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Ruth Kelly: I will not give way to the hon. Gentleman, because I must make some progress.
I cannot accept new clause 4 because it would do nothing to increase investment in the North sea, but would simply hand money back to companies that have made very good returns from the sector in recent years and, as I said in Committee, will continue to do so when the changes in the Bill are enacted. It seems to have been forgotten that this tax is not like petroleum revenue tax. It is not a tax on individual fields. It is a tax that applies to company profits in the North sea—profits that have been shown to have far exceeded those of other industries since petroleum revenue tax was abolished for future fields in 1993, even with the effect of oil prices stripped out.
Several hon. Members have questioned our relationship with the US tax authorities and whether the supplementary charge will be allowable under double taxation treaties. The Inland Revenue has written to the Internal Revenue Service in the US to ask for its view on whether the supplementary charge will be creditable. That is, of course, an issue for the US. It was the industry which asked us to do that, and it was then up to the Revenue to contact the IRS and deal with the issue in the usual way.
Sir Robert Smith: Does that mean that until the industry raised the issue as a concern the Inland Revenue was not aware of it? Does the Inland Revenue think that it is a genuine concern or did it miss it completely?
Ruth Kelly: It clearly is of concern to certain companies and it needs to be sorted out one way or the other. It is not clear, however, that companies will be significantly disadvantaged if the supplementary charge were not to be completely allowable under the double taxation treaties. I urge those companies for which that is a real issue to approach the Government and the Inland Revenue and set out their concerns. We will then liaise with those companies and address their concerns. If the hon. Gentleman has evidence that the issue is of real concern, I will also of course be willing to listen to him.
Several other hon. Members raised the question of royalties. Many views have already been expressed to the Government about the abolition of royalties and several dates have been suggested. I expect the Department of Trade and Industry to issue a consultation document in the near future. I can certainly confirm that it remains our intention to abolish royalties subject to that consultation.
The Government have considered the returns on capital employed in the North sea. We have found that, since the tax changes made by the Conservative Government in 1993, the rate of return has risen from 10.5 per cent. to 34 per cent. last year. In comparison, the rate of return for other non-financial industries was, on average, 11 per cent. last year, and the difference was not caused by temporarily high oil prices. In fact, the rate of return in the North sea was higher than that for other industries in every one of the past nine years—even in 1998, when the oil price fell sharply.
It is only right that we take a fair share of revenue from the North sea for the United Kingdom taxpayer. Our reforms promote investment, jobs and development in the North sea. They are right; they are for the long term. I urge hon. Members to reject the Opposition's new clause and to support the Government.
The economic life of the North sea in the 1990s was enormously better than expected, which has been largely reflected in a sensible tax regime since 1993. The Government clearly have a windfall strategy: oil prices have gone up, so it is appropriate to charge more tax. Indeed, the Financial Secretary said so. I warn her that, with the economic outlook facing the world today, and as the European Bank for Reconstruction and Development is funding the installation of a new pipeline from Russia, it is highly questionable whether higher prices will be sustained.
The Opposition have won the argument overwhelmingly. This tax grab will put at risk the maximum future exploitation of the North sea. I commend the Financial Secretary on doing her best to defend the indefensible. I am slightly saddened that someone as bright as she is has swallowed the spin that the Treasury has fed her. We have already made the point that the 34 per cent. return figure is nonsense. It represents the top return for 2001, compared with the 14 per cent. average. Indeed, the figure is only 7 per cent. for investments since 1996.
The Financial Secretary will come to eat her words. The leading oil industry economist, Wood Mackenzie, has made it absolutely clear that the Government's case is rubbish and that the industry cannot sustain any further marginal taxation without a major loss of investment and employment. The Government will regret what they are doing. They have misled the industry by their lack of consultation, but they then try to tell the industry, "Trust us. This is another long-term regime." Pull the other one, mate. When confidence has been broken, people do not give their trust. Britain will suffer; the current account will suffer; jobs will suffer; and investment will suffer. This additional taxation is very unwise.
