House Of Commons
Wednesday 19th March 1975
The House met at half-past Two o'clock
[Mr. SPEAKER in the Chair]
Oral Answers Toquestions
asked the Secretary of State for the Environment if he is satisfied that water authorities are exercising due economies in order to keep increases in water charges as low as possible.
My right hon. Friend has asked water authorities to do everything possible to keep down their charges. I have no reason to believe that they are not heeding that advice.
Is my hon. Friend aware that the Welsh National Water Development Authority, through a process of equalising its costs in one year, has brought about a situation in which the rate increase in my constituency is over 143 per cent.? Is he able to do anything about that? Cannot he persuade the authority to equalise its costs, as other water authorities have done, over a number of years?
I have some sympathy with my hon. Friend. However, the Water Act 1973 requires authorities to break even taking one year with another. As regards equalisation, there is no way in which my right hon. Friend can intervene with a specific authority. Influencing the authorities is a matter for my right hon. and learned Friend the Secretary of State for Wales.
Is the Minister aware that water authorities in various parts of the country have put up their rates, and intend to do so again, to a degree which is extremely worrying both to those who are connected to mains water and drainage and to those who are not? Will he give a greater assurance than he was able to give in reply to the original Question asked by the hon. Member for Gloucestershire, West (Mr. Watkinson) that he will do his utmost to impress upon authorities the need to restrain short-term capital plans which are not essential?
I am certain that my right hon. Friend and the Minister responsible for water have done their best to impress that on the authorities. Unfortunately, under the terms of the Water Act 1973—which was not of our making—it is not possible for my right hon. Friend to intervene about charges levied by water authorities.
Is my hon. Friend aware of the serious concern which has been expressed to Members of Parliament representing Manchester at the continuing departure of the North West Water Authority from the national recommendations on the calculation of general service and water charges, and their failure to implement assurances which they gave to local authorities in December to rectify the anomaly caused in assessing charges for the current year? Is my hon. Friend aware that in the Manchester area the percentage increase in domestic charges in 1974–75 is 62 per cent.?
I am aware of the level of the increase and of the difficulties faced by some of the Greater Manchester districts. I shall look at what my hon. Friend has said.
Is the Minister aware that the county of Herefordshire falls within the area of the Welsh National Water Development Authority? Will he consider increasing the rate support grant for Herefordshire to that for Wales, which currently receives 37p in the pound compared with 18·5p in the pound received by Herefordshire, thus equalising the water rate burden?
I am aware of the anomaly. Herefordshire and Worcestershire come under the Welsh National Water Development Authority. I cannot give that assurance today. However, as the hon. Gentleman knows, I am meeting a delegation from Herefordshire tomorrow.
asked the Secretary of State for the Environment whether he will make a statement about the cost of the supply of water ; and what is the average increase in the cost of water rates in the United Kingdom during the year ending 5th April 1976.
The 1973 Water Act provides that it is for water authorities to decide what level of charges is required to meet their statutory obligation to break even, taking one year with another. I understand that the average increase in the authorities' water supply charges in England and Wales is likely to be of the order of 41 per cent.
Is the Minister aware that the increase in the domestic water rate for water supply by the Eastbourne Waterworks Company for the current year is 53 per cent.? Does he agree that the present system for levying water rate is regressive, unjust and unfair and should be scrapped?
We are looking at all the water authorities in the course of a two-year review. I repeat, however, that the creation of water authorities is not our doing. Many of the difficulties which this House and ratepayers face result from the Water Act 1973. I am aware of the position in the hon. Gentleman's constituency. However, in defence of water authorities, I must say that they were left with a considerable burden since 47 per cent. of their expenditure is to service capital debts. They were created naked by our predecessors, and now the public,have to pay for that creation.
Is my hon. Friend aware that there is a difference in the amount of water used for flushing lavatories in Scotland and England? In the interests of achieving lower costs, will he press for uniformity between the two countries on the lower level, even if he gets opposition from the Scottish National Party on grounds of devolution?
I am afraid that water is a subject which I never think of in connection with Scotland.
asked the Secretary of State for the Environment when it is his intention to introduce the Bill on Land.
The Community Land Bill was introduced on 12th March.
Does the Secretary of State accept that the supply of land is vital to the continuing supply of houses and of industrial and commercial developments and that the uncertainty following the delay in bringing forward the Bill has had a further unsettling effect? Does he recognise that the previous changes in policy have been extremely unsettling as regards the continuing supply of houses? In view of the reservations and counter-proposals which have been put forward by the professional bodies and others concerned with land, would it not be appropriate to refer this Bill to a Select Committee of the House to see whether we can arrive at a policy which will be generally acceptable instead of one which is subject to further change?
I accept that the supply of land for building and development is vital. I cannot accept that last suggestion about arriving at a non-party agreement, since the land issue has traditionally divided the parties, right and left, in this and in many other countries. As regards his other supplementary question, I do not share the hon. Gentleman's anxiety, because we have taken great trouble in the transitional provisions and in other ways to make certain that the supply of land will not be inhibited or held back by the Bill.
From the opposite point of view, may I ask whether my right hon. Friend agrees that it is vital to take into public ownership quickly and cheaply a large amount of land which is needed for housing, with a short transitional period and with few exemptions? Would not that show the public the great benefit that would ensure and also make it much harder for a Conservative Government, should there be one, subsequently to unscramble the Act?
I think that the transitional provisions that we have made are essential to avoid the risk to which the hon. Member for Hove (Mr. Sainsbury) drew attention. Like my hon. Friend the Member for Salford, East (Mr. Allaun), however, I should like the transitional period to be as short as possible. How long it lasts must depend not on the Government but on how quickly the local authorities can gear themselves to carry out the task laid down for them in the Bill.
Is the right hon. Gentleman aware that what he has said is not historically true? The 1947 Act, probably the greatest Act in the last two decades, was passed with the consent of both parties. Can the right hon. Gentleman say how many Acts since then have been passed by one party or the other? Whichever side was right or wrong, this perpetual change from year to year has done more harm than anything else.
The House always respects the hon. Gentleman's non-partisan attitude to our political affairs. However, the guts of the 1947 Act were repealed as soon as the Conservatives came back to power, and the 1967 Land Commission Act was also repealed as soon as the Conservatives came back to power.
Is not one of the principal difficulties faced by local authorities in solving the severe housing crisis the high cost of building land? Until it is brought into public ownership the problem will not be solved.
My hon. Friend has put the matter extremely lucidly and accurately.
Regents Park (Tree Felling)
asked the Secretary of State for the Environment how many more mature trees in Regents Park his Department is proposing to fell.
Two poplars which are leaning dangerously at the edge of the lake near Flower Bridge in the Clarence Gate area. The remaining 22 horse chestnuts in Broad Walk (South) are coming to the end of their life and will probably be replaced within about five years.
Can the Minister explain why only visual inspection was made of the trees before they were pulled down and why there was no tree surgery to protect the public from falling branches when they were being pulled down? Can he explain, further, why he failed to consult Westminster City Council and Camden Borough Council before taking the action he did?
The park superintendent inspects all trees twice a year, and the Department is advised on these matters by the Committee on Forestry of the Royal Parks. It is that committee's recommendation that we are following.
the Secretary of State for the Environment what steps he can take to assist local authorities suffering from land shortage for house building within their own boundaries.
I am not aware of any additional assistance which is required by local authorities to ensure that they make the most appropriate use of available land within their boundaries or beyond them. The Housing, the Town Development and the New Towns Acts all make provision for housing development elsewhere to meet housing needs which cannot be satisfied locally.
Does my right hon. Friend agree that if the aims and objects of the 1974 Housing Rents and Subsidies Act are to be met, the effects of the reorganisation of local government mean that many local authorities now find it difficult to provide land within city boundaries? Will he take into account one of two alternatives? The first is to consider the amount of land at present occupied in my constituency by British Rail, the gas board and the British Docks Board. They occupy areas capable of providing sufficient land for the development of 6,000 houses. The second alternative is to give local authorities a wider choice of land by transferring the responsibility to the counties in the interim period.
On that latter point, I have no intention at present of making any further changes in the distribution of duties between counties and districts. Dealing with the first part of my hon. Friend's supplementary question, I accept what he says about disused land. The South Docks in Liverpool cover a very large area of land. My hon. Friend the Under-Secretary recently met representatives of the Docks and Harbour Board, Merseyside county and Liverpool city, and a working party under my regional director's chairmanship is exploring all the possibilities as to how this land could best be utilised by local authorities.
Is the Secretary of State aware that local authorities with insufficient land in both urban and rural areas will not be assisted by any cutback in the money available for improving housing stocks, and that in a time of economic crisis we should be placing emphasis in that direction rather than moving towards more new building?
I cannot agree. Within the total amount of money available for public sector housing—which, incidentally, is far greater than it was a year ago—our priorities are, number one, new additional housing ; number two, the improvement of the worst part of the existing housing stock, which is typically in the private sector ; and, I regret to say only number three, the improvements on which huge sums are being spent on purpose-built local authority estates.
Rented Accommodation(Municipal Purchase)
asked the Secretary of State for the Environment what reductions he plans in the finance available to local authorities for purchasing privately-rented accommodation.
Will the hon. Gentleman accept that, with the Greater London Council rate precept planned to rise this year by nearly 80 per cent., it is unjustifiable to spend large sums of money purchasing blocks of flats many of which have very few vacant tenancies? How can the hon. Gentleman justify the GLC's expenditure of £350,000 on a block of flats in my constituency in which there are only two vacant tenancies? This does nothing for the home-seeker and adds considerably to the burdens on ratepayers.
In our view, the purchase of occupied blocks of flats is not the first priority for municipalisation expenditure. The vast bulk of expenditure which has been provided has gone in the purchase of empty properties or blocks of flats in which there is a very high proportion of empty properties. That goes for the GLC as well as for any other local authority which has embarked on this policy. If the hon. Gentleman has specific cases in mind such as the one to which he referred, I shall be glad if he will let me have details.
Is my hon. Friend aware that many local authorities have virtually run out of land within their boundaries on which to build new houses, and that the only way they can hope to reduce large waiting lists is to buy up empty properties offered to them? Will he ensure that adequate funds are available to those authorities which want to buy up empty properties in order to rehouse people on their watiing lists?
Unfortunately, in the present financial situation, I cannot say that there will be no ceiling on total national expenditure. However, provision will be made to maintain the level of municipalisation which local authorities have embarked upon, and we hope in the future to increase it by various means which I am now examining.
asked the Secretary of State for the Environment whether he will make an official visit to Thorne
I have at present no plans to do so.
Is my right hon. Friend aware that 43 residents of Corona Drive, Thorne, who have paid their rates along with the weekly rent for their homes, had not up to last Saturday received any of the rate relief provided by the Government for the current year, even though the local authority paid the appropriate lump sum last autumn to the landlord's agents, who are Corona Properties of Manchester? Is not this blatant robbery by the landlords?
I regret that I have not had the pleasure of visiting Corona Drive in Thorne. I am always sorry that my hon. Friend, who was practically born and bred in Grimsby, moved so far away. If he will send me, as I would like him to, the details of the point he is making, I will look into it at once.
asked the Secretary of State for the Environment whether he will now make an estimate of the number of local authorities whose rates will show an increase next year of more than 25 per cent.
Less than half of local authorities have so far given us the information for which we asked. It would therefore be premature to give a figure.
Is it because of the absence of a General Election this year that the Secretary of State is not prepared to give any help to ratepayers, such as those in my constituency, who face swingeing increases in rates and real cuts in services?
No, Sir. The reason why the special relief was given last year was that ratepayers and local authorities had been grossly misled by the estimates of the previous—Tory—Secretary of State for the Environment.
Is it not a curious coincidence that both last year and this year the areas which have benefited most from the Secretary of State's rate support grant, and which have therefore been able to keep their rates down, are those which happen to have had local elections?
That, incidentally, is not at all true. The area which benefited most from the needs element in the rate support grant was West Sussex.
asked the Secretary of State for the Environment whether he will introduce greater flexibility into his Department's criteria for speed limits for principal roads, and in particular more discretion for local authorities concerned.
I see no reason at present to change the general criteria but I am always ready to take account of special factors in a particular case.
Is the hon. Gentleman aware that there are local areas, some in my constituency, which do not meet the criteria and, therefore, do not have limits but which, because of local changes in traffic conditions, present serious road safety hazards for the inhabitants? Is he further aware that it will be cold comfort for these inhabitants to know, if serious accidents occur, that it will be those accidents which produce the criteria? Will he let me know whether it would be correct to write to him about this situation or whether I should go through the normal processes? I welcome his assurance that he will give the subject sympathetic consideration. Above all, it is the local inhabitants who know how situations change.
I accept that local inhabitants know a great deal about local conditions. My principal concern is to safeguard the general value of speed limits throughout the country. If they are not safeguarded, their value can be debased. We should then be worse off than we were when we started. I shall be pleased to look at particular cases in which the hon. Member feels that there has been a considerable and noticeable change in traffic conditions.
Does not the whole question of road speed limits need overhauling? Are there not many instances where speed limits are too high and others where they are too low? Is this not a general situation, and is not the law flouted for that reason?
The basic reason why we have criteria is to try to get some sort of standard throughout the country. We find that the law is not flouted if the speed limit is realistic and motorists feel that it is reasonable for the area. We work on an 85 per cent. observance of limits. If a limit is unrealistic, motorists will take a chance no matter how great the penalties.
While I appreciate that the Minister has to change speed limits every now and then, would it not be possible to have a simple and more satisfactory arrangement whereby the voices of the people in the district, who were to be the victims of a change in the speed limit. could be heard?
There are opportunities for local people to make representations about speed limits. If the hon. Member looks back to the period before there was any question of speed limits and such things as pedestrian crossings being the responsibility of the Government, he will find that sometimes, while local people knew an area, they were not always able to assess the difficulties of the area. There was a general debasement of limits. Something had to be done nationally. Criteria had to be introduced. I hope that we make every effort to make them sensible.
Is my hon. Friend aware that in addition to the use of speed limits to reduce road hazards he ought to introduce guard rails on pedestrian refuges in the centre of roads? Is he further aware of a tragic fatal accident in my constituency in Bradford Road, Riddles-den, when a girl was killed even though she was acting perfectly properly and was on the central island reservation? Can my hon. Friend assure the House that he will investigate the possibility of providing protective diversionary guard rails on such central islands so that traffic is prevented from striking pedestrians seeking refuge there?
