´óÏó´«Ã½

´óÏó´«Ã½ BLOGS - Douglas Fraser's Ledger
« Previous | Main | Next »

The Viking plunder that keeps giving

Douglas Fraser | 07:26 UK time, Tuesday, 26 October 2010

Three hundred billion pounds - not a bad stash for a country of less than five million people.

Norway's global pension fund has been funded by the nation's oil and gas revenue for the past 15 years, since the Oslo government switched into saving mode.

To Scottish Nationalists, it's an example of what a small, resource-rich country can achieve if it makes the right, long-term decisions.

I've been to Oslo for Newsnight Scotland to find out more (you can see it on ´óÏó´«Ã½'s iplayer for a week). And while Nationalists certainly have a point, it's a bit more complex than that.

Paying for Thatcherism

First, the question is not just one of whether Scotland could have created a giant trust fund.

The same question also needs to be put to the UK government, which had, and still has, the power to save some of the money, instead of using it for each year's revenue spending.

That allowed Britain to keep taxes much lower than, for instance, the Norwegians.

A Thatcherite might also argue that the use of the money when the oil revenue taps were turned on in 1980 was effectively used in modernising and transforming Britain's economy.

Those of a less Thatcherite political hue might point out in response that much of the money was used to pay the bills of high unemployment during the 1980s - the painful flipside of that economic transformation.

The fact is that the UK government did not put aside oil revenue, and shows no signs of doing so any time soon, as oil production declines for the next three or four decades.

Saving discipline

So what about the case for Scotland having the power to put that money away for a rainier day?

The positive case - put by Strathclyde's Professor Robert Wright on Newsnight Scotland - is that Scotland and Norway are of similar scale, and all that revenue could have gone further if kept to a population of five million or so.

Spread over a UK population in excess of 55 million, its impact was bound to be diffused.

But there's a challenge to those who say Scotland could be in the same position as Norway.

What evidence is there that Scots have the self-discipline not to spend money and to save it instead?

Following 11 years of devolution, there has been a requirement to spend all, or nearly all, of Holyrood's block grant, so you could say the fact it's been spent is no measure of fiscal discipline.

But when you look at the way it's been spent - on open-ended commitments and expansion of universal provision - it's hard to argue that the Scottish political culture is one of spending constraint.

Would Scotland be able to withstand the constraint Norway imposes on itself of spending no more than 4% of the fund's value each year?

At the same time, would Scots be willing to face sky-high taxes and a living costs to fund its social welfare provision? And would it be willing to sacrifice its exporting industries to a consistently very strong currency?

Subsidies for loss-makers

If you transport yourself back into the Scottish politics of the 1980s, what would have happened then?

Would there not have been a strong lobby - if not an overwhelming one - to use the proceeds of an independent Scotland's oil revenue to subsidise loss-making coal-mining, shipbuilding and steel-making?

An independent Scotland might now be able to boast all three, with the high employment to go with them. But would they have become more competitive?

And would there have been anything left for the nation's savings fund?

These are 'what if...' questions to which, of course, there are no clear answers.

But what did become clear to me in discussions with Norwegians - including finance minister Sigbjorn Johnsen, NRK's economic commentator Steinar Mediaas and Oslo University lecturer Silje Ansaksen - is that they have a very different culture of responsibility to future generations.

Future generations

In British and Scottish politics, you're lucky to get any sign of responsibility to whatever follows the next election.

But in Norway, they see their gigantic global pension fund as a commitment to the young and unborn. It's partly to ensure that they are not burdening those generations with pension commitments.

And it comes with an explicit sense of the trust they're placing in their children and grandchildren that they will steward this financial heritage wisely.

Whatever you make of Scotland's constitutional future, with pensions, welfare, deficit and debt dominating our national life, there's a lesson there worth pondering.

Comments

  • Comment number 1.

