Gordon Wilson – 1978 Speech on Scottish Oil

Below is the text of the speech made by Gordon Wilson, the then SNP MP for Dundee East, in the House of Commons on 22 June 1978.

I beg to move,

That this House condemns Her Majesty’s Government for its mismanagement of Scotland’s oil resources and its refusal to establish an Oil Development Fund for Scotland to be used for restructuring the Scottish economy, encouraging industrial growth and reducing unemployment.

There can be no more important subject for debate for the people of Scotland than that which we have chosen today.

The future of our country and its economy can rest on this major source of national wealth. I refer to the resources of oil and gas which lie off our coasts.

Today’s news about the cut-back at Singer on Clydebank from 4,500 jobs to 2,000 indicates the real worry about the fabric of the Scottish economy. It is sad that there is no sign that Scotland can have those additional resources steered towards her and that the Government, although making claims about the value of having a Secretary of State for Scotland in the Cabinet, are apparently unable to do anything to save jobs in Scotland. It must ring in many ears today in that part of the country that a vote for Labour means a vote for unemployment.

I should like to review the three areas that will be affected by oil—unemployment, the curtailment of emigration and the social distress which many indicators have shown to exist in Scotland. These are the main subjects of political and social concern in Scotland. Every political party has been offering solutions for those problems. In this debate we are discussing, in particular, the mismanagement of our oil resources and the lack of an oil fund to help our industrial structure.

Labour Members will have grave difficulty in making excuses. They can ​ blame some of the faults on the Conservative Party which failed in its duty by leaving behind a policy vacuum when it left office in February 1974. It can be compared with the early English king Ethelred the Unready.

In almost every sector of the oil industry which the Government have tackled, they have bungled the approach or climbed down on their main intentions. The consequences for Scotland have been damaging, are damaging and will continue to be damaging for years to come. For example, the platform industry was one of the main areas of interest when the Government came to power in 1974. They set out to exploit the oil well quickly. One of the earliest Bills that we had in this Parliament was the Offshore Petroleum Development (Scotland) Bill 1974. The then Minister of State, now Secretary of State for Scotland, said during the Second Reading of that Bill:

“to ensure that these vast resources can be used to the best effect they must be exploited quickly.”

Later he said:

“It is very much bound up with the question of getting oil out as quickly as possible because the work involved will be an important source of jobs and prosperity for the people of Scotland.”—[Official Report, 19th November 1974; Vol. 881, c. 1108–9.]

Right from the outset, the Minister indicated that it was the Government’s intention to get the oil out quickly—that was their main criterion—and to produce employment. The oil is now coming out and the balance of payments has been strengthened, although a recent Barclays Bank report pointed out that the advantages of that strengthening will be eroded through import suction, so the alleged long-term benefits may not exist for too long.

It is in connection with jobs that the Government’s strategy was entirely wrong. The intention was that oil companies should be given a choice of platform yards producing steel and concrete platforms, and there was a wholesale rush to provide those yards. Warnings were given during debates on the 1974 Bill that there would be too many yards and too much dislocation. Today we find that of the yards that were provided, Nigg and Ardersier have been continuously open, Methil closed and reopened, though only with an order which had to be partly shared with another EEC country, Ardyne is ​ empty, Kishorn has recently been empty and Portavedie and Hunterston were never used. As a result, we have wasted more than £25 million of public money which could have been used for alternative industrial development.

We had hoped—I think that I speak for everyone—that the oil industry would provide one of the greatest injections of life into our engineering industry, but since the Government came to power, we have lost 10,000 engineering jobs in Scotland while there has been an increase of 3,000 such jobs in the United Kingdom as a whole. The engineering sector in Scotland is critical. It is the greatest repository of our skills and has been the backbone of our industry for many years. As other countries have shown, it should have been expanded, even in these difficult days of recession.

We had hoped that the arrival of the oil industry, giving, as it did, a large and protected home market, would have provided a stimulus for production and development which would have given the engineering industry the opportunity not only to secure a strong base in the oil industry but to become much more sophisticated in other industrial applications.

The Labour Party’s statement “Oil for Everyone” which was issued before the General Election in October 1974, said:

“The Labour Government’s plans for North Sea Oil will benefit everyone by creating many more jobs in Scotland. By creating new industry. By creating, through Labour’s new economic strategy, a booming Scottish economy.”

