Westminster’s oil-fund failure a ‘major error’ admits David Steel


  By Martin Kelly
Former Liberal Party Leader David Steel has admitted that Westminster made a “major strategic error” in not setting up an oil fund upon the discovery of North Sea oil in the 1970s.

Lord Steel, who later served as the first Presiding Officer of the Scottish Parliament, said that he pushed the Callaghan government in 1977 to create a separate account for oil revenue which could have been used on major infrastructure projects, but believed Labour wanted the revenues for a spend “bonanza”.

In an interview with Holyrood magazine, the senior Lib Dem politician told Katie Mackintosh:

“I remember on the oil question there was a short period of debate when Callaghan was PM when he was asking should we have a separate national bank account for oil and he eventually just said ‘no’, it will just go into the general government income pool, year by year and I think that was a major strategic error because if there had been a separate account, it could have been used for major infrastructure projects and kept separate from the workings of government, so that was real mistake,”

He added: “I lost out on that argument because I argued with Jim Callaghan that we should have a separate account [an oil fund] but we had no power over the Government, really because we were just there for the parliamentary support and they just decided not to and I don’t think there was any push from the Conservative opposition to do anything different.”

The admission from Lord Steel is the latest in a series of revelations that highlight the extent to which Westminster based politicians repeatedly misled Scottish people over the potential of North Sea oil and mismanaged the resource.

Last month, Holyrood magazine’s editor Mandy Rhodes revealed how in an exclusive interview with Denis Healey the former Labour Chancellor admitted that Labour had underplayed the value of Scottish oil due to the threat posed by the SNP.

Yesterday, Newsnet Scotland revealed how the Conservative party backtracked on a pledge made in the 1970s to set up an oil fund which would have been used to fund infrastructure projects and replace out-of-date industry.

In 1974 Professor Gavin McCrone wrote a report which stated that Scotland would have had an “embarrassingly large tax surplus as a result of the North Sea oil boom”.  UK governments kept the information under wraps until it was eventually released in 2005.

Commenting, SNP MSP Maureen Watt said:

“Today’s revelations from Lord Steel show just how short-sighted Westminster is when it comes to making decisions on natural resources with long-term consequences.

“Had the oil and gas resources off our coasts been invested wisely, we would be far better placed to grow our way out of recession by funding capital investments.

“The fact of the matter is that Westminster simply cannot be trusted to treat the North Sea oil & gas sector as anything other than a short-term cash cow to be squeezed at every opportunity to prop up the Treasury’s crumbling books.

“It has already been shown that with responsibility for managing our own resources, Scotland would be in a stronger financial position than the rest of the UK.

“The more recent history unravels – with former Labour Chancellor Denis Healey’s revelations and now this form Lord Steel – the more compelling the case for a Yes vote becomes.

“The only way the oil industry will be managed on a long-term basis to the benefit of people in Scotland is with the powers of an independent Scotland that only a Yes vote in next year’s referendum will secure.”