    What 'If' we Scots were handed this Norwegian utopia! I wonder if our little country could cope with a mass influx from all corners of the globe, not all will bring wealth generating skills! How many times have we heard / seen radio / TV interviews of residents in communities mostly outwith the big cities, quite a few have accents hailing from south of Hadrian’s Wall. For sure many cashed in on high property values of 80 / 90's and moved north, and perhaps many more took advantage of care of the elderly provisions, with generous building grants etc. 'If' Scotland were to prosper under a Norwegian template, we would need robust immigration / border controls, just for a start!

  • Comment number 2.

    I have the solution. Instead of voting for Independence or different forms of devolution, can we also vote for unification with Norway ?

  • Comment number 3.

    I think this story and the piece on Newsnight Scotland last night somewhat underestimates Norway's economic success.

    There is little doubt that the Oil Fund apart because of the natural collaboration between the Norwegian Govt (both Labour and Tory), their industry and their financial services sector Norway has left Scotland and indeed the UK well behind when it came to developing their oil/gas supply and manufacturing sector and they are now beating us hands down when it comes to renewables.

  • Comment number 4.

    Good stuff from the ´óÏó´«Ã½ Scotland last night apart from the elephant in the room question I find it unbelievable that no discussion was held regarding what an independant Scotland would have done with these billions.

    What has this country got to show for having such a great resource WMD's, 80's unemployment benefits, following america into wars all over the world, pretending to be a super power.

    Wake up people it has been wasted and we scots have get nothing but grudged handouts from it.

  • Comment number 5.

    "Sky High Taxes"???
    Is that just to try to scare the Scots away from Independence Douglas?
    What do you mean by "Sky High"? Fairer?
    Perhaps that you mean that rich Norwegians actually pay their taxes. Unlike in the UK, where as the Bankers keep telling us - "Income Tax? Is that what the poor people pay?"
    Ach your probably right Douglas. We Scots would have blown the whole thing on Buckie and Fags ......................
    Slainte Mhor

  • Comment number 6.

    From what I can see, these hypothetical scenarios & conjectures are somewhat simplistic. They are based on comparing a nation (Norway) who have exclusive claim to a vast oil & gas reserve (much to the benefit of their 5 million inhabitants)to Scotland, a nation of similar population. Norway are not an industrialized nation in the same way as the UK (including Scotland)and their liabilities to infrastructure, social cohesion & manufacturing commitments, can not be compared with the liabilities and aspirations of any of the home nations.
    Speculating as to what could have been done to exclusively improve the lot of 10% of the UK's population (Scotland), had North Sea Oil been deemed "Scottish Oil" and all profits channeled through a devolved parliament, is worthy of a good novel, but in reality, it never could have happened & is unlikely to ever happen in the future.
    Where Scotland should be focusing it's attentions in order generate additional income for investment & social care, is through green technology and the 22nd century "new oil", which will be fresh water.
    Every second, billions of gallons of fresh water pour back into the sea from Scottish rivers, whilst in the South of England, there are still hose pipe bans and ring fenced customers who have no free market provision of tap water.(local water authorities in the South Of England are even contemplating building reverse osmosis desalination plant, totally unsustainable with massive energy running costs)
    We can take oil & gas from Scotland to the South of England by pipeline, why not water? All of the manufacturing industry in the UK who are heavily reliant on water for their production processes, are being charged in excess of £1 per 1000litres (metric tonne) If Scottish water was available at 50p per tonne, which incidentally is high quality soft water from Scotland, I would estimate Scotland could be generating £3 million sterling a day (1 Billion per annum)in England alone.
    I know I have strayed off the point, but looking forward positively will enable the Scottish economy to grow. The oil is ring fenced & I suspect that any additional income from the treasury from "oil bonus" would simply be clawed back in reduced finance from central government.

  • Comment number 7.

    allthingsconsidered
    This country has many valable resources and we must independantly control them, that way we will ensure that our country will benefit and saves for the future.
    If we leave westminster to control our resources, including water, do you think westminster will allow us to keep the profits and build for the future?

