Clause 35 - The Extractive Industries Transparency Initiative

Infrastructure Bill [Lords] – in a Public Bill Committee at 4:15 pm on 8th January 2015.

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Question proposed, That the clause stand part of the Bill.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I will speak briefly on the Extractive Industries Transparency Initiative, which is the subject of the clause, and the application the UK is currently in the process of making as a candidate member of the EITI standard. I realise that the initiative is largely the responsibility of the Department for Business, Innovation and Skills rather than the Department of Energy and Climate Change, but I hope the Minister will be able to respond to some questions I have on it.

The Minister will be aware, as will many members of the Committee, that the initiative was launched by the previous Government back in 2002 as a way of ensuring that oil industry companies were obliged to disclose financial transactions and that Treasuries were obliged to disclose the revenue. As people could probably have anticipated, it was initiated for countries where there were questions about the veracity of information from oil industry companies and suggestions of clandestine payments to Government in exchange for concessions. It was initially trialled in Nigeria, Azerbaijan, Ghana and some other countries. In many of the countries for which the EITI was designed, taxpayers had absolutely no sight of those transactions and there was a fear that in some developing countries mineral resources were proving a hindrance rather than an aid to development. I therefore support the rationale for the initiative, which has been helpful in bringing some transparency to such transactions in those parts of the world.

In the UK we are obviously in a different situation. I do not count myself in this category, but there are some in this House—at least one, anyway—who regard themselves as the most fervent opponents of fossil fuel industries. However, I do not think that even they would suggest that we operate the type of regime that the EITI was initially intended to address. I think—I wonder whether the Minister can help me on this—that the reason why the UK is determined to participate in the initiative is so as to be able to set a good example. I would argue that we set quite a good example in introducing and helping to establish the organisation back in 2002, but the serious point is this. How can we allay concerns that if more developed countries with a strong civil society and transparency record now join the EITI—Norway is also on the list of applicant countries—the organisation’s initial focus on preventing the potential misappropriation of funds and the various payments that I described will be lost?

Can the Minister also help us on the time scale for this matter? I remember reading an article by the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), in Wireline, the magazine of Oil and Gas UK, which is a publication that I am sure the Minister reads as often as I do—the autumn edition is particularly good, as it includes a very good article from someone on the Labour Benches about the Wood review. The hon. Member for East Dunbartonshire suggested that the time scale for the process meant that the UK would become a compliance country by April 2017 and effectively part of the EITI after a 13-month validation period.

The hon. Member for East Dunbartonshire also mentioned in that article the expectation that the templates that companies falling within the scope of the EITI would need to complete as part of the process would be sent out by March 2015, to be returned by July 2015, to help the independent administrator to reconcile the information. Has any thought been given to the appropriateness of that time scale? I am not suggesting that there is a problem with the end point, but are the Minister’s officials and her colleagues in BIS absolutely confident that the period from March to July provides those companies with enough time to provide that information in a comprehensive and meaningful way?

As I said at the outset, I am not against the UK’s membership of this initiative. I think it is a good initiative and there is some value in the UK’s being part of it. However, it is important that the information available is properly comprehensive and, therefore, that there is an appropriate amount of time to ensure that the information coming in is properly completed—and verified, I presume, by BIS—before it enters the assessment process. It would be wise to check that that is the case, so that the UK can be involved—as I am sure is intended—as an exemplar rather than participating in a less complete way.

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change

I thank the hon. Gentleman for his comments. It is good to hear his broad support for clause 35, which will give HMRC a new function, allowing it to participate in the EITI. On 22 May 2013, the Prime Minister announced that the UK would be signing up to the EITI, and in October last year the UK was officially accepted as an EITI candidate country. In countries that sign up to the initiative, the EITI provides an assurance that companies will publish what they pay for extracting natural resources in that country and that the Government will disclose the money they receive from that. By joining the EITI and encouraging other countries to do likewise, the UK will play its part in improving the way that revenues from oil, gas and minerals are managed and in ensuring that people across the world share in the economic benefits of the natural resources of the countries they live in.

The hon. Gentleman asked whether the UK’s joining the EITI would be a positive thing, given that other countries from the developed world might serve somehow to dilute the initiative. I do not share that view. In general, the view is that the more countries that join, the stronger the EITI will be. The view from industry is quite supportive. The main reason for the UK’s signing up to the EITI was to provide international leadership and encourage other countries to follow suit. To promote it further, the UK is working closely with the EITI international board, bilaterally and in international forums, to encourage other countries to adopt common global standards for extractive transparency.

In addition, the Department for International Development is in the lead in influencing other countries to sign up to the EITI. The UK has contacted other countries to discuss their experiences of implementation and invited counterparts from overseas to observe the UK multi-stakeholder group. We are encouraged and enthusiastic about supporting the EITI and ensuring that the UK continues to play a leadership role.

The hon. Gentleman asked about timing and whether 2017 was too long or achievable. I would point out that there is an 18-month deadline from successful candidacy  applications to getting the first report out, so our report will be due out by April 2016. We are hopeful of sticking to that timetable, but it could not be any faster, given our current status.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

Just to be clear, my concern was not necessarily about the endpoint of the time scale; it was specifically about the time frame within that for companies to which the provision will apply to provide the information needed for that assessment to happen. I am concerned about whether they will be able to do that comprehensively enough for the Government to be satisfied that the process is robust. In particular, I was asking whether sending the template out in March—it seems from the article by the hon. Member for East Dunbartonshire that the time frame will be between March and July 2015—would give enough time for it to be returned and assessed prior to the independent assessment that is part of the application process.

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change 4:30 pm, 8th January 2015

I am grateful for the hon. Gentleman’s clarification. I can reassure him that the industry is working closely as part of the multi-stakeholder group and is indeed supportive of the timetable.

As the UK’s tax authority, HMRC will have a leading role in providing information on payments received. The clause will ensure that HMRC will be able to participate in this important initiative and is the minimum legislation required to meet the UK’s public commitment to the EITI. I commend the clause to the Committee.

Question put and agreed to.

Clause 35 accordingly ordered to stand part of the Bill.