pay the tradesmen's bills.
I ask the House to consider whether the Secretary of State for Energy—who I am told had a talent, in his previous life before entering the House, for making money —would deal with his own assets in the way in which he proposes to deal with public assets in this case. Would he contemplate, should he be fortunate enough to have the oil interest holding which the British Gas Corporation has in the North Sea, selling it at this time? Of course he would not. He would consider it more prudent to preserve the investment in these fields and derive the substantial income of £100 million a year which would come his way.
If it is not the way in which Conservative Members would behave with their own assets, why on earth do they propose that the assets of the British people should be dealt with in this way by those who are alleged to be their trustees?
We hear a great deal from the Conservative party about the taxpayer. I urge British taxpayers to remind themselves that in this case they are being deprived of their assets; the British citizen, both as taxpayer and gas consumer, will foot the bill for the Government's ideological prejudices.
Those are the main principles on which we oppose this privatisation exercise. One would have thought that a particularly valuable asset such as we are discussing should be retained for the nation. However, certain questions must be asked about the techniques which the Government are adopting in this disreputable manoeuvre.
About a year ago we debated a prayer moved by my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) against the initial directions which were used in this process. At that time the Government were involved in a somewhat complicated procedure. They proposed that the British Gas Corporation should set up no less than six subsidiary companies, companies A to F, which were to hold the interests which existed on behalf of the British Gas Corporation in each of the fields involved, and one of which was to hold the future exploration rights of the corporation.
I understand that only two of those companies were set up and that four remained as it were, prospective companies or companies to which no assets were ever transferred. It was never clearly explained at the time why it was necessary for the Government to go through such an elaborate manoeuvre to dispose of the interests. Why were only two companies formed and not the original six which Parliament was told a year ago were necessary?
It is important to know the answer, because all this manoeuvring arises from a legal problem which we believe the Government have in selling off the minority interests in the oilfields. The problem arises because it is common for the various companies involved — nearly always more than one and usually quite a number — in any oilfield to have operating and contractual agreements among themselves. It is common practice in those agreements—and we believe it to be the case in the fields to which we are referring — that a minority interest cannot be sold without permission or agreement, with some pre-emption rights being given to the others with interests in the fields.
This is a problem which the Government face because in most fields the majority interest is held by American companies such as Amerada. Indeed, I understand that in all the four fields there are substantial American interests. If the Government were to follow the normal practice and say, "We will instruct the British Gas Corporation to sell off its interest in each of these fields", the pre-emption rights would come into effect and the American majority holders would be able to have the first shot at buying the minority interests which the British Gas Corporation holds.
Those in the Conservative party with an eye to the presentation of the policy considered that that did not look too handsome. They did not wish it to be seen that a British public corporation was being forced to sell off its interests to a foreign multinational oil company or gas corporation. They had to find a way to escape from the obligations in which the gas corporation had become involved through its partnership agreements. That is why we have the elaborate arrangement that we are discussing.
A different formulation was proposed to subsidiaries for future exploration funds. One of the orders that we are considering provides that two subsidiary companies have to be set up. I ask the Secretary of State directly— I hope that he will answer my question directly — to explain the complications that face the gas corporation. What are the contractual obligations that the corporation and the council entered into when they were operating in the relevant fields? Are they a factor in the Government having seen fit to embark on these complicated manoeuvres? Why is there not a straight-forward selling off if there is no difficulty of the sort that I have described? I think that the right hon. Gentleman owes the House a frank explanation.
One of the orders transfers ownership from the gas corporation to the Secretary of State and to a nominee of his. I refer to Statutory Instrument 1983 No. 967. A direct change of ownership is involved at that stage. Until that point the gas corporation is merely setting up subsidiaries and changing the rights of ownership between the subsidiaries. That is all carried out under the gas corporation's umbrella. There must be a change of ownership from the corporation to the Secretary of State because the Secretary of State for Industry is clearly a different legal entity from the corporation.
Is the corporation not in breach of the agreements that it entered into, or has it told the majority holders that they had better not complain? Did it say, "Perhaps you have rights, but if you exercise them you will not get any licences and future exploration rights in the North Sea"? Did it advise them that they would be better to keep quiet and not exercise whatever rights they may have? I hope that the Secretary of State will explain frankly whether the transfer of ownership was implied in the very instruments that the House is now discussing. Do they or do they not have the effect that I am suggesting? Are the Government responsible for causing the corporation to be in breach of its obligations? If the right hon. Gentleman will deal with that in detail, I am sure that we will be greatly obliged. In Statutory Instrument, 1983, No. 1096 the Government are making sure that the future discoveries of the corporation will also be sold off. There will be the package of what they already know they have and discoveries in certain fields that are described in the statutory instrument. I think that this is an attempt to make it a more attractive package for the private sector market.
It appears that under the instruments the Gas Corporation will be given the right to 51 per cent. of the oil that is discovered. Presumably this is intended eventually to go to BNOC. However, as I read the relevant instrument it appears that it will go to the Gas Corporation. Is it the Secretary of State's intention to direct the gas corporation to pass it on to BNOC? If that is so, why is it not set out in the statutory instrument? Is that not done because it would cause other legal difficulties in the general area to which I have referred? If not, I am sure that the right hon. Gentleman can give us a simple explanation.
Those who read the financial press carefully will read a great deal about a mysterious company called Enterprise Oil, which is described as the company which has been set up to take over the oil-producing interests of British Gas. More information is given today in the Financial Times. The information has not been given to the House. It appears regularly in the press but it is never given to the House, despite an undertaking given by a Minister in a debate a year ago that the House would be fully informed by the Government of the method chosen for this operation.
Apparently, this mysterious company has two directors — Mr. Peter Elwes who is a director of Kleinwort, Benson and Mr. Julian West who is on secondment from the Department of Energy, in which he is an assistant secretary. The report continues:
The department refused to comment last night on the identity of the company's prospective chairman.
