Scotland Bill

Lord Bruce of Bennachie Excerpts

Monday 22nd February 2016 Lords Chamber

[Lord Darling of Roulanish]

In relation to the Barnett formula, I chose my words carefully. I said that it worked; I did not go on to say “terribly well” or “extremely well” or “without any complaint”. If you look at the north-west of England, there is a legitimate complaint there that Barnett treats it the same as it does the south-east of England, when their economies are clearly very different. I know that successive Chancellors looked at the Barnett formula. I looked at it in the halcyon period of the three weeks between taking office and discovering that Northern Rock was on the horizon, which presented me with rather more pressing problems that I had to deal with. But I can see why, it having been there for so long, no one has touched it. I am sure that others in this House will know that the late Joel Barnett often said that he never intended it to last. It was a fix but it worked. However, where I agree with the noble and learned Lord—I will confess to not having studied his proposed new subsection (2) in the detail I perhaps should have done—is that if we are having a new system, we really need to know how it works. What we do not want is what happened in the aftermath of the Smith commission, when everybody signed up to it and the next day it was denounced. That will not work. If we have something that does not work, let us find out now rather than coming to that awful realisation over several months and years to come.

[Lord Bruce of Bennachie (LD)]

I support Amendment 76 but I have sympathy with all these amendments. I think the noble Lord, Lord Darling, has just touched on the value of a federal system, which I suspect the UK will have to come up with if it is to find a stable solution. In the context of Canada, where I spent some time last summer, I was well aware that for years the Albertans complained that they were subsidising Quebec. But right now the Albertans are grateful to have the support of Ontario, as the oil price has collapsed. That is the benefit of being part of a union with the ability to move fiscal transfers around, as the shocks hit different parts of the economy. I suspect that the majority of people in Scotland voted to stay in the United Kingdom because their heads told them that was the reality.

Apart from simple practice, the other issue with the Barnett formula is that, as the noble Lord, Lord Forsyth, said, as a formula it has narrowed the gap between Scotland and the rest of the UK. That is why while it was 25% when he was Secretary of State, it is now 20%. When people talk about the Barnett formula, they are not really talking about that but about the historical difference in spending in Scotland, which predates the formula and has arrived for a variety of reasons. Again, the noble Lord, Lord Forsyth, mentioned the difference in per capita spending but I am sure he would recognise that the whole point of a needs-based formula, if that is what we move to, is that it is not based simply on per capita spending but on needs. We should reflect on the fact that Scotland has 40% of the land area of Great Britain and less than 10% of the population so, for example, the unit costs of delivering services such as small schools to remote islands and highlands are inevitably higher. Any formula must at least acknowledge that.

--- Later in debate ---

[Lord Bruce of Bennachie]

I certainly do not repudiate that point, but it is still worth acknowledging the fact because it is often presented in a glib way—by saying that there are not legitimate reasons why some expenditure in Scotland is significantly higher. I have represented a rural constituency and seen the rural schools which people want to keep open, for example. The unit costs for those are much higher than for urban schools, and such examples need to be taken into account.

We are all frustrated by the fact that we are asked to enact the Bill without the fiscal framework being in place. In the earlier debate the noble Lord, Lord Hain, made the point that some 40% of the UK’s wealth is concentrated in the south-east. In the run-up to the referendum, when the oil price was very high, the SNP was keen to say how much oil had sustained the United Kingdom, but it conveniently forgot the extent to which the United Kingdom had had to bail out the Royal Bank of Scotland and the Bank of Scotland, which an independent Scotland simply could not have done. The SNP’s response was that they were of course no longer Scottish banks, but it would have found some difficulty in arguing that case, had Scotland been independent and those banks been headquartered within their system. There are inequalities of argument in that context.

There is another point that needs to be made absolutely clear. If, in future, taxes fund a significant proportion of what was previously provided by the block grant, and if there is a divergence and different circumstances arise, the reality is that a Scottish Government can do only one of two things: put up taxes or cut services. In fact, they could do both those things. It is right that the people of Scotland should recognise that if they vote for independence, they will find it difficult to maintain what they have at the moment, never mind what the Scottish nationalists promise them, on the basis of the current tax-and-spend regime, and I suspect that that is why the majority voted no. The implications of that are significant.

There is one argument that I find really confusing. I am in favour of the European Union and of the United Kingdom, which I find a very consistent argument, and I am puzzled by people who are in favour of the European Union and against the United Kingdom, or vice versa. At least I and my party have a fairly consistent view on these things: they both involve compromise and negotiation, and both require some form of treaty agreement or contract to settle them. The Minister has to acknowledge that we are getting very close to voting through an Act of Parliament literally in the dark—one that has serious implications for the people of Scotland and is not being properly debated in Scotland. I completely understand the position taken by Labour Front-Benchers—I would not have supported the amendment of the noble Lord, Lord Forsyth, for the same reason—but we are in danger of allowing the argument to be run by one side; we need to hear a balanced argument. We need to hear generosity from the United Kingdom, because the people of Scotland have said that they want to be part of the United Kingdom. I think the UK will say to the people of Scotland, “We want you to stay; we want to find a settlement that works for both of us”. It is not good enough simply to say, “You are going to get that tax. It is up to you what you do with it. If it falls short, that is your problem”. That is why I support Amendment 76, and the other amendments in the group have a similar intention. Never mind no detriment: we have to recognise that we need a basic, practical, working arrangement that says, if there is clearly an unsustainable disadvantage to the people of Scotland from a formula that has been openly and honestly agreed, we are prepared to revisit it. Amendment 76 gives a framework for doing that.