I am aware of the tragedy that took place in my hon. Friend's constituency. I have seen some of the newspaper reports on it. I shall look at the question of guard rails. It is important to realise that the rails on central islands or before pedestrian crossings are principally to make sure that pedestrians do not try to nip across the road at any place other than that area which is designed to give them maximum safety.
Bus Services (Rural Areas)
asked the Secretary of State for the Environment if he is yet in a position to announce proposals for improving conditions in rural bus services, following his discussions with local authorities and bus companies.
I appreciate the concern felt by the hon. Member and we will make a statement as soon as possible.
Does the Minister realise that many areas, particularly the small villages, will await his statement with the greatest interest because the problem is serious? Can he, when he comes to have these discussions, encourage the traffic commissioners to approach what is admittedly a difficult problem with a little more imagination than they have done to date, particularly with regard to specific ideas such as the merging of postal and bus services and the question of local mini-bus services? Is it not high time that these ideas were tried out?
The hon. Member knows that there have been a number of Adjournment debates on this matter. We have discussed it fairly fully. I have travelled round the country and met a large number of traffic authority people, including traffic commissioners. Some of the ideas that the hon. Member has suggested are among those I hope to be putting forward.
Is my hon. Friend aware that the recent increases in rural bus fares, coupled with the regulations enforced by local bus companies about when concessionary fares can be granted to children, mean that many of my constituents are paying enormous sums every week to send their children to school? Is he further aware that some of them are now sending their children to school an hour late so that they can get concessionary fares? Will he look seriously at the possibility of enabling local bus companies to give concessionary fares for all children going to school in rural areas?
The question of concessionary fares for schoolchildren in rural areas, or any areas, is fairly well laid down in the Education Acts. Schoolchildren should not have any difficulty in getting such fares if they live a certain distance from the school. Some of the other points raised by my hon. Friend will be dealt with in reply to a later Question.
The Minister's reply to my hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings) is complacent in the extreme.
Order. Even on the Front Bench, questions must be asked.
It is complacent in so far as if only the Minister had accepted—[Hon. Members: "Question."] Does the Minister accept that if he had adopted what we proposed in our Road Traffic Bill, particularly the clauses which liberalised bus licensing, the tragic problem of rural areas would be well on the way to being solved? Can he give us an idea of when he intends to announce these relaxations?
I assure the hon. Gentleman that, if I appeared complacent, my activities over the last few months have not been evidence of that complacency—at least, I hope not. I was aware of the proposals made by the Conservative Government in their 1973 Bill. In fact, I made a comment on them in the House. Since coming to power I have realised that, although the problem varies from one part of the country to another, getting a solution which will be generally applicable is not as easy as specifying the difficulty.
Housing (Loan Sanction)
asked the Secretary of State for the Environment whether he will amend the present regulations so that loan sanction for local authorities may be given for both the purchase of second-hand as well as new houses.
Local authorities already have powers to buy new and second-hand houses, subject to Government financial controls and policy guidelines such as have been set out in Circular 70/74.
Is the Minister aware that this Question is prompted by the experience of my local council, which recently sold one of its council houses to a sitting tenant? The sitting tenant having been transferred to another part of the country, the council is unable under the present regulations to repurchase the house. Will the Minister look at the matter and consider whether amendment of the regulations could ease the problem?
I cannot answer that question fully without more detail. Under the general consent laid down in the circular to which I have referred, properties which stand empty for six months or so can be purchased without specific application to the Department anyway. Other applications outside the general consent, such as are described in the cate- gories in the circular, would need to be made to the Department.
Does my hon. Friend agree that the Question on the Order Paper asking that local authorities should have the power to buy both new and second-hand properties makes the very idea propounded by the Opposition that councils should sell off council houses ludicrous in the extreme? How on earth can local authorities buy second-hand and new houses out of the private sector when they have only half the money that they would otherwise get by selling off council houses at about 30 per cent., 40 per cent. or 50 per cent. below the market price, which is what the Opposition want?
The policy of indiscriminate selling-off of council houses, such as was practised by the Opposition when they were in a position to practise it and which is still advocated by them, is to be deplored. I am unable to quote figures without notice, but there has been a considerable reduction in this practice by local authorities. There has been a massive run-down of this practice. There should be a policy of flexibility in housing provision relating to the needs on the ground. This indiscriminate policy pursued like a political gimmick by the Opposition is now at an end.
Returning to the original Quesion, I put it to the Minister that his policy is unrealistic in practice. Is he aware that in one block of flats in my constituency, bought by the GLC, not a single flat is vacant? All the flats are tenanted. Are the tenants to be evicted? If that is not the case, not one homeless family in the GLC area will be rehoused. Furthermore, does the hon. Gentleman agree that this is an extra burden on the already record rise in the GLC rate which my constituents have to bear without benefiting a single homeless family?
As a matter of fact, the hon. Gentleman has not returned to the original Question. I have already indicated to one of his hon. Friends that I shall be glad to consider the details of such cases. I repeat that among the priorities in expenditure for public ownership in this sector is the purchase of empty or largely empty properties—there are other factors as well—and not the purchase of properties in good condition and fully occupied. That may come later, but that is not the priority now. The hon. Member for Arundel (Mr. Marshall) asked whether further powers could be made available for local authorities to buy properties.
Palace Of Westminster (Olivercromwell Statue)
asked the Secretary of State for the Environment when he expects to see Oliver Cromwell outside Westminster Hall again.
Early in 1977.
Does the right hon. Gentleman agree that the presence of Oliver Cromwell standing outside this House was never so necessary as at this time as a reminder of the supremacy of Parliament, particularly when so many persons both in the Government and outside this House fail to appreciate where ultimate power resides?
I am delighted to agree with the hon. Gentleman that Oliver Cromwell was a stern defender of our constitutional liberties.
If my right hon. Friend is seeing Cromwell shortly, will he have a word with him about Question No. 36 and get his advice on the practicality of hiving off the railways in Scotland to a Scottish Assembly?
Does the Secretary of State agree that the man who superseded the House of Commons would certainly be among the minority voting "Yes" in the forthcoming referendum?
Will my right hon. Friend assure the House that the Cromwell statue is in safe keeping because in a recent broadcast the hon. Member for Cornwall, North (Mr. Pardoe) said that Parliament was diseased, that we wanted a new Cromwell and that he was prepared to melt down the Mace for that reason?
asked the Secretary of State for the Environment if, in view of the representations made about the difficulty of operating concessionary fares schemes for retirement pensioners, evidence of which had been supplied to him by the hon. Member for Cannock, he will now decide to introduce a uniform nationally financed scheme to provide concessionary fares for retirement pensioners and the disabled ; and if he will make a statement.
No, Sir. I have nothing to add to the reply given by my hon. Friend the Under-Secretary of State for Health and Social Security to the hon. Member for Berwick-upon-Tweed (Mr. Beith) on 11th December 1974.—[Vol. 883, c. 190–1.]
Is my hon. Friend aware that I read that reply with some dismay? Does he accept that the present situation is one of absolute chaos? The concession depends on where a pensioner lives. In some areas pensioners get entirely free travel and in other areas, mostly Tory-dominated, they get nothing at all. The concession also depends on the bus route as a pensioner moves from one area to another. Does my hon. Friend accept that a simple solution would be to have an automatic system for old-age pensioners applicable both to buses and to rail?
My hon. Friend is calling for a national scheme. I think he should realise that the joint circular on local expenditure which went out to local authorities showed that present expenditure amounted to about £35 million. This varies throughout the country. Not all authorities have these schemes, and there are marked differences between them. It would not be practical in the present state of our economy to introduce a national scheme, because it would cost much more than £35 million.
Does not the question posed by the hon. Member for Cannock (Mr. Roberts) illustrate the chaos existing in public transport when some fares are subsidised by ratepayers, some are subsidised indirectly by taxpayers and others are not subsidised at all, and when services are being reduced and many people are finding it impossible to afford to travel on public transport? Is it not time that the Government, having been in office for over a year, got down to producing a coherent policy on public transport?
The hon. Gentleman should realise that we have been in power for only a year. During that year the cost of public transport has increased tremendously. Oil and petrol have multiplied the cost factor by five during that period. We must accept that mobility will in future be more expensive all over the world. The Government have tried to help. For instance, there is a general scheme for rebates on fuel duties and the purchase of new buses. Local authorities are empowered to operate their own local services under the transport supplementary grant.
Does not my hon. Friend agree that there is something basically absurd about priorities when we can find resources for mile after mile of motorway which communities do not want and for supersonic air transport but not for decent, basic rural transport for those who cannot afford motor cars, especially when we do not want them to run motor cars in view of the energy crisis?
There are always ways of getting better services by pouring more and more money into them.
It would be cheaper than Concorde.
The problem is in deciding on the best value to be obtained from any expenditure. That is what the Government intend to do. I know my hon. Friend's attitude to a particular motorway, but I get many delegations asking for motorways because they are the only way of making life tolerable in certain parts of the country.
Is the hon. Gentleman aware that pensioners find it difficult to understand why, when they go to urban areas like Merseyside, they can have free travel at certain hours whereas companies in the same National Bus Company in rural areas not only offer no free transport but are closing down services? Will he reveal the Government's transport policy in this area?
This is, of course, a question for local authorities. The National Bus Company does not pay for concessionary fares ; it is the local authority which has this power. It must be realised that bus operators are working on a very slim margin all over the country, so that any concessions in one part of their services must be made up by the local authorities or by other travellers.
Battered Wives And Children(Accommodation)
asked the Secretary of State for the Environment if he is satisfied with the progress being made on the provision of refuge accommodation for battered wives and their children.
No, Sir, I am not satisfied but think it best to await the recommendations of the Select Committee, to which my Department yesterday submitted a memorandum, before deciding on future policy. Meanwhile, as an interim measure, I have agreed that housing for battered wives and their children, including hostels, should be eligible for local authority subsidies and housing association grant, and I hope that councils and housing associations will make the necessary provision wherever possible.
I thank my hon. Friend for that reply. Will he recognise, however, that this is a matter of immense urgency for many women who daily face terrible injuries in their homes? Would he also recognise—[Laughter.] I am surprised that some hon. Members regard this as comic. I suggest that they attend the Select Committee on Violence in Marriage, where they will hear evidence which will put them right. Will my hon. Friend recognise that the valuable work done in this field so far has been done by groups of women on a help-one-another basis and that they work in difficult conditions? Will he ensure that local authorities do not harass them in any way on top of their present difficulties?
I certainly take the matter seriously and am trying to treat it as urgently as 1 can. The difficulty is that I am waiting for the results of the Select Committee's consideration and examination of all the evidence given it, not only by my Department, before reaching a view about the longer-term aspects of housing policy and how I can help to deal with this problem. The urgency is reflected in the fact that we have already agreed to provide the necessary subsidy facilities for the provision by local authorities and housing associations of appropriate accommodation for such people who live in tragic circumstances, as I know from cases with which 1 have had to deal as a constituency Member. For the rest we must await the future, but I assure my hon. Friend that I am not complacent.
Does the hon. Gentleman have any idea of the numbers of wives and children involved? This must obviously have a bearing on the kind of accommodation required.
No, 1 have no idea of the size of this problem or of its variation. This is a matter which I imagine will be dealt with much more adequately, at this stage at least, by the Select Committee. But we should not wait for some kind of national assessment of the scale of the problem before trying to provide facilities wherever possible, certainly in the field of housing for which I am responsible. To this extent I am happy that, as a result of what I have said today and contacts that we have with local authorities, facilities will be provided wherever possible under housing subsidy arrangements.
I welcome all that the Minister has said. When the Select Committee reports, which it is hoped we will do as quickly as possible, will the Government find time there and then to implement any recommendations we make, even if they require legislation?
:The hon. Lady will realise that I am concerned with one particular facet of policy and administrative practice—that relating to housing. We should have to await the examination which my right hon. Friend the Secretary of State for Social Services will give to the report when it is forthcoming before deciding what legislation will be introduced and what policy decisions will have to be taken.
Licensed Premises (Rents)
Watkins asked the Secretary of State for the Environment what representations have been made to him about the proposals of brewing companies to increase the rents of public houses following decontrol.
I would refer my hon. Friend to my right hon. Friend's reply to the hon. Member for Braintree (Mr. Newton) on 3rd March.—[Vol. 887, c. 342.]
I thank my hon. Friend for that illuminating answer. Is he aware that evidence has been brought to my attention that brewers are proposing increases of as much as 250 to 300 per cent.? Is it not therefore time that their monopoly was cracked down upon instead of being unleashed?
As my right hon. Friend the Secretary of State explained on 19th December, the Government considered that the control of business rents was having an unintended effect on some parts of the economy. As for the general level of rents, particularly the example that my hon. Friend has given, I understand that a code of practice on tenant security, accepted by both sides of the licensed trade, provides for disputes which cannot be settled by negotiation to go to arbitration.
asked the Secretary of State for the Environment how many furnished lettings were available in England and Wales in each year from 1969–70 to 1974–75.
763,000 households, 4.6 per cent. of all those present on census night in April 1971, were occupying furnished accommodation. Comprehensive information for other years is not available.
That seems a remarkable answer, because the Minister is basing quite a lot—[Hon. Members: "Question."] Does he not realise that what is, I believe, a stable situation will collapse dramatically because of the disincentives incorporated in the Rent Act? Will he stop deluding himself that the only thing that is falling off is the number of newspaper advertisements? The disincentives are forcing landlords to close down the lettings they have been offering.
If the hon. Member has specific information rather than generalisations, I shall genuinely be glad to receive it so that we may more effectively monitor what is happening in the wake of the Act. As for the absence of information for other years, there is nothing startling about that. A census will be taken in 1976 upon which basis we shall be able to update information. It is true that some sample surveys have been taken, but they are hardly an adequate basis for comprehensive statistics.
Will the Minister take seriously the point raised by my hon. Friend? Will he apply some common sense to the whole problem of furnished lettings? Will he now set up an inquiry into the effect of the 1974 Rent Act and apply serious thought to the possibility of providing a new form of short-term tenure?
