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From Militant, No. 400, 7 April 1978, p. 6.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
Andrew Glyn [Oxford Labour Party] assesses the government’s White Paper, The Challenge of North Sea Oil
A small part of the promised bonanza from North Sea Oil has already been squandered – on producing a White Paper on the Challenge of North Sea Oil full of vague platitudes.
The document smugly refers to the participation agreements between the nationalised BNOC and 44 oil companies. But it does not mention their content:– agreement by the companies to sell 51% of their oil to British National Oil Corporation, provided the Corporation sells it back to them at the same price! It boasts that Petroleum Revenue Tax, royalties, and Corporation Tax will get the government 70% of the revenue from the fields. But it fails to mention the rates of profit of up to 50% after tax received by the companies.
The flavour of the White Paper is brought out best by the list of the uses the government has in mind for the oil revenues, reproduced below (capital letters and all) from the introduction:
This is a pretty long list over which to spread the expected tax revenues from the North Sea of £2 billion in 1980 or even the £4 billion hoped for in 1985. In fact, it is amazing that the government has the nerve to include expansion of the social services as one of its priorities when its own Public Spending White Paper plans for school building in 1981 to be one third of the 1972 level and hospital building only two thirds (Militant, No. 397).
All the talk of a ‘fairer and more compassionate society’ is no more than a cover-up for a programme of restoring the position of British capitalism. How else could you have the statement “many new jobs should become available in the service sector, including the public services”, followed by the sentence “The government intends to retain a firm control over public expenditure so that it does not absorb too high a proportion of the nation’s resources?”
The White Paper starts out by bemoaning the feeble performance of British industry. It quite correctly says that “the inadequacy and poor productivity of investment in a number of sectors of United Kingdom industry has been an important factor”.
It goes on:
“It would be all too easy for Government to use the extra revenue simply to finance a quick improvement in living standards through tax reductions and increased social benefits to an extent which left insufficient room for increased productive investment ... It would be wrong to spend the benefits of North Sea Oil this was. It will be recalled that a useful balance of payments surplus was built up in 1969–70; but that this was rapidly dissipated in a short lived consumer boom in the early seventies leaving no permanent improvement in our economy ... Sustained economic growth and a return to full employment would not be possible if our investment strategy were to fail.”
Now it is rubbish to say that if living standards and the social services were increased by the extent of the oil revenues, then there would be ‘insufficient room’ for productive investment. The extra resources from North Sea Oil are less than one fifth of the size of the resources wasted each year in British industry due to the unused capacity of 20% or more, as revealed in the National Institute’s survey of last year.
The reason that capacity is not used is simply that it is not profitable to do so. If it were mobilised there would be plenty of resources for additional consumption, social expenditure and investment. What the White Paper is really saying is that the capitalists will not expand production and increase investment unless the workers’ share of the wealth (‘living standards’ and ‘social benefits’) is held back to ‘make room’ for higher profits.
What then is the Government’s “investment strategy”? It is summarised in the memorable sentence: “Investment can be planned and executed only within industry itself.” The best the Government can do is to ‘help’ by using the oil revenues to guarantee the continuation of the present level of investment incentives (currently worth more than £4,000 million a year), which the White Paper concedes to be “already comprehensive and generous.”
Despite the CBI’s protests at the proposed expansion of selective grants to particular industries and firms – their objection is to the selectivity not the grants of course – there is no question of the government really getting control of profitable manufacturing investment as envisaged in Labour’s Programme 1973 (or 1976 for that matter) through the NEB and Planning Agreements.
True, the NEB has a “vital role” through its major
subsidiaries “exploiting important growth opportunities or
assisting industrial restructuring” (along the lines of Speke?) and
through backing “enterprising small firms in areas of high
unemployment” (which won’t disqualify any enterprising small
firms). Buried, though for good and all as far as the White Paper is
concerned is the idea of nationalising major, profitable companies in manufacturing.
There is also a ritual bow to Planning Agreements to “provide a means of concerting action by Government and individual firms” but there is no discussion, of course, of why only one has been signed; that one, with Chryslers, showed that the only action the capitalists will agree should be “concerted” is bailing them out when they are bankrupt.
But will the government’s strategy of bigger handouts, combined with its general policies of trying to hold down the exchange rate and wages to maintain competitiveness (profitability), really work?
The White Paper admits that “no programme designed to stimulate investment can succeed unless the economic background encourages industrial expansion.” Simply giving the capitalists more cash will not lead to increased investment unless they can see a profitable market.
But generating a rapid expansion by cutting taxation and increasing social spending would not lead to an investment boom either as the experience of the early seventies shows. Because of the increased share of wealth which would go to the workers, the capitalists would not foresee profitable investment opportunities in private industry and would invest their profits in property speculation and the like.
So the government faces a contradiction. Without an expansion of the economy, the capitalists will not invest. With too rapid an expansion, they will not invest.
If only other countries would respond to the Government’s urging of “the need for effective action to bring the world economy out of the present recession”.
But the very day before the White Paper was published The Times reported from Brussels that Denis Healey had failed to persuade the German government to take more expansionary action, and the EEC was foreseeing growth of less than 3% this year as compared with the target of 4–4½% set last autumn.
The fact is, that the Government has no coherent strategy for
North Sea Oil revenues, or anything else for that matter, to restore
full utilisation of society’s resources. All it can do ‘if the
world economy does not recover rapidly’, is to “start expanding
the economy through appropriate fiscal and monetary policies.”
Presumably Dennis Healey’s Budget will contain measures aimed at securing perhaps 3–3½% growth. But this with 20% excess capacity would leave the extent of unemployment and wasted resources unaffected.
The government has totally abandoned Labour’s policies to get control over the investment and production decisions of the private sector, policies which Militant has always argued would be insufficient, but which would at least be a step in the right direction.
The only useful purpose served by this White Paper would be if it finally lays to rest the idea that the cuts of the past three years, plus North Sea Oil, will see the economy right – and thereby brings it home to those who had illusions in North Sea Oil as a magic solution that socialist policies provide the only means of planning the resources of the North Sea and the UK as a whole.
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