It is essential that the Minister address two issues. First, he must explain how we can enact this legislation without having formally acknowledged the formula written in both Houses of Parliament and the Scottish Parliament. Secondly, and more to the point, if we are not able to deal with the matter here and these amendments are not accepted, that leaves the Scottish Parliament as the only arbiter of whether this goes ahead. We all know that it is likely to say, “We couldn’t get a deal so you have to vote for us, because nobody else will give you a decent deal”. However, the truth is that it was offered a pretty generous deal that would have protected Scotland’s position in the United Kingdom and given it more powers and control, which it rejected for the simple reason that it was terrified of the responsibility of having to take these issues up with the people of Scotland and explain the reality of the resources it had and how it was going to balance them out. That is the everyday debate of politics everywhere—except, at the moment, Scotland. We are debating this issue in a vacuum, without facing the fundamental reality that Scotland benefits from being part of the United Kingdom. Scotland wants more control over its own affairs. We have an agreement in principle to deliver that, but we do not have a fiscal framework. Whatever framework is introduced, we need to make sure that we have a mechanism for reviewing it genuinely to reassure the people of Scotland and ensure that it will be fairly and independently assessed, and that if there is a clearly unacceptable and unsustainable disadvantage, as determined by independent commissioners, action will be taken to put that right. If we can get that right, we can win the argument.

[Lord Turnbull (CB)]

My Lords, I support Amendment 75A moved by the noble Lord, Lord Kerr, on debt and borrowing. The amendment is founded on the principle that the UK is a union, constitutionally and financially. There is a common currency, single monetary policy, single exchange rate and a banking union. We have some banks that pretend their headquarters are in Scotland, but they are not really. The public finances of Scotland and the rest of the UK are inextricably intertwined. A large part of public services has been financed—even under the new arrangements, when they are unveiled—by grants from the UK or assignment of revenues. Departments of Her Majesty’s Government have large budgets that they spend directly in Scotland.

The SNP may not like the fact that the union exists, but it does, and certain consequences follow. When the Economic Affairs Committee took evidence on post-referendum arrangements, there was little appetite by then for full fiscal autonomy. It was always an illusion, but it was thoroughly punctured by the gaps in the oil price. Some witnesses argued that, in addition to sensible arrangements to deal with short-term fluctuations, Scotland could operate a separate borrowing regime, financed by borrowing in its own name. In effect, that would be policed by financial markets and underpinned by a no bail-out rule. As noble Lords have mentioned, debt issued by the Scottish Government would have its own credit rating with its own risk assessment, and if debt issuance was thought to be excessive its cost would rise and the Scottish Government would be forced to respond. However, most witnesses did not believe this model, given the extent to which the two economies are interlinked, and no one really thought that a no bail-out clause was plausible. Most notably, the noble Lord, Lord Darling, told the Committee that the eurozone has a no bail-out rule that we can see “works very well”. I think he was being ironic, but I cannot be absolutely sure. He thought that a no bail-out rule would be,

“unnecessary and downright provocative and actually sound very patronising … I am part of the UK as well; do not tell me I cannot be bailed out by a country that I happen to be a citizen of”.

That was strongly endorsed by the Committee.

During the course of the referendum, there was some loose talk that said, in effect, “Vote for us and we will put an end to austerity”, but even now in Holyrood there is a recognition that although borrowing policy does not have to be identical to that of the UK, it nevertheless has to be consistent with it and supportive of policy for the UK as a whole. Two things follow from that. First, the amount of borrowing year by year cannot be such as to undermine the Government’s overall borrowing objective. Secondly, the stock of debt, relative to some measure of capacity to repay, cannot be such as to raise the spectre that the UK Government might have to intervene. As the noble Lord, Lord Kerr, stated, this amendment does not seek to specify what those various ratios should be. They should rightly be in secondary legislation. Why, then, is the amendment needed? It is needed to entrench the principle that Scottish fiscal and debt policy cannot be decided unilaterally in Scotland. It has to be related to the policy of the UK as a whole and the limits must be set by the Treasury, after consulting the Scottish Government, and should be approved by Parliament. In that way, the amendment fills one of the holes in the Bill, although many are left.

The noble Lord, Lord McFall, mentioned an article, “Sleight of Hand”, by Jim Gallagher, who, as many noble Lords will know, is a former Scottish civil servant and is now a professor. However, the noble Lord did not read the last paragraph:

“So I wonder if this is less about fiscal formulae and more about nationalist politics. It’s becoming pretty clear that the SNP won’t promise another referendum after the next Holyrood election. They think they’d lose. But without it they’ll have nothing to talk about. So maybe their aim is to reject the fiscal framework, whatever is offered and so derail the new powers in the Scotland Bill. Then they can spend the next five years arguing about power, not exercising it”.

Scotland Bill

Lord Bruce of Bennachie Excerpts

Tuesday 19th January 2016 Lords Chamber

Moved by

[Lord Bruce of Bennachie]

54: Clause 49, page 51, line 36, leave out from “authorised” to “(or”

[Lord Bruce of Bennachie (LD)]

My Lords, I rise to move this amendment in the name of my noble friends, with apologies to the Committee. I have not taken part in deliberations on the Bill so far because when it was last before the House, I had not made my maiden speech. Noble Lords will, however, understand that I have a very direct interest in it as a former leader of my party in Scotland who negotiated some of the original agreements for the first Scotland Act and the creation of the Scottish Parliament.

These amendments relate to gaming regulations. They have been tabled to try to ensure that the Scottish Government have a clear line of responsibility and that there is no confusion between the two Governments. The first two, essentially, would ensure that the Scottish Government have the right to vary the number of gaming machines regardless of the stake they carry. As it stands, the Bill specifically relates to a stake of more than £10. Our concern is that we need to be able to ensure that there is a clear line of authority, that the Scottish Government have the right to regulate all gaming and that there is no confusion about that.

