Ian BetteridgeI am VERY tempted to write another long post about how the decision in the 1970s not to establish a Norway-style sovereign wealth fund in favour of simply using the oil money to prop up finances at the time, has done more damage to the UK than any other decision in history. LONG THREAD, SORRY.
Without it, Thatcherism would have been impossible. No oil money, and the welfare bill for mass unemployment would have been unsustainable. Without that unemployment, union power couldn’t have been broken, and privatisation would have been far harder.
It was oil revenues that bankrolled the unemployment, the destruction of manufacturing, the high exchange rate, the termination of British coal mining, and the big bang that turned London into arguably THE capital of global neoliberalism.
Oil revenues were used to cut taxes for business and the wealthy and to fund benefits during a wave of industrial closures. The oil money paid for tax cuts at the top and the benefits at the bottom. Despite Thatcher’s reputation as a prudent manager of finance, no money was set aside for the future.
The government could afford a long confrontation with the miners because it had both the fiscal cushion and an alternative energy supply. Without North Sea gas, a miners' strike long enough to threaten power generation would have been genuinely dangerous to the government's survival.
And then, to complete the insanity, Thatcher privatised the industry generating the revenues that were funding the whole operation. The British National Oil Company (BNOC) was privatised in two phases in 1982 and 1985.
BNOC was created by Harold Wilson's government in 1975, specifically to give the British state a direct stake in North Sea extraction rather than leaving it entirely to private multinationals like BP and Shell. It was our equivalent of Norway's Statoil, established around the same time.
And of course the government freed itself in stages from all its equity in BP: 51% state ownership in 1977, down to 46% in 1981, 31.5% in 1983, and fully privatised in 1987.
Labour built the institutional architecture to capture public value from a public resource; Thatcher dismantled it, took a short-term cash payment, and handed the long-term revenue stream to private shareholders.
Norway kept its equivalent. And that is why Norway has the money to subsidise EVs to the point where it barely needs oil for cars, and we do not.
Nicovel0 🍉@ianbetteridge maybe a stupid question, but why didn’t the U.K. set one up now? Soon enough it will be a net exporter of energy again, most notably wind.
@Nicovel0 Ideology, timing, and the structural weakness of the British state basically. The money started to kick in at almost exactly the point thatcher got elected, and a sovereign wealth fund was almost exactly the opposite of her ideology. And she wanted the oil money to help “transform” the British economy, by supporting her plan to break the unions etc.
The Treasury treated oil revenues as income - money to fund current spending - rather than as a capital asset that belonged to future generations as much as to the present. That accounting choice was political, not an economic inevitability.
@ianbetteridge oh I got that, I was wondering why not setting one up now, say on the back of the new British energy company, whatever it’s name is.
@Nicovel0 It’s too late. To set up a fund, you need to be running surpluses. The “National Investment Fund” Labour announced is really a bank, rather than a fund. And GB Energy, which is supposed to effectively be a state owned energy company, currently employs 13 people.