I am waiting for the “Hear, hear” from the Government Front Bench. Do they think that there is a booming Scottish economy when we have 170,000 people unemployed, compared with the figure of 91,000 when they came to office? If that is their example of a booming Scottish economy, heaven forbid that we should have any more of it.

It is time that we had a major change. We had a promise from the Labour Party in the election campaign about what it would do, but on the two main sectors, which would have helped many of the people in West Central Scotland who voted Labour, we find that the engineering industry has not got access to the contracts that have come from oil and that it has not been able to maintain its position. ​ The pre-election message of the Labour Party must sound sick to many folk in Scotland and today’s news from Singer will reinforce that.

A number of jobs have been created. Some could hardly avoid being created, but it is a peak of 60,000 jobs, and once the underwater or land pipelines from the offshore platform have been laid to the market, no more will be laid unless more fields are found. There is a limit, and many of the jobs are only short term. They will disappear. Many have already disappeared and some have been caught up in other developments. The creation of 60,000 jobs is a disappointing achievement in view of the hopes that were held out.

We must lay emphasis on the fact that we had a strong home market which existed because oil resources were being developed off the coast of Scotland. Bearing this point in mind, I suggested during our debates on the oil taxation Bill that fiscal incentives should be built in to encourage oil companies to buy Scottish. I believe that if the Government had, from the outset, introduced into the licences a “Buy Scottish” provision and it had been known in advance to the licensees that a certain proportion—we suggest 50 per cent.—of the products should be purchased on our home market, many more jobs would have been created in Scotland.

Throughout the world where oil has been developed, these protections are provided. For example, there is a prohibition in the United States, under the Jones Act, on the use of supply boats which do not fly the American flag. If the mighty American Government which controls the mighty American economy found it necessary to take those steps, surely the British Government could have done at least that for the people of Scotland.

We have not had the employment and economic multiplier taking effect. We were told that the benefits of the oil industry would penetrate other industries remote from oil and provide more work throughout the country, but if we look at the distribution of employment, although we are happy that many areas, such as the Grampians and the Highlands, have done very well, we find that many areas in Scotland with industrial resources ​ and strengths have benefited hardly at all from the oil industry. In July 1977, the numbers of inshore jobs fully related to oil were nearly 13,000 in the Grampian area, nearly 7,000 in the Highlands, 1,750 on Tayside, 1,600 in Fife, Central and the Lothians together, 845 in the islands and a mere 1,460 in mighty Strathclyde. For most of Scotland, the impact of the oil industry has been a damp squib.

It may be that Scotland’s industrialists are to be blamed for slowness. It may be that there is an element of fairness in that criticism. The speed of the Government’s intention to exploit the oil did not give our industry much time to catch up. It is interesting that the report of the International Management and Engineering Group on industrial opportunities for the United Kingdom stated:

“British industry has to break into an area of activity in which foreign investment, mainly American, has established an entrenched position in offshore work, and is daily strengthening that position by the accumulation of experience in solving the still more difficulty problems of the North Sea.”

There should have been some form of Government back-up to ensure that more work went to Scottish firms. No doubt the Government will say that they established the Offshore Supplies Office. However, the Office had to accept, first the political mandate that it was there to help the early production of oil, to get the oil out as quickly as possible, and, secondly, to provide contracts and jobs. One of the problems is that the OSO is just as likely to provide jobs and contracts for those south of the border as for those in Scotland. It was located in Glasgow, but from the outset many of the important officials—the audit engineers, for example—were located in London. It is only lately that they have been transferred to Glasgow.

The OSO will not publish the percentage of the work that goes to Scottish firms although it publishes that information for United Kingdom firms. There are regular outputs of information for United Kingdom firms, but it cannot or will not produce similar information for Scotland. It will not produce figures to tell us what business and employment was generated from oil in Scotland and how it assisted in that activity. I accept that the OSO tries to do its best, but I suspect that Scotland has had only a ​ small proportion of the work, bearing in mind that the oil is located off our coast.

The Minister of State, Department of Energy (Dr. J. Dickson Motion)

Rubbish.

Mr. Wilson

If there is any doubt, let the Government produce the figures. If they can produce the figures, we shall listen to them. The right hon. Gentleman, who is so sensitive on the subject and who shouts from the Government Front Bench, knows full well that he cannot produce the figures. If he did, they would be so shameful and shocking that the Department would be embarrassed.

Mr. Douglas Henderson (Aberdeenshire, East)

Get up and give us some figures.

