Norway’s Oil Fund, Scotland’s oil and Scotland’s banks
published this on 11:56 am, Saturday, 12th December, 2009Business| Community News| Politics| Renewable Energy | Comments (rss) | Respond | Ping |
Norway’s attitude to its oil wealth, from the outset, has shown the sort of fiscal long-sightedness that should be the aim and practice of any nation in respect of its significant resources.
In the UK, not only is such a practice of national investment unknown, the notion itself is alien to the way our governments deal with the national budget. What we’ve got is spent more for short term political gain than for nation-building. When we’re flat broke, as we are now, the government keeps on spending for the same desperate. self-centred reason.
This week’s budget was the most irresponsible act of political chicanery in centuries. It’s tempting to campaign to vote Labour back in again to make them face up to the mess they’ve made or to lose a subsequent general election badly enough to be out of power for a generation.
The Irish showed the way to deal with a very real crisis – just as it did in the banking collapses of last year and just as Norway has long shown the way to responsible management of a country’s finances.
The Norwegian example
The SNP’s Westminster Leader, Angus Robertson MP, has just met Dag Drydal, Chief Strategic Relations Officer of the Norwegian Oil Fund – Norges Bank Investment Management.
At this meeting, Mr Robertson learned that the value of the Norwegian National Oil Fund will double in the next 10 years. Set up in 1996, it is now worth $430bn and will be worth $850bn by 2019. In the last quarter this year – even in the current recession, it saw its biggest return ever in a 13% increase.
The fund now owns almost 1.8% of stocks in European listed companies and employs 240 people globally.
The contrast of this strategy with the UK’s squandering of oil revenues could not be more stark.
This does, of course – and with reason, fuel the SNP argument for the repatriation of oil revenues to their country of origin, Scotland.
The wider impact of banking failures
However, like it or not, Scotland has its banks to thank for weakening the current legitimacy of that call.
The UK Government, with Gordon Brown’s ‘regulation with a light touch’, almost explicitly invited financial institutions to embrace risk without risk assessment. This may have generally seduced banks into bad practice but it was banks carrying the name of this country who dashed most recklessly for cash and brought down the economy of the entire UK for decades to come.
In this context, any cry of ‘It’s Scotland’s oil’ is shouted down by ‘It’s Scotland’s debt’ – with claims and disclaimers clinging fast to both slogans.
Any call to establish a Scotland Oil Fund from continuing oil revenues will, as reasonably as the call itself, be seen as our unwillingness to share the consequences of long-term UK-wide injury inflicted by our banks.
The Royal Bank of Scotland and the Bank of Scotland have damaged their country of origin far beyond financial pain. They have created a climate where economic uncertainty has undermined and retarded any open-minded engagement with the issue of independence.
This double-debt makes inexcusable the current behaviour of the banks – in refusing to lend to assist the survival and development of perfectly secure businesses and, as in the case of the Bank of Scotland, cutting lifeline services like Islay’s Business Manager.
A Scotland Energy Fund
What Scotland should do is to establish a Scotland Energy Fund, with contributions from renewable energy, carbon capture and existing energy generating systems accumulating from now on.
This fund should receive environmental levies on nuclear power plant operation and decommissioning; and any contributions in respect of oil extracted from the UK Government at any stage.
Contributions to such a fund might come from – for example:
- Crown Estate revenues from any licenses granted in respect of marine renewable energy using Scotland’s sea bed;
- the redirection of ‘planning gain’ funds which land-based wind farm operators pay to local communities – it’s Scotland’s wind;
- a similar ‘planning gain’ charge applied to marine renewable energy developments – just as wind farms impact on communities, marine installations will impact on fishing, shipping and water-based leisure and tourism activities;
- a percentage of annual operating profits of all energy producers, before tax – as a condition of licence;
- a percentage of annual operating profit, before tax – as a condition of licence for all public utility companies (this would have the added advantage of retrieving something from the national vulnerabilty we experience through foreign ownership of critical utilities);
- a percentage of oil revenues accruing from development and operations on Scottish territory – negotiated with the UK Government;
- an annual environmental levy paid, in operation and in decommissioning, by nuclear power generating establishments on Scottish soil.
In respect of percentages of operating profits to be paid to such a fund, it has to be remembered that Scotland is a stakeholder - a shareholder – in such operations, because they use the country’s natural resources.
We need not just to hark back weakly to what was stolen from Scotland – and it was and it’s irretrievable – during the oil boom, but to make sure that in continuing developments on all fronts we harvest a gain for national investment. It’s not just about oil.
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December 12th, 2009 at 1:47 pm
There’s alot to be said for this. However, I would object very strongly to the funds presently paid to communities on the doorstep of windfarms being redirected. The impact of windfarms on local communities should not be underestimated, and these communities should be recompensed directly.
However, given the extraordinary revenues that the developers make from Windfarm installations, a further percentage payment into a national fund would not hurt their business models at all. If we say that the present payment of £2K-£4K per kilowatt per annum to communities is matched by a payment of the same to the national fund we would only be asking the windfarm companies to pay around 10% of their profit before Corporation tax to the “public purse”.
I think the other thing that you must pay attention to is that these payments to communities are key to the new drive in Argyll towards rural sustainability. If not for these funds the communities involved would be in a great deal more trouble than they are now.
Lastly, the government, at least in Scotland, is keen to empower local communities and by taking such funds back into a central pot, the benefit that accrues to those very communities who would most benefit would be lost. In my view we must fight to prevent the fragile rural communities we do have being de-populated by lack of services and a surfeit of second-homeowners. The only way to do this is to get those communities themselves to activate and move forward.
December 12th, 2009 at 3:48 pm
While a fund, such has the one outlined above, is an excellent idea, I can not belive that Westminster will allow it to happen. They work on the theory that we have to be beholden to them, that we can not live without them and that we should be grateful for every thing they do for us.
Any amount of money build up in such a ‘ indepentant ‘ fund will simply be deducted from the amount of money that Westminster gives to Holyrood.
December 12th, 2009 at 5:09 pm
We could always take the Westminster by pass, Spike!
Charles, I agree with you that community enterprise should be rewarded but if it can be demonstrated that company profits are excessive an additional central levy would not go amiss.
December 13th, 2009 at 8:31 pm
It should be takern on board that those banks are primarily large internationally owned banks and they are continually being described as “Scottish ” banks mainly for political reasons.
RBS is a bank of Scottish origin which retained its HQ in Scotland as it became one of the world’s biggest banks. Over 90% of its business is furth of Scotland. It is, for instance Nat West, a huge English Bank. It is Ulster Bank. And we all know it is also a huge failed Dutch bank. This not an attempt to excuse is failings but merely to point out that an independent Scotland would have had no particular national interest in saving the behemoth. It was saved in the British national interest. (Sir Fred Goodwin was knighted by Labour and made a special advisor to Gordon Brown).
While RBS retained some element of which would justify it being describes as a “Scottish Bank” HBOS on the other hand cannot be under any circumstance be described as such.
It is the Halifax, a huge English company, which gobbled up the Bank of Scotland years ago, and is HQd in Yorkshire.
Nobody south of the border describes as other than the Halifax except for reasons of political spin. The “BOS” is tabbed on after the “H” in Scotland only to keep us happy.
I’d have let them both go bust.