UK Sovereign Wealth Fund

Debate between Ian Blackford and Gregory Campbell

Wednesday 14th December 2016 Westminster Hall

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Owen. I congratulate the hon. Member for Weston-super-Mare (John Penrose) on securing the debate and raising this most important topic. He asked whether there could be consensus across the House. There are those of us on this side who have been arguing for infrastructure investment for quite some time, for the simple reason that we need to build capacity in the economy—we need to create the circumstances for growth.

We all want a high-wage economy; we would absolutely welcome that. The debate is about the mechanisms that will create it. We make the point that if we want to deliver a balanced budget in this country, that has to come through the delivery of economic growth; it cannot come on the backs of the poor, as has been the case over the last few years because of austerity. The issue has to be about building capacity in the economy, creating the circumstances for growth, which perhaps can deliver the kind of outcomes that the hon. Gentleman talks about.

I am delighted that we are having this debate, but in some senses it is happening too late for us in Scotland. As the House of Commons Library briefing paper confirms, more than 30 countries have sovereign wealth funds, and it is estimated that funds based on oil and gas receipts are responsible for more than half the global total value of those funds. We in the Scottish National party have long argued that we should have established a wealth fund from our oil revenues to ensure that future generations could benefit from the proceeds of North sea oil. Not for the first time, and over a long time, Westminster was not listening.

The UK Government have taken a staggering £340 billion in tax receipts from North sea oil. Where has that gone? Why have we not seen a legacy from that bounty for all the people in this country? It was not invested to ensure that there was a legacy for future generations. Rather than North sea oil receipts being looked at as a bounty that could be invested to ensure that there was future growth, the proceeds of North sea oil were frittered away.

Let us contrast the UK’s lack of foresight with the foresight of our near neighbours in Norway. Norway’s wealth fund, to which the hon. Gentleman referred, now exceeds $905 billion; the value is $177,000 per capita—for each Norwegian citizen. That astonishing sum shows what can be done if people take the right approach to investing in their future. The Norwegians recognised that oil was a bonus. It will run out at some point, but they ensured that their country would have a lasting benefit. Let me quote what The Economist said in an article in September this year:

“Two decades after Norway’s government paid a first deposit into its sovereign-wealth fund, the country is learning how to manage a behemoth. The vehicle, which is used to invest abroad the proceeds of Norway’s oil and gas sales, has amassed a bigger fortune than anyone expected, thanks to bumper oil prices.”

The hon. Gentleman has talked about a wealth fund that may build up over generations, but Norway has achieved the largest wealth fund in the world after two decades because it was prepared to put something away for future generations. In that sense, I support the broad outline of what he says. The article goes on:

“As the direct benefits of oil decline—around 46% of Norway’s expected total haul of oil and gas is gone—the relative importance of the fund will grow. The annual revenues it generates now regularly exceed income from oil sales.”

Establishing a wealth fund from the benefits of North sea oil receipts is an effective means of protecting an economy from oil prices that can prove to be volatile. In that sense, the lucrative revenue generated by oil and gas is used to protect its own longevity as well as the overall prosperity and stability of an economy during price swings. We have known all that for decades.

The McCrone report, delivered to the UK Cabinet Office in 1974, claimed that North sea oil revenues could have made an independent Scotland as economically prosperous as Switzerland. The report was so alarming for the UK Government that it was buried as top secret for 30 years. That is, perhaps, of little wonder. Scotland’s bounty has kept the UK afloat; there is no lasting financial legacy for Scotland. The Norwegians have a foundation of financial security; we have a UK Government who would not come clean on the benefits of North sea oil and have denied us the opportunity to have our own legacy from that bounty. Yes, let us plan for a sovereign wealth fund, but that should have been delivered over the past few decades.

Denis Healey said the following about the saga:

“I think we did underplay the value of the oil to the country because of the threat of”

Scottish

“nationalism”.

He said he thought that Westminster politicians

“are concerned about Scotland taking the oil, I think they are worried stiff about it.”

That is the reality, yet we are constantly told by Westminster politicians about the perils of Scottish independence and that we cannot afford to take responsibility for our own destiny. If we had this oil fund, that would give us the tools to manage any financial storms like those we have witnessed over the past few years.

Denis Healey let the cat out of the bag; it was a worry that the wealth of Scotland could create this oil fund and undermine the significance of Westminster. McCrone suggested way back in the 1970s that an oil fund should be set up, but here we are in 2016 asking why we have not done so.

[Mr Gregory Campbell]

There is an emerging consensus about the need to think long term in regard to the wealth fund. Does the hon. Gentleman agree that some people will listen to his comments about an oil fund, which would, by its nature, have a very limited lifespan—the oil is going to run out at some stage in the near future—and think we need to think beyond that lifespan? We need to be talking about a generational expectation rather than a general election expectation.

[Ian Blackford]

I agree, in so far as we have to establish the mechanisms to make sure that we have something left for future generations and the issue is not just about oil. What I want to do in this debate is talk about the missed opportunities and how we can learn from them.

I will come specifically to how we can deal with not only the financial crisis but the decline in oil prices over the past few years. We cannot run away from the fact. We know that oil prices are depressed at the moment and that revenues from North sea oil have declined alarmingly, and that that will remain the case for the next couple of years. However, there is still the value of 2 billion barrels of oil in the ground under the North sea, and at some point oil prices will recover: there will still be the opportunity to create that oil fund out of the North sea oil revenues.