Mr. Wilson

If the Government cannot produce the figures, I draw an answer from that. There has been little work going to Scotland during one of the blackest depressions that we have had for years. However, we live in a world in which offshore development is regarded as an extension of national shipping and shipbuilding.

There are various forms of protection. I suggest that the Jones Act is one example. Many of our merchant seamen would have found it desirable to benefit from a similar measure. It would have meant more jobs for them at home.
In future licensing rounds it should be made clear to the oil companies in advance that they will be asked to indicate, in the event of their being successful in the allocations of licences and the finding of oil what industrial application or investment they propose to steer towards Scotland. The licences are discretionary and should be used to bring in as much work as possible. I cannot understand why the Government have been so relaxed and liberal in their attitude. They have allowed employment and economic development to disappear.

I shall make a few comments about taxation and participation. It is difficult to cover the whole range of the development of the oil industry and the use of the oil funds even in an opening speech. Comment should be made about taxation. It is unsatisfactory—this can be seen from the falling estimates of income that ​ the Government will be receiving from the revenues—that the oil companies are seen to be using the loopholes that exist in present legislation. The Government should do something about that. Time is short.

Labour Members who did not study these matters when we were considering oil taxation will be surprised to learn that the Government halted in their tracks in the middle of the Bill. They set out with great statements about what they intended to do. They said that they would take on the mighty oil companies, but midway through the proceedings in Committee they changed the taxation structure. They took the Bill backside foremost. They had not developed a tax system that would work.

There is a significant article in the Petroleum Times of 7th March 1975. The article appeared some time ago but it remains relevant as we are still labouring under an unsatisfactory taxation regime. The heading is:

“The UK Government’s give-away tax.”

It reads:

“The battle of the UK rate of petroleum revenue tax is now over, and the oil companies operating in the North Sea can chalk up another victory over a European Government.”

Later in the article there is reference to dilution. It said:

“Although the computers have yet to digest the new programmes, it is already clear that the manifesto policies have been diluted almost to the point where no flavour is left.”

That was the analysis in one of the petroleum journals. It is an objective analysis of the weaknesses of the Government’s tax structure.

Participation has been summed up by the Government’s words “No gain, no loss”. There has been no gain to the country and no loss to the oil companies. That does not rank very well with the claims made in the October 1974 General Election that a Labour Government would negotiate for participation and take participation. The whole process was a waste of time, and the Government well know it. They had to fulfil the letter of their manifesto promise even if they have been unable to implement it in reality.

Participation and taxation were two of the main areas of concern to the Government when they took office. They ​ have bungled them. They have bungled the taxation set-up. They could have gone for a higher petroleum revenue tax. They had the opportunity and they decided not to take it. They procrastinated on participation. We have not had anything on that score.

Depletion policy is extremely important. I can give some credit to the Secretary of State for Energy, who in a speech to the Southwark College of Further Education—he is a hard-working man to cover it—on 1st February 1977 said—

Mr. Henderson

Where is he?

Mr. Wilson

“The other important question is how fast the Government should authorise the lifting of the oil. If we take it up too rapidly, we may be in danger of having a national surplus of oil in the 1980s only to move into shortage during a period of world scarcity, with all the financial implications of that misjudgment. Very prudent and careful assessment will be needed to weigh our immediate interests against our long-term needs.”

It is indicative that the Secretary of State for Energy realises, along with other specialists, that oil prices are likely to rise dramatically in the early 1990s, if not before. At that stage oil imports will cost a tremendous amount. However, instead of eking out the oil over a longer period the British Government are making the strategic blunder of trying now to produce as much oil as they can, when there is a glut and the price has stabilised. Yet in the 1990s, as the Government well know, the United Kingdom will be importing up to 50 per cent. of its oil requirement at extremely expensive prices.

It is only a pity that the Secretary of State for Energy does not have the same fighting ability that the Minister of Agriculture, Fisheries and Food has displayed in the Common Market when dealing with fisheries. If the Secretary of State were prepared to do more about oil and to fight inside the Mafia of the Cabinet, something more might be done.

Mr. Harry Gourlay (Kirkcaldy)

Will the hon. Gentleman make up his mind, or make up the SNP’s mind, what is to be his or its policy on depletion? Earlier he was arguing that very few jobs have come to Scotland from the oil industry, but he is now arguing that we should slow down the rate of depletion, which would add to unemployment in Scotland.

​Mr. Wilson

My party’s policy has always been clear. I have had some say in its evolution. Its policy, basically, is that we take out of the sea as much oil as we require for home and export consumption. That is the principal strategy.

