ECONOMICS AND THE CITY
Pouring dear oil on inflation
Nicholas Davenport
The ink was hardly dry on my protest against Labour's extreme egalitarianism last week before I read in some gossip finance column that Lord Kearton had been appointed chairman of the British National Oil Corporation at a salary of some £80,000 I presume to level him up to the outrageous salaries of some American oil tycoons. At first I thought it was a joke being played by that puckish ex-textile enterpreneur, reputed to be the most brilliant of our big business crypto-socialists, for he would naturally be anxious to prove that at such a gross salary he would be worse off net than his political boss, Mr Anthony Wedgwood Benn. For Our top marginal rate of personal income tax, which is 83 per cent, becomes operative for a married man (without children) at £20,956. (An interesting comparison the top marginal rate in Germany is 56 per cent at £50,300, In France 48.6 per cent at £38,800 and in Italy 82 per cent at £382,000!) But I came to the conclusion that it was not Lord Kearton's joke: it was simply that Government ministers are still labouring under the delusion that heads of the nationalised industries are entitled to receive much higher salaries than those of the civil servants running similarly large departments of state. Egalitarianism is applied with envy and spite to the private enterprise sector but not to the nationalised public sector where jobs for worthy ex-politicians and ex-civil servants are readily available. The workers should not fail to note, and resent, the discrimination.
But the activation of the British National Oil Corporation raises a much more important issue than the inflated salaries paid to the anti-egalitarian chairmen of the public boards. It epitomises the new socialism adopted in the Labour Party's last manifesto the huge extension of the public sector. The left wing of the party has long been seeking an economic excuse for this extension, for it realised that there was no majority4 opinion, either in the party or in the unions, for the imposition of Clause 4, the socialisation of all the means of production, distribution and exchange, which is the introduction of the communist state. So it has welcomed the new economic policies of Stuart Holland who has brilliantly expounded them in The Socialist Challenge. This book was fully and excellently reviewed by Robert Skidelsky last week and I have no need to repeat his refutation of Stuart Holland's attack on the mesb-economic power of the multinational companies. The point I -ain making is that the Labour Party's excuse for the extension of the public -sector which is based on the Stuart Holland pretence that the multi-national companies have deprived Britain of its proper investment and growth is at its most irrational in the case of oil. There is not the slightest economic justification for the 'setting up of a British National Oil Corporation, especially as we already have a State oil enterprise in British Petroleum which is now 70 per cent state-owned since the takekiver of Burmah Oil's holding by the Bank of England.
I have previously protested against the formation of the British National Oil Corporation (April 19) on the grounds that it gives the Government a vested interest in dear oil. If the world price of oil were to drop substantially the North Sea oil concessionaires, in whose companies the Government seeks a 51 per cent interest, would be ruined. Whether the Arab oil cartel can hold together if the world trade recession is prolonged may be doubtful but the British Labour government has in effect become a member of it and is not likely to dissuade the OPEC countries from raising the price of oil again in the autumn as they threaten to do. The disgraceful fact is that a British Labour government, having just appealed to every worker to join in the fight against inflation, is buying a position for itself in the oil business at the top of the market and is bound in the best tradition of State enterprises to put up the price of state oil and petrol when it comes to marketing. It is, I read, already reserving space for its oil headquarters in Glasgow another sop to the Scots who imagine that a lot of the oil belongs to Scotland, which was of course under the sea when the oil was being formed and it has begun to recruit staff, beginning with the most expensive ex-tycoon in the market. All this demand increases and adds to the inflation. It will not be unnoticed by industrial workers who are being thrown out of their jobs that the British National Oil Corporation is the latest ingenious idea for creat ing more jobs for civil servants, local authority clerks and trade union officials. The multi-national oil companies may have exploited the Arab and other oil producers in the past but they did give us :fantastically cheap oil and petrol, which a British state enterprise run by civil servants is incapable of
•.doing.
The Labour manifesto instructed the government "to take majority participation in all future oil licenses and negotiate to achieve majority state participation in existing licenses." Fortunately this delicate job was not put in the rough hands of Mr Wedgwood Benn but left to the financial skill and ingenuity. of Mr Harold Lever, Chancellor of the Duchy of Lancaster; and Mr Edmund Dell, the Paymaster-General, They knew perfectly well that the government could not finance a 51 per cent take-over seeing that the Treasury borrowing requirement is already Up to £10,000 million. To add another £10,000 million to it would destroy any remaining foreign confidence in sterling. So they can only suggest to the North Sea oil concessionaires that when they finally get some oil into the pipelines in substantial quantity the government will be prepared to buy 51 per cent at a fair price and settle up when the oil is marketed. But all this could have been done through the offices of the state-owned British Petroleum Company. The creation of the British National Oil
Corporation was superfluous, was extravagant, was inflationary, was the act of a weak government pandering to the doctrinaire socialism of the extreme left of its party.
In the case of oil there is no economic argument on the Stuart Holland thesis which could be advanced to justify a state oil enterprise. The multi-national oil companies, now hounded out of their old concessions in foreign parts, have been, and still are, immense spenders on capital account for our own national good. If you turn to the accounts of Shell you will find that last year their capital expenditure came close to £1,000 million and that this year they expect it to be higher. The British National Oil Corporation is therefore based on a travesty of Stuart Holland economics which the left have used to further their aim the Clause 4 socialised economy, the one-party anti-democratic state. If Lord Kearton is correctly described as an activist he is clearly the wrong chairman for this monstrosity. A wise government would have chosen a Gladstonian liberal with aversion to any increase in government expenditure. Since our nationalised industries were established they have cost the Exchequer £4,000 million in revenue subsidies and £3,500 million in write-offs. I suppose Lord Kearton has assured the Prime Minister that he could pay off these losses in no time by selling us oil and petrol at too high a price.
linso
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