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Let me, like others, recall what happened in 1993, when tax changes were introduced without consultation. Whatever the longer-term implications, the short-term consequences were immediate and dire. Rigs were stacked, people were laid off, and there was a serious downturn in activity. Wildcat exploration has never recovered from the tax changeand that certainly has long-term implications.
As I said earlier in an intervention on the hon. Member for Arundel and South Downs (Mr. Flight), we should also remember what happened in the House when those changes were proposed. My party opposed them. It was the only party to do so, although I think the Scottish nationalists supported us when we forced a Division. In the Division Lobby, the then shadow Chancellorthe current Chancellorrushed across to ask why I was forcing a Division. I said I was standing up for jobs and investment in the Scottish oil and gas industry. I accept that it is in fact the United Kingdom oil and gas industry, but it is heavily concentrated in the north-east. The right hon. Gentleman's response was "But when I am Chancellor, I will need that money. I am not going to support you."
I am not surprised that the Chancellor has done this. He has been yearning to do it since the day he walked into No. 10[Laughter.] The right hon. Gentleman does, in fact, live at No. 10 Downing street. I meant the day he walked into the Treasury, although of course he is longing to walk into No. 10 through the front door.
The point is that the Chancellor has always seen the industry as a milch cow to fund whatever programmes he has in mind. He has never seen it as an industry. It is surprising and disappointing that he has not, given that he is a Scottish Member.
I am fairly certain that when the Chancellor instituted the review he intended to review the tax and increase it. Thanks to effective lobbying by the industry, and indeed by the hon. Member for Aberdeen, Central and othersand, I accept, the background of a low oil pricehe was persuaded that there was no justification for such an increase, and he did not proceed.
I think those in the industry, having initially feared the worst, emerged feeling that they had engaged in worthwhile consultation, and had had a real opportunity to explain to the Chancellor the complexities of the industry and the dynamics of taxation. They felt that an understanding had been reachedthat the Chancellor would not change the tax regime in future without consultation. It is pretty clear, however, that the Chancellor was shedding crocodile tears, or donning a disguise. His initial instincts remained unchanged, and in this Budget he did what he would have liked to do in his first: he grabbed the money.
It is interesting to hear Labour Members who I suspect know in their heart of hearts that what we are saying is true trying to justify the position that they have acquired. It is all very well for the hon. Member for Aberdeen, Central to say that the capital uplift will in itself enable investments to go ahead. Of course we welcome the uplift, but for investment to take place companies must have the money. If that money has been creamed off in tax, there is less to invest, and there will be a consequent impact on the number of investments that take place with or without the uplift. I think the industry is conceding that across the board.
The most damaging effect, however, is the shattering of confidence. The industry felt that it had an understanding with the Governmentthat the Government recognised that it operated against a background of long-term horizons. It has to make calculations above oil prices that fluctuate a great deal. One thing it looks for from the Government is a degree of stability in the tax regime. I agree with the hon. Member for Banff and Buchan (Mr. Salmond) that that does not mean never changing the regime. None of us is suggesting that. I have certainly not opposed every tax change proposed for the North sea; but I have vigorously opposed changes that have been applied without consultation and full assessment, and which have been damaging. There have been a number of such changes, and this change is in that category.
Jim Sheridan: The hon. Gentleman's party is well known for arguing that revenue raised from taxes should be invested in public services. He opposes these proposals, but how else does he suggest that tax revenue be raised to fund the public services that his party is glad to tell everybody they support?
Malcolm Bruce: That is a perfectly fair intervention, but I should point out that we are debating the Government's proposals. We had our own alternative Budget, and we set out our platform for how to raise the money. We were particularly in favour of increasing tax on very high earnersa proposal that old Labour also used to be keen on. We would have imposed a 50 per cent. tax on earnings over £100,000, which would have yielded substantially more than changes in oil tax.
The best way to raise taxes is a matter of judgment, and in our view this tax change is damaging to jobs, to investment, and to the long-term health of the economy. We are entitled to argue that as a perfectly reasonable debating point.
Mr. Bercow: The hon. Gentleman is making a characteristically sensible speech. Given the naive anti-capitalist prejudices that still permeate the thinking of all too many Labour Members, would the hon. Gentleman care to comment on the enormous capital requirements of UK continental shelf projects, and the very long time scales over which returns on capital are achieved?
Malcolm Bruce: The hon. Gentleman knows perfectly wellthis is the point of his questionthat we are talking about field lives of 20 or 30 years, and sudden fluctuations that have to be averaged out over time. The industry has to make very fine judgments on whether to invest at all. In introducing further uncertainty into a business that is already uncertain, the danger is that financial planners, in particular, might conclude that is better to invest where the uncertainties are less. It is all very well talking about taxation regimes in, say, Angola, but what concerns the industry is cash flow, the likelihood of finding a field, and the cost and scale of production. When it considers those
The issue is one of great concern. Although the hon. Member for Aberdeen, Central and I are in broad agreement, he is missing one point. It is fine to promote enhanced recovery, and to encourage companies to squeeze as much as possible out of the existing infrastructure, and I acceptwith the qualifications that I have already identifiedthat the capital uplift makes a contribution in that regard. However, it is also important that the industry be encouraged to make wildcat wells in the interests of serendipity. Such exploration has declined to an alarming extent.
We support the amendment tabled by Conservative Members, and happily support the amendment in the name of the hon. Member for Banff and Buchan. It is not a wrecking amendment but a cooling-off amendment. It points out that the Government have introduced changes that have not been fully evaluated, and which could prove deeply damaging. It invites them to delay those changes, and to discuss with the industry not necessarily abandoning them, but whether other measures could be introduced on a case-by-case basis to ensure that the damage that we fear can be avoided. Such measures might involve a combination of capital uplifts to encourage more wildcat exploration wells, or even "serendipity" appraisal wells. People forget that many holes are drilled that prove dry. Looking for and producing oil is a very uncertain science. Such measures could also include additional help, in the form of innovative techniques, for companies that want to develop technology.