Question put, That the clause be read a Second time:—
The House divided: Ayes 177, Noes 303.
AYES
Ainsworth, Peter (E Surrey)
Allan, Richard
Amess, David
Ancram, Rt Hon Michael
Arbuthnot, Rt Hon James
Atkinson, David (Bour'mth E)
Atkinson, Peter (Hexham)
Bacon, Richard
Baron, John
Barrett, John
Beggs, Roy
Beith, Rt Hon A J
Bellingham, Henry
Bercow, John
Beresford, Sir Paul
Blunt, Crispin
Boswell, Tim
Bottomley, Peter (Worthing W)
Bottomley, Rt Hon Virginia
Brady, Graham
Brazier, Julian
Brooke, Mrs Annette L
Browning, Mrs Angela
Bruce, Malcolm
Burnett, John
Burns, Simon
Burnside, David
Butterfill, John
Cable, Dr Vincent
Calton, Mrs Patsy
Cameron, David
Campbell, Rt Hon Menzies
(NE Fife)
Carmichael, Alistair
Cash, William
Chapman, Sir Sydney
(Chipping Barnet)
Chidgey, David
Chope, Christopher
Clappison, James
Clifton–Brown, Geoffrey
Cotter, Brian
Cran, James
Davey, Edward (Kingston)
Davies, Quentin (Grantham)
Djanogly, Jonathan
Donaldson, Jeffrey M
Dorrell, Rt Hon Stephen
Doughty, Sue
Duncan, Peter (Galloway)
Evans, Nigel
Ewing, Annabelle
Field, Mark (Cities of London)
Flight, Howard
Flook, Adrian
Forth, Rt Hon Eric
Foster, Don (Bath)
Francois, Mark
Garnier, Edward
George, Andrew (St Ives)
Gibb, Nick
Gillan, Mrs Cheryl
Goodman, Paul
Grayling, Chris
Green, Matthew (Ludlow)
Greenway, John
Grieve, Dominic
Hague, Rt Hon William
Hammond, Philip
Hancock, Mike
Harris, Dr Evan (Oxford W)
Hawkins, Nick
Heald, Oliver
Heath, David
Heathcoat–Amory, Rt Hon David
Hermon, Lady
Hoban, Mark
Hogg, Rt Hon Douglas
Holmes, Paul
Horam, John
Howard, Rt Hon Michael
Howarth, Gerald (Aldershot)
Hughes, Simon (Southwark N)
Hunter, Andrew
Jack, Rt Hon Michael
Jackson, Robert (Wantage)
Johnson, Boris (Henley)
Jones, Nigel (Cheltenham)
Kennedy, Rt Hon Charles
(Ross Skye & Inverness W)
Kirkbride, Miss Julie
Knight, Rt Hon Greg (E Yorkshire)
Laing, Mrs Eleanor
Lait, Mrs Jacqui
Lamb, Norman
Laws, David
Leigh, Edward
Letwin, Oliver
Lewis, Dr Julian (New Forest E)
Liddell–Grainger, Ian
Lidington, David
Lilley, Rt Hon Peter
Llwyd, Elfyn
Loughton, Tim
Luff, Peter
MacKay, Rt Hon Andrew
McLoughlin, Patrick
Malins, Humfrey
Maples, John
Marsden, Paul (Shrewsbury)
Mates, Michael
Mawhinney, Rt Hon Sir Brian
May, Mrs Theresa
Mercer, Patrick
Mitchell, Andrew (Sutton Coldfield)
Moore, Michael
Moss, Malcolm
Murrison, Dr Andrew
Norman, Archie
Osborne, George (Tatton)
Page, Richard
Paice, James
Paterson, Owen
Price, Adam
Prisk, Mark
Redwood, Rt Hon John
Reid, Alan (Argyll & Bute)
Rendel, David
Robathan, Andrew
Robertson, Hugh (Faversham)