It is important to recognise where Clause 49 devolves, by way of an exception from the current reservation in Schedule 5 to the Scotland Act 1998, power to vary the number of gaming machines authorised by a betting premises licence granted by a licensing board in Scotland where the stake is more than £10. But the Smith commission specifically stated:

“The Scottish Parliament will have the power to prevent the proliferation of Fixed-Odds Betting Terminals”.

The Committee will understand the pain and disastrous consequences that these machines have caused some people both north and south of the border. That legitimises the reason to ensure that the power exists to regulate them. These machines have been described as the crack cocaine of gambling because they are so addictive. It is possible for people to lose substantial sums in a very short time. It would be unfortunate if there were a diversion of power and authority, which the exception currently in the Bill seems to produce. That is the first point. These two amendments would remove the limitation of £10 and give the authority to the Scottish Government to regulate and reduce the number of all machines, regardless of the size of the stake.

The second is the exception that basically denies the Scottish Government the right to regulate those licenses that have already been awarded. The current exemption states:

“The amendments made by this section do not apply in relation to a betting premises licence issued before the section comes into force”.

Once it becomes apparent that, under the new legislation, the Scottish Government have the power to regulate gaming machines but not to regulate those that were licensed before the power was granted, people in Scotland will likely regard that as a slightly untoward situation.

I appreciate that people will argue that there are difficulties associated with revoking licences that have previously been issued, but it seems to me that that is nevertheless a matter for the Scottish Government to determine in the future. They need to make a judgment as to whether there are any practical difficulties. Why should the current legislation deny the Scottish Government the right to make that decision?

Essentially, these amendments seek to give a power to the Scottish Government to regulate all gaming machines regardless of the stake, to do so in a way that enables them to limit the number of machines, and to be able to make changes to those that were licensed prior to the Act coming into force. On that basis, I commend these proposals and I beg to move.

[Lord Davidson of Glen Clova]

I rise to speak to Amendments 55 and 57 in my name and that of my noble friend Lord McAvoy. The amendments would require licensing standards officers in Scotland to be recognised as authorised persons who may exercise inspection and enforcement functions under the Gambling Act 2005. In its submission to the Scottish Parliament’s Local Government and Regeneration Committee’s call for evidence to the inquiry into fixed-odds betting terminals carried out in August last year, the Law Society of Scotland outlined its concerns. Those concerns, previously raised with the Gambling Commission, are whether a licensing standards officer appointed under Section 14 of the Licensing (Scotland) Act 2005 has the power to carry out any of the enforcement activities under Part 15 of the Gambling Act 2005 in respect of both alcohol licensed premises and gambling licensed premises.

Unlike in England and Wales, the licensing authority in Scotland is the licensing board, which has no officers or employees. Licensing standards officers are officers of the local authority, not of the licensing board. This is confirmed in the Gambling Commission’s advice note on the role of authorised persons in Scotland and states that the enforcement powers contained in the Gambling Act cannot be exercised “as of right” by an LSO. As an authorised person, an LSO would be entitled to:

“Enter premises for the purposes of discovering whether facilities for gambling have been … provided, whether the premises are licensed for gambling and whether the terms and conditions of any licence are being complied with”.

In addition, LSOs would have powers to,

“inspect any part of the premises … to question any person on the premises; to require access to and copies of written or electronic records kept on the premises; to remove and retain items which may constitute or contain evidence”.

Additional legislative competence is being devolved to Scotland in this area, and therefore we suggest that it is vital that the Scottish Parliament is given all the necessary resources to manage these increased responsibilities. That, we say, is exactly what Amendment 55 does. The authority of licensing standards officers must be beyond any doubt, and that is what the amendment seeks to achieve.

Separately, I turn now to the issues raised by the noble Lord, Lord Bruce of Bennachie. In setting the £10 limit, we suggest that the Government have failed to meet the recommendations of the Smith commission. We would be keen to know why a £10 threshold has been set. Is it perhaps that the Government wish to roll out a similar policy across the whole of the UK? That may be understandable. However, not only do fixed-odds betting terminals with a stake of less than £10 remain the responsibility of the UK Government but, crucially, the maximum stake threshold does not cover other reserved matters such as the speed of play or the type of game being played. The existence of a threshold would allow addictive casino games to be placed in Scottish bookmakers without recourse to the Scottish Government. That is plainly of concern. What, we ask the Minister who is to reply, is the policy justification for this aspect in Scotland?

Responding to a question on this issue in the other place, the Secretary of State for Scotland said that he was “reflecting” on it. At what stage are those reflections, and might the Minister explain how the Government’s proposals are in keeping with the Smith commission’s recommendation that the Scottish Parliament be empowered to prevent the spread of fixed-odds betting terminals? I look forward to his response.

[Lord Dunlop]

My Lords, perhaps I may set the scene for Clause 49, which refers to gaming machines in licensed betting premises. The provision will give the Scottish Parliament the power to vary the number of high- stakes gaming machines permitted by betting premises licences in Scotland. This power applies to all gaming machines on which players can stake more than £10 per play, which was referred to by the noble and learned Lord, Lord Davidson. At present this is possible on sub-category B2 gaming machines only. These are the machines that are widely referred to as fixed-odds betting terminals. Further, the power conferred by the Gambling Act 2005 on the Secretary of State to vary the number of such machines permitted by new betting premises licences will be transferred to Scottish Ministers.

