Gregor Mackenzie – 1978 Speech on Scottish Oil

Below is the text of the speech made by Gregor Mackenzie, the then Minister of State at the Scottish Office, in the House of Commons on 22 June 1978.

The nicest thing I can say about the speech of the hon. Member for Dundee, East (Mr. Wilson) is that it was not the most constructive I have ever heard. We all waited for the Book of Revelations. Instead we got something like the performance of an Old Testament prophet, and the speech was almost as long as that we would expect from an Old Testament prophet. It did not help me necessarily to understand the various arguments.

The hon. Member has demonstrated once again just how narrow and unrealistic is the view of the SNP of oil development and of the opportunities that oil affords to the people of Scotland and of the United Kingdom. In the light of the election results of the last few weeks it is perfectly clear that the people of Scotland do not share the greedy and selfish approach exhibited by the SNP.

The development of North Sea oil and gas has been one of the most successful operations undertaken in the United Kingdom since the war. Bearing in mind that the oil is being recovered from one of the most difficult areas in the world, the SNP’s niggardly attitude seems to me to be designed to make a success ​ look like a failure. All the people concerned can take credit enough for the remarkable success which has been achieved in moving to a position in which about half the United Kingdom’s oil requirements are being met from the North Sea. The figure last year was 38 million tonnes.

That fact will be seen increasingly as one of the most important milestones in Britain’s economic history.
Achieving this state of affairs has not been without difficulty for the Government. Perhaps I might remind the House of the situation we inherited. It was most unsatisfactory in a number of important respects. When we came to office the previous Government, in four years of power, had operated one gigantic licensing round of nearly 300 blocks. The consequences of their action has illustrated how defective their policies were in almost every respect.

No effective provision had been made to secure an adequate share of the revenues for the people. There was no petroleum revenue tax, and not even any means of making corporation tax effective. There had been inadequate controls over development and no effective controls over the rate of depletion or the flaring of gas. There had been no effective control over exploration after the initial years of the licence. We have taken action to put those matters right.
The hon. Member for Dundee, East revealed in his speech to day that, we gather, he is now in favour of a depletion rate of 10 million tonnes a year, as against 38 million or 50 million tonnes a year. There would not be the jobs there have been in the offshore and onshore industries or the developments both in the North Sea and throughout Scotland if that policy had applied.

Mr. Gordon Wilson

Where in my speech did I say that production from the North Sea should be 10 million tonnes? Nowhere did I say that.

Mr. MacKenzie

The hon. Member could not have been reading his speech very carefully. He was questioned on this matter by my hon. Friend the Member for Kirkcaldy (Mr. Gourlay). What I have said was the distinct impression that the hon. Member left with my right and hon. Friends and, I am sure, with the Opposition.

The taxation measures that we have introduced have made sure that the people of Scotland are getting a fair share of the revenues while allowing the oil companies sufficient profit on their investment, encouraging them to develop the resources. The Petroleum and Submarine Pipe-lines Act 1975 puts control where it should properly be, which is in the hands of the Government. Under the Act the companies are subject to tighter control over submarine pipeline routes, levels of exploration activity, and rates of depletion from individual fields.

In addition, the creation of the British National Oil Corporation ensures that the State participates in all the major discoveries, and guarantees that these important offshore resources will be exploited and developed in the way which best accords with the interests of the people of Scotland and of those throughout the United Kingdom. I believe that all of these measures are now widely accepted both by the public and by the oil industry as just and necessary.

In Scotland one of the most serious failings was the quite inadequate forethought given initially to the needs of the infrastructure in supporting North Sea oil. That is a condemnation of the previous Conservative Administration and of the SNP Members. Apart from a few slogans which we occasionally heard from the SNP, they made no constructive contribution. Only since we have come to office has a major effort been made to catch up in this area. The local authorities and the other public agencies are, I believe, to be congratulated on their achievements.

Mrs. Margaret Bain (Dunbartonshire, East)

Is not the Minister, in fact, outlining with great hindsight the policies that should have been adopted in the late 1960s, when it was a question not of a Conservative Government but of a Labour Government? In the late 1960s the Labour Government practised the kind of policies that were followed by the Conservative Government.

Mr. MacKenzie

I am sure that the hon. Lady has one thing in common with me at present—and that is that neither of us knows what she is talking about. One thing that I recall is that the discoveries were made at a very much later stage than that which she has just mentioned.

It is worth while mentioning that we have done a great deal on the whole question of infrastructure, and much to the benefit of some SNP Members.

Mrs. Winifred Ewing (Moray and Nairn)

Where?

