The UK Prime Minister, David Cameron, implied recently that Scots people were stupid for expressing their desire to have greater control over the energy which comes in from Scotland’s maritime sector. Cameron went on to say that the oil and gas revenues should be used for the benefit of the UK.
It’s a funny thing that oil and gas production off the north and north east of Scotland has attracted so little attention over the past forty or so years it has been supporting the UK economy from Westminster governments, both Labour and Conservative, but still touched a nerve with Cameron.
Perhaps it has been the sensitive nature of the energy industries which necessitated their exclusion from calculations over Scotland’s contribution to the UK treasury and forced Westminster to bury the McCrone report for thirty years before it was dragged out of its dusty drawer through Freedom of Information. The endurance and patience of the Scots throughout these decades as the steady stream of oil and gas revenues have been channelled south of the border perhaps does confirm Cameron’s opinion of us as stupid after all.
The English Tories had little idea, before the Report was delivered how lucrative an asset for the UK purse the energy sector would turn out to be. It has to be said that when you look around parts of the west of Scotland it’s difficult to match up the generated maritime wealth with the poverty and wasted lives of so many people, many it should be said who are or were Labour Party loyalists throughout this long period of production and deceit.
Bury bad news – or good news – depending on who you are and what the news is. Bad for the Union – good for an independent Scotland. Except we didn’t know it at the time. Or rather those of us in the north and north east did recognise that there was incredible wealth being created and it was a mystery why oil and gas figured so little in the discussions of the UK economy as a whole, with its contribution played down to the extent that many in the UK are possibly still unaware that there is an oil and gas sector operating here at all.
So the civil servants and Secretary for State for Scotland (sic) in the Scottish Office (sic) agreed to work against the best interests of Scotland and its people and preserve the myth of subsidy junkie Scots dependent on English largesse .
The truth, as we know, was just the opposite and we have been supporting that pampered and self-serving corner of S-E England to the detriment of ourselves. So stupid we still are if we fall for the ‘better in the Union’ argument any more.
‘Most peopleregarded both their statistics and arguments suspect, and theycontinuedto believe that Scotland derived more economic advantage than disadvantage from the Union.The importance of North Sea oil is that it raises just this issue in a more acute form than at any other time since the Act of Union was passed.’ (McCrone)
Perhaps if Glasgow’s working people who suffered badly following the loss of the heavy industries in the 1970s had looked beyond the end of their streets and seen what was happening in other parts of Scotland and voted for the SNP then instead of automatically voting Labour, the Party which has consistently kept them in the manner they have become accustomed, poverty, then Scotland might today be in a far better position.
‘With North Sea oil revenues, public expenditure on construction projects could be greatly stepped up and a major operation should be mounted to carry on the rebuilding of Glasgow and do much more than has been done in the past for environmental recovery.’
The revenues of North Sea oil and gas would have created an affluent and prosperous Scotland which could have supported ship building and other heavy industries against overseas competition. The lessons, however, have been slow to learn.
Around 90 per cent oil and gas reserves were in Scottish waters in the mid-seventies. This was before Tony Blair’s Labour government had the idea of transferring 6000 square miles of Scotland’s maritime space to England, affecting oil, gas and fishing rights.
In the 1970s, the North Sea energy industry was in its infancy and projected figures estimating its output were cautious – very cautious. All part of the Unionist game to suppress the reality of the opportunity for Scotland to become a thriving and well-off nation beholden to no-one, least of all its chippy and hard-up neighbour to the south.
McCrone goes on to explain how the Department of Trade and Industry played down the extent of income and its impact on the economy. And allowed foreign competitors to take up North Sea options to the detriment of the UK economy, in particular, Norway benefitted considerably from the UK , read Scottish, areas of the North Sea.
