The noble Lord obviously has more experience in this House than I have. I am a mere new Member. However, as a mere new Member, I
have been an observer of parliamentary procedure for long enough to realise that it is perfectly common for a Government to table amendments, which on occasion have been substantive. Indeed, over many years the party opposite has tabled amendments on substantive points. My point, which the noble Lord unfortunately did not take on board but which I hope others will and will be more charitable in understanding it, is that when legislation is being brought forward which will make a significant contribution to the success of the British economy, it is best done after proper and due participation and consultation with the sector which it will legislate. That is why the Government have indicated that they will bring forward measures before Committee, as the Minister said in her opening speech, to which the noble Lord no doubt listened.
In the debate on the gracious Speech in another place, the Prime Minister gave a strong indication to my honourable friend Sir Robert Smith, the Member for West Aberdeenshire and Kincardine, in relation to the oil and gas industry:
“My hon. Friend speaks very powerfully for his constituency and for that absolutely vital industry which, as he says, is vital not just for Scotland, but for the whole of the United Kingdom. We are going to make sure that the recommendations of the Wood review are included in our infrastructure Bill, which is a key Bill at the heart of this Queen’s Speech”.—[Official Report, Commons, 4/6/14; col. 27.]
The Prime Minister was right: this is a vital sector. Therefore, I hope that during the passage of this Bill we will give due consideration to the impact which that sector makes to the whole United Kingdom economy. It is 50 years since the first licences were issued. Some 42 billion barrels of oil have already been produced and up to 20 billion more could still be produced. The United Kingdom continental shelf production meets 60% of UK oil demand and 50% of UK gas demand and directly and indirectly supports 450,000 jobs across the UK. It paid 9% of all UK corporate taxes in the last financial year, which is 2% of all United Kingdom tax receipts. Decommissioning relief introduced by this Government represents around 1% of our GDP.
The Government intend to include measures in the Bill to take forward the recommendations of the Wood review. The Bill provides us with an excellent opportunity to ensure that the UK continental shelf is able to face the very complex and difficult challenges which lie ahead. Although more than £14 billion was invested in the continental shelf in 2013—a record amount—production has fallen by 37% between 2010 and 2013, and production efficiency has fallen from 80% in 2004 to 60% in 2012. Rising exploration costs and falling success rates have led to fewer wells being drilled. This was the background to Sir Ian Wood being asked by my right honourable friend Edward Davey to carry out a review into how the UK continental shelf can maximise economic recovery for the whole of the United Kingdom.
Sir Ian Wood’s four recommendations are significant. Two of them in particular require legislative change in this Parliament; and both will, I hope, be the source of proper scrutiny when the Bill passes through Parliament. One is to create a new arm’s-length regulatory body to ensure that there is collaboration in exploration, development and production across the industry. Although
it will be arm’s-length from the Government, they will be a partner. My right honourable friend Danny Alexander, the Chief Secretary, only last week indicated at the Oil and Gas UK conference that the Government accept this recommendation in full. He also announced that the authority should be called the “Oil and Gas Authority” and be based in Aberdeen. As regards the other recommendation of Sir Ian Wood, my honourable friend said that it will ensure that protocols and processes will be in place for dispute resolution and for ensuring that there is better co-ordination and collaboration among the industry, and that the licensing regime will be rationalised. All these measures will require proper and full scrutiny by Parliament. That is why the signal in the Queen’s Speech and the Minister’s announcement are significant.
Another area that has been touched on is taxation and revenue. The Government have stated that the new oil and gas authority will carry out a wholesale review of the ring-fenced tax regime for the oil and gas industry. This has the potential to be a hugely significant piece of work, which will have repercussions not only for the Scottish economy, where the oil and gas sector represents nearly one-third of the entire GDP, but for the United Kingdom as a whole.
Finally, I seek further clarification from the Minister. It was welcome that she indicated that it is the Government’s intention to bring forward amendments before Committee, but is it the Government’s intention that those amendments will cover all the recommendations of the Wood review on the relationship with industry, how clear they will be on the funding of the authority, and how that authority will take forward its work on the fiscal review? Sir Ian Wood gave a clear steer that he wanted the new authority and regulator, and his recommendations, to be taken on board so that the industry can look forward with confidence to a strong and clear regulatory regime and licensing for the future of the sector. It is the Government’s intention; I hope that it is Parliament’s will and that no further constitutional theory needs to be put forward to ensure that the future of the oil and gas sector is as strong as it can be, so that we can rely on it well into the future.
6.33 pm