On that last point, as I made clear in an answer a week or two ago, the answer is No ". I do not think that an inquiry is warranted. [Hon. Members: "Oh."] The Opposition, particularly hon. Members with knowledge of property dealings, would do well to stop playing politics with this issue.
asked the Secretary of State for the Environment if he will consider introducing incentives for the separation and collection of waste by local authorities.
I have asked the recently-appointed Waste Management Advisory Council to consider to what extent incentives may be needed. Some schemes already make a profit and I hope that we can help local authorities to make others do so too.
I thank my hon. Friend for that reply. May I urge upon the Government the setting up of an advertising scheme similar to that used for the litterbug campaign in the 1960s, to give people the incentive to carry their waste to central receptacles? I understand that that would be the only economic way of collecting much of the recoverable waste.
I agree with my ron. Friend about litter. I encourage all local authorities to make adequate provision for such waste receptacles so that litter need not deface our streets. However, I think that that is rather away from the original Question on recycling.
Will the hon. Gentleman confirm that his Department is spending about £2 million to advertise the need for waste separation? Does he think that that can be justified at present? Should not the money be allocated to local authorities for other things that they need to do, bearing in mind that they cannot at present find the money to set up the expensive plants that are necessary?
I do not know where the hon. Gentleman gets his figures from. No such expenditure is being made or is envisaged.
Is my hon. Friend aware of the difficulties that many groups which collect waste paper are experiencing as a consequence of the cyclical nature of the waste paper industry? Will he investigate ways of alleviating the difficulties and giving local authorities further power to store and dispose of waste paper?
I am aware of the problems They arise in the main from voluntary organisations which, properly and public-spiritedly, decided when the market was high that they would have collection schemes and so on. Because of the cyclical nature of the market, the price is temporarily low. I am convinced that the answer is to have longterm agreements between local authorities and the industry. My right hon. Friend the Secretary of State for Industry is considering Government assistance for storage by industry.
What progress has been made on an excess stock support scheme for waste paper? Proposals from the industry have been before the Government for many months.
That is more a question for my hon. Friend the Under-Secretary of State for Industry. It is one of the matters being considered by the Waste Management Advisory Council. We hope for a report within the next month or two.
Local Authority Mortgages
asked the Secretary of State for the Environment if he has now completed his consideration of the proposal to provide Government loans at lower interest rates to local authorities for the purpose of granting mortgages to would-be house buyers ; and if he will make a statement.
asked the Secretary of State for the Environment if he will list those local authorities which have since 23rd January 1975 announced their intention of charging mortgage lending rates above 11 per cent.
On the general issue, I would refer my hon. Friends to the answer I gave to my hon. Friend the Member for Nelson and Colne (Mr. Hoyle) on 10th March.—[Vol. 888, c. 31–2.]I will, with permission, circulate in the Official Report a list of 18 local authorities in England which have to my knowledge announced decisions to raise their variable mortgage rate above 11 per cent. in the last eight weeks.
Is it not a fact that many local authorities which help people who cannot obtain mortgages elsewhere are having to pay more than 15 per cent. on their current borrowings, whereas building societies can get money in at less than 11 per cent.? Could not the Government—at little cost to themselves, as they can obtain money cheaply—provide loans equally cheaply to the local authorities for this most valuable purpose?
Applying to local authorities what one might loosely call the building society scheme that we adopted a year or so ago would not be of much help, even if it were acceptable to operate it, because £500 million loaned to building societies must be seen in relation to the £2,500 million loaned by them. The application of that kind of proportion of lending to local authorities would not produce the desired results. The figures have been worked out. In any case, in terms of public expenditure our housing priorities lie elsewhere.Having made those two points, I want to make it clear that we are still carefully examining ways in which we might be able to deal with this serious problem, serious particularly for a minority of borrowers from the local authorities concerned.
While I appreciate that there are differences between the position of building societies and the position of local authorities in some respects in regard to mortgage interest rates, may I ask whether constructive action will be taken to help authorities which are encountering special difficulties? Has the Minister yet concluded consideration of, and given sympathetic attention to, the representations made to him by the Broxbourne District Council over its special difficulties?
We have had a number of representations, not from all the local authorities affected but from quite a few. Except in certain marginal respects, we have not been able to be of immediate assistance to the local authorities concerned, but we are still looking into ways in which we may be able to help in the matter.
is my hon. Friend aware that with every month that goes by more local authorities will have to change more than the 11 per cent. building society rate for their mortgages? This is inevitable because of the nature of local authority financing. May I stress that many of the people who take up local authority mortgages are in the lower income groups and could not obtain mortgages from the building societies? Is it not essential that they should be treated fairly, as were the building society borrowers?
I take the point my hon. Friend is making about the policy practices of local authorities in the issuing of mortgages, although, as a result of recent analytical examination, I would not go too far down that road in a general way. There is evidence of a considerable overlap in the kinds of customers covered by local authority provisions and those covered by building societies—far more than I had thought until quite recently. Nevertheless, we still take the problem seriously. I cannot promise that there will be an immediate answer. We shall try to find an answer, but it must be one which does not involve public expenditure being redirected from higher housing priorities.
In view of the many thousands of empty houses in local authority ownership, does the Minister accept that the proposal contained in Question No. 20 is a far more sensible way of deploying public resources than a programme of municipalisation? Will he have regard to those authorities which are finding it difficult to recruit teachers or to provide homes for public service employees, because those employees do not wish to be council tenants but cannot afford to buy their own homes at the high level of mortgage interest proposed by local authorities?
The hon. Gentleman has raised some cases demanding sympathy in the coverage that has been given to the matter. The housing difficuilties which teachers and other public service workers in London and some other places have experienced did not start with the increase in mortgage rates in recent months. They started a considerable time ago during the great boom in house prices under the previous Government.The hon. Gentleman's introduction of the issue of municipalisation is a red herring. There are considerable pressures form public service worker's organisations for local authorities to buy even more properties in oreder that they may make vacant property available for such workers.
Following is the list:
|Bolton DC.||Luton DC.|
|Bournemouth DC.||Melton DC.|
|Bracknell DC.||Middlesbrough DC.|
|Brent LB.||Milton Keynes DC.|
|Cambridge DC.||North Herts DC.|
|Chichester DC.||Reading DC.|
|Eastbourne DC.||Suffolk Coastal DC.|
|East Staffordshire DC.||Tendring DC.|
|Langbaurgh DC.||Uttlesford DC.|
asked the Secretary of State for the Environment how much of the increase in grant to the Sports Council of £1.15 million for 1975–76 is in respect of inflation ; and how much is intended for the growth of facilities.
The difference between the grant for this year and that proposed for next can be accounted for by inflation, but the council's estimates for next year include over £3½ million towards capital schemes already under construction or ready to start in that year.
Is the Secretary of State aware that his reply is totally inadequate? Is he further aware that the amount for the increased grant certainly will not cover inflation and will not allow for any expansion of facilities? What is most important, will he accept that the country cannot understand his Government's priorities, because on the one hand they give away hundreds of million of pounds for nationalising industry but on the other hand they cannot afford £2 million for sport?
It is always curious to hear Opposition Members calling for increased public expenditure. The hon. Gentleman debated this matter on Monday night with my hon. Friend the Minister of State with responsibility for Sport. If he is saying that the present Government's record on sport is inadequate and unsatisfactory, I must tell him that when my hon. Friend the Minister of State resumed his responsibility for sport there was a sensational improvement in the morale of the entire sporting world.
While recognising that more public expenditure is necessary for sport and recreation, may I ask my right hon. Friend to remind the Sports Council that in the financial year 1973–74 it spent £1·6 million in administrative costs in order to disburse a mere £2·1 million? Does not my right hon. Friend consider that instead of handing out public money to non-elected and non-accountable bodies it would be far better to have an integrated Ministry of Recreation, answerable to Parliament, which would be responsible for organising and financing recreational and sporting facilities throughout the country?
My hon. Friend has made a very interesting proposal. I would remind him that the fact that the Sports Council is now at such a distance from Parliament—and, indeed, from anywhere else—was due to the reconstruction of the Sports Council by the previous Conservative Government. We should all, of course, like more money for sport. I should like a large sum of additional money for Grimsby Town Football Club—which is a cold place on a windy day. But much as I should like that, we must nevertheless stick to our basic national priorities.
What guidance has the Secretary of State given to local authorities concerning the priority they should give to expenditure on sports facilities?
The guidance was given in Circular 141/74.
Questions To Ministers
On a point of order. May I raise with you, Mr. Speaker, a point of view that is fairly widely held in the House—that there is inadequate time for Questions to the Department of the Environment? Housing, transport, local government and planning all have to be grouped into one day. There are 66 Oral Questions on the Order Paper. Whereas under the previous Conservative Government, energy, trade and industry were initially, for instance, all part of the responsibility of the Department of Trade and Industry they now have their separate days. Will you, Mr. Speaker, see that this matter is brought to the attention of the relevant authorities?
Further to that point of order. When you are considering this matter, Mr. Speaker, I hope that you will bear in mind that during the 31 years of the previous Conservative administration and certainly for the first part of it, this Question hour was dominated by many planted Questions, which were tabled by hon. Members of the present Opposition, including possibly the hon. Member for Christchurch and Lymington (Mr. Adley). It may be just possible that he is a little aggrieved because he cannot now put down his planted Questions.
No doubt the Leader of the House will consider this matter. It is not a matter for me. It is a matter for discussion through the usual channels.
On a point of order. Have you any information, Mr. Speaker, whether the Home Secretary intends to make a statement tomorrow on the transfer of the Price sisters to Northern Ireland?
No. That is a bogus point of order.
On a point of order. We have today, Mr. Speaker, the statement on the Defence Estimates. Is it not usual for a statement to be made in the House when they are published? Are we to have a statement today or tomorrow?
Again, that is not a matter for the Chair. I do ask the House to support the Chair. I am trying to stop what are in fact false points of order. I can only do that with the assistance par- ticularly of experienced hon. Members. As the hon. Member knows, that is not a matter for the Chair. [Interruption.] In the last Parliament the other side were just bad.
Business Of The House (Oiltaxation Bill)
That the Third Reading of the Oil Taxation Bill may be taken immediately after the consideration of the Bill, notwithstanding the practice of the House as to the interval between the stages of Bills brought in on Ways and Means Resolutions.—[ Mr. Coleman.]
In order to save the time of the House, I propose, unless there is any objection, to put together the Questions relating to the two statutory instruments.
That the draft Redundant Mineworkers and Concessionary Coal (Payments Schemes) (Amendment) Order 1975 be referred to a Standing Committee on Statutory Instruments.
That the Rating (Water Hereditaments) Order 1975 be referred to a Standing Committee on Statutory Instruments.—[Mr. Edward Short.]
Social Security (Abolition Ofwage Stop Rule)
I beg to move,
The wage stop rule is the rule contained in paragraph 5 of Schedule 2 of the Supplementary Benefit Act 1966.That leave be given to bring in a Bill to abolish the wage stop rule in relation to the payment of social security benefits.
Order. Will hon. Members who wish to conduct loud conversations do so outside the Chamber.
The rule applies to all men who have to register for work as a condition of receiving supplementary benefit. The rule demands that unless there are exceptional circumstances the amount of supplementary benefit payable shall not exceed what would be the individual's net weekly earnings if he were engaged in full-time work in his occupation. I am asking leave to introduce the Bill firstly because I believe it is fundamentally wrong that we should deliberately condemn families to a life below the poverty line, which is precisely what the wage stop rule was about.In November 1974 there were 8,000 supplementary benefit claimants subjected to the wage stop. The figures for family size, which are available only for November 1973, show that 60 per cent. of claimant families then were families with five or more children, and that another 30 per cent. had three or four children. On that basis we can calculate that in excess of 35,000 children are affected. It is also evident that the larger the family the larger will be the wage stop deduction, and the further below the poverty line the children will have to live. The average wage stop deduction at present is about £2. But in the case of three-, four- or five-children families it is quite possible that this deduction can be three or four times the amount. The rule is often misunderstood. It is not supposed to be a weapon against the work-shy. The Supplementary Benefits Commission has enough weapons in its armoury to deal with that problem without needing the wage stop rule. In its 1967 report the commission stated:
The question we must ask ourselves is this. Are we justified merely because some families have to live in poverty when the breadwinner is in full-time work in condemning them to live in poverty when they are eligible for State benefits? The question really is this. In a humane Welfare State, can we tolerate a rule which means consciously and deliberately deciding that certain people should live below a level that we have ourselves decided is the poverty level? We are accepting a situation in which parents cannot afford to feed or clothe their children decently because of a rule which belongs more to the days of the Poor Law then to the days of an enlightened Welfare State. It is right that we as a society should be concerned about a situation in which a man may earn less in work than he can receive in State benefits. However, the reason why we should be concerned is that we should question the type of society which pays a man less than a living wage for doing a week's work. The continuation of the wage stop rule will do nothing to change that society. It will only continue to mask the injustice. I believe that the abolition of this rule will give a boost to the implementation of a system of family benefits that is needed by families in work to move them above the poverty line. Above and beyond the moral argument on this question there is a problem of administration. The wage stop rule places an impossible burden upon the officers of the Department of Health and Social Security, because it is virtually impossible to administer fairly. First, it must be decided what an unemployed man's normal earnings would be. This means, I understand, that regard must be had to likely future earnings and that judgment must be exercised—I am told—over past earnings. Past earnings, of course, particularly in the days in which we are living now, can often be rendered meaningless by inflation. The commission's rules state that any skill or experience should be taken into account in assessing a man's earning power and that there should be discussions with the claimant about his normal earnings. Yet in the majority of cases investigated by the Child Poverty Action Group, it was found that this was not done. The vast majority of wage-stopped claimants are assessed on the National Joint Council rates for light labourers, and, although these rates now include a guaranteed minimum income, they take no account of overtime. We all know that to a man with a large family it is the overtime earnings which make the difference between living and existing. The commission's rules mean that the National Joint Council rates are applied to all men after a year's unemployment, irrespective of their past earnings. The rule is particularly harsh when applied to the disabled. Some men are no longer able to continue their former jobs because of disability, and not only suffer the drop in living standards to supplementary benefit rates but if they register for work they become candidates for the wage stop. There are numerous examples which the Child Poverty Action Group has quoted. There is the case of Peter Rothman, who had earned good money as a skilled gas fitter in Liverpool until he had to leave the job because of osteoarthritis. Stuart Brown was a well-paid lorry driver until he suffered a heart attack. Ray Jameson had been a £40-a-week sanding machine operator when a stroke left him partially paralysed. Mike Bracken, who had been doing a skilled manual job, is no longer able to do that because of cervical spondylosis. Robert Chaffer, who had infantile poliomyelitis and now suffers from partial but progressive paralysis, continued to work, against medical advice, as a process operator in a steel works until his health gave out. All these cases produced by the Child Poverty Action Group have been affected by the wage stop rule. One of them was told "There aren't any jobs for you, so you might as well sign on." By signing on, he made himself a candidate for the wage stop, and this was promptly imposed. All these cases, who were formerly skilled men, are classified according to the earnings of light labourers, jobs they never did previously. The proper administration of this rule demands that due regard should be paid to rent and rate rebates and family income supplement due to the man concerned when in work. It is impossible to say whether this happens. Recently I asked my hon. Friend the Under-Secretary of State to give information on how the introduction of rent and rate rebates had changed the number of people affected by the wage stop. He was unable to provide me with precise figures. I do not blame him for that, because I believe that it would be a massive task properly to monitor the rule. Undoubtedly if the rule were carefully applied some injustices could be avoided. but at the same time that would reduce the saving to public funds of the wage stop rule and increase the administrative costs. We could well reach a point where the rule actually cost the Exchequer money, and I am sure that it would then be scrapped. How, then, can there be any justification for keeping a rule which saves us money merely because it is applied over-harshly and haphazardly and is improperly administered?" The purpose of the wage stop is not to provide an incentive for a man to get work. The wage stop does not require a man to get less than he would when working. What it does do is to ensure that an unemployed man's income is not greater than it would be if he were in full-time work."
