Page last updated at 15:08 GMT, Saturday, 7 June 2008 16:08 UK

Civil servant wrote oil fund plan

oil platform
The rising price of oil has generated a fresh debate on its future

A former senior civil servant said he wrote a report in the 1970s about the pros and cons of setting up an oil fund for the UK.

The undisclosed paper by Professor Gavin McCrone was produced for a Westminster committee.

The revelation comes in light of First Minister Alex Salmond reiterating calls for Scotland to have its own long term oil fund.

Prof McCrone was a Scottish Office economist when he wrote the paper.

He believes it was regrettable that such a fund was never established.

Speaking to BBC Scotland's Derek Bateman on his Newsweek radio programme, Prof McCrone said: "I did argue to a Treasury committee, that there ought to be an oil fund - not just for Scotland, but for the UK to be spent in the areas of financial decline so as to help give them new life.

"And I think it was a pity that didn't happen because much of the benefit of North Sea oil just went into current expenditure."

Gavin McCrone
Shetland Island council managed to get its own oil fund which it still has and which has vast amounts of money in it
Prof Gavin McCrone

He went on to suggest that the deep economic problems faced in the late 1970s was probably at the heart of why his paper was never acted upon.

Prof McCrone said: "We didn't actually begin to get the oil revenues in till the 1980s when the Conservatives were in office.

"I think the Labour government did consider the question quite carefully but didn't act on it because they were more or less living from day to day trying to put off economic difficulties."

He believed that if a fund had been established it would have seen the benefits that Shetland has had.

"Shetland Island Council managed to get its own oil fund, which it still has and which has vast amounts of money in it," said Prof McCrone.

On Friday, Mr Salmond said Scotland should benefit directly from the Treasury revenue generated through rising oil prices.

He wants a long term oil fund to be set up, using 10% of an additional 4.4bn expected to come from fuel tax.

However, Energy Minister Malcolm Wicks accused the first minister of using the issue to advance the SNP's case for Scottish independence.

He said North Sea oil revenues were a UK resource which benefited the whole of the UK.

Tax surpluses

Prof McCrone, who led a high profile inquiry into teachers' pay in Scotland, was the author of another secret Whitehall dossier.

Written in 1974 and made public in 2005 under the Freedom of Information Act, it set out how oil would have given Scotland one of the strongest currencies in Europe.

In that report, Prof McCrone stated that Scotland would have had "embarrassingly" large tax surpluses.

But the projections were kept secret because of Labour's fears about a surge in SNP popularity.

Prof McCrone said that if the paper had been published at the time "it would have strengthened the position of those arguing for independence".

Following Prof McCrone's revelation that he wrote a paper on an oil fund, a spokesperson for Mr Salmond said it was now "abundantly clear that successive Westminster governments have squandered the opportunities" of North Sea oil.

The spokesperson added: "With over half of the revenues still to flow, it is absolutely essential that we establish a fund now which can power Scotland's economy forward for generations to come, and help hard pressed sectors suffering from high fuel prices."


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