Enterprise Oil has eight full-time staff temporarily housed in four rooms at Kleinwort, Benson's Fenchurch street offices in the City.
None of that information has ever been given to the House. No doubt the Secretary of State will make up for that deficiency tonight.
Who set up Enterprise Oil? What are its purposes? What are its expenses? Who is paying the salaries of Mr. Elwes and Mr. West? Is it the taxpayer? Under what Vote are they being paid by the Government or the taxpayer? What is the cost of divesting the British Gas Corporation of the company's functions?
I understand that the company has gone to the lengths of extracting all of the Gas Corporation's relevant files and carting them round to the offices of the mysterious Mr. Elwes and Mr. West. All the British Gas Corporation's files and information have been quietly spirited along the back streets into the City and handed over to the men who represent Enterprise Oil. Is the Secretary of State the spirit behind Enterprise Oil? If so, how much is he charging us, the taxpayers, for running the operation?
We know that the principal beneficiaries of most privatisation enterprises are in the City. They buy the concern and get the expenses of the sale. They do very well out of those expenses. It is time that the Secretary of State informed us of the cost to the British taxpayer of the sale. That is a legitimate consideration to take into account when assessing whether it is desirable that these matters be proceeded with. I should like the Secretary of State to give some direct and detailed information about the costs involved and much fuller information about Enterprise Oil than has previously been given to Parliament or the public.
If, in future, the British Gas Corporation discovers oil, shall we go through this exercise again? Will we have to set up subsidiary companies to ensure that it is never allowed to exploit oil? Are we to look forward to a succession of these orders? It is quite possible for the British Gas Corporation to be allocated a field, set out to search for gas and find a substantial amount of oil. If, as I hope, licences are issued to the Gas Corporation in future and it finds oil, presumably we will have to go through this pantomime again to ensure that it is denied the benefits of its commercial success. Will more orders relating to exploration by the gas corporation have to be laid before the House?
I hope that the Secretary of State will go into substantial detail about what safeguards will apply in relation to the buyers of any interests. We have the curious arrangement with Britoil—the so-called golden share—which gave the Government rights in the disposition. Are there to be any restrictions on who buys the substantial interests? They amount to £500 million in the North sea. The North sea is not a normal commercial operation. It is Britain's most important strategic asset. Control of its ownership is vital to Britain. Are foreign interests to be allowed to buy? If not, what protection will there be to stop foreign interests controlling an important sector of the North sea? If the Government are proposing any safeguards, this is the time for the Secretary of State to tell us about them.
This is a sorry tale. The taxpayer will lose—£500 million-worth of assets are to be taken away. The British Gas Corporation must lose — its assets are being expropriated without a halfpenny of compensation. The gas consumer will lose, because £100 million that currently comes into the finances of the corporation will no longer be available. Presumably that will have to be made up by increases in charges to both domestic and industrial users.
The public interest generally will lose because there will be less public control over an important sector of our North sea oil interests. The whole matter defies the logic of energy development. Wherever there is oil, there is usually gas. As the private sector freely deals in both, why should our most important public sector gas company be denied the rights that even the smallest private sector operator is given by common consent in the world's oil and gas provinces?
There is an ideological obsession in the Conservative party that, whenever public enterprise is successful, it must be robbed of the benefits of its success. Even if it defies energy and commercial logic, that ideological obsession must be pursued.
It is sometimes said that the Secretary of State for Energy represents the moderate wing of the Conservative party—that he is the wet in waiting. As a result of his interventions, minor modifications have been carefully leaked by his supporters to the press. After all, instead of forcing the BGC to give up 24 blocks, he let it keep four, so that only 20 will now be sold off. Is not that the mark of a moderate? Did he not also tell the BGC that it should not worry too much, because, according to The Observer, it will in future be allowed to swap its oil interests for gas interests? Was it not he who leaked to the press the information that in future it might be allowed to keep the money from some of the sales that it was forced to make?
In effect that is saying, "I admit I am robbing you now, but we might not always do so if you are nice to me and drop some of your opposition to some of the proposals." The Secretary of State should be ashamed of the way in which he inherited the proposals fashioned by his predecessor, who unfortunately is now in a more damaging position in the Government. He should be ashamed of the way in which he is treating public enterprise, the way in which the taxpayer is being robbed and the public interest diminished. For all these reasons, we intend to vote against the orders.
I welcome the opportunity provided by this debate and thank the right hon. and learned Member for Monklands, East (Mr. Smith) for his understanding of my "wet" position. I am not sure about his position in the Labour party; whether someone on the moderate wing of that party is called a "dry" and those on the Left wing are called "wets". I know that in the summer months the right hon. and learned Gentlemen took an active part in a certain campaign within his party and failed. When I last took part in a leadership campaign in my party I failed and was sacked from the Shadow Cabinet within 24 hours.
My right hon. Friend the Minister of State would have liked to attend the debate, as this is a sphere over which he has responsibilities, but I know that hon. Members on both sides of the House will deeply regret the news that a dreadful explosion in a hotel in his constituency has killed quite a number of people, and understandably he has rushed there this evening. He asked me to convey his apologies to the House for his absence.
We are tonight debating the sequence of events in August 1982 when the BGC was directed to prepare a scheme so that six North sea oilfields in which it had an interest could be transferred from the public to the private sector. I recognise that the Labour party is opposed to any such move. When we believe that it is better, if possible for a commercial activity to take place in the private sector, it is described as an ideological, extreme belief, as is the belief of the right hon. and learned Gentleman that it is much better that these events should be controlled by the public sector. I admire a great deal of the activity of and work done by the nationalised industries, and of those working in them, and I have had Cabinet responsibility for every nationalised industry except the Post Office, but I do not think that it is an ideal system on which to base commercial operations. Whether there is a Conservative or a Labour Government, one of the problems is the substantial interference of the politician and the civil servant.