Perhaps I may put it another way for those who are unaware of the Scottish situation in terms of oil production. We consume about 10 million tonnes of oil per year. If we produce 90 million tonnes of oil, as the Government intend, to quote one of their lower targets, that will be the equivalent for the United Kingdom of about 900 million tonnes of oil per year pro rata. If Britain consumes 100 million tonnes and a population multiplier of nine is applied, obviously that is the scale of the uplifting that the Government are taking per head of population.

The second point that I want to make in response to the hon. Member for Kirkcaldy (Mr. Gourlay) is that, if we increase the Scottish content of the orders which come in, we shall get many more jobs. On the one hand, we save the oil for future generations. We have agreed to accept higher production figures than we would have wished. We have developed our approach in considerable detail on the subject. If anyone is interested, I can provide some detailed comments that I have made. The important thing is that, by increasing the Scottish content by the methods which I have suggested, we should have much more employment and activity to help Dundee, for instance, West Central Scotland and other parts of the country. That would be more sensible than to stampede into unnecessary oil production and lost job opportunities.

Dr. Mabon

If 10 million tonnes is the Scottish net self-sufficiency figure and we have produced 38 million tonnes in one year, is the SNP’s depletion policy that we should not open up any more new fields?

Mr. Wilson

No, it is not. It should be taken gradually over a period. We should allow the anticipated rate of production to fall slowly within the parameters which exist for that. There are technical matters concerned with that aspect. I am very glad that the right hon. Gentleman came in on that matter. If he had been able to help me with the figures ​ from the Offshore Supplies Office with regard to the Scottish content, it would have helped considerably. If he has that information, we should be pleased to hear it.

Dr. Jeremy Bray (Motherwell and Wishaw)

Will the hon. Gentleman give way?

Mr. Wilson

I will allow one more intervention. Time is short.

Dr. Bray

If the hon. Gentleman is suggesting that it is a matter of continuing with existing contracts, presumably employment in opening up new fields would dry up overnight.

Mr. Wilson

No, it does not mean that.

Mr. Henderson

That is the British Steel Corporation’s policy.

Mr. Wilson

My hon. Friend makes the point about British Steel. If we adopt a gradual process of running down production so that we have a lower depletion take-up rate, we shall have more oil available for future generations. That is very important. There are those of us in this House who have some thought for our children and grandchildren. We are not prepared to blue it all in one great extravagant blow-up of the kind that the British Government have in mind.

I turn now to petrochemicals. There must be a lot of worry that too little has been done in this connection. We have not had much of the great petrochemical boom which was supposed to build up employment in Scotland. Apart from Grangemouth, most of Scotland’s oil is due to be exported. There has been silence about Cromarty Petroleum. We are waiting to hear a little more about that. Scanitro has gone by the wayside. Many of the petroleum gases are due to be exported without being developed, refined and processed here. We are still awaiting final news from the Government about Mossmorran and the associated cracker.

We need the jobs in chemicals. Only 1·6 per cent. of jobs in Scotland come from chemicals compared with 2·2 per cent. in England and 2·3 per cent. in Wales. Therefore, there is room for improvement there.

I find that each company seems to find excuses for exporting to England or further afield and not building up its opportunities and investment in Scotland. The Government have gone out of their way to help, because their refining policy has been relaxed to help the companies to export crude oil instead of refining more, even inside the United Kingdom.

The plastics industry will grow, according to surveys which I have seen. It is significant—again, we come back to the Common Market—that some of the major European chemical companies have not established branches in Scotland or even in the United Kingdom. We have not had much benefit from that industry. Yet, it is reckoned that about 10 million tonnes of additional plastics capacity will be produced in Western Europe in the next decade. There are opportunities there.

We are still waiting to hear what is to happen to the gas gathering pipeline. That caused a lot of publicity two or three years ago, but it has disappeared.

I ask the Government to consider encouraging oil companies to become involved in joint projects to ensure that singly they do not find excuses for failing to build up their investment in Scotland.

I come now to the last aspect of my speech. I refer to the oil revenues and the oil development fund. The way in which the oil revenues are being dealt with must count as one of the greatest swindles and frauds on the Scottish people for a long time.

At the last election, all the parties had their own delicate ways of expressing that the Scottish people would get the maximum benefit. That was the inference that they put before the people of Scotland.