Question put and agreed to.
Bill ordered to be brought in by Mr. John Ovenden, Mr. Ivor Clemitson, Mrs. Maureen Colquhoun, Mr. Robin F. Cook, Mr. Robin Corbett, Mr. Bruce George, Mr. Bryan Gould, Mr. Eddie Loyden, Mr. Max Madden, Mr. Stan Newens and Mrs. Audrey Wise.
Social Security (Abolition Of Wagestop Rule)
Mr. John Ovenden accordingly presented a Bill to abolish the wage stop rule in relation to the payment of social security benefits, and the same was read the First time ; and ordered to be read a Second time upon Friday 11th July and to be printed. [Bill 1171
Orders Of The Day
Oil Taxation Bill
As amended (in the Standing Committee), considered.
|New Clause 1|
|5||' (1) Subject to the provisions of this section and paragraphs 10 and 11 of Schedule 3 to this Act, where a participator in an oil field would, apart from this section and section (Annual limit on amount of tax payable by participator) of this Act, be chargeable to tax for any chargeable period on an amount (" the said amount ") consisting of the assessable profit accruing to him in the period from the field or that profit as reduced under section 7 of this Act by any allowable losses, then for the purpose of determining his liability, if any, to tax for that period, the said amount shall be treated as reduced or further reduced as follows, that is to say—|
(a) if the said amount exceeds the cash equivalent of his share of the oil allowance for the field for that period, to an amount equal to the excess; or
(b) if the said amount does not exceed the cash equivalent of his share of that allowance, to nil.
|15||(2) The oil allowance for an oil field is, for each chargeable period, 500,000 long tons, and shall be divided between the participators in shares proportionate to their shares of the oil won and saved from the field during the period.|
|(3) For the purposes of this section the cash equivalent of a participator's share of the oil allowance for an oil field for a chargeable period is (subject to subsection (4) below) the amount given by the formula:—|
|£(A x B/C)|
|A is the gross profit accruing to him in the period or, if a gross loss (or neither a gross profit nor a gross loss) accrues to him in the period, nil (in which case the cash equivalent itself will be nil);|
|25||B is his share of the allowance, in long tons; and|
|C is his share, exclusive of excluded oil within the meaning of section 8 of this Act, of the oil won and saved from the fields during the period, in long tons.|
|30||(4) If a participator in an oil field so elects by notice in writing given to the Board at the time when he makes his return under paragraph 2 of Schedule 2 to this Act for a chargeable period, then the cash equivalent of his shale of the oil allowance for the field for that period shall be determined under subsection (3) above|
|35||(a) to the extent that his share of that oil allowance does not exceed his share of the oil (other than gas) won and saved from the field in the period, as if in computing the gross profit or gross loss accruing to him in the period all amounts relating to gas fell to be disregarded; and|
|(b) to the extent, if any, that his share of that oil allowance exceeds his share of the oil (other than gas) so won and saved, as if in computing the gross profit or gross loss so accruing all amounts relating to oil other than gas fell to be disregarded.|
|40||(5) For the purposes of this section the amount of the oil allowance for an oil field utilised by a participator in any chargeable period is|
|(a) if in his case a reduction is made for that period under subsection (1)(a) above, an amount in long tons equal to his share of the oil allowance for the field for that period;|
|45||(b) if in his case a reduction is made for that period under subsection (1)(b) above, the amount in long tons arrived at by multiplying his share of the oil allowance for the field for that period (in long tons) by the fraction of which the numerator is the amount of that reduction and the denominator is the cash equivalent of his share of the said oil allowance;|
|(c) in any other case, nil.|
|50||(6) The total oil allowance for an oil field shall not exceed 10 million long tons, and accordingly|
|(a) for each chargeable period there shall be determined the aggregate of the amounts of the oil allowance for the field utilised by the participators in that period; and|
|55||(b) as regards the earliest chargeable period such that the sum of the aggregate determined under paragraph (a) above for that period and the aggregates so determined for each earlier chargeable period would, apart from this subsection, exceed 10 million long tons, the necessary restriction shall be apportioned between the participators in such manner as may be notified to the Board by the responsible person or, in default of such notification, as may be determined by the Board.|
|60||In this subsection "the necessary restriction "means the restriction necessary to secure that the aggregate determined under paragraph (a) above for the chargeable period to which paragraph (b) above will, when added to the sum of the aggregates so determined for each earlier chargeable period, produce a total of 10 million long tons.|
|65||(7) For the purposes of this section 40,000cubic feet of oil consisting of gas at the temperature and pressure mentioned in section 1(4) of this Act shall be counted as equivalent to one long ton of oil other than gas.|
|(8) Any reduction to be made under subsection (1) above shall be made before applying the provisions of section (Annual limit on amount of tax payable by a participator) of this Act'.—[Mr. Dell.]|
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
On Clause 1, I understand that there is to be a general debate on various other matters.
On a point of order, Mr. Speaker. In view of the indistinct printing of the Notice Paper, may I confirm with you that Amendment No. 230 will be called? It deals with the establishment of a Scottish oil fund.
That is an amendment which is beyond the scope of the Bill. It is out of order.
On another point of order, Mr. Speaker. In view of the importance of the Scottish oil fund to the Scottish economy, will you rule on whether it will be possible for some of the arguments in favour of the fund to be adduced on any other amendments and, if so, on which amendments?
I should be in grave difficulty if I were to allow discussion of matters outside the scope of the Bill. Let us see how we get on. My preliminary reaction is that, if the amendment is outside the scope of the Bill, the argument in favour of it is irrelevant to our discussion.
Further to that point of order, Mr. Speaker. Will you please press the Select Committee on Procedure to hasten its recommendations so that amendments lodged by minority parties, particularly parties that are not minorities in the countries from which they come, can get some rights to be heard in the House?
I do. not think that any Select Committee on Procedure would ever recommend that amendments outside the scope of a Bill could be included in the discussions on the Bill.
Further to that point of order, Mr. Speaker. If there are to be no discussions today on the setting up of the Scottish oil fund, may we be given a guarantee that such a matter will be discussed at a future date, as it is vital to the Scottish Assembly, which will be set up under this Government's legislation, that this matter be discussed?
That is not a matter for me. It appears to be an appropriate matter to be raised at business questions on a Thursday.With this new clause it may be convenient to discuss the following amendments:
Amendment (a) to the new Clause 1, in line 69, at end add—
' (9) Notwithstanding subsection (1) above a participator shall be entitled to the cash equivalent of his share of the oil allowance for a field for each chargeable period from and including the first chargeable period (as defined in section 1(3) of this Act) and if for any chargeable period a participator is not able to utilise or fully utilise under subsection (I) above his share of the cash equivalent of the oil allowance calculated under subsection (3) above, and for which an election has been made under subsection (4) above, he shall be entitled on so claiming to carry forward such unutilised cash equivalent to reduce the said amount of any succeeding chargeable period '.
Amendment (b) to the new Clause 1, in line 69, at end add—
' (10) Notwithstanding subsection (1) above a participator shall be entitled to the cash equivalent of his share of the oil allowance for a field for each chargeable period from and including the first chargeable period (as defined in section 1(3) of this Act) and if for any chargeable period a participator is not able to utilise or fully utilise under subsection (1) above his share of the cash equivalent of the oil allowance calculated under subsection (3) above, and for which an election has been made under subsection (4) above, he shall be entitled on so claiming to carry back such unutilised cash equivalent to reduce the said amount of any earlier chargeable period '.
Amendment (c) to the new Clause 1, in line 59, leave out ' as may be determined by the Board ' and insert:
|New Clause 2|
|ANNUAL LIMIT ON AMOUNT OF TAX PAYABLE BY PARTICIPATOR|
|' (1) The total tax payable by a participator in an oil field for the chargeable period or periods comprised in any calendar year shall not exceed 80 per cent. of the amount (if any) by which his adjusted profit for that year (as defined in this section) exceeds 30 per cent. of his accumulated capital expenditure at the end of that year (as so defined).|
|5||(2) For a participator in an oil field, his adjusted profit (if any) for any calendar year shall be determined as follows—|
(a) for each chargeable period comprised in that year there shall be ascertained—
|(i) the assessable profit (without any reduction under section 7 or (Oil allowance) of this Act) or allowable loss accruing to him in that period; and|
|10||(ii) the total amount taken into account under section 2(9)(b), (c), (d) and (e) of this Act in computing that profit or loss, excluding expenditure so taken into account under section 2(9)(b)(i) or (c)(i) which was not allowed as qualifying for supplement under section 2(9)(b)(ii) or (c)(ii);|
(b) in the case of each such chargeable period—
|15||(i) if there is a profit under paragraph (a)(i) above, the sum of that profit and the total ascertained under paragraph (a)(ii) above is his adjusted profit for the period;|
|20||(ii)if there is a loss under paragraph (a)(i) above smaller than the total ascertained under paragraph (a)(ii) above, the difference is his adjusted profit for the period ; and|
|(iii) if there is a loss under paragraph (a)(i) above greater than the total so ascertained, the difference is his adjusted loss for the period;|
(c) if the year comprises only one chargeable period, his adjusted profit (if any) for that period is his adjusted profit for the year;
(d) if the year comprises two chargeable periods then—
|(i) if for each of them he has an adjusted profit, the sum of those profits is his adjusted profit for the year;|
|(ii) if for one of them he has an adjusted profit and for the other an adjusted loss smaller than that profit, the difference is his adjusted profit for the year;|
|30||(iii) if for one of them he has an adjusted profit and for the other neither an adjusted profit nor an adjusted loss, that profit is his adjusted profit for the year;|
|(iv) in any other case, he has no adjusted profit for the year.|
|35||(3) For a participator in an oil field his accumulated capital expenditure at the end of any calendar year is the total amount of expenditure taken into account under section 2(9)(b)(i) and (c)(i) of this Act in computing the assessable profit or allowable loss accruing to him in each of the relevant chargeable periods, that is to say the chargeable period or periods comprised in that year and all earlier chargeable periods, excluding all expenditure so taken into account which was not allowed as qualifying for supplement|
|40||under section 2 9)(b)(ii) or (c)(ii):|
|Provided that in the case of a participator who has made an election under paragraph 9 of Schedule 3 to this Act, his accumulated capital expenditure at the end of any calendar year shall be taken to be what it would have been if he had made no such election.|
|45||(4)Any reduction necessitated by this section in the total tax otherwise payable by a participator in an oil field in respect of a calendar year comprising two chargeable periods shall be made as far as possible by reducing or extinguishing the tax otherwise payable by him for the later of those periods.|
|50||(5) In the case of any oil field the preceding provisions of this section shall have effect as if the calendar year which comprises the critical half year as defined in section 1(4) of this Act comprised the whole of the first chargeable period '.|
Amendment (a) to new Clause 2, in line 43, at end add:
`and provided further that the Treasury may from time to time increase the accumulated
'shall be so apportioned as to divide the total oil allowance for the field between the participators in shares proportionate to their shares of the total amount of oil own and saved for the field during the chargeable period to which this paragraph applies and each earlier chargeable period.'.
capital expenditure in the case of any participator to take account of such alterations in the rate of inflation as may be evidenced by such index as the Treasury may from time to time determine to be appropriate '.
Government Amendment No. 1.
No. 231, in Clause 1, page 2, line 5, leave out:
'such rate as Parliament may hereafter determine' and insert 'the rate of 75 per cent.'
Government Amendment No. 2.
No. 13, in Clause 2, page 5, line 14, after '(ii)', insert:
'Subject to subsections (4A) and (4B) of the said section 3.'
Government Amendment No. 14.
No. 18, in page 5, line 29, after '(ii)', insert:
'Subject to subsections (4A) and (4B) of the said section 3'.
Government Amendment No. 19.
No. 22, in Clause 3, page 7, line 39, after '(a)', insert:
' Subject to subsections (4A) and (4B) below,'.
No. 24, in page 8, line 17, at end insert:
' (4A) If a participator in an oil field so elects by notice in writing given to the Board before 1st January 1976 or not later than one month after the end of the first chargeable period in which he is a participator in that field, the following subsection shall apply in his case as regards that field ; and an election under this subsection shall be irrevocable.
(4B) Subsection (4)(a) above and section 2(9)(b)(ii) and (c)(ii) of this Act shall not apply but where the creditor is a person connected with the participator within the meaning of section 533 of the Taxes Act the expenditure allowable in respect of interest or other pecuniary obligation shall not exceed the amount which would have been incurred in a transaction with an independent person made at arm's length '.
No. 25, in page 8, line 28, after 'works', insert:
'or acquiring an asset or any interest in an asset '.
Government Amendment No. 168.
Government Amendment No. 169.
Government Amendment No. 232.