FOBT machines are located almost exclusively in high street betting shops, and it is these machines with a maximum stake of £100 and a maximum prize of £500 on which recent public interest and debate have centred. This implements paragraph 74 of the Smith commission report which was explicit in saying that the Scottish Parliament should have,

“the power to prevent the proliferation of Fixed-Odds Betting Terminals”,

and this clause achieves that.

The Smith commission agreement was explicit in saying that the Scottish Parliament should be able to exercise new functions under the Gambling Act 2005 to increase or decrease the number of FOBTs which are authorised by new betting premises licences. The power is sufficiently broad to permit the Scottish Parliament or Scottish Ministers to reduce the number of FOBTs authorised to zero in a new betting licence. The Scottish Parliament will be able to prevent increases in the number of FOBTs created by the opening of new betting premises, as Smith proposed. Gambling and its impact on society is a topic which the Government understand and take seriously, and we remain alert to the changing dynamics of the wider debate and will act in this area as appropriate.

I turn to Amendments 54 and 56, which seek to extend the scope of gaming machines covered by the clause. These proposals go substantially further than what the Smith commission referred to. They would bring within the scope of the clause all gaming machines regardless of stake size. At present, a betting premises licence issued under the Gambling Act 2005 authorises its holder to make up to four gaming machines available for use. The Categories of Gaming Machine Regulations 2007 provide that this entitlement is limited to gaming machines which fall within sub-categories B2, B3 and B4 and categories C and D. The Smith commission agreement relates only to FOBTs, and the term FOBT cannot be found in the Gambling Act 2005, but it is commonly used to describe category B2 machines by the Government as well as the Scottish Parliament’s Local Government and Regeneration Committee. The Smith commission’s use of the term FOBT is not shorthand for all gaming machines. FOBT machines are located almost exclusively in high street betting shops, and it is on those machines that the recent debate has centred. As such, the Government consider that the intentions of the Smith commission agreement have been delivered and that it is unnecessary to bring other gaming machines, which have far lower stakes and prizes, within the scope of this clause.

I am grateful for the contribution that was made on Amendment 58. As I have said, the Smith commission sought powers to prevent the proliferation of FOBTs, and the Government have interpreted this to mean the ability to restrain any future increase in the number, thus preventing proliferation—and hence the focus on new licences. Amendment 58 would extend this power to include existing licences as well as new ones. In conjunction with the extensive planning powers which have already been devolved, the clause as drafted will give the Scottish Parliament sufficient levers to tackle high street gambling and the extent of FOBT terminals, as Smith envisaged and which is the focus of public debate. The Government’s approach is appropriate and therefore I hope that the amendment will not be pressed.

The noble and learned Lord, Lord Davidson, proposed Amendments 55 and 57, which would allow the Scottish Parliament to include licensing standards officers in Scotland as authorised persons who may exercise inspection and enforcement functions under the Gambling Act 2005. There is already a well-used and straightforward mechanism in Scotland whereby licensing standards officers may be authorised persons for the purposes of the inspection and enforcement of functions under the Gambling Act 2005. The Gambling Commission has very helpfully issued guidance on this. Local authorities are already responsible for determining how their existing officers discharge their duties. Clause 49 does not change that. As such, we consider that the amendments are not necessary.

Again, I urge the noble Lord to withdraw his amendment.

[Lord Bruce of Bennachie]

I am grateful to the Minister. As he will know, these amendments were proposed by the Law Society. While his response has made clear that he believes, in accordance with the Smith commission, that it is giving the power to regulate new licences for high-value machines, it creates a dilemma, which means that some machines in Scotland will be regulated by the Scottish Government and others would still be regulated by the UK Government. Would it not be more sensible to have a single Government, the Scottish Government, responsible for the regulation of all machines rather than have certain machines over which the Scottish Government have power and others which remain with the United Kingdom Government, causing potential confusion and future conflict?

That was the purpose of the amendment. All I ask of the Minister is that he reflects on the fact that, while I understand the reasonings for the amendments—I am happy to withdrawn mine on that basis—he should recognise that this could create an anomaly in the future which might require him to come back with future legislation. There is some logic in doing it all in one rather than having to come back on another date. I beg leave to withdraw the amendment.

Amendment 54 withdrawn.

Draft Scotland Clauses

Lord Bruce of Bennachie Excerpts

Thursday 22nd January 2015 Commons Chamber

[David Mundell]

Nobody in the House, with the exception of one party, wants to see the fiscal nature of the United Kingdom undermined in any way, and my right hon. Friend the Chancellor most certainly does not. He has made it clear that as we move forward with the different settlement in Scotland, there will be elements of the Budget that do not apply to Scotland. Clearly it is appropriate, as there is a debate about the governance of England, to debate that matter too.

[Sir Malcolm Bruce (Gordon) (LD)]

My constituents in Gordon overwhelmingly rejected independence and declared their support for the United Kingdom. They will certainly welcome the statement. However, they are concerned that it is the responsibility of the Scottish Government to provide devolution within Scotland. The people of Gordon feel extremely let down by the Scottish Government, who have diverted resources and powers away from them, leading to a crisis right across our public services.

There is also an abuse of the term “home rule”. Apparently, to the SNP it means everything except foreign affairs and defence, which means that it does not address the single currency, the single market or the single welfare system. In other words, it means independence. Nobody should be in any doubt that voting for the SNP is voting to break up the United Kingdom.

[David Mundell]

I certainly agree with the right hon. Gentleman’s final statement. We have to move the debate on, so that it is a debate about what the powers of the Scottish Parliament are used for, rather than a debate about powers, which always seems to be predicated on blaming someone else for the lack of action by the Scottish Government. I hope that today will be a watershed and that the debate in Scotland will be about what the Scottish Government are doing with the extensive powers the Scottish Parliament has and those that it is going to receive.

