Mr. Tom Harris (Glasgow, Cathcart): I rise to make a few brief points. I was near to tears listening to the heart-rending pleas from Opposition Members because I had no idea that multinational oil corporations were in such difficulties. Like me, my hon. Friend the Financial Secretary to the TreasuryI hope that I have got her title correct because she has been promotedis a former journalist who will have learnt the aphorism by which to identify a news story: when a dog bites a man that is not a story; when a man bites a dog that is a story. When businesses complain about taxes that is not a story; if businesses were to welcome new taxes that would be a story.
The argument presented today by Liberal and Conservative Members is based purely on the premise that multinational corporations will have to pay extra taxes. That is a shame. I wish that we lived in a world in which those companies did not have to pay their fair share, but much of the extra revenue that will come into the Treasury will be used to enhance public services.
Mr. Davey: In using an analogy from the newspaper industry, the hon. Gentleman has shown that spinning has gone too far. He should be defending the jobs of Scottish citizens and his constituents.
Mr. Harris: I am more than happy to defend jobs in Scotland and elsewhere in the United Kingdom, which is something that Opposition Members have not done in this debate. The taxation regime for the oil industry in the United Kingdom is benevolent compared with that in other oil-producing countries. I do not believe some of the arguments used by Liberal and Conservative Members. It is right that the oil companies should pay their way. They are not being asked to pay more than is due, but simply a fair amount. I hope that the Government will recommend voting against the amendment.
Mr. Flight: I was not able to interrupt and, with the greatest respect, the hon. Gentleman has missed the point. With a mature field such as the North sea, there is a delicate argument about the right level of tax to generate the greatest revenues and sustain rising investment and jobs. The argument is not ''bleeding hearts for large oil companies''; it is the economic argument that he will hear from not just the industry but outside specialists, indeed the leading specialist in the territory. The Wood McKenzie report, published only last February, contains an analysis of the maturity of the North sea and the fiscal prospects. It concludes that there is no room for additional fiscal rent to be extracted from upstream companies on an expected-monetary-value basis.
Our argument is, ultimately, a pragmatic economic argument. We are saying that the Government's projections and numbers are wrong, both in terms of impact on investment and in terms of revenue potential.
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Mr. Harris: Will the hon. Gentleman explain how his party would fill the gap that was created by a refusal to proceed with this tax change?
Mr. Flight: I fear that the hon. Gentleman did not hear what I said. If he does the sums in terms of revenues and lost revenues, he will find that the net tax benefits will be nothing like those forecast by the Government. Moreover, as was pointed out earlier, even the gross figure may not be anywhere near the Government's forecast.
Let me point out, with respect, that we are not the Government. It is the Government's job to decide where they will raise revenue. We are merely saying that, pragmatically, we believe that the proposal is against the national interest. It will not raise revenue. It will reduce North sea production. It will worsen the current account balance. It will lose jobs, and people will have to be supported by welfare payments. We think that the Government's judgment is wrong.
Mr. Iain Luke (Dundee, East): The hon. Member for Kingston and Surbiton (Mr. Davey) mentioned jobs. My constituency on the east coast of Scotland has lost jobs in the past because of investment decisions by big multinational companies in the North sea, which have concentrated their operations in Aberdeen.
We are currently seeing a change in the nature of operations in the North sea. The larger North sea oil companies are moving, as is inevitable. The hon. Gentleman may have read an article published recently about the huge investment BP is making in, for instance, the Caspian sea. I believe that, in many respects, the North sea will go the same way as the gulf of Mexico. A number of big American companies moved from there to other fields.
I think the Government are right to raise taxes, but I also think it right for the Opposition to raise questions. We are talking about an operation that still has a reasonable medium and long-term life. We must protect those jobs. We must also ensure that the revenue we obtain from companies pays for what they obtain from the country. Ultimately, we should establish the right price for a barrel of oil, which is higher than it has been for a long time, and what we should raise in revenue. That will produce the right balance.
Earlier, we talked about decisions that had already been made, involving 50,000 lost jobs. I believe that the decision to cut 500 jobs, at a time when there was a lot of tension in Scotland, was made before the text of the Budget was known. Decisions were made on the restructuring of business of big multinationals from the North sea to other areas. Most of the movement is long term. The chief executive of BP made that point at a meeting of the UK Offshore Operators Association. He did not believe that a 10 per cent. increase in corporation tax would have an immediate effect on investment in North sea oil. The hon. Member for Gordon apparently knows about that. Anyway, the chief executive believed that in the long
Column Number: 295term, given the corporate decisions that must be made elsewhere, the big firms would move to more profitable fields. They would not linger. That is the nature of the business: it is a cut-throat business.
Experts in the Scottish press who investigate the Scottish oil industry know that the natural process--it happened in the gulf of Mexico--is that smaller companies move into the gap left by bigger players when they eventually sell their interest.
Mr. Flight: I agree entirely with the hon. Gentleman's diagnosis, but the logic is that new ventures and smaller businesses will be expected to keep the oil industry in the North sea going. I would be interested in his opinion of the package of measures for those companies, which is at the heart of our concern about the combination. The capital allowances will not be an effective incentive for investment because those companies are not profitable enough to use them.
Mr. Luke: The measures are a first step because production in the North sea is changing. An article in Scotland on Sunday stated:
I sympathise with some of the amendments, but the Government have taken a balanced decision on the revenue that they will extract from the corporation tax increase and the need to run the national budget. Given the number of people who work in the industry and need to use the health service and social services, a balance must be struck. There is still a lot of work in the North sea and I have attended several meetings as a new member of the UK Offshore Operators Association. In Dundee recently, I visited schools engineers clubs where the success of North sea oil was a big issue. Innovation has been essential to capitalise on difficult oil fields that would previously not have been capitalised on.
The Treasury and the Department of Trade and Industry must ensure that the UK Offshore Operators Association and operators in the North sea are kept closely informed so that they know what is going on. The Government's decision marks a definitive moment in the balance of production in the North sea. On balance, I believe that their decision is correct and that the measures will help newer businesses to enter production fields, but we must keep a close eye on that because it is still a vital strategic industry for economic production.
Mr. Mark Field (Cities of London and Westminster): I support the comments of my hon. Friend the Member for Arundel and South Downs. I
Column Number: 296take on board with interest the robust comments of the hon. Member for Glasgow, Cathcart (Mr. Harris) and the more compliant comments of the hon. Member for Dundee, East (Mr. Luke), who obviously has a lot more experience of the cut-throat nature of the oil industry than some Conservative Members. Those comments were entirely fair.
The substantive issues concerning the clause have been lost in our discussion of the previous group of amendments. Amendment No. 111 covers a narrow point. We want the Treasury to analyse and examine the net monetary effect. We do not know what the effect on the industry as a whole will be and it would be sensible, before taking a path along which it would be difficult to retreat, at least to examine the net monetary effect. The hon. Member for Glasgow, Cathcart may be right and the provision may lead to more money coming into the Treasury's coffers--that is the intention--to fund the national health service and other public services. However, there must be a real risk that it will have the opposite effect and that, in having negative effects not only on multinationals but on small start-up companies in the oil business, many of which will employ significant numbers of people in the UK, they will not result in any great monetary advantage to the Treasury. It seems that the proposal is a sensible compromise, given that there are two distinct schools of thought about the oil industry. Therefore, I hope that the Financial Secretary will give it further thought.
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