Government Amendment No. 239.
No. 26, in page 8, leave out lines 32 and 33.
No. 61, in Clause 5, page 12, line 41, at end insert:
'(5A) The abortive exploration expenditure allowable under this section shall be increased by an amount equal to the relevant percentage of the expenditure allowable by virtue of the preceding provisions of this section '.
No. 62, in page 12, line 45, leave out 'and'.
No. 63, in page 13, line 11, at end insert:
(d) "the relevant percentage "is the percentage mentioned in section 2(9)(b)(ii) of this Act '.
Government Amendment No. 108.
I hope to introduce this large group of amendments at not too great length, but there are many points to explain and criticism from both points of view to deal with.Today we come to the final phase of the Bill, exactly four months after its introduction and after the beginning of the consultations which have gone towards fashioning it. This group of amendments deals primarily, though not exclusively, with the implementation of my statement to the House on 25th February. New Clause I introduces an oil allowance which is designed to assist primarily marginal fields—in other words, 1 million tons of oil allowance per annum or 500,000 tons as the maximum allowable in any chargeable period. I emphasise that the oil allowance is not 10 million tons. That is simply the limit. It is not a ration. The 10 million tons limit was placed in order to limit the benefit to large fields. The oil allowance—that is, the 500,000 tons per chargeable period—acts to reduce proportionately the PRT burden on smaller fields and it acts so that the smaller the field the greater the proportionate relief. This does not depend on a field getting or using the whole 10 million tons within the limit. There is or should have been no misunderstanding on this point, which was made perfectly clear to the industry. I should, however, refer to the fact that there have been reports in the Press which give a misleading impression of the effect on a small field of the operation of the oil allowance as defined in the clause. I quote from the Daily Telegraph of 8th March. There was a similar report in The Times of the same day, and therefore one may take it that it is an accurate report. The report in the Daily Telegraph said that figures had been produced
That calculation has never been put to us by the industry. Indeed, from within the industry the figure which we have received is that more like 8·6 million tons of oil allowance would be used in respect of such a field in normal circumstances. All these calculations depend upon costs, prices, the profile of production, and so on, which cannot be accurately forecast in respect of any field at this stage. The important question about the oil allowance is whether it adequately relieves the tax burden. I believe that it produces a heavy reduction of the tax burden on smaller fields. Moreover, on a 40 million-ton field a relatively small further reduction in tax burden would be available even if all the oil allowance was used, and I do not believe that this would be the kind of difference which would decide whether a field was developed. All this is without taking account of the effect of the safeguard, which can give some assistance to marginal fields. The right hon. Member for Wanstead and Woodford (Mr. Jenkin) has put down an amendment which echoes the view expressed vigorously by one section of the industry and perfunctorily by other sections to the effect that we should so arrange matters that if it is possible all the 10 million tons should be used. The effect of that, apart from being different from the Government's intention, would be to give great help to the few small profitable fields, and equally it would give great help to large profitable fields by deferring PRT liability. I therefore see no justification for this proposed amendment, although I shall listen intently as always to the right hon. Gentleman's arguments." to show that a small field with reserves of 300 million barrels and with investment costs of £250 million would now be able to recover only 1·7 million tons of tax-free oil ".
Will the Paymaster-General confirm that the oil allowance will be sufficient to allow exploitation of the Andrew Field in connection with Forties, and is he in any position to say whether the oil companies have accepted this as sufficient to exploit the marginal fields?
On the Andrew Field, I imagine that the companies are now assessing its economics on the basis of the information they have about the tax system we propose to introduce. I can give no assurance until the companies involved tell me what they have found. However, our assessment of the matter is that these aids to marginal fields will be of great assistance in ensuring that these fields are developed. As to the oil industry's reaction to the marginal field provisions, as I pointed out, I have had very vigorous reaction from certain quarters and more perfunctory reaction from other quarters, but some of the criticism I am receiving from elsewhere is that I have gone too far to assist the oil industry. I will come to that point in due course.I hope that the House will forgive me if I do not give way too much. I have a long list of amendments to introduce and it will be for the assistance of the House if we get ahead. I should like to compare what we are doing over marginal fields with what is proposed by the Norwegian Government should be done in their waters. They intend to give 150 per cent. over 15 years. We are also conceding a further allowance on capital expenditure, what is other than the 25 per cent. further uplift which comes in one of the amendments grouped with the new clause. However, according to our calculations our proposal gives more help to smaller fields and probably less help to profitable large fields. The right hon. Member for Wan-stead and Woodford wants me to go further than that. I see no justification for so doing, but I will listen to the arguments. Government Amendment No. 108 is designed to ensure that the participator cannot increase his oil allowance by the device of spreading an expenditure claim for PRT or by holding up his claims for capital expenditure. That is a necessary consequence of the introduction of the oil allowance. Government Amendments Nos. 14 and 19 increase the uplift from 50 per cent. to 75 per cent. This will help marginal fields, notably those with large capital expenditure. It gives greater assurance that uplift will cover interest. It gives the companies a better opportunity even than was originally provided by the Bill of an early pay back of capital, but I must emphasise, because it appears that some commentators have not fully appreciated this point, that uplift is in replacement of interest and therefore the figure of 175 per cent., that represents the total capital allowance, includes interest, a fact which has misled some commentators. It should also be remembered in considering the adequacy of the provisions in respect of interest that interest relief grants are also available from the Offshore Supplies Office. I now come to new Clause 2 which introduces the safeguard that I announced on 25th February. As I said in my statement then, the clause has been introduced to provide some automatic protection against a fall in the real price of oil, or what amounts to the same thing—movements in domestic prices unfavourable to oil. One can hope that at any rate by the early 1980's the present uncertainties surrounding the price of oil will have been resolved and that the relationship between oil prices and other prices will be seen to be on a firmer basis. The Government of the day would then have to consider whether the protection offered by the safeguard clause remained appropriate to the particular circumstances of some quite profitable fields late in their life. I can perhaps best explain this point by reference to the hypothetical field which was taken for the purpose of illustration in a Treasury Press Notice issued on the day of my statement. The footnote to the illustrative table said that the safeguard provision would not be necessary for the hypothetical field. Like all such illustrations, this was based on certain underlying assumptions about relative costs, prices and the profile of production. It is, however, possible by varying these assumptions, to arrive at a situation where the safeguard might affect such a field. Even on such assumptions it would be unlikely to affect such a field during earlier years of productive life, but during the later years, as production began to decline, such a field could well benefit from the safeguard to some extent. It would be for the Government of the day, in circumstances, one hopes, of greater certainty about relative prices than now exist, to decide whether they should permit a field of this kind to benefit towards the end of its life from the safeguard provision after it had yielded substantial profits on the investment earlier on. I in no way prejudge that issue. It might be sensible to reduce PRT to encourage the bringing out of residual oil, but this matter should be drawn to the attention of the House as a question which may need to be examined at some further stage. None of this affects the statements 1 made in this House about the Government take over the next ten years, which I believe to be a figure of about 70 per cent., or the figure I have given of the total estimated take up to the early 1980's The right hon. Gentleman has suggested that we should index the capital base. I will listen to the arguments in favour of that suggestion. but I emphasise that the clause already gives protection against a change in the relative price of oil. This will be a very expensive procedure especially later in the life of the field. The right hon. Gentleman has been unable to tell us in the amendment how he proposes that the capital base should indexed, and we await that information with interest. However, the whole concept of the safeguard rests on the capital base not being indexed. In my statement I emphasised that historic costs would apply. In response to the right hon. Gentleman's proposal I must point out that even the oil industry has not proposed to me that the capital base of the safeguard should be indexed. Government Amendments Nos. 168 and 169 relate to Clause 3. They are to meet points raised by the United Kingdom Oil Industry Taxation Committee. The amendments extend the provision to cover the purchase of ready-made assets so that it applies not just to the carrying out of works. I hope and believe that the amendments meet the point of Opposition Amendment No. 25. Government Amendment No. 29 deletes the rule that no payment for the hire of an asset shall qualify for uplift but provides that the payment shall qualify broadly if the the asset is used constructing initial treatment, storage, transportation and production facilities in the field. Again, I believe that that substantially meets the point of Opposition Amendment No. 26. No doubt we shall see. 4.0 p.m. Government Amendment No. 232 follows Government Amendment No. 186 on Clause 3 and the related amendments to Clause 10 making the initial treatment and storage of oil allowable for PRT and provides that expenditure on installations for these purposes should qualify for uplift. We have the interesting parallel of the Norwegian tax proposals and can compare the structure of our tax with what the Norwegian Government have proposed to the Norwegian Storting. Some commentators appear to believe that the Norwegian proposals are already legislated, whereas we are likely to be ahead of the Norwegians in getting this Bill through. The Norwegians do not propose to introduce an excess profits tax, and certainly not an excess profits tax of the kind recommended by the right hon. Member for Wanstead and Woodford. It is, in effect, an additional slab of corporation tax. It is a single-rate tax—a characteristic of our proposals which the right hon. Gentleman has found particularly abhorrent. It is largely on a field basis because the depreciation provisions operate only against the income from the field to which they apply. Therefore, again, substantially it is similar to our proposals, which the right hon. Gentleman has found abhorrent. There is a difference in that the additional tax—the special tax—does not have priority over the Norwegian corporation tax or income tax, whereas ours does. As I have explained to the House and to the Committee, the object of priority is to bring in the revenue earlier, and we think that we are right to differ from the Norwegians in this respect. There are, nevertheless, remarkable similarities between the structure which they have adopted and the structure which we, quite independently, have adopted. I come to one of the questions which have worried many hon. Members considerably, and that is the rate of tax, 45 per cent., which is implemented by a Government amendment. I wish to explain the considerations upon which it is based and its consequences for Government take. I should like to give the House some information about the background to the consideration of an appropriate rate of PRT. The first is the considerable escalation in costs which has taken place over the last year or so. The House should bear in mind that we are dealing, even now, with estimates of costs for all fields with the exception perhaps of one. These costs have not yet been finalised in the sense that they have been committed or spent. There is, therefore, considerable uncertainty in that respect. Secondly, there is inevitably a question mark over the price of oil, and the current discussions throughout the world about whether there should be a floor price emphasise the question mark and suggest that it is not unreasonable if certain oil companies are concerned that a fall in the price might operate to the detriment of their profits. That is a justification for the safeguard which we have introduced as well as for the assurance which I have given in respect of substantial changes in the real price of oil, The third consideration is the level of return necessary to achieve financial investment in the North Sea. One of the tragic facts about the present situation is that so much of the finance is coming not from this country but from overseas. Therefore, adequate encouragement must be given if the oil resources are to be exploited at an appropriate rate. Finally, there is the problem of slippages in the programme which have an adverse effect on the rate of return which companies can expect from their operations. Due to many circumstances, largely technical, and the weather, and difficult conditions in the North Sea, there have been slippages in the programme. Various criteria are used by the companies and the banks in determining whether development should be financed. There is the internal rate of return which can be expected. There is the profit/ investment ratio. There is the pay-back period. The rate of tax must be designed to accommodate all these considerations and permit a return on an acceptable level. The hon. Member for Dundee, East (Mr. Wilson), together with his colleagues, has issued an interesting Press notice in which he criticises the calculations upon which the 45 per cent. rate is based and proposes an alternative rate of 75 per cent. He suggests that $1 profit per barrel for the companies should be sufficient. The trouble with such a simple criterion —profit per barrel—as a measure of the rate of tax which is appropriate is that it ignores the time function, the rate of return on capital, and the profit/investment ratio and, therefore, should not be regarded as an acceptable basis for investment. However, leaving all that aside, the hon. Gentleman's calculations of costs are excessively optimistic. I wish that they were right. If they were, the Government take, on the Government's proposals, would be much higher than we shall achieve as they are. It would greatly change the situation and might well make appropriate a different rate of tax from that which we have proposed. I say that his calculations are excessively optimistic except perhaps for a very large field on which capital expenditure has already largely been made. Moreover, the hon. Gentleman's figures include errors about the results of the Government's measures. For example, according to our calculations, he is wrong about the Government take, which, as I have said, we reckon will be about 70 per cent. over the next 10 years. The hon. Gentleman gives the figure of 65 per cent. According to our calculations, he is wrong about the profit per barrel likely to result from the Government's proposals. Moreover, although it is a little difficult to understand the hon. Gentleman's calculations, and, therefore, I make this point with some caution and, as always, I shall be delighted to discuss it with him because he has devoted some attention to this matter and has studied with care the Public Accounts Committee's report with which I had something to do, it appears to us that the 65 per cent. figure which he gives for Government take is based on gross revenue—that is, before deducting costs from the company share. According to our calculations, and applying our methods, the Government take would be about 75 per cent. Evidently that is the figure for which the hon. Gentleman is looking. Therefore, he will perhaps not press his amendment and will vote for ours. I appreciate that it is very difficult to calculate the results of a complex tax system, and, therefore, I blame no one for getting the matter wrong at the first attempt, but we have devoted considerable attention to working out the take. There was an article in the Scotsman on 18th March written by Mr. Frank Frazer, who, as far as I am aware, also has great experience in these matters. It is difficult to see how he has come to his conclusion, but he says that the percentage Government take will be 60 and that the per- centage company profit will be 40. As far as we can see—and I say this with reservation and caution because Mr. Frazer did not set out his complete calculation —he achieves that result by not deducting the capital cost and interest from the companies' share of the revenue. On our basis of calculation the Government take would again, on his essential figures, be around 75 per cent., not around 60 per cent. The real question is whether the 45 per cent. is fair as a share for the British people in the development of these resources and the profits that are being made and whether it also gives adequate profit to encourage North Sea development so that we do not have a peak of production in the early 1980s followed by a rapid falling off thereafter. Comments have been made by stockbrokers and others about the Forties, Piper and Argyll fields. All these are early fields for which a great deal of expenditure was entered into before the recent escalation of costs. I cannot go into the confidential information I have been given by the companies but certain facts are relevant. Argyll is a very small field and the profit made on it does not affect significantly the overall take. I do not regret that such a large and profiable field as Forties is in British ownership. In reply to those critics who say that these proposals allow an inadequate Government take I would again make a comparison with Norway. The Public Accounts Committee had Norway very much in mind when it was drawing up its report. Norway has been described in many journals, particularly in the United States, as a land of blue-eyed Arabs. Let us compare—in so far as we can compare different tax systems one with the other—what our take is likely to be with the likely Norwegian take. Some figures that have been published appear to be based on a misunderstanding of the Norwegian tax system. Figures have been given which suggest that the Norwegians can expect a take of 80 per cent. or 75 per cent. An editorial in the New Statesman suggested that the Norwegians would achieve a 75 per cent. take on average from their proposal. We do not believe those figures to be true of the Norwegian tax proposals. With all the uncertainties which operate when one calculates the effect of different tax systems—I am talking not of special taxes so much as the total tax and related system that operates throughout —we believe that our take is comparable with the Norwegian take and possibly a little higher. I do not believe that the 45 per cent. which we propose is inappropriate in the light of the facts and considerations which I have outlined to the House. We are establishing within the Inland Revenue a substantial centralised office with highly qualified staff to deal with petroleum revenue tax assessment and expenditure claims and with the oil companies' liabilities to corporation tax. That should enable specialised questions on oil taxation to be handled expeditiously and it will bring together in one place experts in oil taxation. That is a highly desirable development given the new era which we are entering.