North Sea Oil and Gas (Employment)

Lord Bruce of Bennachie Excerpts

Tuesday 20th January 2015 Westminster Hall

[Mr Frank Doran]

(Aberdeen North) (Lab): It is a pleasure to operate under your chairmanship, Mr Streeter. We are here to discuss United Kingdom oil and gas, which is in severe difficulties, partly because of a substantial drop in the world oil price. In these debates, it is always important to get the facts right. One key thing about the industry is just how important a part it plays in the UK economy. According to Oil & Gas UK, the industry body, the industry supplies 73% of the UK’s primary energy: oil for transport and gas for heating. The UK balance of payments benefited from oil and gas to the tune of £30 billion last year. The oil and gas supply chain achieved sales of £20 billion outside the UK. The total expenditure in services and infrastructure investment from oil and gas companies in 2013 was £20 billion. Since 1970, the industry has invested £500 billion.

In recent years, the expenditure has been particularly high. In 2014, the industry invested around £14 billion of capital investment in UK oil infrastructure, following on from investment of £11.4 billion in 2012 and £13.5 billion in 2013. Across the industry there is a total committed expenditure—that is, projected future expenditure—on projects in production or under development totalling £44 billion. Figures like these have not been seen since the 1980s. They are massive figures: there is no question about that.

The industry claims to support 450,000 jobs in the UK. These break down as follows: 36,000 employed directly by offshore operators; 200,000 in the supply chain, providing goods and services to the industry; 112,000 jobs in services such as hospitality, taxis, and so on; and 100,000 jobs in the export of goods and services. It is difficult to visit any foreign oil base or complex without hearing a Scottish or English accent. We are operating throughout the world.

Many of these jobs are now under threat because of the collapse of the oil price. Major companies—Shell, Chevron and, last week, BP—have announced redundancies. Some of these have been expected for some time and were part of company restructuring as well as the downturn in the oil price. More announcements are inevitable.

I can find no reliable figures showing the numbers so far made unemployed, but I know from union sources, for example, that roughly 600 people have been made redundant in companies where there are recognition agreements. However, most cuts are likely to be made to the self-employed, who comprise a large number of offshore and onshore employees; they are the easiest and cheapest to remove. At the moment it is estimated that there will be around 2,000 job losses in total. I think that is a fairly realistic projection.

How things will proceed from here on is difficult to judge at the moment. Many jobs lost so far have been lost onshore and it may take time before large numbers of offshore jobs are put at risk. Everyone will be mindful of the need to retain skills for when the upturn arrives, whenever that might be.

In the history of the North sea oil and gas industry there have been at least three serious downturns. The worst and most damaging was the downturn in the mid-1980s, when 20,000 jobs were lost in Scotland, most of them in Aberdeen and the north-east. Some 50,000 jobs were lost in the whole country. The fact that the job losses were higher in the rest of the UK than in Scotland reflects the fact that, although the industry is centred in Aberdeen, the supply chain and the work force is spread throughout the UK.

There is a risk that this year’s downturn could be as serious as the one in the 1980s, but I think it is possible to take steps to mitigate that. In the first place, the industry has changed substantially from the industry we had in the 1980s. For example, it is much more widely spread with fewer of the majors involved. I believe that with the right sort of focused support from Government and the industry, this very difficult time will not develop into the tragedy that we saw in the 1980s. Of course, there is very little we can do about the global price of oil, but we can look at the other issues that have faced the industry for some time now and consider how we can soften the blow and minimise damage.

Exploitable oil and gas are proving harder to find, and discoveries that are made are often in places that are difficult and expensive to exploit, particularly if there are issues around access to infrastructure. Some of these problems will be addressed when the recommendations of the Wood report are fully implemented, but that is likely to be some time away, although there are moves to accelerate the process.

Then there is the skills shortage. Until relatively recently, few companies offered apprenticeships in technical skills. In the 1970s and ‘80s, the industry attracted engineers, welders, boilermakers and others from the collapsing smokestack industries: mining and shipbuilding, and so on. That supply has been exhausted and the work force are ageing. Trainee and apprenticeship programmes have been introduced in recent years, but those take time to make an impact. In the meantime, labour costs have risen enormously and companies have poached skilled staff from each other, driving wages to high levels. With my trade union background, I am the last person to complain about that, but it has a serious impact on costs offshore.

Oil & Gas UK says that contracting prices have doubled since 2010. One executive from a major company told me recently that the cost of scaffolding alone—there are 6,500 workers working on scaffolding in the North sea—has tripled in the last two years. It is obvious that a slice of the money that previously would have been spent on research and development, exploration and appraisal, which are all things to take the industry forward into the future, has been diverted into meeting these wage costs.

[Sir Malcolm Bruce (Gordon) (LD)]

I congratulate the hon. Gentleman on securing this timely debate. He is making some important points. Does he agree that if we—the industry and the Government—get this right, and indeed make the industry more efficient, as and when the recovery happens we will be much more competitive than we have been? The point he is making is that we have been in danger of pricing ourselves out of the business.

--- Later in debate ---

[Sir Malcolm Bruce (Gordon) (LD)]

I congratulate my neighbour, the hon. Member for Aberdeen North (Mr Doran), on securing this debate at a critical time.

I have been connected with the industry since I first arrived at the North-East Scotland Development Agency in 1971—two months before BP announced the discovery of the Forties field. We have certainly had ups and downs before, but my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) was right to point out that we are much more vulnerable in a mature province than we were in the early stages. That is why it is much more important that we take appropriate and considered action—not panicky action—to get ourselves to a place where the industry has a secure future. One thing that we all have to accept is that the UK has no control over the world oil price. We must deal with it although it is, as all commodity prices are, erratic and unpredictable. It is certainly not a good basis for planning economic policy.