Mr. MacKenzie

Perhaps I may continue for a little while without interruption.

There have been major developments of harbours at Aberdeen, Peterhead, Montrose and in Shetland. We have the reconstruction of airports at Aberdeen, Inverness and Sumburgh. There is an immense house-building programme in the Grampion Region, the Moray Firth and Shetland. The improvement in main line railways and communications has been very marked. We have also ensured that ratepayers in the areas affected by these developments were protected from the full impact of the additional financial burden in providing these facilities.

From the start, we have given the highest priority to ensuring that Scotland’s economy gets the maximum possible benefit from activity related to oil. One of the first decisions was to move the Offshore Supplies Office from London to Glasgow. The OSO has had a major role in helping industry in Scotland—and, indeed, in the United Kingdom as a whole —to meet the new requirements of the offshore business.

We also decided to put the headquarters of the British National Oil Corporation in Glasgow. This has not only provided—many of us are interested in this matter—jobs of high quality, and much needed jobs, but helped to bring an important part of the decision-making on oil matters to Scottish people.

At this point, I should like to pay a tribute to the very important part that the BNOC played last summer in helping to secure two very valuable contracts for the Marathon oil rig building yard on the Clyde. Further contracts, as some of my colleagues may know, are under negotiation, and, based on the yard’s performance, we are certainly confident of its long-term future.

We all appreciate that it takes time for industry to adjust to the requirements and specification of a new industry such as North Sea oil. As has been mentioned ​ often, the latest available full figures that we have show that at present some 55,000 to 65,000 people in Scotland enjoy jobs which are either directly or indirectly related to exploration for and exploitation of oil under the North Sea.

The hon. Member for Dundee, East chided us, in the course of his rather long speech, about the estimates of the OSO. It is worth noting that certainly 60 per cent. of the orders from the United Kingdom sector of the North Sea are now placed in Britain. That is a very good record indeed. We have to improve it further—not by protection or by compulsion, hut by trying to better our own industrial performance and the competitive position of our industries.

Mr. Gordon Wilson rose—

Mr. MacKenzie

The hon. Gentleman took a fair amount of Back Benchers’ time in the debate—a very long time.

Not many weeks ago I opened a factory in East Kilbride, a factory producing oil well-head equipment. I have visited many other factories. People who go about Scotland with their eyes open—I hope that the hon. Gentleman will occasionally do this—will see that a very considerable proportion of that 60 per cent. of orders is providing jobs for people throughout Scotland.

Mr. Gordon Wilson rose—

Mr. MacKenzie

Once again, I am obliged to give way.

Mr. Gordon Wilson

If the right hon. Gentleman has made all these trips and has been in touch with the OSO, will he say what the Scottish figure is in relation to jobs, as he was able to give it for the United Kingdom?

Mr. MacKenzie

What we are concerned about is to look at the percentage here. If the hon. Member had been listening as carefully as he has been talking, he would have heard me say about two sentences ago that some 65,000 jobs were provided for the people of Scotland as a result of this industry.

It is already clear that the United Kingdom industry has built up the skills and the knowledge to compete at home, where there are growing markets for inspection, management and repair of installations, and certainly has a very ​ considerable expertise in the export markets.

Scotland has, therefore, benefited already to a very substantial degree from the economic activity related to North Sea oil. This has happened at a time when not only Scottish but British, European and international rates of unemployment have been higher than at any other time since the war. It would certainly be a great mistake to imagine that the development of North Sea oil could alone counteract the unemployment caused by the international recession. This has been a boost to our economy. It has come at a time when it was very badly needed, and without it unemployment would certainly be very much higher than it is at present.

Let me turn to the wider economic benefits which affect the country as a whole. We have heard a great deal from SNP Members about what they would do with taxation revenues from North Sea oil. I can well remember, as can, no doubt, many of my colleagues, on both sides of the House, what was said by various SNP Members during the course of the last General Election. Whenever they were challenged about how they would increase pensions—I cannot remember the figure now; it varied from area to area and from candidate to candidate—all that we could discover was that the money would be coming out of the North Sea. One would have thought that instead of oil coming ashore, someone—an Almightly providence, perhaps—would be delivering pound notes. But I know that the people in the area that I represent were certainly not conned by the SNP candidate. They did not believe that the people of Scotland had collectively won the football pools or anything of the kind.