Before I come to the clause, I should like to express my thanks and those of my hon. Friends to the Paymaster-General and to his private office for having helped us to overcome the considerable difficulties which stand in our way in dealing with what is by any standards, apart from the Finance Bill, a massive Order Paper for a Report stage.I shall be dealing with many of the matters on which the right hon. Gentleman spoke but I should like to say at the beginning that, while I understand his anxiety in wishing to establish to some of his hon. Friends that the Government are being as rough and tough with the oil companies as are the Norwegian Government, I beg him to treat those arguments with a great deal of caution. The Norwegians are likely to be self-sufficient in oil this year. The whole of their policy has been directed to slowing down the pace of exploration and development. Their whole licensing system, their attitude to STATOIL and their heedlessness if companies decide that it is not worth exploring in Norwegian waters are all aimed at the same purpose ; namely, to make sure that Norway does not achieve too substantial a surplus on oil account leading to a major revaluation of the krone and so disrupting established industry which depends on the balance of payments. That is the Norwegian policy, and the right hon. Gentleman should be a little cautious before suggesting that the same policy might be appropriate for this country. It is not. We shall not be self-sufficient for at least five years, and we shall need a continuing major effort in exploration and development if our offshore oil is to pay for the massive debts which we shall by then owe overseas. I wish to avoid repeating all the arguments that we developed at some length in Committee and I shall try to be brief. I acknowledge that the Government have moved a long way from the form in which the tax was first introduced. Instead of the flat-rate, field by field, prior charge tax, we have a Bill which makes some attempt to tailor the burden to the variable circumstances of the fields, which imposes a proportionately heavier take from the prolific fields than from the marginal fields, which may exempt the smallest fields altogether from any charge to PRT and which has made considerable inroads into the original principle of field by field. We shall see that when we come to new Clause 3. In short, PRT is now a tax the substance of which has changed out of all recognition from the tax as first introduced, although the form is still there. There is the £10 million oil tax allowance —and I take the right hon. Gentleman's point on the ½million tons in each period. There is the 30 per cent. safety net, the new reliefs for losses, the increased uplift in Amendment No. 14, the exclusion of gas contracts, the allowance for the initial treatment of storage plant, the allowance on shared costs, the uplift for additional expenditure and the uplift on hired assets. I could go on. All these represent a welcome change of mind on the part of Ministers. They perhaps do not go quite so far as the Treasury went on capital transfer tax, but they are coming a close second. The announcement of 25th February was greeted somewhat to my surprise—and not by myself—as though it conferred an almightly bonanza on the oil companies.
There may be some who think it does. Perhaps I may quote some figures to reinforce what the right hon. Gentleman says. The companies have since been looking at the small print of the amendments as they have appeared on the Notice Paper and have been working out their own figures. For companies with medium or small fields there is no question of there being any bonanza. Indeed, many existing fields may still be highly marginal and may not be developed. I quote Mr. Reynolds from the report in The Scotsman:
That is right as the Bill stands, and the right hon. Gentleman has confirmed that that is his intention. Later Mr. Reynolds said that, although the company would not withdraw its participation it seemed unlikely that the field could be developed economically. Conoco is a highly respected oil company, and I have been making my own inquiries. I am grateful to one of the smaller United Kingdom companies which provided me with a special set of figures—[HON. MEMBERS: "Oh."] I am prepared to discuss the assumptions with the hon. Member for Aberdeenshire, East (Mr. Henderson). They are entirely reasonable. That company provided me with figures for a hypothetical oil field which it christened the Patrick Jenkin Field. The company assumed two fields, a 500-million barrel field and a 300-million barrel field, and assumed in the one case a figure of $10·5 per barrel of oil and in the other case a figure of $9 per barrel. It assumed that there was no loan interest at all—in other words, that the whole development was to be financed internally. To take the most favourable situation, the 500-million barrel field at a figure per barrel of $10·5, there would be a payment of $320 million PRT and $1,623 million corporation tax. The Government take would be 63·8 per cent., and the DCF rate of return to the company would be 24 per cent.. That is dealing with the most favourable case. Assuming $9 per barrel oil, the Government take falls to 61·9 per cent. and the DCF return would amount to a bare 20 per cent. I am sure the Minister will accept that at that level is is becoming barely ecenomic."Conoco announced that their economists had concluded that some of the smaller schemes might not benefit fully from the allowance of £10 million free from petroleum revenue tax."
Does the total take include royalties?
Indeed it does. I did not mention royalties since they are a standard figure on output. In regard to the 300-million barrel field, there is no PRT at all, and to that extent the right hon. Gentleman's point is clear. I wish to emphasise that there is no bonanza in these proposals. In that case, assuming $10·5 per barrel, the Government take is 65 per cent. and the DCF return is 17 per cent.. In regard to the $9 oil the DCF falls to 13 per cent.I must remind the House that I am discussing a 300-million barrel field. [Interruption.] The hon. Member for Bolsover (Mr. Skinner) should realise that in most other parts of the world even a 100-million barrel field is regarded as a large one. These calculations envisage a field that is three times that size, and with a 62 per cent. Government take it yields only a 13 per cent. return to the company. At that rate nobody will bother to find the oil.
The right hon. Gentleman is talking about theory, and I have no doubt that in special circumstances such a field as he envisages could be found. However, he should concern himself with the fact that immediately following my right hon. Friend's statement a few weeks ago the general view of the market and of the people in the oil companies was very favourable indeed. The view from the Tory Front Bench, including the right hon. Gentleman, also was favourable, although perhaps in some cases a little muted. The only occasion I can find in the past few weeks of an outcry of any kind from the oil companies was the quotation the right hon. Gentleman gave from Mr. Reynolds of Conoco. The fact is that the oil companies are squealing all the way to the bank, and the right hon. Gentleman knows it.
I have no doubt that the hon. Gentleman will be able to make the same point at rather greater length if he catches Mr. Deputy Speaker's eye. We shall listen to him—or at least I suppose we shall.
Answer the question.
On 25th February I said:
I am now saying that the companies have looked at the figures and there is serious doubt whether that will happen. The hon. Member for Bolsover said it was possible that such a field might be found. Such fields are littered throughout the area, and the question is whether it will be worth while to go out and explore for them. I he figures I have just given were reinforced by some figures supplied to me by a small American company. Those figures show that the DCF rate of return, assuming $10 oil in a 400-million barrel field, would be 18 per cent., in a 340-million barrel field 16 per cent., and in a 275-million barrel field 13 per cent. A Canadian company has submitted figures in the same sort of conditions showing returns between 18 and 8 pet cent. That is no bonanza when talking about a field of that kind. The concessions made by the right hon. Gentleman, the 45 per cent. rate—lower than expected—the 75 per cent. uplift and the 10-million ton oil allowance go equally to the major fields. They are of considerable value to those larger fields. One company, which I should prefer not to name, says that the rate of return with PRT will be 35·3 per cent. Even assuming no PRT at all, the figure would be 40·3 per cent. It seems to me that these are great defects in the tax, but they are defects which stem from the structure of the tax to which the Government are committed. From the start that structure has been hopelessly and irremediably wrong. Despite dozens of amendments in Committee and over 100 Government amendments which face the House today. PRT is still a miserable fiscal animal. As the Financial Times rightly said following the announcement"I accept that the Paymaster-General's purpose is to achieve both profitability and incentive for the industry, but is he aware that we entertain serious doubts whether his reliefs are adequate and whether they will be enough to restore confidence… "—[Official Report, 25th February 1975 ; Vol. 887, c. 292.]
" A job once botched cannot be unbotched quickly."
Perhaps I may develop my argument. It started as a hideous monster that frightened the life out of the industry. Not all the cosmetics of the Inland Revenue, parliamentary draftsmen and Treasury Ministers to try to turn it into the kind of sleek thoroughbred which the Paymaster-General sought to describe can prevent its emerging as a horrid, misshapen beast. It is not so much the inelegance of which one complains as the fact that the changes made simply fail to achieve the fundamental purpose of the right hon. Gentleman. They have failed to turn it into a tax which creams off the true windfall profits in the rich prolific fields, but have left a tax which will be more costly in marginal fields. It leaves them in a difficult or even impossible position in regard to finance.Let us take new Clause I which deals with the oil allowance. The large field will get the full benefit of the 10-million ton allowance, but the small field will be able to use only part of the benefit while still becoming liable to PRT. The reason is that the rules have been deliberately drawn up to prevent any carry forward of the oil allowance. Assuming a constant crude price of $12 a barrel, a marginal field with reserves of 225 million barrels and an investment of £230 million, the company would be able to use only 67 per cent. of the oil allowance—only 6·7 million tons of the 10 million available over the full life. It would be paying during its lifetime £43 million in PRT. If we take a 450-million barrel field and an investment of £263 million, it would be able to use the whole of the return and pay PRT of over £340 million. We have tabled two amendments, one to carry unused balances forward and the second to carry them back. The one carried forward is important. If this proposal is accepted, the marginal field will be allowed to use the full amount of the oil allowance and will receive a bigger proportionate benefit than the prolific field. It might have the effect of eliminating the charge to PRT and might make the field economic. Our amendment would have no effect on increasing the return to the large field. I accept that for one year, or possibly six months, it might have the effect of delaying the revenue, but no additional oil allowance will become available to the major field. That is the purpose of Amendment (a) to new Clause 1. That is why we say that while the oil allowance is an attempt to turn this tax into a kind of excess profits tax it is a crude and clumsy weapon. 4.30 p.m. This amendment is the most important amendment that we shall discuss today. It bears keenest on the question whether the small marginal fields will be economic. If the Government do not accept the amendment we shall have once again to wait to hear what the Paymaster-General says in winding up—we shall have to level at the Government the accusation that they are more interested in raking in revenue for the Exchequer than in winning oil for Britain. Amendment (c) to new Clause 1 is a minor point, although it has some importance. When each participator in a field uses the full oil allowance there is no difficulty. But if some use it in full and others used it in part—for instance, because some have offsetting losses or unrelieved losses from other fields, or abortive exploration expenditure—there will be problems. The clause provides for the fact that the oil allowance will not necessarily be shared proportionately. Therefore, we have tabled Amendment (c) to seek to ensure that the oil allowance is fairly divided between the participants. I hope that the Paymaster-General will deal with that when winding up. Our objections do not stop there. I turn to new Clause 2 and the 30 per cent. safety net. Here it is intended to provide protection for the oil companies if their returns fall below 30 per cent. before corporation tax. We live in an inflationary era. In the future we can expect, although we cannot be sure, that as costs rise in the industrial countries so will oil prices rise. Therefore, the safety net, which is tied to historic cost, will become less valuable, in the proportion which the historic cost of the capital will bear to the costs, and the revenues of the company become less. Whatever the Sandilands Report may have to say about inflation accounting in general, this is a unique case of a relief intended to ensure for the companies a long-term safeguard against a relative fall in oil prices. However, oil prices can still fall relative to costs, even though they rise in money terms, because of the general effect of inflation. If the safety net is fixed by the historic cost, after a few years it will become a virtually valueless protection. There must be some form of escalator. The wording of the amendment has been left vague since there is no proper index yet to which it can be tied. Therefore, we say that the Treasury should be able to designate an index and perhaps even compile one. There is also the question of interest, with which we are dealing in this group of amendments. There must be an option for companies either to take the 75 per cent. uplift or to claim the real cost of their interest charges which they incur in financing. In some cases 75 per cent. may be enough to cover the cost. In other cases it will be over-generous because the greater the use of internal finance the less interest companies incur. Therefore, while the 75 per cent. uplift is a valuable benefit, it is monstrously unfair that everybody should be fitted into this Procrustean bed of 75 per cent. uplift whatever their financing costs. I take the example of two companies developing the same kinds of field, which have the same capital costs, and which are both borrowing all their development costs. If there is a delay of one year and one company has to bear higher interest costs, no allowance is given to cover that cost. The company is entitled only to the bare 75 per cent. uplift. That is of importance to the smaller British companies which are seeking to establish themselves in the North Sea. I refer to companies represented by BRINDEX. I have seen a letter which was written to the Paymaster-General by Mr. Goodfellow, the Chairman of BRINDEX, in which he makes a powerful plea for an option for the smaller companies. Otherwise those companies will find themselves even more at a disadvantage vis-a-vis the multinational companies when competing for development finance. If account is not taken of those factors we run the risk that many of the small fields on which this country will depend in the 1980s and the 1990s will never be prospected and will never be found. It will not be worth while for the industry to seek such fields, because, if found, such fields will provide a lower return to the industry than that which could be earned elsewhere in the world. The incentive to explore is crucial.
Will the right hon. Gentleman make it clear why he thinks the relatively smaller fields are better exploited by smaller companies than by the larger companies?
I do not say that of course, there is no correlation between small fields and small companies. Large companies find small fields, while the smaller —such as Thomson Scottish Petroleum, Occidental Petroleum (UK) Ltd., and Piper Consortium—have found prolific fields.The interest factor is important to the smaller companies because they do not have the internal resources with which to finance their development. If they are unable to undertake exploration because it is not worth their while, many of the small fields which remain will not be found. Nobody expects any more bonanzas in the North Sea. If small fields are not found we shall be back in the hands of OPEC by the middle of the 1980s. There are three reasons why the allowance, is inadequate. It cannot be carried forward, the safety net affords no protection from inflation, and there is no option for interest. We entertain the gravest doubts whether, even after all the massive changes which the Treasury has made to the PRT, an environment will be created in which the industry will wish to continue to operate at full blast in future. We shall listen with care to what the Paymaster-General has to say. However, if he does not meet my arguments, the Opposition will seek to divide the House on Amendment (a) to new Clause 1.