The Conservative Party proposed that there should be a development fund, interestingly enough, to be controlled by the Secretary of State for Scotland—that was reported in an article in the Scotsman in 1975—but guided by the Scottish Assembly. I am not sure whether, as the Tories reneged on their promise of an Assembly, they have now reneged on the development fund about which they made great play in the election.

The Liberal Party said that Scotland would get half the revenues. That was very generous. I am sure that most ​ English Liberal Members did not appreciate what their Scottish colleagues were doing on their behalf. However, it did not figure in the Lib-Lab pact. The right hon. Member for Orkney and Shetland (Mr. Grimond) did not use his influence with his right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel) to persuade him that one of the crunch issues of the Lib-Lab pact should be that the Scottish Assembly had access to the oil revenue—not even the half that the Liberals generously had in mind.

The Labour Party has procrastinated on the issue and implied that Scotland would get its share. There is a lot of hypocrisy coming from the Labour Party. It used to say that the SNP’s attitude to oil was immoral—that the Scots were greedy. But on 2nd June 1978, that worthy publication Labour Weekly carried the headline:

“EEC has eyes on our oil.”

Obviously, “our oil” is very much a form of British nationalism.

On 16th June 1978, Tribune, that champion of international workers’ solidarity and the flail of “narrow nation-ism”, carried the headline:

“How the EEC seeks ‘legal’ ways to grab our oil.”

For those who are interested in following it through, no doubt free copies will be made available by the Government as they must have difficulty in selling them.

The oil revenues must be the source of the deepest disappointment. We have had “The Challenge of North Sea Oil”. I do not know how the Government managed to come up with that title. I should think that the new PR expert to advise the Prime Minister would have difficulty in fighting any challenge at all in that document which stated that the oil revenues would go into the Chancellor of the Exchequer’s—

Mr. Henderson

Piggy bank.

Mr. Wilson

Piggy bank. That document states that the oil revenues would be steered towards industrial development in Scotland and in other under-developed regions.

On 30th January 1975, again during the course of proceedings on the Oil Taxalion Bill, I had a letter from the then ​ Minister of State, Treasury. After turning down proposals which I had made to increase the amount of work coming to Scotland from oil development, it stated:

“As an Assisted Area Scotland benefits from measures financed by the Exchequer from general taxation. As you will appreciate our capacity to continue with these and other measures such as the Regional Employment Premium (which we retained) will be enhanced by the revenue which will in due course accrue to the Exchequer from North Sea oil. Scotland should thus benefit from our general regional development policy: we hope it will also draw advantage from the more specific measures we have introduced or promoted.”

Three years have passed, and with them the regional policy and the regional employment premium, the abolition of which, it was indicated by the Scottish Council, would cause the loss of some 20,000 jobs in Scotland. The Government are responsible for taking away REP after saying through the Treasury that this would be one of the benefits that Scotland would get from the oil resources. If anyone believes that, he will believe anything. It shows that the Government say one thing and change their minds after a year or two as soon as they think they can get away with it. I remember the exchange that my hon. Friend the Member for Aberdeenshire, East (Mr. Henderson) had in connection with the Chrysler car project which had been proposed for 1979. I notice that the Secretary of State for Industry is just about to scurry to Chrysler to explain the position.

We were accused by hon. Members of being greedy. I remember the abuse that I took. They have to realise, however, that the oil revenues constitute one of the main possibilities for Scotland to develop its economic structure. There is an interesting aspect to the argument about need and morality. The Church of Scotland in its Church and Nation Committee Report in May this year said that Scotland has a “moral claim” to special treatment. When a Church says that Scotland has a moral claim to the oil revenues, that explodes once and for all the insinuations and nasty allegations that have been made over the years.

We are asserting tonight Scotland’s moral and legal claim to the oil revenues, or a fair share of them. We have to repair our social and economic base. In October 1974 an STUC leaflet declared that Scotland would get the major part of the ​ revenues devoted to industry. It said that these could be used to help restructure the economy of Scotland and the development areas.

We need development resources to put into our engineering chemicals, plastics, service, food processing and timber production and processing industries, and for investment in energy, in better transport infrastructure, in housing, and, above all, in the development of our human resources. These are the things that we can do with the assistance and help of the oil resources. We have to have them and we have to get our economy moving. We must bring down unemployment. No answer from the Government can provide any solution.

This House can take positive action tonight to make amends for its ruthless and unscrupulous rape of Scottish resources. It can rightly condemn the mismanagement of Scottish oil, and it can agree the need for a Scottish oil development fund to give the resources necessary to rebuild our nation.