Robertson, Laurence (Tewk'b'ry)
Roe, Mrs Marion
Rosindell, Andrew
Ruffley, David
Russell, Bob (Colchester)
Salmond, Alex
Sanders, Adrian
Sayeed, Jonathan
Selous, Andrew
Shephard, Rt Hon Mrs Gillian
Simmonds, Mark
Simpson, Keith (Mid–Norfolk)
Smith, Sir Robert (W Ab'd'ns)
Smyth, Rev Martin (Belfast S)
Spelman, Mrs Caroline
Spicer, Sir Michael
Spink, Bob
Spring, Richard
Stanley, Rt Hon Sir John
Steen, Anthony
Streeter, Gary
Stunell, Andrew
Swayne, Desmond
Swire, Hugo
Syms, Robert
Tapsell, Sir Peter
Taylor, John (Solihull)
Taylor, Matthew (Truro)
Taylor, Sir Teddy
Thomas, Simon (Ceredigion)
Thurso, John
Tonge, Dr Jenny
Turner, Andrew (Isle of Wight)
Tyler, Paul
Tyrie, Andrew
Walter, Robert
Watkinson, Angela
Webb, Steve
Weir, Michael
Widdecombe, Rt Hon Miss Ann
Wiggin, Bill
Wilkinson, John
Willetts, David
Williams, Hywel (Caernarfon)
Williams, Roger (Brecon)
Winterton, Ann (Congleton)
Winterton, Sir Nicholas
(Macclesfield)
Yeo, Tim
Young, Rt Hon Sir George
Younger–Ross, Richard
Tellers for the Ayes:
Mr. Charles Hendry and
Mr. David Wilshire.
NOES
Abbott, Ms Diane
Adams, Mrs Irene (Paisley N)
Ainsworth, Bob (Cov'try NE)
Allen, Graham
Anderson, Rt Hon Donald
(Swansea E)
Anderson, Janet (Rossendale)
Armstrong, Rt Hon Ms Hilary
Atkins, Charlotte
Austin, John
Bailey, Adrian
Baird, Vera
Banks, Tony
Barnes, Harry
Battle, John
Beard, Nigel
Beckett, Rt Hon Margaret
Begg, Miss Anne
Benn, Hilary
Bennett, Andrew
Berry, Roger
Best, Harold
Betts, Clive
Blackman, Liz
Blizzard, Bob
Borrow, David
Bradley, Rt Hon Keith (Withington)
Bradley, Peter (The Wrekin)
Brennan, Kevin
Browne, Desmond
Bryant, Chris
Burden, Richard
Burgon, Colin
Burnham, Andy
Cairns, David
Campbell, Alan (Tynemouth)
Campbell, Mrs Anne (C'bridge)
Campbell, Ronnie (Blyth V)
Caplin, Ivor
Casale, Roger
Caton, Martin
Cawsey, Ian
Challen, Colin
Chapman, Ben (Wirral S)
Chaytor, David
Clapham, Michael
Clark, Paul (Gillingham)
Clarke, Rt Hon Charles
(Norwich S)
Clarke, Rt Hon Tom (Coatbridge)
Clarke, Tony (Northampton S)
Clelland, David
Clwyd, Ann
Coaker, Vernon
Coffey, Ms Ann
Cohen, Harry
Colman, Tony
Cook, Rt Hon Robin (Livingston)
Cousins, Jim
Cox, Tom
Cranston, Ross
Crausby, David
Cruddas, Jon
Cryer, John (Hornchurch)
Cummings, John
Cunningham, Jim (Cov'try S)
Cunningham, Tony (Workington)
Curtis–Thomas, Mrs Claire
Darling, Rt Hon Alistair
Davey, Valerie (Bristol W)
David, Wayne
Davidson, Ian
Davies, Geraint (Croydon C)
Davis, Rt Hon Terry
(B'ham Hodge H)
Dawson, Hilton
Denham, Rt Hon John
Dhanda, Parmjit
Dobbin, Jim
Donohoe, Brian H
Doran, Frank
Dowd, Jim