I am glad to see that the Government benches are slightly more populous than on the last occasion when I spoke about the petroleum revenue tax. They are not as populous as I should have liked, but at least I have some support, whereas on a previous occasion I stood almost in isolation.I begin by declaring my interests, which are well known. I do not accept the last comment of the right hon. Member for Wanstead and Woodford (Mr. Jenkin) that there are no more bonanzas left in the North Sea. I hope that one of my interests will be in a position to declare such a bonanza resulting from discoveries in 1975 and 1976, since we are involved in two wildcats which I hope will find large accumulations of oil, to the benefit of my associates and the nation. A large number of points were raised which we discussed on previous occasions. The point was raised by my hon. Friend the Member for West Lothian (Mr. Dalyell) concerning the nature and size of marginal fields. It is important that the House should appreciate that it is not the size of the field that is of vital importance. It is the size of the modules of production and number of platforms which is important. It is the amount of oil which can be produced and recovered through a single platform unit which is important. If there is a field of optimum size for drainage by one platform, the economics of the field can be very good even if it is only a 300 million or 350 million barrel recoverable reserve. Equally, a field of intermediate size can have its economics impaired because it might necessitate two platforms at less than the optimum usage required for two platforms. The industry has tended to look at economics in terms of the size of accumulation which can be drained and exploited at an optimum rate by a single platform. This has tended to be about 300 million to 350 million barrels a day.
The hon. Gentleman has contradicted himself. He has just referred to a figure of 350 million barrels a day. Earlier he spoke of a 350-million barrel reserve, and I think that is what he really means.
I stand corrected if I said that. I meant 350 million barrels of recoverable reserves in an accumulation.Taking an optimum accumulation and conducting an economic evaluation on the basis of that size, it is possible to come to a figure for return on capital invested in the region of 26 to 30 per cent. It is possible to vary any number of the factors which go into making up such an economic analysis, but, taking what can best be described as average North Sea parameters for all these, one comes to a figure under the provisions of this Bill of between 26 and 30 per cent. on capital invested. I doubt whether there is a single oil company which would be disappointed with such a return on its capital invested, looking at units of this size. When we come to units which are not of optimum size—and most of them are not of optimum size—we find that the amount of return on capital invested varies according to the departure from the optimum number of platforms. The degree of departure affects the degree of capital investment. The importance of PRT as we now have it, as opposed to an excess profits tax, is that, willy-nilly—and whether it was intended to do so I am not altogether clear—it is an extremely powerful weapon in the hands of the Government in terms of the exploitation of marginal fields. The Government are able to have fields exploited which previously might not have been exploited. We may well get marginal fields exploited which, prior to this legislation would have been unecomic—even under the previous legislation, which included no PRT. We must regard this as a very significant advance, especially for the country at large. The fact is that most of the oil—certainly half of it—in the North Sea will be found in fields of 350-million barrels recoverable reserves or less, and it is important that these fields are exploited over a period to the year 2000. Therefore, it is important that the Government have a weapon which can ensure that any fields which are economically exploitable are exploited if the Government decide that it is in the national interest that these fields should be exploited. We now have a weapon which we did not have before for making sure that they are exploited. I want now to touch upon one small technical point. It concerns the oil allowance. The provision of a similar gas allowance is not explicit in the Bill. It is worth pointing out that if a gas allowance is to be calculated on the calorific or heat equivalent of the amount of gas required to produce the same amount of energy as 10 million tons of oil or 500,000-ton tranches of oil, it will be found that the value equivalent of gas is a good deal less than the oil equivalent. I suggest to my right hon. Friend that he should look again at this provision in the Bill to see whether the equivalents cannot be made value equivalents rather than energy equivalents.
Does the hon. Gentleman also agree that there is a case for making it measured in barrels rather than in tons so that account may be taken of different specific gravities, which also make for differences of value?
I am grateful to the right hon. Gentleman. This is one of the problems that people active in the international oil industry face constantly. A barrel is a measurement of volume. A ton is a measurement of weight. Different oils have different gravities. Therefore a ton of one kind of oil can be of a quite different volume from a ton of another. Since the specific gravities of oil can vary from less than 0·8 to 1 or more, there can he considerable differences between the volumes concerned, which in turn affect the calculations.Having been brought up originally on barrels, I find it very difficult to translate into tons, and I join the right hon. Gentleman in suggesting that in future we describe everything in barrels, and cubic feet per barrel in terms of gas, and stop talking about weight. We have an even more complex situation with gas when we talk about its energy value. We measure gas in BTUs, and the conversion of BTUs into thousands of cubic feet often is beyond me. Because of these slight technical difficulties a company may find that 10 million tons of oil means more to one company than to another and, in the case of gas, when one is looking at energy or some other equivalents other than value—and because gas is very much cheaper still in the United Kingdom the price paid for the gas contracts is very much lower than the international price of oil—a gas producer is less well-off than an oil producer. There is one other matter which I wish to raise about gas contracts. We have excluded existing gas contracts from PRT. Future gas contracts are not to be excluded. This is likely to raise problems as long as the gas price remains relatively low in comparison with the energy equivalent of oil. We may find gas fields which in the interests of the country we want to have produced because our gas reserves look like being less than our oil reserves, and there may be a strong case either for exempting gas from PRT or for introducing some form of allowance which will allow gas fields to be produced, otherwise even large gas fields will prove to be marginal as the Bill stands at the moment. This is a matter of some urgency for the country, and I ask my right hon. Friend to look at it again. Finally, on the oil allowance, the possibility of allowing the oil allowance to he taken as the first allowable overcomes the objection of the right hon. Member for Wanstead and Woodford, if it is possible to do it. If companies are not allowed to accumulate an oil allowance, they will lose out especially in the early stages of a field. It would help if the oil allowance could be one of the first allowances and they could carry some of their other allowances. I welcome the price movement safeguard. This is vital for investment confidence in the industry and for the balance of payments position. Practice will show whether it will work out satisfactorily. I understand that the Treasury is prepared to look at this over a period and that the national interest will take preference over any other interest in deciding exactly what form it will take. Much has been made both by Labour Members and by Members of the Scottish National Party of rates. There has been an astonishing amount of misinformation published in the newspapers, including the articles quoted by my right hon. Friend the Paymaster-General. I can produce a number of other articles purporting to be an analysis of what the national take would be, all of them equally fantastic in their calculations and in the parameters they have used. My calculations indicate that the Treasury figure of an average of 75 per cent. is the most accurate in the current climate. In certain cases it will be lower and in other cases it will be nigher. I say to my hon. Friends that the reason it is 75 per cent. is that it is an average figure. I say to Members of the Scottish National Party that if we produce all the oil we require there will be a number of fields where perhaps PRT and other taxes will be levied at low rates. There is an important distinction between taking 75 per cent. in tax from 2·5 million barrels a day or 90 per cent. in tax from 1·5 million barrels a day. The country requires 2·5 million barrels a day, and 75 per cent. of that is a lot better than 90 per cent. of 1·5 million barrels a day.
Will the hon. Gentleman accept that there is not the same stampede towards the high rate of production required by the United Kingdom since the Scottish requirement will necessarily be less?
I prefaced my remarks by saying that they were directed towards Labour Members and Scottish National Members. The question whether we should conserve our production and save it for a future Scottish nation is not one to which I shall address myself. No doubt my right hon. Friend has this problem in mind.
Would the hon. Gentleman not agree that it is a question not just of conserving production for the Scottish nation but of conserving it for the world? It is not in the world's interest for us to burn up these resources in a short time. We owe it to the developing nations to extract the oil slowly.
If the hon. Lady had listened to a previous energy debate, she would have known that my concern for the way we are burning up energy reserves is as great as hers.The reason why companies are showing a disinclination to explore in Norway at present is due to the nature of the Norwegian package. It is not merely a taxation package; it is a taxationparticipation-licensing package which inhibits enthusiasm. Companies with which I have spoken in recent weeks have said quite categorically that they prefer to spend their exploration moneys in the United Kingdom. As long as we require to discover and exploit oil at the rate which I believe to be essential, I hope that this situation will continue. I turn to the question of allowance of interest. I would welcome an option for the smaller companies. This would be an extremely attractive advantage. It would be used in lieu of uplift. Some smaller companies are not as confident as they might be about the question of waiving royalty. This would largely overcome many of the difficulties raised in the specific examples cited by the right hon. Member for Wanstead and Woodford. We have not sufficiently analysed just how powerful and important a weapon waiving royalty would be in the hands of the Government in getting marginal fields exploited. All the examples quoted today would be transformed if royalty, either in total or in part, were waived. The return on capital invested would be quite different. This power is now in the hands of the Government. Any Government which wishes to encourage the production of marginal fields—when faced with figures showing that the economics are such that a company would not be prepared to go into production—would find that an ability to waive royalty, either in part or in whole, would be the weapon that would allow them to do so. I ask my right hon. Friend to enlarge on the Government's intention in this matter. This is one of the most significant measures affecting marginal fields development. Despite the considerable pressure that has been applied to my right hon. Friend, the Bill has produced one of the best climates for Government take and for continued participation by the international oil industry of which I am aware. The average of 75 per cent. State take compares favourably with the percentage taken by any other country. It is a major take by the State. At the same time we shall be in a position to encourage continued exploration and the continued presence of the oil industry. The House should join me in congratulating my right hon. Friend on an excellent Bill.
I should like to register my disapointment that Amendment No. 230 has not been called. In so doing I accept the statement from Mr. Speaker that he will allow some latitude in relation to benevolence towards a view which might be expressed in its direction.Amendment No. 230 called for the setting up of a Scottish oil fund which would be under the control of Parliament or the Scottish Assembly.
Order. To save the hon. Gentleman from being out of order later on, may I say that this amendment was ruled out of order as being beyond the scope of the Bill. Therefore, it is impossible for him to discuss the items in it.
I appreciate, Mr. Deputy Speaker, that normally when faced with such a question of order you use your discretion. However, Mr. Speaker said that there might be some latitude.
Order. I happen to be in the Chair at the moment. With respect, I can only abide by the ruling that Mr. Speaker has given formally.
Obedient as ever to the Chair, I will bow to your discretion, Mr. Deputy Speaker, and perhaps make my remarks in another forum.We are not now discussing what might be a peculiarly Scottish matter since the earlier amendment has been ruled out of order. We are discussing the take which the United Kingdom might reasonably expect to get as a result of the Bill. Anyone who presents calculations of any sort on taxation matters to the House, or anywhere else for that matter, must be aware of the power of the Treasury and the resources at its disposal. I appreciate the remark by the Minister to the effect that this is a complex matter. I have thought from time to time as the Bill went through Committee that it might help if we were to be allowed charts or access to computer terminal points. Some better understanding of the calculations might have been reached. It is significant that the calculation the Government made on announcing the rate of PRT has been hoisted from 70 per cent., which I think was the average take, to 75 per cent. If this is correct I would be the first to congratulate the right hon. Gentleman.
Perhaps I ought to clarify this issue. My hon. Friend the Member for Dudley, West (Dr. Phipps) made an estimate of 75 per cent. The Government's estimate of the take over the next 10 years is around 70 per cent., but I have emphasised repeatedly that this is affected by uncertainties to do with costs, prices, profiles of production and so on. All these figures have to be treated with a certain care. That is our calculation of the average position, with some fields doing substantially better and other, marginal fields, obviously falling below that figure.
I come to the question of the Scottish National Party calculations which were referred to by the Minister. It is true that we have projected that the jump in costs will not necessarily take place by the 1980s. It is true there has been a severe rise in costs over the last year or two, but there are new technologies beginning to emerge for the extraction of offshore oil. In particular, we have the Exxon sub-sea production system—SPS—a prototype of which is already in operation in the Gulf of Mexico. It has been estimated that this could—I emphasise "could "—reduce costs by as much as 50 per cent.If the Minister is interested, there was a relevant report of this in the 7th March edition of Petroleum Times. The report paraphrased another report which had been taken from the Organisation for Economic Co-operation and Development. The article said:
It goes on to give the reasons for this view. In advancing the argument that development costs might not continue their rocketing inflationary spiral that we have seen in the past two years, I am drawing upon other sources of information apart from those of the SNP. I hope that the Minister will give some consideration to them. I appreciate his argument that he would be delighted were the OECD to be proved correct and the extraction costs prove to be less than previously anticipated. One of the criticisms we have made of the Government's figures concerns the amount of capital relief given. There is relief on the 75 per cent. uplift, which emerged during the course of the Bill with a promise for special relief for the smaller companies. There is a strong argument to suggest that the figure of 75 per cent. is excessive. Interest rates are beginning to fall world-wide. If we adopt a 30 per cent. guarantee return no tax would be paid on oil produced under PRT regula- tions until 175 per cent. of capital costs have been retrieved. After that it is argued that there would be a 30 per cent. guarantee on capital which has, in effect, been repaid. I suggest that the Government have been extraordinarily generous during their negotiations with the oil companies. I hope to make reference to some of these negotiations later. In our study of comparative returns it was clear that in the Middle East the profit margin is currently set at $21·7 per barrel. This contrasted with our estimate, which the Minister disputes, of a net profit after tax of $2·15. In Noroil of March 1975 I noticed an estimate of $1·40 and $2·80 as a return which might be obtained from the United Kingdom sector of the North Sea. While the Minister may object to the figure quoted by me about the North Sea, there are calculations by other observers which relate to the rate of profit. If it is said that a profit 10 times that which is capable of achievement in the Middle East is acceptable, in my opinion the Government are capable of accepting anything. I might add that we must expect a higher rate of return because of the risks inherent in the North Sea oil fields. The multiplier of 10, taken as a form of criticism, is one which might be too simplistic. Therefore, in our calculation we have accepted that the multiplier by itself would be too high and have adopted a lower figure. It should be made clear that this is not a matter of semantics or calculations. It is a question of the money available to the British Government—the sole criterion, which we are forced to adopt in this debate—£6,700 million for the lifetime of the Scottish oil fields even allowing for the full 51 per cent. State participation which the Government have in mind. It has been said that the Government are asking us to take their calculations as being correct. The Minister has referred to the fact that there are some differences in the calculations which have appeared in certain journals. So too has the hon. Member for Dudley, West (Dr. Phipps). He said that he could have produced other articles showing entirely different views. I accept that newspaper articles by themselves are not necessarily to be treated as tablets handed down from on high. That does not necessarily mean that any statements from the Government must be accepted without critical study. If we examine this situation it will be found that there are a number of reports which have been building up and which show that other people—exclusive of political interests such as those of my hon. Friends and those of the Conservative Party who represent the oil interests—have come to the opinion that the rate of tax of 45 per cent. adopted by the Government is far too generous. The first and probably best test of this is to ask what happened to the market immediately after the Government made their tax announcement. The usual effect of such announcements is to drive shares down. In this case we found that there was a rise in share prices for most of the oil companies." North Sea and Alaskan oil will be produced for as little as $125 to $1.50 a barrel by 1980 (taking the 1973 value of the dollar), offshore oil in depths of 300 to 400 metres at around $4 a barrel and oil in depths of between 400 and 2,000 metres at between $5 and $8 ".
