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Mr. Frank Doran (Aberdeen, Central): I must confess to being one of those feeble Scottish Members of Parliament who have been doing all their lobbying behind the scenes. The comment that was made from the Opposition Front Bench either shows just how long it is since the hon. Member for Arundel and South Downs (Mr. Flight) was in government or, as I cannot recall exactly when he came into the House, demonstrates that he has not experienced government at all. Full-frontal attack is not always the best way of dealing with issues. The ability to sit down and talk directly to Ministers is more important, and I am very pleased about the access that Ministers at every level have provided for Scottish Members who are interested in discussing the issue. [Interruption.] The hon. Member for Gordon (Malcolm Bruce) comments from a sedentary position, but I can excuse him, as he has never experienced government and is never likely to do so, so such a way of operating will be completely alien to him.
The presentations from those on both Opposition Front Benches reveal one of the difficulties about this debate. On one side, it is clear—I am very clear about this—that the complaints made by the oil industry are wholly expected. I have listened carefully to the arguments and have engaged in debate with those involved, who are doing what is appropriate for them to do. However, the doom and gloom scenario does not reflect the debate in the industry, which is not unified on the issue. Certain companies, including one of the major ones, have been pressing the case very hard directly and through the United Kingdom Offshore Operators Association, but there is a much livelier debate below the surface.
The discussion is about the balance in the budgetary measures that affect the North sea. It is often conveniently ignored in public statements that the measure is not only about extra tax, although that is important, but about the balancing measure of the tax reliefs that have been provided. Yes, there are concerns about how those provisions will operate in practice, but the bulk of the industry is sitting down to see how particular companies will be affected by the new taxes. It is important to get that on record. The oil industry has a diversity of views on this as on every subject, but the only views that we are hearing at the moment are those of the Private Frazers—the doom and gloom merchants.
Sir Robert Smith (West Aberdeenshire and Kincardine): Does the hon. Gentleman recognise that some of the people expressing doom and gloom might be those who saw the royalties relief that was promised by the
Chancellor as an important part of the upside? Even now, as we reach the final stages of the Finance Bill, the consultation paper on the abolition of royalties has yet to be published. Does the hon. Gentleman think that if the Chancellor is serious about that commitment, he should ensure that the paper is published?
Mr. Doran: I shall make my own contribution to that debate shortly. The hon. Gentleman makes an important point, but I may express it slightly differently.
In their new clauses, the Conservatives are trimming around the edges somewhat in that there is no direct attack on the 10 per cent. increase. The SNP amendments would simply wipe everything out to return to the status quo.
The allegation that I have heard most frequently in every debate on this matter concerns the stability of the tax regime, and Conservative Members mentioned it again today. In fact, the hon. Member for Arundel and South Downs went a lot further in his comments. He said, to quote him verbatim, "The UK tax regime lacks fiscal integrity as a result of this Budget measure." That is an extreme statement, and I find it difficult to see how he has reached that judgment.
Mr. Doran: The hon. Gentleman is anxious to leap to his feet. Before he does so, it is important to say that although we need to have a debate, it must be conducted in a measured way, and his comment was a long way from reality.
Mr. Flight: With respect, I think that I made the point straightforwardly. In the past, Governments have always observed the principle that if the tax regime is changed, it does not affect existing arrangements. Even in the one or two instances where that was not so, compensation was made in other ways. That is not the case as regards this provision, which is why I, and many in the industry, believe that it does not have tax integrity. Moreover, it follows the Secretary of State for Trade and Industry having encouraged substantially higher levels of investment through the PILOT scheme and having implied that the existing tax regime was going to continue. It is a pity if the hon. Gentleman—
Mr. Deputy Speaker (Sir Michael Lord): Order. The hon. Gentleman's intervention is starting to become a speech.
Mr. Doran: I agree with you, Mr. Deputy Speaker. Methinks the hon. Gentleman protests overmuch. I shall remind him of some history. He may not have been around at the time of the 1993 Budget, when the Conservative Government did exactly what he is accusing this Government of doing. They introduced tactics of which the industry—at least, the bulk of the industry—had no advance warning. One company—I think that it was Texaco—signed a deal on the day before the Budget. On the following day, as a result of the Chancellor's statement, that deal lost it several million pounds. The company did not anticipate what was going to be in the Budget, and there was no consultation. That is exactly
what the hon. Member for Arundel and South Downs is accusing the Government of, yet nobody compensated Texaco.