The other thing that we should recognise is that the good thing about our mature province, as the hon. Member for Aberdeen North pointed out, is that we have created a centre of excellence and a critical mass that are incredibly valuable to the UK domestic economy, and which sustain a £10 billion export industry; that industry, however, depends on an active domestic market and levels of activity, which we must secure. It is interesting that Sir Ian Wood, who inevitably has been quoted several times, is taking a characteristically calm and considered view of the situation. He has explicitly said that the Budget is the entirely appropriate place in which to determine the tax cuts and the timing, and he recognises that they need to be balanced and considered.

Having mentioned Sir Ian and the Wood review, I want to commend my right hon. Friend the Secretary of State for Energy and Climate Change, whose initiative it was to invite Sir Ian to conduct his review, on the basis of discussions with the industry and in the wake of its reaction to adverse tax changes in 2011. My right hon. Friend wanted to see how we could better co-ordinate the infrastructure and future development of resources, which the industry admitted were being undermined by its commercial rivalries; unusually, an invitation was issued to partnership with Government, to try to create a framework to secure and unlock a lot more resources than would be done if the industry was just competing within itself. That was a powerful initiative, and although I agree about the importance of establishing the new authority as quickly as possible, we should recognise that it would not exist at all without the initiative of the Secretary of State. I think we all agree that the sooner it can be set up with the right mix of people—who might just be available now—the better it will be able to get on with its important work.

Oil & Gas UK made the point that, with $50 oil, 20% of North sea activity is uneconomic. There are perhaps too many projects in the North sea that have become conditioned to looking at $70 to $90 oil as the essential basis. Frankly, from every discussion that I have had with an oil and gas economist, that is not a wise basis for planning. It has partly been necessitated by the escalating costs that the hon. Member for Aberdeen North addressed. We have a unique opportunity to tackle several problems at once.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

Like the right hon. Gentleman and, I think, everyone else present for the debate, I received an Oil & Gas UK briefing. It deals with the immediate problem in the sector, but there is no mention of how it arose, with the downturn in China and India, and oil and gas fracking in the United States. That is a longer-term issue. Something of a quick fix may be required, but in the longer term we must take cognisance of what is happening globally.

[Sir Malcolm Bruce]

That is a fair point; I would say only that I have never yet met an oil economist who was any good at anything other than explaining why prices did what they did, rather than what they would do next. Yes, the hon. Gentleman may be right, but people have told me many times that the oil price would stay low, and then it has gone up. When they have told me it would stay high, it has gone down. We have to live with that.

Those of us close to the industry, and the taskforce, of which many of us are members, are aware that in recent years prices have escalated unrealistically and unreasonably on the back of the high oil price. I want to make it clear to the hon. Member for Aberdeen North that that is no excuse for a slash and burn response on employment; it is, however, a recognition that a lot of fat has built up in some of the contractual arrangements.

With the right approach, it would be possible to slim down and maintain skills and capacity for the future. The wrong approach means, of course, making people redundant and losing their skills, so that if and when there is an upturn we will have lost capacity as well. I argue that we need to manage things proportionately. The industry has been rather late in tackling that problem. Quite a few of the redundancies that have been announced since the oil price fell were part of reviews that took place because of the escalating costs before we knew that the price was going to fall.

[Sir Robert Smith]

One of the lessons of history is that if downsizing in the current crisis is inevitable, the way it is handled and the way people are treated, so that they are still interested and willing to come back in the good times, are important. There is a lesson for the industry about the way it behaved in the past.

[Sir Malcolm Bruce]

I completely agree.

Finally, I want to set out what things the Government must consider—for which the Budget seems to be the appropriate place. First, the investment allowance that has been announced needs to be confirmed in the Budget. Secondly, there must be a review of the supplementary charge. In my view the Government will get none of it anyway in the present climate, so getting rid of it would not cost much.

There should also be a review of the petroleum revenue tax for the future. The industry has traditionally been taxed at about double the rate of any other sector. Perhaps that was all right in the good times, but in a mature province, in the present situation, asking for a review is not asking for subsidy; it is asking for a realistic tax regime that can secure an industry that has made a massive contribution to the balance of payments and contributed 25% of our fixed industrial investment every year for the past 40-plus years, and which has a great future if we manage it now. If we do not get it right, there is an existential threat to the industry—certainly to an industry on the scale that we have looked for. We do not need to score points off each other. We need to work together and come up with a systematic package of measures that will restore confidence.

I accept that one thing that has damaged the industry is constant change. It now needs a clear, simple, strategic regime that says that the UK wants its investment and will provide a climate in which, provided it can make itself competitive, the Government will work with it to enable it to secure jobs, exports and investment for the future. If we can do that, whenever the oil price turns up, the industry will be much stronger than it would have been if the crisis had never happened.

Oral Answers to Questions

Lord Bruce of Bennachie Excerpts

Wednesday 14th January 2015 Commons Chamber

[David Mundell]

I hoped that the hon. Gentleman and his colleagues would welcome the new franchise with its services to Falkirk and Stirling. There is no suggestion that there will be any reduction in services, but I am happy to make further inquiries for him on that point.

[Sir Malcolm Bruce (Gordon) (LD)]

Will the Minister acknowledge that to increase the reliability, speed and efficiency of the service between Edinburgh and Aberdeen on the east coast main line, we need an upgrade of that line, not least the ending of the single track south of Montrose? What steps can he and/or the Scottish Government, or the two together, take to ensure that investment?