The right hon. and learned Gentleman has had responsibilities in many Departments and been involved in making things happen in industry and fixing investment programmes for industry. I mean no disrespect, because the same argument applies to myself, but he has far less knowledge than those involved in the industries. There are clearly activities of an essentially commercial operation that should go into the private sector. It is good that they should do so, and I welcome the opportunity of seeing that that takes place in this industry.
I listened with fascination to the right hon. and learned Gentleman's version of events, with strange companies and organisations emerging, but the process has been simple. The advice given to the Gas Corporation on the best way to handle the scheme was to transfer the assets into a company called British Gas North Sea Oil Holdings Ltd. The right hon. and learned Gentleman asked why there were not six companies, but two. This was because the British Gas Corporation agree that the need was to transfer these assets into two companies to see that a sensible transfer took place, with no problems over participation and pre-emption rights. The participation problems were dealt with by transferring the participation arrangements into a company called British Gas (P. A.D.) Ltd. Two of these instruments provide for these two companies, into which the British Gas Corporation transferred the assets to be transferred to my control, and that transfer took place on 1 September.
As for the so-called "new" company of Enterprise Oil, it is not a new company. On 1 September, when this company was transferred into the ownership of the Department, the name British Gas North Sea Oil Holdings Ltd., was changed to Enterprise Oil. It is the same company that has existed throughout and to which the Gas Corporation transferred its assets. In doing this I transferred the ownership of the other company concerned, British Gas (P.A.D.) Ltd., to BNOC. BNOC thus owns the company and has the 51 per cent. participation rights firmly in its hands. This has been done in a smooth, sensible, well-thought-out way, through a scheme prepared by the British Gas Corporation.
I renamed the company Enterprise Oil for the purpose of preparing it to be passed to the private sector. The Government have decided that the disposal will proceed by means of a stock market flotation of all of the ordinary share capital of the company. It will be an actively managed exploration and production company, and this will have a number of important advantages.
I did not say that I would do that. I am afraid that the hon. Gentleman is not listening. I said that the company would be floated, and I added that this would have a number of advantages. It will create a new, vigorous British oil company that can be active not only in our own seas, but overseas, as new opportunities occur. It will result in the maximum participation of members of the public, employees of the company and others taking an interest and an active stake in this company. The management consists, not of a small group, but of about 16 people, who are managing the company efficiently and effectively. The total staff of the company will be about 30 or 40 by the time floatation takes place.
It is desirable to have a chairman of considerable experience of the North sea and the oil industry. I am pleased to tell the House that Mr. William Bell has agreed to accept the chairmanship of the company. He has been a senior director of Shell International. He was previously managing director of Shell Expro, and he was responsible for all the major Shell developments in the northern part of the North sea. We are lucky to find a person of such experience and high reputation in the oil industry willing to take on the chairmanship.
The location of the head office and the activities of the company will be decisions for the board of directors.
The company is the original company registered by the British Gas Corporation—[Interruption.] It is exactly the same company. Some staff have been seconded from British Gas. The lovely dream idea that it is a new company with all new people is wrong. It is the same company.
The company is preparing itself—[Interruption.]
The right hon. and learned Gentleman, having displayed such total ignorance and misunderstanding of the position, should not become ill-tempered because of the exposure of his ignorance.
It is our objective to ensure that the company will operate freely. The right hon. and learned Gentleman emphasised the importance of ensuring that the company is not taken over by overseas interests. We shall consider, in the articles of association, ways to ensure that in the early years of the company it is not purchased from overseas, if the Government consider that that is the correct approach.
The safeguards built into the Britoil procedure will be considered for this floatation——
We must see the manner in which the objective is achieved. It might be achieved by some form of token share. Basically, the whole of the share capital will be floated.
The Government will endeavour to ensure that as the firm builds up its employees will have opportunities for participation in the equity. We shall study stock option schemes for the employees coming into the company. We shall ensure that the flotation is carried out in such a way that small investors have opportunities for ownership. We want the flotation to be carried out as soon as possible, but it will depend on the judgment of when the company is ready and after taking into account the market conditions at the time.
Will the Secretary of State please answer two questions? First, did the British Gas Corporation have contractual obligations to its other partners in these fields about how it was to dispose of any of its interests? If so, what were they and how have they been circumvented? Secondly, what is the cost of selling this interest?
All the British Gas Corporation's contractual obligations were transferred to Enterprise Oil. All the contractual obligations that existed with the British Gas Corporation exist now with Enterprise Oil. All the contractual obligations of pre-emption rights were transferred to this company. It is a straight transfer of the contractual position of the oilfields.
There is no way in which the cost of flotation can be estimated. It depends upon the nature, timing and the manner in which it is done. When it is done I am sure that the matter will become public knowledge.
The Secretary of State says that the contractual obligations follow with the transfer of ownership to the subsidiaries, but he knows that under this order they have been transferred to him. That is moving ownership out of the British Gas Corporation to him, and ownership will then be passed to others. Is that not a breach of some of the contractual pre-emption obligations in the oilfield agreements?
Secondly, can he not give us a glimmer of the cost of privatisation? Is it fair to come to Parliament to recommend something without even being able to tell Parliament the cost of the operation?
On the first point, if the right hon. and learned Gentleman had listened carefully he would know that the contractual rights were transferred to this company. The company was transferred to me. The company has remained in its entity, with all its contractual rights, and there has been a change of name. The contractual rights are still with that company. It is a simple operation which eradicates, doubtless to the distress of the right hon. and learned Gentleman, any problems of participation and the rights of other partners in these oilfields. Those matters have been looked after in the national interest. It is a scheme made by the British Gas Corporation and one of which no criticism can possibly be made.