As McCrone pointed out, ‘This has confirmed the total inadequacy of arrangements to secure Government revenue and shows that some of the most attractive measures to put this right would involve breaking the terms on which the licence’s were given. It is partly for this reason that the Government has so far failed to take a decision, the choice lying between carried interest (i.e. state participation), which would provide the biggest revenue and also give some power of control but would go back on the terms of the licences, and excess revenue tax, from which the return in 1980 would be some £200m. less but would be defensible in international law. The DTI estimates of last summer showed that total Government revenue following adoption of these measures would have been between £800m. and £1,200m. a year in 1980 depending on the system used and the prices prevailing in 1980; today, following the huge increase in international oil prices of recent months the corresponding figures are in the range of £1,500m. to over £3,000m. Thus, all that is wrong now with the SNP estimate is that it is far too low; there is a prospect of Government oil revenues in 1980 which could greatly exceed the present Government revenue in Scotland from all sources and could even be comparable in size to the whole of the Scottish national income in 1970.’
Even in those early days, McCrone was aware the potential from the North Sea was massive and would work in favour of an independent Scotland living off her part of the Continental Shelf.
‘As well as the gain to the Government Revenue, North Sea oil will of course make a massive contribution to the balance of payments’ What is quite clear is that the balance of payments gain from North Sea oil would easily swamp the existing deficit whatever its size and transform Scotland into a country with a substantial and chronic surplus.’
I’ve written it before in my blogs, as have many others, that North Sea oil and gas has been systematically derided as fairly insignificant by successive governments in England and nothing has changed to date. For the around forty years of the oil scene in the north east we have listened to the refrain, ‘It’ll not last long.’
Despite being aware of McCrone’s conclusions regarding the benefits to Scotland should she be in charge of her own maritime production, Westminster administrations refused to consider setting up an oil fund for Scotland. However, well done to Shetland Council which acted in its areas interests and insisted on just such a pot for its part in the industry. Shame on the Scottish office for again working against the interests of the country it is supposed to support.
‘ All the above figures are, of course, based on the estimated output of 100m. tons of oil in 1980. This was the DTI’s revised estimate in the early summer of 1973. Already it is beginning to look as if these estimates may be too conservative. Recent finds and the plans of companies appear to indicate that the Shetland basin may prove very productive indeed. Zetland County Council’s consultants worked on the assumption that 70m. tons a year might actually be piped ashore in the county. It is now known that Shell expect to land 50m. tons a year through their own pipe alone and pipelines may also be expected from Total’s Alwyn field, Conoco’s Hutton and the recent BP and Burmah finds. In addition to this there are, of course, substantial finds further south, particularly BP’s Forties field and Occidental’s Piner. Whether or not this, plus any new finds that are made, result in the 1980 estimate of 100m. tons being exceeded largely depends on how quickly newly discovered fields are brought into production, but it does now seem extremely likely that production during the 1980s will use well above 100m. tons a year with consequent increases in revenue and gain to the balance of payments.’
McCrone spelled it out clearly enough for there to be no doubt. An oil rich Scotland would not need the Union. The ‘they need us more than we need them’ would have to be put to rest. But it was his Report which was put to rest, for thirty years, the sleeping beauty.
Perhaps the Westminster administrations, both Tory and Labour shied away from sharing McCrone’s findings because of potential ‘bitterness between the two countries’ Scotland and England preferring to keep us Scots in blissful ignorance. I imagine the bitterness would be all on the part of England, had Scotland become independence and retained all of her designated area of the Continental Shelf.
McCrone alerted the government to the possibility of altering the boundary between English and Scottish waters to provide England with some, albeit smallish oilfields. But the remaining Scottish sector would retain substantial revenues. ‘The country would tend to be in chronic surplus to a quite embarrassing degree and its currency would become the hardest in Europe, with the exception perhaps of the Norwegian kroner.
Norway, yes. Independent and thriving little Norway. Such an inspiration to an oil-rich Scotland. Couldn’t be allowed. Bury McCrone.
McCrone raised the potential difficulty of Scotland having more potential to provide incentives to industry to the detriment of England. ‘Up to now England has always been in a position financially where, if she wished, she could have more than matched any measures which a Scottish Government would be able to afford.’ And he discussed the proposition that an independent Scotland might expect to raise its peoples’ incomes with greater GDP so increasing the gap between incomes per head in Scotland and England.
‘As an independent state, Scotland’s balance of payments position would enable her to break out of the ‘stop-go’ cycle and a sustained rate of growth could be planned on the basis that it could be carried on for at least a decade. The strength of the currency coupled with the budgetary surplus would help to keep interest rates down and there would be no need for sudden increases in taxation or massive cuts in public expenditure. Admittedly, since Scotland is so closely tied to the English market, her economy would continue to be affected by measures taken in London, but this effect would diminish the more Scotland expands trade with other EEC countries. Furthermore, it would be quite proper for a Scottish Government to take countervailing measures to stimulate the Scottish economy at times when England was going through a recession.’
