Queen’s Speech

Lord Bruce of Bennachie Excerpts

Wednesday 25th May 2016 Lords Chamber

[Lord Bruce of Bennachie (LD)]

First, I congratulate the right reverend Prelate on her speech and on her passionate espousal of her own area of the north-east of England. Of course, in Scotland the north-east is the area around Aberdeen and Aberdeenshire, but both areas are equally feisty and equally beautiful, and we all enjoyed her speech very much.

I would have spoken in the debate on Monday, had I been here, because of my interest in international development and foreign affairs, but I was taking part in the World Humanitarian Summit in Istanbul. I came back just this morning, so if I fall asleep in the middle of my speech, noble Lords will know why. I refer noble Lords to my interests in the register. The summit highlighted a perceived shortfall of $15 billion in the funds needed to deal with the crises that are anticipated in the coming year. Clearly, we have to find not just more money but better ways of spending it, and there has to be more co-operation. That kind of co-operation and innovation was highlighted at the summit. I think that the role of the insurance industry in helping to fund humanitarian aid can be developed significantly, releasing a great deal more funding. There is also room for greater participation by the private sector.

Following on from the noble Lord, Lord Truscott, I want to address specifically the North Sea oil and gas industry, and I hope to look for slightly more optimism than he did. This is my area and it is very close to my heart. I have had a close engagement with the sector since 1971. I have seen several cycles of boom and bust but it is fair to say that the present downturn is the most acute. However, I remember the pain of 1987, when people went into banks and building societies and threw the keys over the counter because they could not keep up the payments on their mortgages. Real pain is being experienced.

Although the price of Brent crude has crept up to just under $50 a barrel, it is a long way short of the $100-plus average of the last few years. The market is volatile and there is very little confidence. Thousands of people have been made redundant and the job market in Aberdeen is very difficult, with scores of people chasing every vacancy.

The industry is going to have to rethink its engagement in the UK continental shelf. This is a mature province where costs are high and the challenges severe. The industry has to deal with water depth, the weather, currency, engineering challenges, tax changes and all kinds of uncertainties. There are still substantial reserves under our waters but the question is: can we get the costs and the regime into a position where the reserves can be released? I suggest that, as long as we need fossil fuels, it is much better that we use UK fossil fuels than increase our dependency on imports.

Costs are being cut dramatically. We also have to remember that the North Sea has accounted for something like 20% of all fixed industrial development every year for the last 40 years. In the year before the downturn, there were £10 billion-worth of high technology exports worldwide from our expertise, especially in sub-sea technology. This is not something that we should just throw away; we should invest in it. What will the Government do to address the recovery?

I commend my colleague the former Energy Secretary Ed Davey for his initiative in commissioning the Wood review, which identified some of the challenges. It proposed not only the tax changes to reverse the disaster of the 2016 Budget but the setting up of the Oil and Gas Authority. That authority is up and running but we need to see it taking action. What is needed now is co-operation among those in the sector to invest in new infrastructure and to use existing infrastructure much more cost-effectively as one of the best ways to get costs down and make the industry competitive again.

The other thing that I would like to say to the Government is that exploration has come to a virtual standstill. There is very little appraisal and absolutely no exploration. If we do not identify the reserves in the North Sea, which we know to exist, there will be no future because there will be nothing to produce. Are the Government prepared to work with the industry to see what can be done to stimulate exploration and appraisal to bring the industry back to at least being a major component of the British economy? Indeed, the downturn in the oil industry contributed to the beginning of the recession in the UK. That is how important it is to the overall UK economy. Indeed, it is probably our biggest and most dynamic industrial sector.

Having spoken about oil and gas, I will make it clear that I fully support our ambition for a zero-carbon economy and low-carbon transition. I think we all recognise that while we get there we need to use fossil fuels efficiently. I should like to see carbon capture and storage, and, if we are not prepared to invest in it, I hope that other nations will give us the technology that we can use. Of course, fossil fuels will still be required as a feedstock, even when they stop being actual fuels.

I think that the Government and the industry are working together better, but more needs to be done to ensure that, as oil prices recover, as the industry gets its costs down and as the tax regime becomes more favourable, we get back on track and make sure that we maximise the potential for the industry in terms of our own fuel resources and our high-tech industry, which depends on having an active home market.

I will make a final comment on the referendum from a Scottish perspective. It is being stated that if Britain were to vote for Brexit, which I hope it does not, this would trigger the case for another referendum on Scottish independence. I suggest to the House that, on reflection, the assertion is preposterous. In reality, to my mind it is not credible that the other 27 members of the EU would be the slightest bit interested in discussing Scotland’s future relationship with the Union before they had resolved Britain’s exit. The terms of that exit would be absolutely crucial to Scotland’s future. I find it very bizarre that the SNP is so enthusiastic about membership of the EU but regards membership of the UK as the biggest obstacle to Scotland’s progress to success. It is an absurd proposition. The reality is that we would be faced with probably three different currencies running together to enable Scotland to opt out of its biggest single market—the UK—in order to try to be competitive in the remaining single market that it sought to join. I do not think that any sensible Scot would vote for another independence referendum in that context.