It is absurd to suggest that someone should give the cost of a flotation before the price and the timing are fixed. The right hon. and learned Gentleman has made a guess at what he considers the company is worth, and he can make a similar guess about when the offer will take place.
We are certain that the nation will receive a proper market value for these assets. The right hon. and learned Gentleman's speech implied that the assets were being given away and that the Treasury or the public were to get nothing for them—that it was just a loss to the British Gas Corporation. We know that the full market value will be paid.
No. There will be other changes in this company which will, of course, affect its valuation. An important part of the valuation will be the quality of the management that takes over the company, as Opposition Members will witness.
The third statutory instrument requires the British Gas Corporation to prepare plans to transfer the eight offshore licences which it enjoys in oil prospecting territory. The directions follow the same basic structure as those covering the first disposal exercise. The main requirement is for the corporation to draw up a scheme to transfer its interest in the licences to a new BGC subsidiary. After the scheme has been implemented, I envisage transferring the new company to my control by means of an order under section 11(5) of the Oil and Gas (Enterprise) Act 1982.
My intention is that the new company should then be combined with Enterprise Oil before the flotation. It will create a more attractive spread of interests and add to Enterprise Oil's growth prospects and value.
The Secretary of State said that when the shares are floated he will consider several matters, such as small investors, employees and the golden share. He said that they will become matters of public knowledge. Will they be matters for debate in the House before the share issue is floated?
I shall ensure that decisions about the share issue that affect my Department are made known to the House before the flotation. Tonight I am telling the House that it will be a 100 per cent. disposal of shares and that the terms of the flotation will be prepared by the company.
In relation to the exploration acreage, the direction calls for an independent petroleum consultant's report, and that is being carried out by Energy Resource Consultants, the firm chosen by the corporation. BNOC will participate fully in the transfer, as it did in the previous one. Legislation may be necessary during this disposal to ensure that the British Gas Corporation does not suffer from any tax charge as a result of the disposal.
I express my gratitude to the Gas Corporation for the way in which it has co-operated in the transfer and assisted in ensuring that the new company gets under way.
It will be taken fully into consideration when deciding future financial targets of the Gas Corporation. That is another example of the right hon. and learned Gentleman's nonsense arguments. He tries to give the impression that the corporation will lose £100 million a year. If it were receiving £100 million a year from oil revenues, that would affect the financial targets set by any Government, Labour or Conservative, for the corporation. To suggest that moving these assets from the corporation to private commercial activity and disposing of them for a substantial capital sum that will go to the Treasury will have an adverse effect on the gas industry is nonsense, and the right hon. and learned Gentleman knows it.
I am pleased to say that the difference between the two sides of the House is that the Opposition, despite all their difficulties, their political interference and their Civil Service interference, remain basically in favour of nationalisation. I hope that they continue to favour nationalisation and enter the next general election in favour of nationalisation, but I am delighted to say that the Government will not.
From the closing remarks of the Secretary of State, and from the speech of the right hon. and learned Member for Monklands, East (Mr. Smith), it is clear that the House has again become the forum for another bout in the doctrinaire battle between the two major parties that has continued for far too long. The Government propose privatisation, and almost by a reflex Pavlovian reaction the Opposition feel obliged to resist it. As this move by the Government was motivated especially by dogma and doctrine, I and my right hon. and hon. Friends will not support the Government this evening. As this deal is motivated by ideology, it is not the best deal for the British nation.
We heard briefly some of the proposals for the flotation of the company. I have no doubt that, having had their fingers burnt in some past transactions, officials at the Department of Energy will be much more careful in the marketing of this asset. We have already heard that they have tarted it up with the title Enterprise Oil. No doubt much will happen between now and the day when the share issue comes to the market, but, with financial columnists suggesting that the oil market is depressed and fearing that it will slide down next spring, nothing the Secretary of State said tonight reassures us that the nation will reap full value for its assets.
The Secretary of State has been light on the detail of the marketing of the shares. We have not been reassured but have been given pious expressions of intention that it will include some means of employee participation, that it will include some means whereby the small investor is given an incentive to participate. Without such reassurance, we find the package unacceptable.
We also believe that this privatisation of national assets smacks of financial irresponsibility. Had it been presented to us as an overall package in which one national asset was being exchanged for another, if we could have had some reassurance that the funds which will accrue to the Treasury from the sale of these assets will be used for investment in the economy 's infrastructure or to develop another worthwhile national asset — for example, to underwrite a share in the gas gathering in the northern and middle sectors of the North sea, which would not only help to ensure our future energy and gas supplies but would have a significant impact on employment in steel and related service industries — my right hon. and hon. Friends might have been more warmly disposed towards it.
But that is not what is being offered. We are told that we must sell off a national asset, but we have not been assured that the money will be used for investment in another national asset. We can only suspect that it will be used further to reduce the public sector borrowing requirement. That is not sound financial management. It is hardly the household economics that the Prime Minister preaches to us. I do not think that the Prime Minister's Victorian forebears would have approved of selling a valuable part of the landed estate to pay the weekly wine bill. Had they done so, they would have been well on the way to financial ruin.
Apart from the financial aspects, we believe that the move will have a detrimental effect, and possibly a continuing one, on the British Gas Corporation. The right hon. and learned Member for Monklands, East has expounded on this point at considerable length, and I wholeheartedly agree with many of his sentiments. It should not be forgotten that in the mid 1960s, when the exploration of gas in the North sea was hardly a fashionable activity, the British Gas Council, as it then was, took the risk initiative of seeking gas resources in the North sea. In the course of exploration, it found oil. That is hardly surprising as it is almost impossible to prospect for gas without finding oil but in the development of these oil resources it has acted prudently and has shown sound commercial management. Indeed, in the recent survey and efficiency audit of the British Gas Corporation undertaken by Deloitte, a copy of which is in the Library, it was found that as an exploration company, the British Gas Corporation had met its objectives and had been successful in achieving licences in its exploration track record and ownership of reserves and in the return on capital employed. It found that the exploration department had a highly motivated and effective team which was essential for successful oil or gas exploration activity. Despite that sound financial management and enthusiasm, it seems to have got little in return from the Government but a kick in the teeth. It is little wonder that in some British Gas Corporation circles it is thought that Enterprise Oil should be "Expropriation Oil".
