Examination of Witnesses (Questions 160-177)
MR DAVE
BLACKWOOD AND
DR REBECCA
BROWN
18 JULY 2006
Q160 Mr Walker: So a lot of this
profit that you earn is paid out in dividends that go to pension
funds.
Mr Blackwood: Correct.
Q161 Mr Walker: That allows us to
retire with a degree of comfort hopefully.
Mr Blackwood: One calculation
says one pound in every six.
Q162 Mr Walker: One pound in every
six you have generated.
Mr Blackwood: Yes.
Q163 Mr Walker: Not in profit, just
one pound—
Mr Blackwood: In the return that
goes back to these pension funds. That is one calculation; I do
not think I could tiptoe my way through it.[4]
Q164 Mr Davidson: Indeed it is one calculation,
but of course the pension fund distribution in that way is somewhat
uneven and I suspect that my constituency does not get as much
of a share of that as perhaps Mr Walker's constituency. It is
an interesting point that you make about the question of distribution
of finance to deal with fuel poverty being a responsibility of
government, and I think I accept that, but should we accept then
that the corollary of that is that we have to levy taxes sufficient
to pay for it and if you are not doing it then we have to pay
for it and we have to do it by raising taxes on people like yourselves.
To some extent it comes back to this point about there has never
been a tax increase you met that you liked, and the difficulty
we have with this is the extent to which we believe the industry
is crying wolf. You have been quite honest with us in giving us
the impression that you are trying to get us to accept that this
is a grey area and it is difficult looking forward and so on,
but is there anything you can say that would help us overcome
this issue as to whether or not you are just simply crying wolf?
Some people have been far more strident than yourselves; when
we were in Aberdeen, particularly when we were meeting the Chamber
of Commerce and some of the people who were there, they were really
getting quite excited about all this, they were not dealing with
it in the much more responsible and calm manner that yourselves
have. Is there any guidance you can give us that helps us weigh
this up in the balance?
Mr Blackwood: I would have in
my balance the physics on this side, the physical and economical
realities. The individual accumulations, which we are now finding
in the North Sea, are getting smaller. They are getting more expensive
to develop, they are getting more remote and costing more to operate.
The fundamental business of the North Sea today is, if everything
was left alone and there was no more investment made, the production
would decline at something like 20%, exponential physics. The
fundamental business of the North Sea is wisely laying in capital
to slow that down as much as we can and prolong the life of the
North Sea. For me, that is sitting on this side of physical data
we cannot argue with and if we make it a less attractive investment
value on top of that, in the long term it has to hurt. On the
other side of the scale at the moment, I think all of this is
being masked by today's commodity prices, and can I go back to
where I started if that commodity price changes significantly,
that scale is going to tip.
Q165 Chairman: If I understood it
correctly, in conclusion, Mr Blackwood, you are saying at the
present level of prices of oil, the industry is well-equipped
to cope with this tax increase, but if the prices soar to the
level where you would be concerned about it, you would like the
Government to reduce the tax burden on the industry. Secondly,
you are concerned about the uncertainty of the future tax increases
and if there was to be some assurance from the Government not
to increase the tax in the near future, you would feel comfortable.
Mr Blackwood: I think, Chairman,
that is an excellent summary other than maybe to push a little
on the starting place, I am not sure the entirety of industry
would agree they are well-equipped to deal with it at the moment.
Q166 Chairman: Thank you, Mr Blackwood
and Dr Brown. That concludes our questions. Before I declare the
meeting closed, if there are any issues which we have not covered
during our questioning would you like to shed any light on any
issue? We are happy to listen to you.
Mr Blackwood: No, thank you, Chairman.
Chairman: Thank you very much.
4 Note by witness: We estimate that one pound
in every six pounds of UK pension funds income, from companies
in the FTSE Index, comes from BP's profits. Back
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