Willie Hamilton – 1974 Speech on North Sea Energy

Below is the text of the speech made by Willie Hamilton, the then Labour MP for Fife Central, in the House of Commons on 20 March 1974.

It might be as well to get on the record the fact that we should have another look at the way in which we conduct the Consolidated Fund Bill. The last debate began at just after six o’clock. That means that it has continued for virtually six hours. It was concerned with a subject of major importance, but I think that our proceedings should be arranged in such a way that Members who take part in the ballot and are badly drawn in it might have a better chance of participating and having their say on whatever subject they wish to discuss. I suppose that that is a matter for the Procedure Committee. I hope that the committee will consider the desirability of limiting a debate to a maximum of two or three hours.

Mr. A. J. Beith (Berwick-on-Tweed)

The hon. Member for Fife, Central (Mr. Hamilton) might consider having a word with his Whips about the possibility of allocating more Supply Days to minority parties. That means could be used and might ease the hon. Gentleman’s problem.

Mr. Hamilton

It might well be that the minority parties would fare a lot worse than today. Minorities are to be protected, but majorities also have rights. Perhaps I may describe them as larger minorities. Until now, and certainly since the election, the House has given protection to the smaller minorities. It is time that the larger parties had a greater say in the running of debates than they have had hitherto.

I come immediately to the subject of this debate, which is North Sea oil. Next week we shall have the Budget, in which one of the most critical problems that will have to be dealt with is the scandalous blunder which has been perpetrated in the handling of North Sea energy resources by both Labour and Conservative Governments. I think that the Conservative Government were more culpable than the Labour Government, because it was under the Conservative régime that we had a glimpse of the obvious wealth of resources under the North Sea waiting to be developed.

The guidelines on future policy were laid down devastatingly by the Public Accounts Committee Report of 1972, which made damning disclosures about Government ineptitude in a purely nonpartisan and objective way. But even since that report was produced at least two new factors have emerged which make imperative the introduction of radical new attitudes and policies.

The first new factor is the quadrupling of world oil prices within the past four months. It is easy to be wise after the event, but I suppose that we should have foreseen that. It is possible that there will be an equal increase in the foreseeable future.

Secondly, there has been increasing knowledge about the extent and value of the oil finds in the North Sea—much of it, as well as the Celtic Sea, not yet even explored. In a few months the value of the known commercial reserves has increased sixfold. Various estimates are now made, but anyone who engages in hard figures in this game is being absurd. We do not know what the value of the finds is. It depends entirely on existing prices, and they can be out of date before I sit down.

It was estimated by the Observer on, I think, 10th February this year, that the resources are worth about £130,000 million at existing prices. The Observer also stated that by 1980 production could be up to 150 million tons a year.

Professor Balogh said in his recent article in the Banker that by 1980 it could be up to 150 million tons a year. American bankers estimate that production could be over 200 million tons a year. Various estimates are given. Professor Odell, quoted by Professor Balogh, believes that production could be 300 million tons a year, with the British sector delivering two-thirds of that. We are talking in figures beyond the comprehension of the British people.

Let us assume a minimum United Kingdom figure of 150 million tons a year, or over 1,000 million barrels. Even at 10 dollars a barrel, the annual pre-tax profits would be over £4,000 million and by 1980 the price is almost certain to be at least 50 per cent. higher. It has already been higher than that in some of the auctions. These figures are far higher than the latest figure for the gross profits made by ​ the whole of United Kingdom manufacturing industry as of now. That is the scale of the problem with which we are trying to grapple.

The scandal is not irreversible, because not a barrel of oil has yet been delivered. At present, more than half of those profits could go untaxed to foreign interests. As early as mid-1970 the oil experts were predicting that the North Sea could provide up to two-thirds of the whole of Europe’s requirements, and since then enormous further finds have been made.

I referred on a previous occasion to the Edinburgh Mafia, but now the international Mafia has moved in for the killings, from the House of Fraser to Courtaulds—concerns that have no relationship to oil—Thomson Associated Newspapers, and the inevitable stockbrokers, land speculators and merchant bankers. They are all in it, and I hope that the Government—who are now in the process of formulating their policies—will prevent these people from grabbing what they can while they can and then clearing out. By the end of 1971 the potential robbery and plundering of the North Sea was terrifying in its magnitude, matched in size only by the crass ignorance of the Government of what was going on under their noses. But the situation is not irreversible, and the recommendations of the Public Accounts Committee still await implementation.