  • Comment number 8.

    cnoccnoc
    Good point & I appreciate your skepticism on whether anything that Scotland can develop independently, could be ring fenced solely for Scotland's benefit; however I would say that I cant see any rational argument that Westminster could bring forward, that water falling in Scotland is "UK owned"; the Scottish landowners & state I believe own the rivers and any investment in pipe and pumping capability would all be future investment borne by Scottish private & public money from Holyrood accordingly ie. not Westminster.
    Oil however, I believe is a different matter, as the investment has always been UK based collaborative investment and I don't think you can turn that clock back without upsetting those who still believe in economic union on the Western Isles of Europe.

  • Comment number 9.

    I believe that Scotland should be independent and be in control of our own resources, I am sceptical as to wither water would remain ours to control under the present system, I am not naive enough to think that if Westminster wanted to it would find several rouges who would sell us out for some power or a gong, as the Scottish labour and Tories did with our oil.

    Part of the Scottish Tory policy is to privatise Scottish water this would be a good vehicle in removing the control of water from the Scottish Government.

    The investment in the removal of the oil from Scottish water was mainly funded by the large oil companies, any investment Westminster made was small in comparison and returned a very large profit very quickly.

    There is no difference in the removal of our resources from land or sea, they are Scottish resources and should be controlled by us and the people of Scotland reap the benefits, I hope you agree.

  • Comment number 10.

    Let's be a bit more extreme - what if Shetland gained independance, and claimed the revenue from oil for itself instead of sharing it with the central belt masses? Surely the benefit to the few islanders would make much more of a difference?

  • Comment number 11.

    This is such an interesting idea but the issue isn't really about whether Scotland should have kept the money at the expense of the rest of the United Kingdom or not. What is of most concern is that we as a country (the UK) failed to use this windfall gain for long term benefit. The obvious investments that it could have funded would have been in national infrastructure that would outlast our oil reserves. For example, Britain could have easily funded some high speed railways and motorways (Newcastle and Edinburgh are still only linked my a single carraigeway road!) such as our European peers have done over the last 30-40 years. This could have led to enhanced competitiveness for indsutry and commerce across the UK rather than concentrating and more and more of our effort in South East England. What an opportunity missed.

  • Comment number 12.

    cnoccnoc,

    Do you think that people of Scotland who have chosen to live in other parts of the United Kingdom should not share in benefits accruing from 'our resources'?

  • Comment number 13.

    DingwallKev or maybe each oil rig can claim independence or the fish that swim around the rigs have a claim.
    An very poor argument,wake up DingwallKev there's nothing extreme about a Scotland seeking self rule and using our resources to benefit the people of Scotland.

    LoftyBiggles (11)
    "that we as a country (the UK) failed to use this windfall gain for long term benefit" and still are westminster will continue to waste our oil on trying to a superpower.
    The Scottish government will do a better job than westminster (it would be very difficult to do worse)of using the oil to benefit those who's land/sea its on (Scotland.

    LoftyBiggles (1)
    Any person who lives in Scotland and pay's Tax in Scotland benefit or not from the decisions of the Scottish Parliament.

  • Comment number 14.

    This comment has been referred for further consideration. Explain.

  • Comment number 15.

    A saving discipline? Well that just wasn't the language of the "Boom and Bust" years. Save? What the hell for? We'll just borrow for whatever we need in the future when we get to that time.

    Of course, now that the party is over .... we realise such an approach lacked 'joined up thinking', lacked thinking 'outside the box', lacked stategic thinking, etc., etc.

    And politians, and their public sector officers /civil servants, are generally poor at recognising trends and mechanisms such as inefficient cost-cutting (headline savings that actually cost you more), counter-productive audit (audit that costs more than the value of the irregularity you discover), cost-shifting rather than cost-reduction (it's not my problem because it now gets paid out of someone else's budget) and a whole wad of others. Often, instead of an actual outcome, you get a slogan or sound-bite out of them.

