Scottish Independence: What should we really be afraid of? OIL
So the time is nearing for the people of Scotland to decide if they want to stay with England, Northern Ireland and Wales or to go it alone in the big bad world with no one to hold their hands, tuck them in at night or to scare away the trows. The TV, newspapers and blogosphere have been alive with debate and argument in both camps from politicians, news presenters, economists, academics, business people and even those ivory tower economic experts, our celebrities. Now to some it may appear a complex economic, political and ideological arguments. But from our wise mediums, sorry, media, it seems the issues are easy to sum up.
The Scottish people have been told, in no short measure, what will happen if Scotland leaves the UK. They won’t get a currency union, they won’t be in the EU and they won’t be able to manage their own natural resources effectively. This in turn will lead to welfare cuts that hurt the most vulnerable and rising taxes will serve to increase poverty and inequality. Now this is a terrifying situation for a people to face. So in this series of articles I will look at how the UK governments ability to tackles these issues and avoid the pitfalls that the Scottish people would be falling into should they choose to vote yes.
So, this being the first post, let’s start with the biggie: Natural Resources. If Scotland stays a part of the UK we want to know that our natural resources will be secure and provide long term security. Just recently it was claimed by David Cameron that with our current operations, new carbon capture technology and the might of the UKs “broad shoulders” we can extract gas worth up to £200bn in only 20 years. This is fantastic news for all of the UK. We’re told that the size and strength of the UK economy serves to make the industry more resistant to market fluctuations in oil prices, supply and demand that would otherwise cripple a Scottish economy that was reliant on oil revenue. So let’s take a look at how other nations that are natural resource rich make use of such revenue and how the UK measures up.
It seems sensible that the UK should have some way of banking some of the revenue from it’s natural resources for a rainy day, or a even a global financial crisis. One way to do this is with a Sovereign Wealth Fund (SWF), into which you put a proportion of your oil revenue each year, with the aim being to grow the fund through wise investment. Here is a list of countries and even individual US states that have set up SWFs and how much they were worth in February 2014. Taking the most cited example, it was recently announced that technically everyone in Norway is a Krone millionaire and apparently the Norwegian Government are able to cover 11% of it’s national spending from the interest alone from their SWF fund. How much would it be worth to the UK then? Well, a SWF for the UK oil started in 1980 would have brought in an additional £24bn per year. How much does is actually in the UKs wealth fund? Well actally the UK has never started one. Instead, each successive UK government since 1980 has spent the oil revenue as it came in. I’m loath to mention her name, but it’s estimated that Margaret Thatcher’s government single handedly spent £166bn of oil revenue just during her reign.
Okay, so to date they seem to have made short term, rather than long term use of the natural resources. But with an independent Scotland aiming to implement a SWF to safeguard and maximise the benefits of Scotland’s natural resources, the UK the government surely must have similar proposal to make the most of what is left. Sadly not it seems. They plan to keep doing exactly as they have done for the past 30 years and spend it as it comes in.
Despite this, the UK is still one of the richest nations on the planet so in the next few articles we’ll look at how effectively the UK has utilized and maintained its wealth and how it addresses issues such as poverty, health, the elderly and education.
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