In the middle of a measured, objective analysis of the possibility of the United Kingdom becoming the Untied Kingdom, Jim Leaviss of M&G’s Bond Vigilantes suddenly comes up with this:

May I take a moment to rant about the lack of a UK SWF?  In real terms the UK government has taken £270 billion out of the North Sea in tax revenues.  Did we save it, like the Norwegian Statens pensjonsfond, now worth around £330 billion?  Nope, after millions of years spent turning bracken into oil, we gave it away in a 20 year period to a population who just happened to be alive under a particular government’s time in office and got a windfall gain which they used to buy avocado coloured plastic bathroom suites, now doomed to eternity in landfill across the nation. Bah.

It’s not the bad taste jibe at the avocado suites that made me stop (just you wait, the fashionistas will be gagging for them when the pendulum swings) but the idea that the UK government would somehow make a success of a £270 billion Sovereign Wealth Fund. The 1970s, when North Sea Oil started to make a serious impact on the national finances, were desperate times. The spirit of union bloody-mindedness was neatly captured in a cartoon of a man walking past a newstand which bore the headline: “Railmen demand eternal life”.  Reform was painful enough, even with the balm of the North Sea windfall.

We extracted the oil when its inflation-adjusted price was at a peak that was not regained for 30 years, while the impact on sterling allowed UKplc to take advantage of the scrapping of exchange controls (remember them?) and buy assets abroad. The resulting flow back from these private sector investments has been far more beneficial than anything some SWF might have produced, even if subsequent governments had been able to keep their hands out of the pot.

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