THE UK Government missed a chance to establish a wealth fund based around North Sea oil which would today be worth more than £500 billion, according to a new report by the Institute for Public Policy Research (IPPR).

In the study, Our Common Wealth, researchers for the think tank point out that between 1980 and 1990, North Sea oil raised £166bn in taxes, based on 2011 prices. It points out that the revenues were used by Margaret Thatcher’s Conservative government to fund tax cuts unrelated to the oil industry.

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However, the IPPR study contrasts this with the strategy pursued by Norway, which created a sovereign wealth fund in 1990, which was in 2017 reported to have reached approximately $1tn in value, or £712bn. Had the UK established a similar fund it would now be worth £500 billion.

“Between the years 1980-81 and 1989-90, North Sea oil raised £166 billion in taxes (in 2011 prices). Instead of establishing a sovereign wealth fund, increasing investment, reducing national debt, or decreasing liabilities – all which would have increased public wealth – the UK used part of its tax windfall to fund the reduction of non-oil taxes,” it explained.

“While this may have boosted private wealth in some instances, the collective stewardship of finite resources which would have occurred through investment in a sovereign wealth fund, would have created a lasting, equitably-held asset. By contrast, the temporary boom in the 1980s spurred by tax cuts enabled by North Sea oil increased both intergenerational and national inequality in the UK. No mechanism was established to ensure future generations could share in that windfall.”

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It added: “A different approach to oil revenues was adopted by Norway, which invested its income in a sovereign wealth fund established in 1990. Today, Norway’s fund is worth over US$1 trillion. Had the revenues from North Sea oil been invested in a sovereign wealth fund in the 1980s, as happened in Norway, such a fund would have been worth over £500 billion today.”

Aberdeenshire East MSP Gillian Martin who sits on Holyrood’s Economy Committee said the report pointed to the “lost opportunity” missed by the Thatcher Government.

“It’s no great secret that oil and gas revenues have been mismanaged by successive UK government’s over decades – treating Scotland oil industry as a cash cow through the good years, but barely lifting a finger to help during the recent downturn.

“To put it in context, the Treasury has siphoned off some £600,000 per head of population here in the North East of Scotland while we’ve seen precious little in return.

“This report points to a £500 billion missed opportunity, but it’s also a stark warning that the UK government must not make the same mistakes again.”

She added Holyrood should have the powers to help prevent the opportunity being missed again.

“With a steady oil price, the oil and gas sector is once again set on an upward trajectory. The revenues from such a valuable national resource cannot be put towards covering the cost of Tory tax cuts for the very richest in our society – they should be invested wisely for future generations.

“The best way to ensure that happens it to take these powers out of the hands of Westminster altogether – devolve them to Holyrood and let us properly steward, rather than squander, Scotland’s natural resources.”

The IPPR report cites wealth funds established by Australia and Alaska. The former established a fund in 2006 which is now worth £90 billion and part of the fund helps pay for civil servant’s pensions.

Alaska established the Alaska Permanent Fund in 1976 through an amendment to the state constitution requiring 25 per cent of rent and royalties from the state’s mineral, oil and gas resources to be deposited in the fund.

As of the end of last year the fund was worth $64.5 billion. Citizens have enjoyed a stake in the fund’s performance in the form of an annual dividend.