Whatever happened to Britain’s oil?

Anyone who remembers the 1960s should recall a political language very different from today's. Headlines, debates, party political broadcasts and news bulletins bristled with terms such as "trade gap", "sterling crisis" and "balance of payments deficit". Elections hinged on these things; ordinary people - or at least some of them - worried about them and looked out for the next monthly figures. Those worries disappeared from common talk long ago, and the oil did that.

By any measure, the trick of geology that put oil and gas under the North Sea gave us a mighty windfall. The industry itself estimates that since the oil came on stream (it was discovered in 1969) the British exchequer has benefited to the tune of £200bn, while directly or indirectly the business supports roughly 200,000 jobs. A couple of decades as a net oil exporter also did wonders for the trade figures and the balance of payments and, bar a couple of sticky moments, made the pound one of the world's strongest currencies.

Whether this windfall was spent to best advantage is another matter. Margaret Thatcher famously stands accused of using the extra income in the early 1980s - when the tax income from oil was at its highest - to fund her three million unemployed. It is difficult to rebut the charge, given that the money was certainly topping up state coffers at a time when unemployment costs were draining them, but Thatcher herself doesn't even engage with the argument, hardly mentioning North Sea oil in her memoirs.

It's also true that a strong sterling has hurt manufacturing industry, making our exports dearer. One motor industry executive remarked in the early days that it would be better if the oil were left in the ground, and his worst fears were realised with the virtual disappearance of British car making. Today Britain no longer even thinks of itself as a country that makes things.

And whether we meant to or not, we have extracted the oil at breakneck speed, so that our output actually peaked at a time when oil prices were at their lowest. If we had thought strategically we might have got more money for it. Back in the 1970s, when he was prime minister, James Callaghan suggested that there should be a national debate about how the oil should be used; maybe we should have listened.

There's no doubt that the oil, while we have had it, has made us richer, but has it really changed us? Only now that output is declining can we begin to know the answer. So watch out for politicians talking about the trade gap.