[David Mundell]

My right hon. Friend will be aware that we actively engage in discussions with the Scottish Government on important strategic transport projects that impact the whole United Kingdom, such as the Forth crossing. I am sure that colleagues in the Scottish Government will have heard his points, and I will certainly raise them further with them.

Scotland within the UK

Lord Bruce of Bennachie Excerpts

Monday 13th October 2014 Commons Chamber

[Mr Carmichael]

On the hon. Gentleman’s latter point, I think I have already made that clear. I very much hope that once we have done this piece of work, we will in Scotland at last be able to move on to using the powers of the Parliament rather than just talking about them.

[Sir Malcolm Bruce (Gordon) (LD)]

rose—

[Sir Menzies Campbell (North East Fife) (LD)]

rose—

--- Later in debate ---

[Mr Carmichael]

That remains the position of my party.

[Sir Malcolm Bruce (Gordon) (LD)]

May I first welcome my right hon. Friend’s Command Paper? As somebody who led our party in the constitutional convention, I welcome the fact that the Scottish Parliament will now get proper tax-raising powers. Does he agree that anything more than 50% looks a lot like home rule and a shared partnership? To those who want devolution within England, may I say, “You have our support, but it is quite difficult to support something that is unclear”? We need a constitutional convention. I suggest that devolution has in every case been accompanied by electoral reform and proportionality, and that should also be a condition in England.

[Mr Carmichael]

It is an important point that devolution has in every case been accompanied by electoral reform, and that institutions to which power is devolved are always elected proportionately. I cannot add a great deal to my answer to the right hon. Member for Southampton, Itchen (Mr Denham) on the need to build consensus in whichever way people in England choose. In Scotland, we have done it in a way that has worked for us twice, and will I believe now work for us a third time. It could work for people in England, but it is for them to make up their own minds about that.

Oral Answers to Questions

Lord Bruce of Bennachie Excerpts

Wednesday 7th May 2014 Commons Chamber

[Mr Carmichael]

Both Governments agreed in the Edinburgh agreement that there would be no question of pre-negotiation. That was a sensible situation and I am astonished that the hon. Gentleman now seeks to walk away from it.

[Sir Malcolm Bruce (Gordon) (LD)]

Does the Secretary of State agree that the Bank of England is not an asset to be shared but an institution that belongs to the United Kingdom which Scotland chooses to leave? Does he also agree that it is an extraordinary kind of independence where one wants to hand over control of one’s fiscal and monetary policy to a foreign bank?

[Mr Carmichael]

My right hon. Friend puts it perfectly. The difference between an asset and an institution is not a difficult one to understand, but the Scottish nationalists do seem to struggle with it.

Scotland’s Place in the UK

Lord Bruce of Bennachie Excerpts

Thursday 6th February 2014 Commons Chamber

[Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD)]

I congratulate the Backbench Business Committee on allocating the time for this important debate. I also congratulate those who have contributed to it so far; their speeches have been very thoughtful. I hope that we will be able to maintain that tenor throughout the afternoon, although that might be wishful thinking. Everyone who has spoken so far has acknowledged the fact that we have a big moment coming up in a few months’ time. The election in 2011 was transformational, and we are finally focusing on the big choice for Scotland between going it alone and staying part of the most successful family of nations in the world.

It is hardly a surprise that I want Scotland to stay part of the United Kingdom. That desire is based not only on my upbringing and experience in the borders and elsewhere in Scotland but particularly on my experience as Secretary of State for Scotland. It was a great privilege to hold that post, not least because of the people I worked with, including the great team of civil servants, special advisers and others who did an immense amount, even though it was a small team. They helped to produce the Scotland Act 2012, which brought about the biggest transfer of financial powers from this place to Edinburgh since the Act of Union, and supported me in the work that we did on the Edinburgh agreement. It was not just those two moments that were important, however. As Secretary of State, I also had the chance to get out and about and see the fantastic country that we all call home and that we are proud to be from and to represent.

I am thinking of the young woman in Glasgow who had been given an opportunity through the jobcentre and Skills Development Scotland to get some training and to work up a business plan, which she wanted to develop into something big. She had the vision, and she wanted to go for it. I am also thinking of the woman business leader in Fife who had taken her small family agricultural business and, with her family, developed it into a business that operated across the United Kingdom and Europe. Her vision was an expansive and positive one.

I am thinking, too, of the oil and gas sector. For Members representing Aberdeen, and for those on both sides of the House representing the north-east of Scotland, including my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith), that sector is a precious jewel. We argue about the politics involved all the time, but I doubt that we truly appreciate all that it does, and all the highly skilled people working in Aberdeen and the north-east, including those from all our constituencies. They have a great future, but they will also face a big challenge in a few decades’ time, and that is something that we should all be thinking about now. It was a great privilege for me to learn much more about that sector, and to see the opportunities that exist now and that will exist in the future, when the oil and gas are finished.

Travelling all those miles around Scotland over three and a half years reinforced my sense of Scotland’s place in the UK. We have fantastic economic opportunities. That is not just about being part of the huge single market in the UK, or about having a great platform from which to promote our goods and services throughout the world through UK Trade & Investment and other channels; it is also about having the right attitude and approach to connecting with the international business sector.

[Sir Malcolm Bruce (Gordon) (LD)]

Is my right hon. Friend aware of the concern among some businesses that have taken advantage of UK representation around the world that, if Scotland became independent, the UK Foreign Office network would effectively be competing with a Scottish network, rather than acting as an ally working towards achieving economic success?

[Michael Moore]

That would be a terribly sad situation. Last March, I was part of an energy showcase in Rio de Janeiro, at which Scottish Development International was working in partnership with UKTI and the consulate there to promote Scottish business and Scottish skills on the international stage. We were supporting each other, and we do not want to lose that scale and that ability.