I do not think that people find the SNP’s approach to the difficult economic problems facing us to be constructive. Certainly the SNP has failed to make out a convincing case, even on its own terms. SNP Members never explain to us how they would tackle the deep-seated problems of the Scottish economy—problems of steel, of shipbuilding and of motor vehicles. As most of us know these problems stem from a lack of demand in overseas markets and from intense international competition. But whenever the SNP is challenged about ​ these matters, the only answer that we ever get is

“Do not worry about these matters. If there were a separate Scottish steel corporation, a separate Scottish shipbuilding corporation, a separate Scottish this, that or the other, all these problems of demand and productivity would be solved.”

The electorate can very well see that the SNP’s policies in this regard are quite farcical and are designed to separate Scotland—I know that SNP Members do not like the word, but designed to separate they are—from the management of the United Kingdom economy as a whole. They will only make a difficult situation quite disastrous.

Faced as we are with depressed markets, serious dislocation in world trade and intense competition from countries in the Far East, the only hope lies in closer co-operation within the United Kingdom and Western Europe as a whole. A fragmented approach, a separatist approach, will produce only divisive policies, from which I think all of us would suffer.

Therefore, the Government totally reject any attempt by SNP Members to hypothecate the North Sea oil revenues exclusively to Scotland. We have made our position perfectly clear. Oil, like the gas in the Southern Basin before it, is a United Kingdom resource, to be used for the benefit of the United Kingdom as a whole.

Mrs. Winifred Ewing rose—

Mr. MacKenzie

Perhaps the hon. Lady will forgive me if I do not give way until I have finished this part of my comments. As it happens, I live in Cambuslang, not terribly far away from the hon. Lady’s home. She will know that we use gas in our homes which comes from the Southern Basin of the North Sea. We use it all over Glasgow. We do not talk about the English gas which is coming in to supply various homes in Scotland.

To take advantage, as Scotland has done over many years, of being part of the United Kingdom, sharing in the United Kingdom’s economic assets and resources, and then to try to keep the benefits of North Sea oil for Scotland alone is not only immoral—irrespective of the work of the Church and Nation ​ Committee or anyone else—but unworthy of Scotland as a whole. It fits ill with the spirit which enabled Scotland to contribute so much to the United Kingdom and the whole economic and social development of this country in the past. It would be seriously damaging to Scotland’s wider economic interests.

Mrs. Winifred Ewing

Does the Minister not see in the slogan “It’s Britain’s oil” something terribly unacceptable to the EEC member States, who regard it as a European resource and have their greedy eyes on it? Does he see ally thunder cloud affecting his British nationalist stand on oil from the EEC’s desire to interfere with the promises which the Government gave me in this House when I asked whether the EEC would affect the rate of extraction of the oil and the right to select our price and our markets? Does he see a threat to British nationalist oil claims?

Mr. MacKenzie

The trouble is that the hon. Lady is confusing her roles. She is today at Westminister representing a Scottish seat and she should for a few moments forget the obvious interest that she has been showing in the European Parliament for all sorts of reasons for some time.

The Scottish economy is closely integrated with the rest of the United Kingdom. The Fraser of Allander Institute of Strathclyde University, headed by Professor David Simpson, shows this beyond doubt in its recent input-output study. Just under half of Scotland’s manufacturing output is sold across the border to the rest of the United Kingdom, and nearly half Scotland’s consumption of manufactured goods comes from the rest of the United Kingdom. There can therefore be no question of a prosperous Scotland except in a prosperous Britain, despite what SNP candidates and Members may say.

Scotland’s problems are essentially the same as those of the rest of Britain. They have common origins in our past industrial structure, our attitudes and our common economic history. They will be overcome only if we recognise them for what they are and work on them until they are overcome. North Sea oil gives us a real opportunity to strengthen our economy. Even with North Sea oil, that will not be easy. it is not a panacea for all our problems, but it will give us a breathing space and a better chance than we have had at any time since the war.

It is therefore essential that we make the right choices and set out priorities so that North Sea oil gives the maximum benefit to the country. Those priorities have now been decided upon by the Government and were set out in the recent White Paper. We have made it plain that our aim is to promote the expansion of demand and activity to get the economy moving forward.

We certainly intend to redouble our efforts through the industrial strategy to improve the competitive position of our industries by raising investment. We shall maintain and strengthen the impetus of regional policy which has already, despite what the hon. Member for Dundee, East said, made a considerable improvement in the Scottish position. We shall also invest in the future in new replacement forms of energy supply.

Since we came to power in 1974, we have already substantially strengthened the measures available to help the people of Scotland. The Scottish Development Agency, which we established in 1975, in advance of any revenue from the North Sea, is now making a significant impact on the Scottish economic scene. SNP Members constantly ask us to add to its contribution, so I hope they approve of it.

