When the UK first began extracting oil and gas from the North Sea seabed in the 1970s, it was hoped that the resulting revenues could turbocharge a stagnating industrial economy into the modern age. However, that is not quite what happened: not only did sterling’s status as a “petro-pound” further damage industrial communities by inflating the currency and pushing up the prices of UK exports, but successive governments have failed to wisely invest oil tax receipts.
While Norway has built up a $1.3trn sovereign wealth fund with its North Sea oil revenues, which will help pay for an ageing population for decades to come, the UK has only ever spent its profits on cutting national borrowing and keeping down taxes. This allowed Margaret Thatcher’s chancellor, Nigel Lawson, to cut top rate tax from 60p to the pound to 40p during the 1980s oil boom years. But such an approach has failed to give anything to future generations.
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