This is not just about opportunity, however. It is also about our resilience. We have already heard references to the banking collapse of a few years ago. The right hon. Member for Edinburgh South West (Mr Darling), who was Chancellor of the Exchequer at the time, is in his place today, and I am sure that he will say more about this. The fact that we in Scotland had the whole of the UK standing behind us at the time was massively important and gave us the ability to work through those difficult times, the legacy of which is still with us today.

Oral Answers to Questions

Lord Bruce of Bennachie Excerpts

Wednesday 18th December 2013 Commons Chamber

[The Prime Minister]

The right hon. Gentleman may not like the facts, but he cannot hide from them. The typical taxpayer is paying £600 less because we cut taxes. The deficit is falling—it is down by a third—because we took difficult decisions. Today, for the first time in our history, there are 30 million people in our country in work. The fact is that at the end of this year we have a recovery Labour cannot explain, growth it said would never come, and jobs it said would never happen. Meanwhile, it is stuck with an economic policy that does not add up and a shadow Chancellor it cannot defend. That is why the British people will never trust Labour with the economy again.

[Sir Malcolm Bruce (Gordon) (LD)]

rose— [Interruption.]

[Mr Speaker]

Order. We will just have to keep going a bit longer, because I am not going to have—[Interruption.] The right hon. Gentleman will be heard.

[Sir Malcolm Bruce]

I can give the House something to cheer about. Will the Prime Minister join me in welcoming the fact that investment in our North sea oil and gas industry this year will reach a record £14 billion, accounting for an unemployment rate in my constituency of just 0.7%, but is he aware of Sir Ian Wood’s report that says we need collaboration between Government and industry to unlock between 3 billion and 4 billion barrels of oil worth £200 billion that will otherwise be left under the sea?

[The Prime Minister]

My right hon. Friend makes a very important point: the Wood report is an excellent report and we are looking to put that in place because we want to maximise the returns and the employment and the investment in the North sea. In recent months we have seen very encouraging signs of greater investment in the North sea, not least because of the decisions taken by the Chancellor to bring into play some of the more marginal fields. We need to keep up with that and implement the Wood report as my right hon. Friend says.

Piper Alpha Disaster

Lord Bruce of Bennachie Excerpts

Thursday 11th July 2013 Commons Chamber

[Sir Malcolm Bruce (Gordon) (LD)]

I am pleased to take part in this debate, and I congratulate the hon. Member for Aberdeen North (Mr Doran) on securing it. Indeed, I acknowledge all the work he has done, both inside and outside the House over many years, to campaign on safety in the oil and gas industry.

Like the hon. Gentleman, I was at the memorial service in Aberdeen, on a sunny morning last Saturday in the memorial garden. I was moved perhaps more than I expected to be, particularly when the families were invited to come up with their wreaths—we are talking about 400 people. Watching young adults, who were obviously babies when their fathers were killed, holding up tiny children just to touch the names of the granddads they never knew brought home to me in a personal way just what a human tragedy this was.

I was on a trade and industry visit to Romania at the time. It is worth recording the fact that the incident was all over before I had even heard about it. There was no e-mail and no mobile phones. I felt a long way from my people who were suffering and unable to do very much—although to be honest, I am not sure that that is when Members of Parliament are at their most useful. What we did have to do, obviously, was provide support to the families and the bereaved, ensure a process that would get to the bottom of what was wrong, and put in place mechanisms and a culture to ensure it would never happen again.

Oil and Gas UK and its contractors produce figures from time to time. Usually, my constituency has the highest or second highest number of people working in the industry. It is important to remember, 25 years on, that the industry is still huge. It is still the driver of our economy. Although a 100% guarantee of safety is never possible, there are still thousands of people working or travelling offshore who need the assurance that everything is being done to ensure that safety is paramount.

A number of the events around the 25th anniversary have illuminated the fact that there are still some worrying cultural problems, to which the hon. Member for Aberdeen North alluded. He talked about the danger of a top-down approach. My instinct is that I genuinely believe top management when they say to me, “Safety is paramount.” They believe that that is what drives their culture. The problem is that people down the line have a dilemma. Their job is to produce oil and gas. If somebody says, “I’ve got a problem,” or, “I’ve got an anxiety,” there is a tension. Bob Keiller, the chief executive of the Wood Group, made an impressive speech at a dinner a couple of weeks ago in Aberdeen, in which he highlighted that dilemma. His view was: “Safety is paramount—period.”

That is crucial, but it is worth making the point—Maersk is a good example of this—that safety is paramount because there is a moral responsibility to ensure that people get back to their families, but in the end, if a company does not act, its commercial viability will be destroyed. Whoever hears of Occidental in this part of the world now? Indeed, after the Macondo and Texas disasters, one more disaster would be the end of BP. Had Total not got on top of Elgin, it would have been the end of Total. I give the company credit for the work it did and for not rushing back into production until it was fully satisfied that it was on top of things.

I noticed in the very good documentary that was shown on the BBC this week that one of the men said, “We always thought that the biggest risk in this job was the journey to and from the rig,” and that is still the case. It is ironic that only yesterday the Civil Aviation Authority said that it is ready to give clearance for Super Pumas to come back into operation. I think there will be a great deal of caution and reservation about that, and nobody should be getting into a Super Puma until everybody is sure that everything possible has been double-checked to ensure a proper degree of safety.

We should recognise that this is a dangerous environment and that a culture of safety must be paramount. Nobody at any level should ever think twice about stopping production if there is the remotest concern about safety—it is in the best moral and commercial interests of their organisation. If anything can be learned from Piper Alpha and the excellent Cullen report, it must be that.