Chris Grayling: I, too, had not entered the House in 1993. Did the hon. Gentleman oppose the changes in the 1993 Budget, and, if so, how can he support those in this Budget?
Mr. Doran: Unfortunately, due to a little disagreement with the electorate, I was not here in 1993 either. However, I was acting as a consultant to one or two of the people involved and contributed to the discussions.
On stability, it is difficult to know what the oil industry wants. I understand why PILOT has been mentioned, but PILOT has a completely different focus. The Chancellor's words were clear. In 1998, when he dropped the review of the oil tax regime, he made it clear to the industry that the decision to do so was a decision for the duration of the Parliament. He made it equally clear in this year's Budget that he was giving us a tax regime for the oil industry for this Parliament. I know of no other area of the economy with that level of stability—a guarantee that that is it for the entire Parliament.
6.45 pm
There are three high watermarks in the history of oil taxation. In 1975, the then Labour Government established the modern petroleum tax regime with the introduction of royalties, petroleum revenue tax, and so on. That, with some changes around the edges, remained the position until 1993. This year, a further substantial change is being introduced. That is a considerable degree of stability for any industry, and it should be noted and recorded.
Mr. Salmond: The hon. Gentleman is being somewhat disingenuous. He may recall that in a Scottish Grand Committee last year, the hon. Member for Aberdeen, South (Miss Begg) said:
- "The oil industry in the North sea is doing so well because this Government have provided a stable fiscal regime. When they came to power, my right hon. Friend the Chancellor considered the fiscal regime and took advice from the industry, and those of us in the north-east who advocated leaving well alone."—[Official Report, Scottish Grand Committee, 28 March 2001; c. 26.]
Mr. Doran: I am not sure what the hon. Gentleman's question is. He is right that in 1997 and 1998 I lobbied the Chancellor—not publicly, but privately—to leave well alone. As the hon. Gentleman well knows, at that time, the industry was experiencing a sustained period of low oil prices. This year, the Chancellor is reacting to a sustained period of nearly three years of high oil prices.
Mr. Salmond indicated dissent.
Mr. Doran: The hon. Gentleman took part in the debate and he knows exactly what I said. He is twisting words; he is very good at that. At that time, in 1997 and 1998, leaving well alone was the approach that both he and I took.
I have already spoken for longer than I intended, but I want to make a couple more points. Despite the support that I have given to the Chancellor's measures, two issues need to be addressed. The first of those—royalties—was mentioned by the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith). It is important to get an early decision from the Treasury on royalties, and I know that the intention is to publish a consultation paper. From the industry's point of view, and from my perspective as a Member of Parliament with an interest in the industry and a constituency that houses part of the capital of the industry—the city of Aberdeen—an early decision on royalties would be extremely welcome. There is a genuine fear in the industry that the Chancellor intends to delay the introduction of any reliefs until the next financial year. I would be disappointed by that. The oil industry sees the royalties relief as part of the package, and would appreciate it if it were part of the package for this year, starting on 17 April when the new supplementary tax was introduced.
The second point concerns financing costs, the most important aspect of which is to deal with the uncertainty that has arisen. My hon. Friend the Member for Waveney (Mr. Blizzard) has already made the position fairly clear. I do not go the whole way with him, but the industry needs to know as soon as possible exactly what the position is.
With those two qualifications, this is an important measure. The industry will learn to live with the new arrangements. When they are properly examined, the tax allowances provided in the Budget will be welcomed and will take the industry forward into the new era. That is inevitable. It is a maturing province, which remains the most important part of our economy—not only in the north-east of Scotland, but in the whole of the UK. Last year, a little under £4 billion was invested, and the hon. Member for Gordon mentioned the five-year figure of £23 billion. That is a massive amount of investment in one part of our economy, and it should be supported.
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