As for Scotland not having access to the, then, EEC. McCrone notes, ‘North Sea oil could have far-reaching consequences for Scottish membership of EEC because of the tremendously increased political power it would confer. Without oil other members might pay little enough regard to Scotland; her voting power would not be large and it might indeed be argued that she could exert more leverage on the Community as part of the United Kingdom.As the major producer of oil in Western Europe, however, Scotland would be in a key position and other countries would be extremely foolish if they did not seek to do all they could to accommodate Scottish interests. For Scotland the net cost of Common Agricultural Policy, which features so large in British discussions would be at most some £40m. a year, a small sum compared with the balance of payments gain from North Sea oil. The more common policies come to be decided in Brussels in the years ahead, the more Scotland would benefit from having her own Commissioner in the EEC as of right and her own voice in the Council of Ministers instead of relying on the indirect, and so far hardly satisfactory, form of vicarious representation through UK departments.’
And what did he see as the benefit for the Scottish population? ‘so long as Scottish GDP per head is only 70 per cent of the European average, the unemployment and emigration rates among the highest and the country regarded by the EEC as one of its worst problem regions, then Scotland is justified in using her own resources to rectify these problems rather than relying on the generosity of others at least until she has managed to catch up.’
So where would Scotland have stood in relation to England? ‘ Economic conditions in Europe and above all in England, with whom Scotland will remain closely tied in trade, are of particular importance. Even with greater diversification of Scottish trade to Europe and to North America, an impoverished England or one perpetually suffering the rigours of demand restraint would have most serious consequences for the Scottish economy. Britain is now counting so heavily on North Sea oil to redress its balance of payments that it is easy to imagine England in dire straits without it. The oil prices since the Yom Kippur war make this a much more serious matter than could have been imagined before; and it is now likely that transfer of North Sea oil to Scottish ownership would occasion much bitterness in England if not an attempt to forcibly prevent it. England would, of course, be no worse off than most of the Continental EEC countries in this respect; indeed, probably there are better chances of finding oil in the Celtic Sea or the English Channel than are open to most of them. If therefore the other countries can adjust to the new energy situation, England should be able as well.’
So for those of us who sometimes puzzle over why those who hold so much enmity towards Scotland and Scottish independence are often the most vociferous Unionists perhaps McCrone’s conclusions supply some possible answers.
Oil and gas production has waned somewhat from the heady days of the past but there is still plenty out there, in Scottish waters. Jobs are still being created and the plan is that this will continue with some 15000 projected in the years to come. Oil prices are high, bad news for consumers but good news for national treasuries. Our waters also have the potential for big profits from wave and tidal energies and it is vital that Scotland is not fleeced a second time (I’m being generous and forgetting about the circumstances of the Union).
UPDATE MAY 2014
Now it has emerged that Professor McCrone, then chief economic adviser to the Treasury, wrote another paper three years later – and it was again ignored by Wilson’s successor, James Callaghan.
In it, Professor McCrone wrote that Britain had been presented with “an opportunity to her economic performance, raise her living standards and overcome some of the serious difficulties which have impeded progress in the last two decades”.
He urged the Government to set up a “Special Fund for Investment” to provide money for “industrial and regional development” and to “safeguard” Britain’s oil wealth from being spent on short term projects.
Although North Sea oil and gas had made the UK “the most richly endowed economy in the EEC”, Professor McCrone warned: “This advantage is of
finite and relatively short duration; and if we do not put to good use the time that we have to strengthen our economy, we cannot expect a second chance.”
He concluded: “If we allow this precious asset to be used without leaving something in its place for the future, we shall rightly be condemned in the eyes of succeeding generations.”
The report was found in the National Archives of Scotland following Professor McCrone’s appearance before a Scottish Parliament committee last week.
Although his 1974 report has long been a talking point in Holyrood politics, he stunned MSPs when he recalled writing “a second paper which has not been unearthed so far, in which I recommended an oil fund amongst other things”.