Will the hon. Gentleman put the matter into perspective by explaining to the House by what percentage the share prices declined from the time that the Government first came into office with a mandate virtually to carry out this policy and the time when the details were announced?
The hon. Gentleman will be aware that for a period all share prices were in considerable decline, including oil company shares. I cannot estimate to what extent the drop in the price of oil company shares was related to the Government's announcement or anything else. In fact, share prices rose after the announcement was made in appreciation by the investing public, including the institutions presumably, that North Sea oil operations would become more profitable as a result of the tax rate which had been adopted.
Does the hon. Gentleman accept that the change in the value of oil shares could also have been related to the enormous bogyman that my right hon. Friend had been built up to be by the Conservative Party in the preceding six months and that we were seeing a recognition of his sensible and pragmatic approach to the whole problem?
I am glad that the hon. Gentleman has come forward with rehabilitation of his right hon. Friend in the work that he has been doing. Some of the criticisms made in Committee by myself, if not by others on this side, were that the right hon. Gentleman was not doing enough to act as a bogyman.
It gives me no pleasure to make this point, but it appears that I am still a bogyman. Realising that the point about share prices was likely to be made, I had figures extracted for the share prices of many of the companies operating in the North Sea. The average increase in the value of share prices of those companies between 24th February—the day before I made the announcement—and 14th March was substantially less than the increase in the FT index generally. Therefore, it appears that I have not yet escaped from my character as a bogyman.
I am sure that, after full appreciation of the tax rate had been taken in, much of the opposition expressed in the share markets towards the right hon. Gentleman must have gone and that, therefore, he can walk into the Stock Exchange at any time without danger of being lynched.This is not purely a question of the stock market. There have been reports from stockbrokers looking at individual companies and working out their profitability with a view to encouraging business. Those assessments suggest that the professionals, having got out their slide rules and pocket calculators, or whatever they possess now, have calculated that the 45 per cent. rate is generous to the companies involved. I move now from the general to the particular and comment on the article in the The Scotsman to which the right hon. Gentleman referred. That article brought out a company profit of 40·6 per cent. Some elements in the calculation were not mentioned directly in the figures. However, the right hon. Gentleman will see a reference to the method of financing:
The article goes on to point out that 175 per cent. of total capital cost in lieu of interest charges which have been disallowed under the Bill could lead to £38 million more than the actual cost of providing and borrowing the capital being given as a tax concession. Therefore, there is reference to development and financing charges in that article. 5.15 p.m. I should now like to move to an assessment which has been made by a trade journal. It is all very well to take a broad approach and to say that the market jumped when the announcement was made, that individual brokers have made their assessments or that political parties, such as the Scottish National Party, have made theirs, and that special figures have been provided for the official Opposition. The Petroleum Times, a trade journal well regarded in the industry, on 7th March was extraordinarily tough in its comment on the whole business. Under the heading,"The method of financing the development—by borrowing 90 per cent. of the capital cost and repaying over six years after peak production was achieved — would mean that some £217 million would be paid in interest charges. This would raise development outlay to £557 million."
it states:" UK Government's ' give-away' tax ",
it was not referring to the amendment proposed by myself and my hon. Friends—" The battle of the UK rate of petroleum revenue tax is now over"—
Later, it states:"and the oil companies operating in the North Sea can chalk up another victory over a European government. Their success in this sector contrasts strangely with their failure to cope with the governments of the OPEC nations."
I hope that I do not hurt the feelings of the hon. Member for Lanarkshire, North (Mr. Smith), who is not present—"Predictably, the oil companies began their intensive defence immediately—and few industries are so well organised in matters of propaganda and lobbying. In the UK the companies were further aided "—
A few paragraphs further, it continues:"by muddled thinking in the Department of Energy, which seemed unable to decide on the right line of approach. More complications were introduced by the Treasury Department which appeared more interested in administrative convenience than in oil."
of the Government—" Although the computers have yet to digest the new programmes, it is already clear that the manifesto policies "—
Referring to the work of the oil companies, the article states:"have been diluted almost to the point where no flavour is left."
that relates to OPEC—"But the weakness in this area must be compensated elsewhere "—
That is a comment in a trade journal which is read and respected by the oil industry. The Minister is asking us to believe that his calculations are correct and that everybody else's may be wrong and that the Government have, in his words, been fair but tough with the oil companies and have not given away more than they should. On the other hand, we have had the various comments to which I have referred. We have a phrase for this situation in Scotland which I am sure will tax the efforts of Hansard, but I will try to provide a translation after the event' A' oot o' step but oor Jock." I suggest that the Government are trying to pretend that all those who have said that the Government have made a critical mistake in levying the PRT at 45 per cent. are wrong when all those people believe that they are right in their calculations. I ask the Minister, even at this late stage, to consider adopting our amendment of 75 per cent., which, according to our calculations, would add effectively 10 per cent. to the total take over the lifetime of the fields instead of present Government policy. Otherwise, when the Government find that their policy on oil development has been wrong, as it has been on so many other aspects, they will be forced on some future occasion to bring about a change in the rate of petroleum revenue tax in one of the monthly Budgets which I am sure that by next year we shall be having."if the international oil industry is to maintain its comfortable position in world affairs. So it has not hesitated to exploit, directly and indirectly, the economic weaknesses and balance of payments difficulties that have, in large measure, been caused by a critical dependence on oil. Such a policy may be of benefit to the shareholders, and the recent rise in oil share prices suggests that it is, but it will bring the industry precious few friends."
The right hon. Member for Wanstead and Woodford (Mr. Jenkin) spoke of an oil field named after him. I, too, have this claim to fame in the Maureen Field, but I have no direct interest to declare except that of a £1 share in the Brighton Co-op.One of the interesting things about the North Sea oil debate is the inconsistency of the experts to reach any consensus about how much oil will eventually flow. Speaking as an economist, I would say that they join those economic experts who can always supply a directly opposing opinion to one that someone does not like.
I hope that my hon. Friend will accept that, speaking as an oil expert, I have always been consistent and that it is not my fault if my colleagues have been in error.
I have never seen my role as projecting the importance of my hon. Friend.Some representatives of oil companies seek to make the most gloomy possible projection of profits. The oil companies can never have been represented with more vigour and concentration than they were by the Opposition in Committee on this Bill. I regret to say it, but the Government left the Committee with less than they went in with. Some experts in Rotterdam put the potential of North Sea oil much higher than the Government, the Opposition or the companies:
If that projection is only remotely accurate, if these forward complicated computer programme projections from Rotterdam come true, with all the concessions that the Government have made the Bill will have created only a further and bigger bonanza for the oil companies. What I wanted was a bigger bonanza for the people. The recent profits of the oil companies sicken me, as they do every other working person."Whilst the conventional wisdom thinks in terms of a maximum total potential reserve of 40 milliard barrels, this study indicates the possibility of a range of 80–140 milliard barrels, with a mean figure of 110 milliard."
My hon. Friend will appreciate that if the existing fields should prove to have reserves substantially greater than is now stated, the Government take from those fields, the capital expenditure having been disposed of in the early stages and the oil allowance having fallen out, will be much higher than the figures which I have given.
I hope that my right hon. Friend will not be too upset if I speak frankly and fully today.Developing my theme, the greed of the oil companies knows no bounds. The extent of Government control now proposed is a great disappointment to me and some of my hon. Friends. I ask the Government even at this late stage not to be so bemused by the pressures for private profit but to stick by and consolidate North Sea oil on behalf of the people. When I went in to the Committee on the Bill, I believed that we were about to impose a substantial extra tax on the oil companies' profits from the North Sea and to plug the loopholes in existing taxation. That was the promise in our manifesto:
Perhaps the Minister will say what he believes the Committee achieved and why, when it was actually sitting working out the nitty-gritty of the Bill and the hopes for ordinary people which we all had then, the Chancellor of the Duchy of Lancaster was in America, with no knowledge of what the Committee was doing, while the Committee had no knowledge of what he was doing, even more avidly negotiating more concessions to oil men. The way in which this situation has been and is being handled makes one realise what a poor and ineffective role a back bencher has and what a sad story and miserable contribution he has to accept. All that back benchers are really needed for on a Bill is to be Lobby fodder, passive players in a drama the main part of which takes place in another country, certainly not in the British House of Commons, and over which we have no control. To that extent, the only tiny bit of democracy left is here today, so that in the last hour one can say "I do not like what has happened." I hope that I am saying that fairly effectively and forcefully."The discovery of oil off our shores dramatically changes not only the country's energy prospects, but our whole economic future. Because its importance cannot be overestimated it is essential that its development should be under public control in the interests of the whole community, and with regard to the future. The Labour Government will… Take majority participation in all future oil licences and negotiate to achieve majority state participation in existing licences."
Would my hon. Friend agree that if anyone ever saw capitalism entrenched for the benefit of profit against the wishes and interests of the British people, hon. Members on the Committee on this Bill certainly saw it? It was openly portrayed that the oil companies operating in the North and Celtic Seas and elsewhere were concerned only with profits and not at all with the interests of the ordinary people of this or any other country.
I thank my hon. Friend for his intervention. I agree that the Government do not have the best deal that they could have got for the people of Britain. Time and time again they were outwitted by the Opposition's advisers, gentlemen from the oil companies who sat in the front row of the public seating in the Committee every day. They certainly occupied the undying and reverent attention of Conservative Members.This American-type lobbying at the very source of parliamentary power has to be stopped. It was admittedly open to members of the Committee to observe what a tragedy it was that television cameras could not enable the amazed British public to observe this process too.
Would it not have been a good thing if television cameras had been in the Committee, because people might then have seen how little the Government knew about the legislation which they were putting forward?
People also might have seen how little the Opposition knew, and how much they had to rely on the American oil companies' lobbying for their speeches.On one occasion the Opposition Whip circulated documents from the American lobby to the Opposition. I eventually named them the "American-suited bandits ", as I began to think of them increasingly in that role as the Committee proceeded. The whole shabby set-up should have been televised. If people could see the extent to which this American-type lobbying has permeated Parliament and the very heart of parliamentary power, they would be extremely distressed. I hope that at some stage we shall be able to take the matter up. I blame the Opposition, because hour after hour, in Committee session after Committee session, they spoke up on behalf of the oil companies and only occasionally, when reminded, did they speak on behalf of their constituents. Too much encouragement has been given to the expertise of the oil companies, and not enough recognition has been given to the indisputable fact that North Sea oil belongs to the people. Having gone through the machinery of the Committee, I feel that it would have been better if progress towards winning the oil had been directed less to national or company greed, and if there had been careful and painstaking consideration of the environment, the beautiful coast of Scotland and the long-term right of the people to benefit more fully from the enormous profit that will eventually be won from the North Sea. I fought two General Elections on a promise of oil profits for the people. However harsh this may sound to the Government, I am not certain that we have even begun to achieve that with the Bill.
The hon. Member for Northampton, North (Mrs. Colquhoun) has poured her heart out against her own Front Bench and the Opposition, mainly over the inability of back benchers to take part in the decision-making processes. But I am surprised to hear such comments from the hon. Lady, because she attended the Committee throughout all it deliberations, and that would have been the place for her to make such a speech. However, she was conspicuous by her silence during those debates.I do not bear any malice against the hon. Lady for taking the opportunity to make these points now, but the Committee stage offers back benchers the opportunity to alter legislation as they examine it word by word and line by line. I regret that it is only now that we have heard her complaints about the system. For example, I should have expected in Committee to see an amendment allowing members of her sex to be on oil rigs. It has always struck me as one of the anomalies of the oil industry that it does not allow members of the fair sex to take part in its activities or to arrive on oil rigs, even in the capacity of Press correspondents. I commend the Treasury Ministers for their considerable movement away from the original, harsh anti-oil-company approach establised by Lord Balogh in those heady days when the Government were in opposition. With massive increases in costs and inflation, it became apparent to Treasury Ministers that action would have to be taken to change the Bill in Committee to produce a workable tax system to enable exploration and development to continue in this vital area of our economy. I welcome the fact that the flexible and understanding Treasury Ministers have got the message from both Opposition and industry. I turn to the question of the attendance at Committees of representatives from outside Parliament. I have since been a member of the Committee considering the Coal Industry Bill, and I recall that members of the National Coal Board sat in during the whole of the Committee stage, offering advice to both the Government and Opposition. This is an essential part of the procedure. This Bill started life as one sort of animal but it returns today as a much less fierce creature. The scavenging wolf, which it appeared to be to the oil industry at the beginning, has now become an Alsatian, friendly enough to all appearances, but still possessing a dangerous streak which is enough to frighten prospective oil developers away from the front gate. The original Bill would, I am sure, have effectively stifled our North Sea adventure and forced a number of oil companies away from Britain. This may be what the members of the Scottish National Party would like to see, but it is certainly not what I and, I believe, the majoirity of hon. Members would like to see. It must be remembered that North Sea development depends mainly on the willingness of American oil companies to explore and exploit our fields as against other parts of the world. The introduction of hasty, ill-drafted legislation would have stopped all those companies dead in their tracks, especially if the details had not been finalised before being presented in the form of the Bill.