    As of Thatcher, well I watched a ´óÏó´«Ã½ London programme called London Inside Out which highlighted the number of doctors and nurses who are suspended, at vast cost to the public purse, because they've upset local NHS Managers by whistleblowing on various issues. Maggie was, of course, the great proponent of the NHS Manager - we didn't really have them as such before her reign.

    Unoptimised oil revenue, wasted public money, money spent on nursing ego's rather than service delivery .... it all seems to revolve around the calibre of the people doing these things and we don't seem to have any scheme or plan to ensure that the key people perform any better in the future.

    Is this just the phenomenon of history constantly repeating itself?

  • Comment number 16.

    What happened to my post at 2.01? I think I should at least be informed why it was not posted. According to your own rules I should have been informed by email why it breached your guidelines.
    I await your answer, but then again this email may be ruled unacceptable as well.

  • Comment number 17.

    300 Billion, very nice.
    Scotland would have wasted most of that money, and maybe saved 10%.

    The Scottish Parliament fiasco and the Trams disaster are perfect examples of the dysfunctional local and national government departments that exist within Scotland.

    Various high powered Officials would have spent their time fighting over access to that cash, and splurging it on wasteful empire building projects.

    The Norwegians are smart, and have had an egalitarian society for decades.

    The Scots have a society run by vested interests and personal egos.

    Not very nice to admit it, but the comparison in this case is one of chalk and cheese.

  • Comment number 18.

    Someone mentioned merging Scotland with Norway.

    Which is far and away the best idea I've heard in a very long time.

    A trading bloc based on energy producing countries.

    Now all the Scots have to do is vote accordingly...

  • Comment number 19.

    You can't compare Norway with scotland or the UK in general. Norway has low unemployment, educated people and doesn't have the massive baggage of the welfare state and massively bloated public sector that scotland/the UK possesses. Even if an independent scotland (though why bother honestly!) had had all the money it would have been frittered away on an ever increasing public sector and unwillingness to have higher taxes and the like to allow for savings.

    Its a completely different culture. Unless you rewind a couple of generations it would never work.

  • Comment number 20.

    ady wrote:

    "300 Billion, very nice.
    Scotland would have wasted most of that money, and maybe saved 10%."

    Actually, I think you're probably right. The problem seems to be that many people in public office still deal with public money like we are back in Maggie T's time. Civil servants, NHS Managers, local government officers, etc., often seem to be talking and deciding about money, budgets and resources in ways reminiscent of Maggie's "corner shop" economics.

    They're all looking for a "quick fix" and a "sound-bite" to go out to the media / boss / workforce / political master(s).

    That seemingly, of itself, results in short-term thinking and also a generally low calibre of financial planning and financial decision-making permeating through the public sector.

    Perhaps we need some kind of mammoth re-training programme throughout central, devolved, regional and local government to bring many individual's concepts of handling public money 'up-to-date'. Many LGO's and civil servants - possibly like many in the banking sector - still haven't truly woken up to the fact that the world has changed radically since the days when many of their posts and functions were invented.

    The public sector has to find a new, "tomorrow" way of dealing with its finances, not rely on yesteryear's systems, strategies and mechanisms.

  • Comment number 21.

    ady what a sad example you are, we scots can't be trusted to use our revenue wisely.
    This counrty has been underfunded for a long time, I would have thought that revenue would be used to create jobs to educate our children to be more dynamic, with a vision to succeed.

    DrK
    Why do you think it would be difficult to invest in our children education, do you think we are some sort of sub humans who can't change those feel they have been left to rot after 25 years of Labour rule.
    Create the right conditions, provide the means and goals, then pride and selfrespect will return, we have to start young

  • Comment number 22.

    21. At 1:21pm on 28 Oct 2010, cnoccnoc wrote:

    I just think that modern UK culture is what it is. Wasteful where civil servants of all stripes will blow any money they have for a quick fix and an easy headline and none think longer than the next election. So such far thinking planning is just not part of the UK establishment.

    Its stupid and its pointless but its also sadly the truth. In addition to support saving that much would people really accept higher taxes and less benefits? Its a "me, now, me" culture in scotland (and the UK).