One suspects that the instruction given by the previous Secretary of State to confine future licence applications to areas expected to yield gas rather than oil will continue to have a demoralising effect on the British Gas Corporation. Until now the BGC has had a widespread interest in our offshore activities. One can only suspect that if the geologists and teams are confined to the very narrow and small area in the southern part of the North sea, or around Morecambe bay, they will not find that continuing to work for the BGC restores the morale that the Government have done so much to dash.
I do not know whether the information was leaked to the press, but it is said that as a future deal the BGC may be allowed to swap some of its oil discoveries for gas interests, or to keep the revenues from its gas sales. That would be welcome. It would show a degree of flexibility that was not forthcoming from the Secretary of State's predecessor.
The right hon. and learned Member for Monklands, East wondered whether the Secretary of State was wet or dry. I rather thought that that term was old hat. During the Tory party conference, Sir Robin Day told us that the "in" words nowadays were "consolidators" and "radicals". If the Secretary of State shows some flexibility, and allows the BGC to apply for licences outwith the restricted area of his predecessor and to do swaps, he may be seen to be starting a third group in the Cabinet—the "unravellers". However, as things go, he has not unravelled enough, and we shall certainly not support the Government tonight.
I listened with some care to the right hon. Member for Monklands, East (Mr. Smith). Apparently, he has forgotten the speech that he made in the House in 1975. Under section 13 of the Petroleum and Submarine Pipelines Act, the North Sea assets of the National Coal Board were sold without compensation. Today, the right hon. and learned Member has argued that there is a tax on the consumer, but was there not a tax on the coal consumer? Under that section the Government offered no compensation for the assets. Surely that is disgraceful.
The hon. Gentleman will appreciate that a transfer within the public sector is quite different from a transfer from the public to the private sector. While he is busy considering that point, will he also tell me why he complained about that at the time if it is all right now?
I complained about it at the time, because, on that occasion, the consumer came out very badly, just as the right hon. and learned Gentleman alleges that the consumer is now coming out badly. The BGC has been selling expensively, and deriving its raw material from the continental shelf at 6p per therm, or on average 10p per therm. Indeed, the price has probably gone up to 15p per therm. If it is making a large profit, it can afford to lower its prices.
The Labour Government sold the NCB's assets in 1975, disposed of the shares in BP in 1977 and acquired the shares of the Burmah Oil Company for virtually basic prices in 1976. Labour Members are concerned about the elaborate procedure laid down in the statutory instrument of August 1982, but they themselves had no procedure at all at the time. That disposes of all the arguments which have been advanced. All that remains is a sword without a blade or a handle.
I congratulate the Secretary of State on the flotation. The five commercial oilfields and the eight exploration licences which cover 20 blocks will be a considerable asset to the company. How will my right hon. Friend evaluate for sale the amount of potentially unexplored acreage? He has said that he wishes to interest the small purchaser of assets. If he disposes of the assets next year, I hope that he will consider the market conditions. Rowe and Pitman say in their October 1983 Oil Monthly publication:
Our assessment is that OPEC production will drift down over the fourth quarter to average 18 mb/d. This will probably lead to a realisation of overstocking in January, when prices will fall abruptly, taking OPEC production down with it.
Further down the page, they say that a price-cutting war could bring the price down to $20 per barrel. I do not accept that view, but a flotation may be difficult at this time. Although I congratulate the Secretary of State on his actions, he may face difficulties in the market.
When my right hon. Friend is evaluating the assets, what does he consider will be the market price of crude oil per barrel? The public would be interested to know the answer. Perhaps my right hon. Friend will answer that question by letter. Wood Mackenzie's estimate of the assets in 1981 was £425 million, but that assumed an oil price of $35 per barrel, which has since fallen to $30. Phillips and Drew, in the same year, valued the assets at £455 million. Before we can work out the puzzle, we must know what the Secretary of State estimates will be the prevailing price of oil.
The exchange rate is also a crucial factor in the evaluation. Of importance is the likely discount on asset value, and the potential value of the undrilled areas. I appreciate that those questions cannot be answered immediately. I hope that the Secretary of State will consider the market extremely carefully before he arranges the flotation.
A further asset disposal is Wytch Farm. The relevant provisions are section 7(2) of the Gas Act 1972 and Statutory Instrument 1981 No. 1459 which was to come into operation on 13 October 1981. That was three years ago. What has happened to that? Is the British Gas Corporation still sitting on it and not disposing of the property, or shall we be told that that asset is to be realised soon?
I shall be much obliged if my right hon. Friend will answer the questions that I have put to him.
The point raised by the right hon. and learned Member for Monklands, East has been shot to smithereens and he is left with no case and he had to embellish his argument to fill in the time. The Liberals must realise that practical administration and commercialism are far more satisfactory ways of running companies than any ideology which emanates from their argument.
The last remarks of the hon. Member for Bedfordshire, North (Mr. Skeet) encapsulated the ideological way in which the Government are proceeding with privatisation. It is sad to see such a valuable national asset being given away.