Drew, David
Eagle, Angela (Wallasey)
Eagle, Maria (L'pool Garston)
Edwards, Huw
Efford, Clive
Ennis, Jeff
Etherington, Bill
Field, Rt Hon Frank (Birkenhead)
Fisher, Mark
Fitzpatrick, Jim
Flint, Caroline
Flynn, Paul
Follett, Barbara
Foster, Rt Hon Derek
Foster, Michael (Worcester)
Foster, Michael Jabez (Hastings)
Francis, Dr Hywel
Gapes, Mike
George, Rt Hon Bruce (Walsall S)
Gerrard, Neil
Gibson, Dr Ian
Godsiff, Roger
Goggins, Paul
Griffiths, Win (Bridgend)
Hall, Mike (Weaver Vale)
Hall, Patrick (Bedford)
Hamilton, David (Midlothian)
Hanson, David
Harris, Tom (Glasgow Cathcart)
Healey, John
Henderson, Doug (Newcastle N)
Henderson, Ivan (Harwich)
Hendrick, Mark
Hepburn, Stephen
Hesford, Stephen
Heyes, David
Hill, Keith
Hinchliffe, David
Hodge, Margaret
Hood, Jimmy
Hopkins, Kelvin
Howarth, Rt Hon Alan (Newport E)
Howarth, George (Knowsley N)
Hoyle, Lindsay
Hughes, Beverley (Stretford)
Hughes, Kevin (Doncaster N)
Humble, Mrs Joan
Hurst, Alan
Hutton, Rt Hon John
Iddon, Dr Brian
Illsley, Eric
Irranca–Davies, Huw
Jamieson, David
Jenkins, Brian
Jones, Helen (Warrington N)
Jones, Kevan (N Durham)
Jones, Lynne (Selly Oak)
Jones, Martyn (Clwyd S)
Joyce, Eric
Kaufman, Rt Hon Gerald
Keen, Alan (Feltham & Heston)
Keen, Ann (Brentford & Isleworth)
Kelly, Ruth
Kemp, Fraser
Khabra, Piara S
Kidney, David
Kilfoyle, Peter
King, Andy (Rugby & Kenilworth)
King, Ms Oona (Bethnal Green)
Knight, Jim (S Dorset)
Kumar, Dr Ashok
Ladyman, Dr Stephen
Lawrence, Mrs Jackie
Laxton, Bob
Lazarowicz, Mark
Lepper, David
Leslie, Christopher
Levitt, Tom
Lewis, Ivan (Bury S)
Lewis, Terry (Worsley)
Linton, Martin
Lloyd, Tony
Love, Andrew
Lucas, Ian
Luke, Iain
Lyons, John
McAvoy, Thomas
McCafferty, Chris
McCartney, Rt Hon Ian
McDonagh, Siobhain
McDonnell, John
McIsaac, Shona
McKechin, Ann
Mackinlay, Andrew
MacShane, Denis
Mactaggart, Fiona
McWalter, Tony
McWilliam, John
Mahmood, Khalid
Mahon, Mrs Alice
Mallaber, Judy
Mandelson, Rt Hon Peter
Mann, John
Marris, Rob
Marsden, Gordon (Blackpool S)
Marshall, David (Shettleston)
Marshall, Jim (Leicester S)
Martlew, Eric
Meacher, Rt Hon Michael
Meale, Alan
Merron, Gillian
Michael, Rt Hon Alun
Miliband, David
Miller, Andrew
Mitchell, Austin (Gt Grimsby)
Moffatt, Laura
Mole, Chris
Moran, Margaret
Morgan, Julie
Morley, Elliot
Mountford, Kali
Mudie, George
Mullin, Chris
Munn, Ms Meg
Murphy, Denis (Wansbeck)
Murphy, Jim (Eastwood)
Murphy, Rt Hon Paul (Torfaen)
Naysmith, Dr Doug
O'Hara, Edward
Olner, Bill
O'Neill, Martin
Organ, Diana
Palmer, Dr Nick
Pearson, Ian
Perham, Linda
Picking, Anne