  • Comment number 23.

    As Usual it is said All of theNorth Sea oil and Gas is Scottish, last time I looked some 30% of Britains oil and Gas exists in what would be English Waters and then flows into humberside, which last time I looked was in England.

    Scotland gets more out of the UK than any other country

  • Comment number 24.

    glasgowwolf wrote
    I don't agree with the 30%, but Iam not argue about it.
    Scotland does not get out more than it puts in, why are some of us so scared of going out on our own, many many counries would love to have the resources we have.
    Get your head out of the sand we scots should be responsible for our self and use our wealth for our future and not waste it on WMD's, 80's unemployment benefits, following america into wars all over the world or pretending to be a super power.

  • Comment number 25.

    --ady what a sad example you are, we scots can't be trusted to use our revenue wisely.
    This country has been underfunded for a long time, I would have thought that revenue would be used to create jobs to educate our children to be more dynamic, with a vision to succeed.--

    We're a country run by dogma, not vision.

    The Scots Parliament concerns itself with nonsense like banning foxhunting and smoking in bus shelters!

    Money that's available for essential infrastructure work gets spent on the Edinburgh Tram project because it's affy trendy...even though Edinburgh has got one of the best Bus companies in Britain, if not Europe...and the tram 'will save hundreds of baby polar bears'...

    Meanwhile the two lane donkey track between Edinburgh and Glasgow disintegrates under the weight of traffic and lack of investment because cars are just not trendy just now.
    ...can anyone say Doctor Beechings disease...lack of vision...eejits

    I drove from Edinburgh to Portsmouth a few months ago, it's all 3 lane motorways south of Glasgow, and the increase in efficiency for the movement of goods people and services is incredible.

    Political dogma is making us a third world nation.

    And for those of you still left with a furrowed brow, especially those of you who are on the Government Income Support Programme like the current incumbents at Holyrood...the vehicles of the future will be powered by hydrogen, electricity etc.

    Now get yer fingers out, eejits.

  • Comment number 26.

    Douglas

    How about a post explaining the £250m furore that's going on at the moment? Why do the LibDem (in particular) and the Tories think that this money should be drawn on for renewables investment when the equivalent amount will be deducted from the block grant? If Scottish ministers wanted to spend £250m on renewables investment surely they could just do this from the block grant money? What's the difference between spending the block grant money on this on the one hand, and drawing it from the Green Investment Bank with an equivalent cut in the block grant on the other hand? Surely the current proposals from the Tory-LibDems are identical to the Treasury just pocketing Scotland's share of the fossil fuel levy and stating that Green Investment Bank money is for England only?

    The press reporting of this is rubbish. No detail, just claim of swizz and swindle on one hand and good deal for Scotland on the other hand. On the face of it, I think the SNP's position looks correct (though this is perhaps because they're the only party actually making a claim), but the Tory-LibDem position doesn't appear to make any sense (or in any case they are not rebutting the substance of the SNP's claim). Hopefully you can provide some actual detail of the mechanics here?

    Also, press reports yesterday stated that the £60m ports money was England only, with Scotland receiving Barnett consequentials. Fair enough. But then what does the following statement about it being a reserved matter mean?

    "He [Labour MP Albert Owen] said: "This week it was announced the £60 million set aside for UK ports would go to England only, with the Barnett consequential going to Wales. "This is a reserved matter for this Parliament and surely Welsh ports and Scottish ports should have a level playing field in applying for this subsidy?" "

  • Comment number 27.

    I saw your wee film about Norway, I was quite impressed and it goes to show just how much we have been and are being ripped off by.

    It's a pity about the condescending buffoon that was interviewed afterwards.

  • Comment number 28.

    Again. Why have I not had any explanation as to why my post at 2.01pm on 27th.Oct. Or do you not bother to reply in the hope that I will just go away?

Ìý

´óÏó´«Ã½ iD

´óÏó´«Ã½ navigation

´óÏó´«Ã½ © 2014 The ´óÏó´«Ã½ is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.