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Baroness Symons of Vernham Dean: My Lords, Her Majesty's Government strongly support the open door policy which was outlined at Madrid. Indeed, the Madrid declaration did not prejudice future enlargement decisions, which will depend, as I said, not only on the credentials of the individual candidates, such as Romania--specifically mentioned by the Prime Minister in his speech in another place--but also on the wider security background and the need to maintain NATO's effectiveness. As regards the future timetable, we have to wait until 1999, when the next review will take place. That will be the time for sorting out when future accessions can be accepted.

Lord Pearson of Rannoch: My Lords, as regards the answer which the noble Baroness gave to the noble Lord, Lord Barnett, does she agree that the two absolute priorities for Romania, and indeed the other countries of the former Soviet Union, are, first, defence through NATO and, secondly, access to the European single market? Does the Minister further agree that access to that market need not necessarily involve membership of the Treaty of Rome with all the damaging bureaucracy which that inevitably brings?

Baroness Symons of Vernham Dean: My Lords, I had imagined that I was answering questions about

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NATO and not about EU enlargement. However, should there be further access to either the EU or NATO, I am sure that those accessions will be dealt with on their merits and in the proper way.

Baroness Rawlings: My Lords, as Romania is so often bracketed with Bulgaria, what is the Government's view on Bulgaria's future membership? Will Bulgaria be included in the second wave?

Baroness Symons of Vernham Dean: My Lords, I am sure that the noble Baroness will be asking that question in due course and then I may have a full range of briefing with which to answer it. However, as I said, in 1999 there will be a review of those countries which wish to accede to NATO. Bulgaria will then have the opportunity of making any case that it wishes at that time.

North Sea Oil Taxation

2.49 p.m.

Lord Mackay of Ardbrecknish asked Her Majesty's Government:

    What progress is being made on the review of North Sea oil taxation, and when they expect the review to be completed.

Lord McIntosh of Haringey: My Lords, as the Chancellor said in his pre-Budget report on 25th November, the review of North Sea oil taxation, which was announced on 2nd July, is not yet complete. Oil industry representative bodies, oil and gas producing companies and others have provided their views both in writing and at a number of meetings. Various analyses have also been undertaken. No decisions have yet been made about any changes which might emerge, but the review is expected to be completed in time for the spring Budget.

Lord Mackay of Ardbrecknish: My Lords, I thank the noble Lord for that classic parliamentary Answer, which tells me what I already know and nothing that I do not know. Perhaps I may ask the noble Lord this: what is the motive behind the review? Is it to increase development in the North Sea and at the Atlantic margin and thus provide more jobs, particularly in Scotland, or is it to increase the tax take for the Treasury at the cost of jobs in the North Sea and the Atlantic margin?

Lord McIntosh of Haringey: My Lords, my Answer told the noble Lord what he already knows. And it told him all that I know. As I said, the review is not yet complete. When it is complete, the results will emerge in the spring Budget. On the noble Lord's second question, the purpose of the review, as the Financial Statement and Budget report makes clear, is to ensure that,

    "an appropriate share of North Sea oil profits are being taxed while continuing to maintain industry interests in the future of the UK's oil reserves".

Lord Bruce of Donington: My Lords, will the noble Lord inform the House whether Her Majesty's

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Government have entered into any obligation, express or implied, which would prevent them from increasing taxation on North Sea oil?

Lord McIntosh of Haringey: My Lords, as I have made clear on a number of occasions in this House, questions of taxation and expenditure are matters for this country. I assume that my noble friend is referring to any obligations as a member of the European Union and possibly even to future obligations as a member of European monetary union. Our right to set our own tax regimes still stands.

Lord Dixon-Smith: My Lords, how far are the costs involved in dismantling platforms and other undersea installations driving the need to review the tax regime for the North Sea oil industry?

Lord McIntosh of Haringey: My Lords, the noble Lord is right; they certainly form part of the considerations. The North Sea oil tax regime is extraordinarily complicated. Indeed, I wish that I had not asked for a full briefing on it, because it took me a very long time to read. Questions relating to decommissioning are among those which will be considered in the review.

Lord Tebbit: My Lords, can the noble Lord say whether our freedom to decide our own rates of taxation extends to the freedom to introduce new zero rate bands or to remove items from the standard rate and put them into the zero rate band? Have we still got that freedom?

Lord McIntosh of Haringey: No, my Lords. The noble Lord is well aware of the VAT regime and the House has been reminded of it very recently. The sixth directive makes clear that there are limits on the extent to which we can vary the value added tax regime, but that regime is entirely separate from our other taxation policies.

Lord Harris of Greenwich: My Lords, no doubt the noble Lord, Lord Tebbit, will at some stage tell us when this country should leave the European Union.

Noble Lords: Now!

Lord St. John of Bletso: My Lords, against the background of existing North Sea oilfields paying a total of 68 per cent. tax, do not the Government agree that any attempt to tighten and increase the fiscal take on new fields may result in new oil companies leaving the North Sea?

Lord McIntosh of Haringey: My Lords, I do not want it to be thought that the result of the review will inevitably be an increase in tax. The review may result in no change or, I suppose, even in a reduction in tax. However, the noble Lord ought to consider two factors. First, as I said, our petroleum tax regime is extraordinarily complicated and has developed over time so that fields approved before 1st April 1982 are subject to royalties based on the landed value of the oil. Those

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approved before 16th March 1993 are subject to petroleum revenue tax, which is a tax on profits, and new fields are subject to corporation tax only. Secondly, the noble Lord may like to bear in mind that although international comparisons are very difficult, petro-consultants who conduct an annual survey on this subject have concluded that our tax regime is second only to that of Ireland in its attractiveness to the oil industry.

Lord Pearson of Rannoch: My Lords, is the noble Lord aware that he practised a popular deception when, in answer to his noble friend Lord Bruce of Donington, he referred to EMU as "European monetary union"? Is the noble Lord not aware that EMU stands for "European economic and monetary union" and that it is the "economic" bit that will do the damage to which his noble friend referred?

Lord McIntosh of Haringey: My Lords, I should be wary of answering questions from either my noble friend Lord Bruce or the noble Lord, Lord Pearson, when every single question that they ask in this House comes down to Euro-scepticism. I went too far in responding to my noble friend Lord Bruce; I shall not go so far as to respond to the noble Lord.

Lord Mackay of Ardbrecknish: My Lords, is the noble Lord aware that his answers have not, I am afraid, reduced my suspicion that the Chancellor may be looking at the oil industry in the same way he looked at the pensions industry--that is, as a suitable place from which to pull more tax? However, does the Minister accept, and will he pass on to his right honourable friend the Chancellor, the fact that the oil industry, especially on the Atlantic margin, is involved in some ground-breaking, world-beating innovation to deal with the problems of extracting oil and that that, in addition to the jobs that that provides directly at the Atlantic margin, has made Britain a world centre for oil development technology? That is very important. So can the noble Lord tell us that the Chancellor will bear those important points in mind?

Lord McIntosh of Haringey: My Lords, I do not know that there is very much that I can do to relieve the noble Lord's psyche. He is congenitally suspicious of this Government and nothing that I can do will change that. However, the simple answer to the noble Lord's second question is "yes". The Chancellor will bear those points in mind. We are well aware of the importance of a successful oil industry for this country and particularly for the Scottish economy.

Lord Bruce of Donington: My Lords, as the noble Lord, Lord Pearson, was kind enough to refer to me,

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will the Minister accept from me that the question that I addressed to him was not intended to have any European implications whatever?

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