Certain minimum steps are required to be taken by the Government. Some have been spelt out, partly by the Public Accounts Committee and partly by Lord Balogh. Despite what the Opposition may say about Lord Balogh, he knows his onions about North Sea oil, and I do not think that anything he has proposed will frighten off the oil companies. Let not the Tory Party say, “You are too severe; you will frighten them off.” We shall not be able to drive them out. They will settle for 5 per cent. or 10 per cent. on their capital; there is no question of their pulling out.

First, there is a case for renegotiation of the existing licence conditions. We have the benefit of hindsight and can see how ridiculously over-generous were successive Governments in giving away the licences at the beginning.

Secondly, I agree with Mr. Dick Douglas, the former Member for Clackmannan and East Stirlingshire, who ​ sat on the Public Accounts Committee and strongly recommended a barrelage tax on a sliding scale, perhaps as recommended by Lord Balogh in the Banker article. We on the Government side favour increased public participation at least comparable to that exercised by Norway.

We must have a reform of the royalty system, varying with the size of the field, and, going back to the Labour Party policy of six or seven years ago when we recommended the establishment of a national hydrocarbon corporation, a monopoly State buyer and seller which would fix the price at which the oil was bought and sold. The manifesto on which the Labour Party fought the election, referring to the increased oil prices in the Arab countries, said—

“the new situation has greatly strengthened Labour’s intention to ensure not only that the North Sea and Celtic Sea oil and gas resources are in full public ownership, but that the operation of getting and distributing them is under full Government control and majority participation. We cannot accept that the allocation of available world output should continue to be made by multi-national oil companies and not by Governments. We will not permit Britain’s own resources to be parcelled out in this, way. It is public ownership and control that will enable the British people, through its Government, to fix the pace of exploitation of our oil, and the use to which it is put, so as to secure the maximum public advantage from our own resources.”

The manifesto went on to refer to the possibility of setting up an international energy commission to establish an international allocation of available oil resources. I shall return to that in a moment.

When he spoke last Tuesday, the Prime Minister reminded us that these resources are already a publicly-owned asset, under the Continental Shelf Act. The machinery to ensure its proper use has not yet been devised. The Government admit that frankly. Much the same consideration applies to this matter as applies to Kilbrandon. Any Government would be most ill advised to make decisions of this magnitude on the spot. Instant government does not apply either to Kilbrandon or to North Sea oil. I could not blame the right hon. Member for Wanstead and Woodford (Mr. Jenkin), when concluding for the Opposition in the energy debate last week, for making some play of the apparent contradiction between one policy and another ​ expressed from this side. But there is no need to apologise for saying that it is an extremely difficult problem to tackle. One does not want to drive the oil companies away. On the other hand, one does not want them to be the masters of our fate. They must be our servants, not our masters.

All we are entitled to expect from the Minister tonight, I think, is a progress report. Two days ago, on 18th March, he made a speech to a conference in Newcastle in which he said, in so many words, that the Government were planning a partnership with the oil companies to obtain the maximum benefit for the British people. That can be criticised, of course, as saying no more than that we are not going in for full-blown public ownership, or nationalisation. I do not give a damn how the cash is obtained—whether through 51 per cent. control, a public corporation, a barrellage tax, or whatever it may be—so long as we ensure that the revenues from North Sea oil come back to the people. The asset belongs to us and to no one else. The oil companies’ expertise in exploring, discovering and extracting must be used for the public good.

My hon. Friend went on to say that several schemes are being considered, and that legislation will be forthcoming in the next 12–18 months. Tonight, I hope that he will be able to answer one or two specific questions. He recognises the importance of the IMEG Report, which was highly critical of what had gone on up to 1972, when the report was made.

Do the Government intend to implement as swiftly as possible all the recommendations in that report? If not, which are they throwing overboard, and why?

For instance, are we to have art extension of further education and training facilities? It is absurd that we should be talking about thousands of millions of pounds of potential revenue, yet for education and training facilities we speak in terms of hundreds or thousands at the most. We should be thinking in terms of millions of pounds, and we should be demanding that kind of money from the oil companies.

I hope that we shall hear from my right hon. Friend the Chancellor of the Exchequer in his Budget next week that we hope to get revenue from the oil companies’ profits, prospective and present, ​ and use a lot of that for extending these facilities, for building up the Petroleum Supply Industry Board which was recommended by the IMEG Report, for an information service to offshore operators and contractors, for credit facilities for covering the sales of equipment and services to offshore operators and contractors, and financial support for research and development projects.

