Mr. Flight: May I raise the specific issue of mothballing? My understanding is that mothballing extends the life of a field and is something that everyone wants to see in the national interest, as opposed to shutting down, which means, ''That's it''. I do not understand why the new capital incentives will apply to shutting down but not to mothballing, which, if anything, is entirely the wrong way round. It is rather crackpot not to give mothballing the capital allowance. Why is it there for shutting down?
I apologise for being away. I intended to ask a question rather than make a separate contribution. My specific point needs explanation.
Mr. Jack: I listened with interest to the Minister's reply to this debate. I would like to pick her up on her retreat into ''commercial and in confidence'' when we questioned the economic arguments underpinning the Treasury's position. Magically, when matters are flowing in the direction of the Treasury and the world outside is saying, ''Thank you very much for this good idea'', estimates of great increases in investment and economic activity are scattered around like confetti.
Column Number: 282However, when the going gets tough and people start saying, ''How did you make this calculation and what is the economic impact?'', we find that the shutters come down.
I draw the Minister's attention to a letter sent to her on 15 May by the UK Offshore Operators Association. Interestingly, commenting on a debate on the Floor of the House in which the same argument was used, the Director General, Mr. James May, writes:
If the Minister knows the cost, she knows the amount of investment affected, and, if she is as confident of her position as she says, it is remarkable that she is not prepared to share the numbers with the Committee. In the age of freedom of information that we are rapidly moving towards, it will be interesting to see how she could defend, in terms of the public position, not sharing with the House of Commons the basis of an argument that would enable us to understand more clearly the economic assumptions that have been made. Indeed, the industry invited the Minister to share such information with us. I am interested to know why the Minister is so reluctant.
The Minister will also be aware of a letter that I am sure was circulated to her. Having had an opportunity to assess the current situation, UKOOA members wrote to the Chancellor on 6 June. The Minister said in her opening remarks that the Government want to create a period of long-term fiscal stability. I asked her what she meant by ''long-term''. She replied that the Chancellor said that the Government want the North sea regime to be long-term and stable, but I wanted to know how many years should be read into ''long-term''.
On the subject of the measure to which the amendment relates, UKOOA's letter to the Chancellor says:
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UKOOA says that without the ''transitional relief'' proposed under the amendments advocated by my hon. Friend the Member for Christchurch, the current proposals
One of the arguments for amendments Nos. 99 to 104 is that they will help to sustain investment in the United Kingdom offshore fields, and not allow it to move to potentially more profitable areas. I am not surprised that the share price did not go down, as people in the markets would have said, ''Fine; some of the investment money that we might have made in the UK offshore fields will go elsewhere.'' In particular, it will go to Scotland and those constituencies on the west coast that are benefiting from some of the oil and gas development there. It will be to the UK offshore fields' detriment that that investment goes elsewhere.
I do not wish to rehearse the arguments that we had on the Floor of the House, but it is evident that there are more profitable areas than the UK continental shelf for investment in oil. [Interruption.] I can hear that the Royal Bank of Scotland is ringing up to agree with my arguments. I am delighted that it pays so much close attention to our debates. The Minister may well be able to sustain her position, but unless she can justify it more specifically, there will be deep suspicion that she is resisting the amendment because the proposal in the Bill represents a smash-and-grab raid by the Chancellor on a source of money that he has decided he wants.
Mr. Davey: I rise again because I was not happy with the Minister's reply. I have also been informed of a point that has not yet been raised, which is that smaller fields and companies tend to lease, not purchase, their equipment. They have therefore profited from 100 per cent. relief on such leasing, but the clause does nothing to help them offset the new tax. Such smaller companies, which are often the most innovativeand are trying to develop the marginal fields that we have heard so much about in the Government's defence of themselveswill not benefit. They will be hit by the 10 per cent. tax and will have no offsetting allowances.
If the Minister is trying to tell the Committee that the new structure will be beneficial to investors in the long term because the marginal fields will benefit, she shows that she and the Government do not understand how the industry works through leasing for small companies and fields. I hope that the Government will take that on board, and that if the Minister speaks again she will give more assurances to the Committee and the industry that the Government will think again about the measure and will consider the amendments under discussion.
Ruth Kelly: I very much enjoyed hon. Members' contributions on the point raised by the hon. Member for Arundel and South Downs. We shall return to that
Column Number: 284point under a later amendment, but I will say that the 100 per cent. allowance for decommissioning covers the mothballing of infrastructure at the end of a field's life. We may want to return to that point when we discuss amendment No. 109.
The right hon. Member for Fylde has made several accusations that I do not accept. He talked about the shutters coming down, and the Government's unwillingness to share our economic analysis with hon. Members. I set out in considerable detail our methods of economic analysis, and the economic appraisal assessment that we used in developing these policy ideas, on the Floor of the Housewhich gave an opportunity for hon. Members on both sides of the House to cross-question and carefully scrutinise them. Indeed, that opportunity was taken up, and I do not intend to rehearse again today the arguments that we went through at that time.
The right hon. Gentleman mentioned the letter from the industry association, which says, ''We have lots of figures, and we do not mind if they are put in the public domain, and the Treasury should do the same.'' The figures that we are talking about are not industry figures; industry figures are incomplete. We are talking about the release of Inland Revenue and DTI information, which is commercially confidential. The industry association does not represent all the companies in the North sea.
However, Committee members are, of course, able to find out the estimated cost of the Budget measures and the forecast tax receipts, which are published in the Budget. Therefore, no one could accuse the Government of having the shutters down, and of not being prepared to share our analysis with hon. Members.
The right hon. Gentleman also talked about what we consider the long term to be. I have set out the criteria on which our assessment of the fiscal regime was made. The right hon. Gentleman accused the Government of imposing an element of retrospection. I do not accept that that is the case. The measures will come into force as they are introduced. Of course, the industry has made plans on the basis of different tax policies, just as ordinary individuals in life make plans on the basis of a particular tax regime. When tax rates and reliefs, and so on, are changed in the Budget and those individuals have to adjust, we do not say that that is retrospective, and nor should we say that the regime that we are introducing in the North sea is retrospective.
Not a single person or company has come to us and said that a single project will be made uneconomic by the changes that we shall introduce. In fact, serious analysis has been published that shows that the impact on investment from these changes will be positive.
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