The petroleum and oil industry is a high risk industry in which in normal market conditions people who put up risk capital often lose their money. In this case, the public has put up the risk capital over the years but now that the investment has proved successful the profit that should accrue to the people of this country is to be handed over to private individuals. It is no more than a rip-off of public assets. Those assets do not belong only to those represented by the Labour party. I assume that Conservative Members also represent the ordinary people of this country—the pensioners, those on fixed incomes and the workers of this country —rather rather than just the City or the big farming interests that the Secretary of State supported so strongly in his previous incarnation. If that is so, they should be fighting to keep these assets under public control.
The Secretary of State cannot justify his ideological position. He accuses the Opposition of ideological obsession, but he is clearly so obsessed with privatisation that he can no longer act in the public interest in carrying out his duties as the custodian of the government of this country and the values enshrined in the public bodies for which he is responsible. He is acting as the Opposition would expect him to act. He is acting for the friends who finance his party and who put the Conservatives into power.
I in no way accuse the right hon. Gentleman of hypocrisy in his views or his politics. He is acting in accordance with the dictates of his party and his ethos and looking after his friends. That is what this privatisation is all about.
Not one decent argument has been put forward to justify this action. The hon. Member for Bedfordshire, North talked about the Secretary of State keeping a careful eye on the market—currency exchange problems, the world price of oil and gas and all the other nuances—so as to choose precisely the right time for flotation. I see the hon. Gentleman nod his agreement. But if profits are now accruing to the nation after all the risks that have been taken by the nation with public money, why should the Government go in for this exercise at all except to hand over the money to their friends? That is what privatisation is about and will continue to be about, and the longer the Conservatives remain in power the greater will be the rip-off of British assets into their friends' pockets. The sooner they are exposed, the better.
In trying to justify his action in setting up these two companies, the Secretary of State said that some of the British Gas Corporation's interests were being consolidated into one company, now known as Enterprise Oil. One of his criticisms of the public sector was that it was not designed to operate in what he chose to call a market-oriented sphere but let us consider the people whom he has put in charge initially of Enterprise Oil. I do not disparage civil servants in any way. One of them, Mr. West, was a civil servant. We now find that Mr. Bill Bell, whom I know fairly well and who recently retired from Shell, receives a reincarnation as chairman of this new company.
It is a mystery to us, and it will certainly be a mystery to the people of this country, to know how our people will benefit from this integration of the British Gas Corporation's enterprises in parts of the North sea into a private sector company which will be floated in the market in due time. How will the nation benefit? Where is the greater enlargement of the nation's wealth, income or assets? This is just a doctrinal device, which I do not believe that the Secretary of State himself believes in. He was a member of the Government who in 1972 gave the British Gas Corporation extensive powers, and those powers have been used very well by the corporation.
We know that there is an additional order. Some of the fields which have yet to be tested—perhaps high risk fields, or perhaps very choice blocks; we do not know that, because drilling has not begun—are to be consolidated into Enterprise Oil to make it a much more attractive proposition.
The Secretary of State seems to be saying, "We have put together some blocks that are already producing oil and some blocks that we anticipate will produce oil to make them a marketable proposition." At the same time he makes no judgment as to how the nation will keep some control over assets which at present belong, 100 per cent., to the nation. He is unwilling at present even to go as far as his predecessor—that most doctrinal of all doctrinal men — went with Britoil, when he kept the golden shares. He gave an undertaking to the hon. Member for Orkney and Shetland (Mr. Wallace) to keep the House fully informed, but it will not be sufficient to do that by means of a written answer. When the articles of association of the company are known and drawn up, and when the Secretary of State has made up his mind whether and how the nation will have a continuing interest in Enterprise Oil, will he undertake to make a statement to the House about his method and approach, whether there will be a tender offer, or what type of marketing operation it will be?
The hon. Member for Bedfordshire, North (Mr. Skeet) put questions of greater import to the Secretary of State. I shall not go over what he said about the price of oil, but there is an air of déjà vu about tonight's debate. It is 10 years since 1973 and the crisis that befell not just this country but the whole Western world. One of the most significant changes that took place during that period was the decline in the interest in terms of ownership and control of oil by the "seven sisters". Off the top of my head, I believe that the seven sisters had control at that time of about 60 to 70 per cent. of the free world's oil. That has declined to about 30 per cent. today, because producing Governments have said, "This important asset belongs to us as producers." This Government, 10 years after that hard lesson, being an oil producer, go the other way. If that is not doctrinal nonsense, I do not know what is. All other producer Governments with sense are holding on to assets.
We are uniquely privileged because we can act as honest broker between the OPEC nations and some of the consuming nations. The Secretary of State will give up some of that bargaining counter when he gives up control of these assets. The power of Britain to act as honest broker was seen in the summer, when the former Secretary of State went parading round the OPEC nations of the Middle East trying to keep up the price of oil.
This is an important international commodity, yet this stupid doctrinal Government say, "No, we will not keep it in the public sector. We will put it in the private sector." If that does not weaken us strategically, commercially and in our international relations, I do not know what does. There is no reason for doing it—because the nation will not benefit in wealth, income or expertise—except for reasons of doctrine and because the Government need some cash to alleviate the results of their stupid management of the economy.
The Secretary of State did not answer some crucial points. He totally failed to explain how the British Gas Corporation would be compensated for the loss of £100 million a year in income. Either some alteration must be made in the corporation's finances or another £100 million must be extracted from British gas consumers.
The right hon. Gentleman simply said—in the bland manner of Ministers in the House these days—that some account might be taken of it by the Treasury in future negotiations of the obligations of the corporation and that some adjustment might be made. If that adjustment will compensate the corporation, then the PSBR reasons for this exercise seem much less convincing. If not, the penalty will be paid by the gas consumer. We are entitled to know which path the Government intend to follow.
