Are Scotland’s expectations still oil-fired?

Scots are not engaged, as they were in the 1970s, in a debate about how best to utilise North Sea assets.

The discovery of oil and gas in the North Sea in the late 1960s and early ‘70s had a transformative effect on Scottish political debate. Where previously the SNP had been expected to demonstrate that Scotland’s economy could function independently of the United Kingdom, suddenly unionists faced pressure to explain why it couldn’t thrive under Scottish control.  

In his introduction to The Red Paper on Scotland, published in 1975, Gordon Brown - then student rector of Edinburgh University - acknowledged how radically developments in the North Sea had altered the Scottish political landscape: "Modern Scottish nationalism is less an assertion of Scotland’s permanence as a nation than a response to Scotland’s uneven development - in particular to the gap between people’s experiences as part of an increasingly demoralised Great Britain and their (oil-fired) expectations at a Scottish-level."

By the time he had become Chancellor of the Exchequer two decades later, Brown’s analysis of nationalism had reversed. In a pamphlet, New Scotland, New Britain, written ahead of the first Scottish parliamentary elections, he dismissed "the cause of separation" as little more than a "misguided retreat from … modern forces of change".

Nonetheless, oil remained central to the SNP’s argument that Scotland could be a richer, fairer and more dynamic society outside the UK. But to what extent are Scottish expectations still "oil-fired"? Certainly, strategists on both sides of the independence referendum continue to view the issue as pivotal.

The most recent clash centred on an OBR report, seized on by Better Together, that predicted oil revenues would fall sharply from 2017, leaving Scotland with a larger fiscal deficit than the UK as a whole. Nationalists responded by highlighting the industry’s optimism over future rates of production and citing the work of Alex Kemp, professor of petro-economics at Aberdeen University, which estimates oil could generate between £50bn and £100bn in tax over the next 10 years alone.

When the debate becomes counterfactual, the unionist case weakens. Opponents of independence insist that, as a separate state, any benefit Scotland might have secured from control of the oil would have been offset by large fluctuations in annual revenues. Yet, between 1976 and 2011, total North Sea royalty and tax receipts amounted to £285bn (at 2009/10 prices), of which Scotland’s share - according to a median line division of North Sea territory - was £257bn. The focus on annual revenue flows is deceptive for the obvious reason that low revenues one year can be (and have been) compensated by high revenues the next.

Against these numbers, Scotsman columnist and former Labour MP Brian Wilson claims an independent Scotland run by the SNP would simply have mismanaged the oil industry. Again, the evidence suggests otherwise. As Chris Harvie explains in his book Fools Gold: the story of North Sea oil, SNP oil policy in the ‘70s and ‘80s drew heavily on the Norwegian model, with commitments to hold the oil as the property of the Scottish state, limit output to between 70 and 100 million tons per year and establish a Scottish state oil company with a 50 per cent stake in as yet undeveloped fields.

Few deny that Norway’s stewardship of its oil resources has been vastly superior to that of Britain’s. Norway’s oil fund, established in 1990, is currently worth more than £450bn, while the country’s GDP, once 9 per cent lower than that of the UK’s, is now 71 per cent higher. By contrast, throughout the 1980s, successive Conservative administrations at Westminster wasted record oil tax returns on rising welfare and unemployment bills caused by Mrs Thatcher’s monetarist experiments. Moreover, Thatcher used her oil tax windfall to disguise the growing deficit in the UK’s trade in general goods and services - a deficit compounded by her deliberate erosion of Britain’s manufacturing base.

It is difficult to believe that an oil-rich, independent Scotland would have allowed its industrial sector to decline as rapidly and as relentlessly as it has under the direction of UK policy-makers. More likely, Scotland would have pursued a programme of long-term industrial restructuring, with the possible benefit of avoiding the growth in unfettered financial capitalism that has proved so damaging to the British and Scottish economiesof late.

However, legitimate historical grievances notwithstanding, there doesn’t seem to be a great deal of political capital to be made from agonising over London’s failure, so far at least, to grasp the developmental opportunities presented by North Sea oil. Scots are not engaged, as they were in the 1970s, in a public conversation about how best to utilise Scottish oil assets in Scotland’s interests, nor do they seem particularly animated by the SNP’s talk of another boom in oil investment over the coming years.

It’s possible this sense of disengagement is symptomatic of the broader lack of public enthusiasm for the referendum campaign routinely noted by commentators. But perhaps its roots lie in a deeper collective memory of how cruelly the hopes raised by Scotland’s first oil boom were dashed, first by the defeat of devolution in 1979 and then by the decade of economic and political stagnation that followed. It would be a frustrating irony for nationalists if the defensive habits Scottish voters developed during the Thatcher era proved the undoing of the independence project. 

A tanker taking on oil from a loading bay at the Statfjord A-platform in the North Sea. Photograph: Getty Images.

James Maxwell is a Scottish political journalist. He is based between Scotland and London.

Photo: Getty
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Theresa May's U-Turn may have just traded one problem for another

The problems of the policy have been moved, not eradicated. 

That didn’t take long. Theresa May has U-Turned on her plan to make people personally liable for the costs of social care until they have just £100,000 worth of assets, including property, left.

As the average home is valued at £317,000, in practice, that meant that most property owners would have to remortgage their house in order to pay for the cost of their social care. That upwards of 75 per cent of baby boomers – the largest group in the UK, both in terms of raw numbers and their higher tendency to vote – own their homes made the proposal politically toxic.

(The political pain is more acute when you remember that, on the whole, the properties owned by the elderly are worth more than those owned by the young. Why? Because most first-time buyers purchase small flats and most retirees are in large family homes.)

The proposal would have meant that while people who in old age fall foul of long-term degenerative illnesses like Alzheimers would in practice face an inheritance tax threshold of £100,000, people who die suddenly would face one of £1m, ten times higher than that paid by those requiring longer-term care. Small wonder the proposal was swiftly dubbed a “dementia tax”.

The Conservatives are now proposing “an absolute limit on the amount people have to pay for their care costs”. The actual amount is TBD, and will be the subject of a consultation should the Tories win the election. May went further, laying out the following guarantees:

“We are proposing the right funding model for social care.  We will make sure nobody has to sell their family home to pay for care.  We will make sure there’s an absolute limit on what people need to pay. And you will never have to go below £100,000 of your savings, so you will always have something to pass on to your family.”

There are a couple of problems here. The proposed policy already had a cap of sorts –on the amount you were allowed to have left over from meeting your own care costs, ie, under £100,000. Although the system – effectively an inheritance tax by lottery – displeased practically everyone and spooked elderly voters, it was at least progressive, in that the lottery was paid by people with assets above £100,000.

Under the new proposal, the lottery remains in place – if you die quickly or don’t require expensive social care, you get to keep all your assets, large or small – but the losers are the poorest pensioners. (Put simply, if there is a cap on costs at £25,000, then people with assets below that in value will see them swallowed up, but people with assets above that value will have them protected.)  That is compounded still further if home-owners are allowed to retain their homes.

So it’s still a dementia tax – it’s just a regressive dementia tax.

It also means that the Conservatives have traded going into the election’s final weeks facing accusations that they will force people to sell their own homes for going into the election facing questions over what a “reasonable” cap on care costs is, and you don’t have to be very imaginative to see how that could cause them trouble.

They’ve U-Turned alright, but they may simply have swerved away from one collision into another.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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