In my own Department, the Scottish Economic Planning Department, we have made offers of selective financial assistance of £97 million in the last few years and have paid out about £373 million of regional development grants, thereby safeguarding and creating thousands of jobs for the people of Scotland.

The difficulties of the current economic situation, both in the international economy and in the United Kingdom, tend to make us overlook what has already been made possible, and the Government’s policies have already been influenced by the availability of North Sea oil. It would have been difficult, indeed, perhaps impossible, without it to provide the stimulus of the income tax cuts of the Budget of 1977 or the further stimulus provided last November, which was particularly helpful to the construction industry. Without it the scope for ​ measures to assist industry through the Industry Act, the SDA and the industrial strategy would have been curtailed and the special measures for job creation which now benefit about 53,000 people in Scotland would have been much reduced.

I recall that this was acknowledged by no less a person than the right hon. Member for Western Isles (Mr. Stewart), who said that the special measures had reduced unemployment in his constituency to the lowest level in his lifetime—and with no disrespect to the right hon. Gentleman, he is no chicken. Therefore, we are already benefiting from North Sea oil to an important extent.

The effects of the measures that we have taken have been more important in Scotland than in the rest of the United Kingdom. We have heard today, as we have heard before, the proposal for an oil development fund for Scotland, but nothing specific or convincing has been said about how it would work, so I conclude that those who propose it have not thought through its implications in great detail.

I have explained why we reject the implications of the words “for Scotland” in the motion as being narrow, selfish and unworthy, but, leaving that aside, the idea of a special fund was considered carefully and at length in our review before the White Paper was published. Quite simply, we consider that what matters is to decide the right priorities for our use of North Sea oil benefits, and for that purpose we consider a fund to be unnecessary.

The policy decisions we need can be taken within the present framework and they must in the end be implemented through our main policy programmes. For a fund to have any effect, it would have to be devoted to the finance of additional items—to things which do not receive sufficient priority in main programmes. If so, it might end up being used in ways which many of us feel would have given poor value for money.

Mr. James Sillars (South Ayrshire)

When the Minister says that an oil development fund was considered, is he saying that the Government considered something which they thought selfish and greedy and is that the reason why it was rejected, or were there other reasons?

Mr. MacKenzie

I have just made the point that we considered the establishment of an oil fund. I am not sure what kind of oil fund my hon. Friend wanted. I think that it was rather different from that envisaged by Members of the SNP, but sometimes I doubt it.

For a fund to have had any effect, it would have had to be devoted to the financing of additional items, which might not have been good value for money. If such items can be justified, it is simpler and more effective to adjust our programmes to take account of them. A fund which merely replaced additional programmes of expenditure would in the end satisfy no one. On balance, therefore, we have concluded that the creation of additional machinery would be artificial and the wrong approach to the country’s problems. The right way to use the benefits from the North Sea is to set our priorities as we have done.

The hon. Member for Dundee, East was very loud and long in his criticisms, if not always acute in his understanding of the real issues at stake. Those who pretend without any justification that opportunities have been wasted, that production should have been held back or that revenues should in some way be concentrated solely on Scotland have a duty to say whether they will also oppose the expenditure measures taken by the Government which have been made possible by oil. So far they have not done so, though they have the opportunity in this debate.

For my part, I am satisfied that the policies which the Government have set for the development of North Sea oil are working well. Scotland has benefited substantially already from the employment created from North Sea oil, and will continue to benefit, within the priorities which the Government have set for the use of the revenue and balance of payments benefits.

At the risk of repeating myself, I must say that I still think that this is a selfish and inward-looking motion. I believe that it does not reflect the true attitude of the people of Scotland, who are concerned about the problems of their native land but every bit as concerned about the problems of Merseyside, Wales, the North-East of England and elsewhere. I must also tell the hon. Member for Dundee, East that, just as I think his motion ​ greedy and selfish, I am convinced that it does not reflect the attitude of the people of Scotland any more than his and his colleagues’ conduct in this place in recent days has done.

Not many weeks ago, the Scottish National Party went into the Lobby to ensure that there were even further tax reductions for the well-to-do in this country. Last week, they went into the Lobby with the Tories to try to stop the whole development of devolution. Where, we often ask ourselves, was the old Celtic fervour? Where was the old Celtic radical? Where was old Uncle Donald that night? He was marching hand in hand with the hon. Member for Glasgow, Cathcart (Mr. Taylor).

We have rumbled all of this for a long time. The people of Garscadden rumbled it. The people of Hamilton rumbled it. The people rumbled it in the regional elections. We are rumbling it once again today, and I am sure that I can confidently ask my right hon. and hon. Friends to defeat the motion this evening.