Pickthall, Colin
Pike, Peter
Plaskitt, James
Pollard, Kerry
Pond, Chris
Pope, Greg
Pound, Stephen
Prentice, Ms Bridget (Lewisham E)
Prentice, Gordon (Pendle)
Prescott, Rt Hon John
Primarolo, Dawn
Purchase, Ken
Purnell, James
Quin, Rt Hon Joyce
Quinn, Lawrie
Rammell, Bill
Rapson, Syd
Reed, Andy (Loughborough)
Reid, Rt Hon Dr John (Hamilton N)
Robertson, John
(Glasgow Anniesland)
Robinson, Geoffrey (Cov'try NW)
Roche, Mrs Barbara
Rooney, Terry
Ross, Ernie
Roy, Frank
Ruane, Chris
Ruddock, Joan
Ryan, Joan
Sarwar, Mohammad
Savidge, Malcolm
Sawford, Phil
Sedgemore, Brian
Sheerman, Barry
Sheridan, Jim
Shipley, Ms Debra
Simon, Siôn
Simpson, Alan (Nottingham S)
Singh, Marsha
Skinner, Dennis
Smith, Angela (Basildon)
Smith, Rt Hon Chris (Islington S)
Smith, Geraldine (Morecambe)
Smith, John (Glamorgan)
Smith, Llew (Blaenau Gwent)
Southworth, Helen
Spellar, Rt Hon John
Starkey, Dr Phyllis
Steinberg, Gerry
Stewart, Ian (Eccles)
Stinchcombe, Paul
Stoate, Dr Howard
Stuart, Ms Gisela
Sutcliffe, Gerry
Tami, Mark
Taylor, Rt Hon Ann (Dewsbury)
Taylor, Ms Dari (Stockton S)
Taylor, David (NW Leics)
Thomas, Gareth (Clwyd W)
Thomas, Gareth (Harrow W)
Tipping, Paddy
Todd, Mark
Touhig, Don
Trickett, Jon
Turner, Dennis (Wolverh'ton SE)
Turner, Dr Desmond (Kemptown)
Turner, Neil (Wigan)
Twigg, Derek (Halton)
Twigg, Stephen (Enfield)
Tynan, Bill
Vaz, Keith
Vis, Dr Rudi
Walley, Ms Joan
Ward, Claire
Wareing, Robert N
Watson, Tom
Watts, David
Whitehead, Dr Alan
Williams, Rt Hon Alan
(Swansea W)
Williams, Mrs Betty (Conwy)
Wilson, Brian
Winnick, David
Winterton, Ms Rosie (Doncaster C)
Woodward, Shaun
Worthington, Tony
Wray, James
Wright, Anthony D (Gt Yarmouth)
Wright, David (Telford)
Wright, Tony (Cannock)
Tellers for the Noes:
Mr. Nick Ainger and
Mr. John Heppell.
Question accordingly negatived.
New Clause 5
Contingent liabilities under the Private Finance Initiative
'.—(1) Section 156 of the Finance Act 1998 (c. 36) is amended as follows.
(2) At the end of subsection (4) insert "and to generally accepted accounting practice.".
(3) After subsection (4) insert—
"(4A) The Financial Statement and Budget Report shall include a statement of the aggregate amount of all financial liabilities, actual and contingent, to those persons who are or who will become the owners of assets which are to be made available to or for the benefit of any Department of State and which are to be financed through the Private Finance Initiative.".'.—[Mr. Flight.]
Brought up, and read the First time.
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