SECRET files have revealed Margaret Thatcher defied desperate pleas from her senior Cabinet colleagues when she vetoed plans for a multibillion-pound North Sea gas pipeline.
The true scale of internal divisions in the Tory government over the ill-fated project, which could have brought thousands of jobs to the north and north-east, were today revealed for the first time in records from 1981.
Mrs Thatcher was warned that to abandon the scheme would be “inexplicable”, it would be “a great mistake” and it would be “fatal”.
The pipeline would have linked North Sea fields at an estimated cost of £1.5billion then – about £4.3billion today – and could have paved the way for jobs to be created at new chemical plants at Nigg and Peterhead.
The then-foreign secretary, Lord Carrington, described it as the “largest single economic project” the government was involved in after it came to power, but the story is often forgotten.
The Conservative government inherited the scheme from the previous Labour administration, but new prime minister Mrs Thatcher – elected to the post in 1979 – and her chancellor, Geoffrey Howe, believed the oil and gas industry should pay the entire construction cost.
The sector proved reluctant to foot the bill, with many firms keen to develop their existing pipelines in a piecemeal way, as eventually occurred after the government pulled out.
The files show several key Cabinet members argued the industry would come on board and help fund the project if the government ordered the state-owned British Gas to underwrite the initial stages of the work.
At Nigg, on the Cromarty Firth, Dow Chemicals and Highland Hydrocarbons wanted to use the gas piped onshore at proposed new cracking and fractionating plants, which would have cost £400million then – about £1.1billion today – and have created anywhere between 3,000 and 15,000 jobs, according to reports.
“It goes without saying that inward investment of this magnitude would have a very significant impact on the wellbeing of Scotland and of the Highland area in particular,” one Cabinet briefing note stated.
Meanwhile, Occidental planned to use ethane from the pipeline at a proposed polyethylene complex at Peterhead, near St Fergus, costing £200million – about £600million today – creating around 2,000 jobs.
pleading
Records show the then-energy secretary, David Howell, wrote to Mr Howe on August 26, 1981, pleading for the gas-gathering pipeline to be progressed.
He said: “To abort the project on the grounds that it would add potentially to the PSBR (budget deficit) would be inexplicable. We would be accused of abandoning a project of great national advantage, with a large net benefit to the economy on the grounds of economic argument which is, at best, debatable. It is not clear what our defence would be.”
Lord Carrington wrote to Mrs Thatcher two days later and said he found Mr Howell’s arguments “entirely convincing”.
He said: “To abandon it could only damage confidence in the government’s determination to pursue its objectives consistently and Britain’s ability to manage large-scale major projects successfully.”
The next day, the Scottish secretary, George Younger, wrote to the prime minister and said it would be a “particular loss to Scotland” and reduce scope for the projects at Peterhead and Nigg to be developed.
He added: “I believe it would be a great mistake to allow a scheme of such importance to founder because we find ourselves confronted with a problem in setting out the mechanics of its financing.”
On the eve of the decision to abandon the pipeline, Mrs Thatcher received a telegram from Malcolm Bruce, who was then the Liberal Party candidate for what would become his Gordon constituency.
He said: “Gas gathering vital. Sound national investment. Delay fatal. Decision now.”
A minute of the meeting on September 10, when the Cabinet discussed the project, shows Mr Howell made it clear he “strongly disagreed” with the chancellor on the issue.
Mr Howe, the chancellor, said the “crucial element” in the argument for supporting the scheme was that the private-sector financing would be found, but the prospects of firms joining the project were “not at all good”.
Mrs Thatcher made the final decision. She said there had been “serious doubts” about whether firms would help the public sector pay for the scheme and that not going ahead would “almost certainly involve less public money”.
The decision was announced and, four days later, Mr Howell, who is now deputy Tory leader in the Lords and the father-in-law of Chancellor George Osborne, resigned as energy secretary.