What above all was distressing was the way in which the Secretary of State was unable to say what public benefit was involved in this whole operation. He did not explain how it would increase and develop our resources in the North sea. He did not argue that somehow everything would be better managed in the new and unknown hands into which the assets are destined to go. The right hon. Gentleman did not say how it would benefit the strategy for energy deployment both for gas and oil in the North sea.
We were simply told that hon. Members on one side were all privatisers and those on the other were all nationalisers, with a great deal of spice thrown in about political interference interrupting commercial judgment. The right hon. Gentleman knows that all the commercial judgment of the British Gas Corporation was totally against what is happening. Those making that judgment had the common sense to realise that if they had a first-class asset, they would be foolish to sell it off.
This is a classic exercise of political interference—of the ideological gentlemen in Whitehall telling the commercial management of a successful public enterprise what it must do to serve the interests of their party when the people in control of that organisation know what the interests of the nation are. I challenge the Secretary of State to say what public interest is being served. In the minute or two remaining for the debate perhaps he will try to answer the questions which he ducked earlier.
The right hon. and learned Member for Monklands, East (Mr. Smith) returned to the extraordinary argument of what must happen to the accounts of the British Gas Corporation if one removes an asset from it. My hon. Friend the Member for Bedfordshire, North (Mr. Skeet) made it clear that when this was done in respect to the coal industry, no compensation—
The right hon. and learned Gentleman may not like it, but he knows that his argument is an absurdity. If the Government fix a financial target for the British Gas Corporation, they take into account the various forms of income that go into that target. If at a particular time the financial target agreed by the Treasury was 3½ per cent. and as the result of a change it was felt that there should be a higher or lower figure, depending on the impact of that move, that would be done.
The right hon. and learned Gentleman dealt with the matter on a purely PSBR basis. I have never put forward that argument in this context. The Government wish to create a commercially viable free enterprise concern that will be free of political interference of the nature that nationalised industries suffer under both Labour and Conservative Governments. We believe that that will be a better way of obtaining commercial success, and success for the country.
The right hon. Gentleman began with the remarkable story—
|Division No. 48]||[11.30 pm|
|Alton, David||Howells, Geraint|
|Ashdown, Paddy||Hughes, Robert (Aberdeen N)|
|Barron, Kevin||Hughes, Sean (Knowsley S)|
|Beckett, Mrs Margaret||Johnston, Russell|
|Beith, A. J.||Jones, Barry (Alyn & Deeside)|
|Bermingham, Gerald||Kirkwood, Archibald|
|Blair, Anthony||Lewis, Terence (Worsley)|
|Brown, Gordon (D'f'mline E)||Lloyd, Tony (Stretford)|
|Brown, Hugh D. (Provan)||McCartney, Hugh|
|Brown, N. (N'c'tle-u-Tyne E)||McDonald, Dr Oonagh|
|Bruce, Malcolm||Mackenzie, Rt Hon Gregor|
|Callaghan, Jim (Heyw'd & M)||Madden, Max|
|Carlisle, Alexander (Montg'y)||Marek, Dr John|
|Clay, Robert||Marshall, David (Shettleston)|
|Cocks, Rt Hon M. (Bristol S.)||Martin, Michael|
|Cohen, Harry||Maxton, John|
|Cook, Frank (Stockton North)||Michie, William|
|Cook, Robin F. (Livingston)||Millan, Rt Hon Bruce|
|Corbyn, Jeremy||Miller, Dr M. S. (E Kilbride)|
|Cowans, Harry||Nellist, David|
|Craigen, J. M.||Oakes, Rt Hon Gordon|
|Crowther, Stan||O'Neill, Martin|
|Cunliffe, Lawrence||Parry, Robert|
|Cunningham, Dr John||Penhaligon, David|
|Davies, Ronald (Caerphilly)||Pike, Peter|
|Davis, Terry (B'ham, H'ge H'l)||Powell, Raymond (Ogmore)|
|Dewar, Donald||Prescott, John|
|Dixon, Donald||Rogers, Allan|
|Dobson, Frank||Ross, Ernest (Dundee W)|
|Dormand, Jack||Rowlands, Ted|
|Douglas, Dick||Skinner, Dennis|
|Duffy, A. E. P.||Smith, C.(Isl'ton S & F'bury)|
|Dunwoody, Hon Mrs G.||Smith, Rt Hon J. (M'kl'ds E)|
|Eadie, Alex||Steel, Rt Hon David|
|Eastham, Ken||Strang, Gavin|
|Evans, John (St. Helens N)||Thompson, J. (Wansbeck)|
|Fatchett, Derek||Wallace, James|
|Fields, T. (L'pool Broad Gn)||Wardell, Gareth (Gower)|
|Fisher, Mark||Wareing, Robert|