Different types of production platform are being put forward for offshore moorings, or for pipelines. There are various techniques for deeper water exploration. All these require enormous sums of money. I was glad to see the IMEG report recommending a study of the infrastructure. There is no doubt that oil facilities onshore will affect the environment. No one can prevent this.

I do not believe that the industry can be sustained without a massive switch of transport from road to rail. There will have to be a big investment in the railways in the Highlands and wherever there is an oil potential. There is a reference in the IMEG report to the problems created in Scotland. It happens that oil has been found where the environment is perhaps more important than anywhere else in the United Kingdom. It is not easy to marry the need to get the oil for national purposes with the need to protect a way of life that is unique. To make sure that one situation does not destroy the other is an exciting and challenging task, which we cannot shirk or pretend that it will go away.

We must ensure that the minimum long-term damage is done to traditional values and ways of life. It is not good enough to say that we should slow down development. The tap cannot be turned off as easily as the Scottish National Party seems to suggest. How would that party slow it down and to whose advantage would that be? I appreciate that in the nature of things this is an extremely valuable asset, limited in its duration. We do not know how long an extractive industry will last. It is important to treat it as a precious asset, not one to be squandered by selling it below the world price or by getting people to believe that it can be shovelled out to provide massively increased pensions.

The SNP campaign during the election appalled me by its appeal to the base ​ material instincts of people. It had a leaflet that was almost pornographic. It spoke of £25-a-week pensions, no income tax, and no rates. One of the party’s candidates actually went around on a camel in one of the constituencies.

Mr. Gordon Wilson (Dundee, East)

It was a Conservative candidate in Clackmannan and East Stirlingshire who had occasion to use a camel in the course of the campaign. Certainly none of our candidates was so minded.

Mr. Hamilton

No, perhaps they could not afford it. That was the kind of campaign conducted. Certainly it was not a Labour candidate who used a camel.

It is quite wrong to appeal to people’s nationalistic greed by saying that because the oil happens to have been found round a particular part of the coast north of an arbitrary line drawn between Carlisle and Berwick, all the benefit should go to people who happen to live north of that line and nothing should go south. I find that kind of campaign quite appalling.

I go further. These ought to be treated as international resources. We are not at that stage yet. We are a long way from world government. But that is how I would like to see them treated. At the moment we have divided the North Sea by international agreement, and we have divided the resources by international agreement. We have to see to it that they are used for the benefit of all our people.

There are people all over the United Kingdom who are as poor as and sometimes poorer than the poorest in Scotland. As an international Socialist, I do not think in these narrow nationalistic terms, and as an Englishman representing a Scottish constituency for 24 years, I think that I can say that.

My nationality has never been questioned, although my birth sometimes has. The people of Fife always ask me what I stand for and what principles I stand for, not where I was born and what nationality I am. This problem should be approached in a similar way.

Whatever Government machinery is devised or evolved, the minerals round our shores and beneath our land belong to us all, and we have to see to it that the oil companies are answerable and ​ accountable to us. They must be our agents and not our masters. I appeal to my hon. Friend the Under-Secretary to seek ways and means of keeping this House continuously informed. I should like some machinery devised—it may be a permanent all-party Select Committee of this House having a continuous oversight of what is going on, or the Government might see fit to produce monthly reports on the progress of consultation. They must demand from the oil companies a full disclosure of their costings and of their accounts. Let us have full open disclosure by them. For far too long we have worked in the dark. The oil companies are skilled at pulling the wool over the eyes of successive Governments. That must no longer pertain. I hope that we shall have some undertakings along these lines.

I hope, too, that my hon. Friend will explain precisely what is to be the role of Lord Balogh in these proceedings and what is the relationship between my hon. Friend himself, Lord Balogh and the Minister for Energy. I have a great admiration for the noble Lord. I think that he knows what he is about, and the oil companies have a right to fear and respect him. I hope that he will be used to the maximum. But I should like to know the relative importance of Lord Balogh, of the Minister for Energy and of my hon. Friend.

It will be a very difficult exercise and a very exciting challenge. I hope that this minority Government will exist long enough to get the legislation on the statute book which the previous Chancellor of the Exchequer promised in his last Budget. Nothing has happened since, except a retreat, if anything, from that promise. Apart from that, I hope that the present Chancellor of the Exchequer will take it upon himself to lay down the line to the oil companies that we are not having any more of the kind of financial jiggery-pokery for which the oil companies have been well known over many years. They have always known how to cook the books and how to evade taxation. This must be stopped. We must ensure that the vast resources at our disposal are used for the benefit of all our people and that in the process the environment is disturbed to the minimum extent.