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Mr. Blizzard: I, too, support new clause 17 and wholeheartedly welcome the restoration of the capital gains tax roll-over relief for the oil and gas industry. I am the chairman of the all-party offshore oil and gas industry group and I represent a constituency that relies heavily on the industry, which is a major source of employment.
The industry has been operating for about 30 years and has achieved huge benefits for this country, such as the sheer scale of its input into our economy. Often, people think only of the 30,000 jobs offshore, but 10 times that number are spread around the country onshore through the 5,000 contractors whose work relates to the industry. Annual investment from the industry accounts for about 16 per cent. of total British industrial investment.
Hon. Members should consider for a moment the sums that I am talking about. Shell, which is based in my constituency, invests about £2.5 billion a year in the North sea operation. We should compare that with the capital investment that is made when a new Japanese electronics company sets up. We rightly get excited about investments of £200 million, £300 million or £400 million, but one oil company is investing annually eight times that sum in the North sea. That is substantial investment.
In my constituency, as in many others, the industry provides the employment that was lost from shipbuilding and fishing. The employment comes not only from large companies such as Shell and large fabricators such as Odebrecht, but from home-grown companies such as KYE and Boston Putford and scores more, some of which are little businesses with fewer than 10 employees. They all form part of the supply chain for the industry.
The industry has also provided a huge source of revenue to the public purse down the years--the debate concerns how that can continue--and relatively clean North sea gas, which has been of great benefit to the environment. When that fuel is used to generate
electricity, it produces only half the CO 2 emissions of coal burn. This country is on course to meet the Kyoto targets because of the contribution made by North sea gas.
It would not be economic to exploit today's fields if the industry still operated as it did 20 years ago. The industry has undertaken dramatic cost reduction measures, efficiencies and the development of new technology in a hostile environment, all of which has made the North sea a world leader. It is good for our business that we can export technology and expertise around the world.
The industry has changed, and, in its maturity, it needs a new tax structure, different from those of the past. We want the industry to continue for another 30 years--we need the jobs. We want the exports to continue, and we want continued investment that must be won in a global economy in which oil companies can choose to come here or go elsewhere. We want continued tax revenue from a huge industry. As long as the infrastructure exists in the North sea, it makes environmental sense to extract as much oil and gas as possible rather than leaving it behind.
Capital gains tax roll-over relief will help. It is well targeted and effective, and it will enable assets to be consolidated or traded, ownership to be rationalised and partners to be aligned. It will therefore reduce costs. Various projects and deals that would not otherwise have gone ahead can go ahead because of the change. Existing infrastructure can be used to develop satellite fields, and the relief will encourage investment, extending the life of the industry. It is a win for both the industry and the Treasury. By extending the life of the industry, the Treasury will receive more revenue in the end.
The measure proves that we have a listening Government. The industry has put its case, and the Government have listened. The Government want to work with the industry, and their method of doing so provides a model for such working. The task force has been formed, and the Government have sat down to see what can be done. Rather than having a lot of empty bluster after everything has been sorted out, a task force--into which both the industry and the Government put much time and effort--has brought about results.
The Government have signalled their commitment to the oil and gas industry, and they understand that field size--and not just oil price--is important. The changes are welcome in my constituency and in the scores of others around the country that support the industry. One comes to the House to press many issues and ask many questions. It is good sometimes to see a case on which one has worked coming to fruition.
Mrs. Roche:
This has been an interesting debate. I shall deal first with new clauses 15 and 16, which deal
Mr. Quentin Davies:
Does that include a floating production platform?
Mrs. Roche:
Floating production platforms are unlikely to be affected by new clause 15.
Mr. Davies:
That is a very vague response. In what circumstances would a floating production platform be affected, and in what circumstances would it not be affected? It is important to be precise.
Mrs. Roche:
The hon. Gentleman will appreciate that one must be careful in the language that one uses when dealing with taxation. I have been as precise as I can under the circumstances. Assets affected would include terminals and pipelines. The position regarding floating production platforms would depend on whether they were considered to be a mobile asset, a dedicated mobile asset or a fixed asset. The hon. Gentleman was perfectly right to ask his question. I mean no disrespect to him when I say that it was one of the most coherent parts of his speech.
Mr. Peter Brooke (Cities of London and Westminster):
The Financial Secretary has read the note handed along the Bench to her, and has indicated that the situation would depend on three different things. However, she did not say in what way it would depend on them.
Mrs. Roche:
The right hon. Gentleman will realise that the situation will depend on individual circumstances. A definition of assets is included in the Oil Taxation Act 1983. There are also matters of interpretation, and, as a former Treasury Minister, the right hon. Gentleman will appreciate that the situation depends on circumstances. I have been as helpful to the House as I can. The position would also depend on what had been agreed at the time--the right hon. Gentleman knows how the Inland Revenue works, and what negotiations take place; he has a good memory, and all that will come flooding back to him.
The principal subject of our debate is capital gains tax roll-over relief. We heard an excellent speech from my hon. Friend the Member for Aberdeen, Central (Mr. Doran), who takes a close interest in the industry and who has great expertise. We heard a further excellent speech from my hon. Friend the Member for Waveney (Mr. Blizzard), who chairs the all-party offshore oil and gas industry group. We have had many interesting discussions on the subject, and I know of his great efforts in this regard. The hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) also holds a position in that group.
It is difficult to know how to characterise the speech made by the hon. Member for Grantham and Stamford (Mr. Davies), except to say that I heard every word, even though he delivered it without a foghorn. My hon. Friends and I were accused of machismo and of strutting our stuff, and we shall be pleased to carry on as we are. I should have taken the hon. Gentleman's bluster and protestations more seriously if the hon. Member for Maldon andEast Chelmsford (Mr. Whittingdale)--now off to be
Parliamentary Private Secretary to the right hon. Member for Richmond, Yorks (Mr. Hague)--had not congratulated us during the Committee Stage. At no time in Committee did he raise CGT roll-over relief. Even in the all-party group, no Opposition Member has ever raised the matter.
New clause 19 is an Opposition U-turn, reversing the position that they took in 1987. The hon. Member for Grantham and Stamford can protest all he likes, but they had all their years in Government to put it right. I shall outline the differences between our new clauses and the Opposition's new clause.
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