|Freeson, Rt Hon Reginald||Welsh, Michael|
|George, Bruce||Wilson, Gordon|
|Hamilton, James (M'well N)||Winnick, David|
|Harman, Ms Harriet||Tellers for the Ayes:|
|Harrison, Rt Hon Walter||Mr. Norman Hogg and Mr. Allen McKay.|
|Home Robertson, John|
|Alexander, Richard||Beaumont-Dark, Anthony|
|Amess, David||Bellingham, Henry|
|Arnold, Tom||Benyon, William|
|Ashby, David||Berry, Sir Anthony|
|Aspinwall, Jack||Bevan, David Gilroy|
|Atkins, Rt Hon Sir H.||Biggs-Davison, Sir John|
|Atkinson, David (B'm'th E)||Blaker, Rt Hon Sir Peter|
|Baker, Nicholas (N Dorset)||Boscawen, Hon Robert|
|Baldry, Anthony||Bottomley, Peter|
|Batiste, Spencer||Bowden, A. (Brighton K'to'n)|
|Bowden, Gerald (Dulwich)||Hickmet, Richard|
|Braine, Sir Bernard||Hind, Kenneth|
|Brandon-Bravo, Martin||Hirst, Michael|
|Bright, Graham||Holland, Sir Philip (Gedling)|
|Brinton, Tim||Howard, Michael|
|Brown, M. (Brigg & Cl'thpes)||Howarth, Gerald (Cannock)|
|Bruinvels, Peter||Hubbard-Miles, Peter|
|Bryan, Sir Paul||Hunt, David (Wirral)|
|Buck, Sir Antony||Hunt, John (Ravensbourne)|
|Budgen, Nick||Hunter, Andrew|
|Bulmer, Esmond||Jessel, Toby|
|Butcher, John||Johnson-Smith, Sir Geoffrey|
|Butterfill, John||Jones, Robert (W Herts)|
|Carlisle, John (N Luton)||Knight, Gregory (Derby N)|
|Carlisle, Kenneth (Lincoln)||Knowles, Michael|
|Carttiss, Michael||Lang, Ian|
|Chope, Christopher||Lawler, Geoffrey|
|Churchill, W. S.||Lee, John (Pendle)|
|Clark, Hon A. (Plym'th S'n)||Leigh, Edward (Gainsbor'gh)|
|Clark, Dr Michael (Rochford)||Lightbown, David|
|Clarke Kenneth (Rushcliffe)||Lloyd, Peter, (Fareham)|
|Colvin, Michael||Lord, Michael|
|Cope, John||Lyell, Nicholas|
|Couchman, James||Macfarlane, Neil|
|Currie, Mrs Edwina||MacGregor, John|
|Dicks, T.||MacKay, Andrew (Berkshire)|
|Dorrell, Stephen||MacKay, John (Argyll & Bute)|
|Douglas-Hamilton, Lord J.||Maclean, David John.|
|Dover, Denshore||Malins, Humfrey|
|Dunn, Robert||Malone, Gerald|
|Eggar, Tim||Maples, John|
|Emery, Sir Peter||Marland, Paul|
|Evennett, David||Marlow, Antony|
|Eyre, Reginald||Mather, Carol|
|Fairbairn, Nicholas||Mayhew, Sir Patrick|
|Fallon, Michael||Mellor, David|
|Favell, Anthony||Merchant, Piers|
|Forman, Nigel||Miller, Hal (B'grove)|
|Forsyth, Michael (Stirling)||Mills, lain (Meriden)|
|Fox, Marcus||Mills, Sir Peter (West Devon)|
|Fraser, Peter (Angus East)||Mitchell, David (NW Hants)|
|Galley, Roy||Moate, Roger|
|Garel-Jones, Tristan||Morrison, Hon C, (Devizes)|
|Goodlad, Alastair||Morrison, Hon P. (Chester)|
|Gummer, John Selwyn||Moynihan, Hon C.|
|Hamilton, Hon A. (Epsom)||Murphy, Christopher|
|Hamilton, Neil (Tatton)||Neale, Gerrard|
|Hampson, Dr Keith||Needham, Richard|
|Harvey, Robert||Neubert, Michael|
|Havers, Rt Hon Sir Michael||Newton, Tony|
|Hawksley, Warren||Nicholls, Patrick|
|Hayes, J.||Norris, Steven|
|Hayward, Robert||Oppenheim, Philip|
|Ottaway, Richard||Stevens, Martin (Fulham)|
|Page, Richard (Herts SW)||Stewart, Allan (Eastwood)|
|Parris, Matthew||Stewart, Andrew (Sherwood)|
|Peacock, Mrs Elizabeth||Stradling Thomas, J.|
|Pollock, Alexander||Sumberg, David|
|Powell, William (Corby)||Taylor, Teddy (S'end E)|
|Powley, John||Tebbit, Rt Hon Norman|
|Prentice, Rt Hon Reg||Temple-Morris, Peter|
|Price, Sir David||Terlezki, Stefan|
|Proctor, K. Harvey||Thomas, Rt Hon Peter|
|Raffan, Keith||Thompson, Donald (Calder V)|
|Rathbone, Tim||Thompson, Patrick (N'ich N)|
|Rhodes James, Robert||Thome, Neil (Ilford S)|
|Ridsdale, Sir Julian||Thornton, Malcolm|
|Rifkind, Malcolm||Thurnham, Peter|
|Roberts, Wyn (Conwy)||Townend, John (Bridlington)|
|Robinson, Mark (N'port W)||Townsend, Cyril D. (B'heath)|
|Roe, Mrs Marion||Tracey, Richard|
|Rossi, Sir Hugh||Twinn, Dr Ian|
|Rost, Peter||van Straubenzee, Sir W.|
|Rowe, Andrew||Viggers, Peter|
|Ryder, Richard||Wakeham, Rt Hon John|
|Sackville, Hon Thomas||Waldegrave, Hon William|
|Sainsbury, Hon Timothy||Walden, George|
|Sayeed, Jonathan||Walker, Rt Hon P. (W'cester)|
|Shaw, Giles (Pudsey)||Wardle, C. (Bexhill)|
|Shaw, Sir Michael (Scarb')||Watson, John|
|Shelton, William (Streatham)||Watts, John|
|Shepherd, Colin (Hereford)||Wheeler, John|
|Sims, Roger||Wilkinson, John|
|Skeet, T. H. H.||Winterton, Mrs Ann|
|Smith, Tim (Beaconsfield)||Winterton, Nicholas|
|Soames, Hon Nicholas||Wolfson, Mark|
|Speed, Keith||Wood, Timothy|
|Speller, Tony||Woodcock, Michael|
|Spencer, D.||Yeo, Tim|
|Spicer, Michael (S Worcs)||Young, Sir George (Acton)|
|Stanbrook, Ivor||Tellers for the Noes:|
|Stern, Michael||Mr. Douglas Hogg and Mr. John Major.|
|Stevens, Lewis (Nuneaton)|