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 Wednesday, 1 January, 2003, 10:15 GMT
Heath sparked Scots oil debate
Edward Heath graphic
Former Prime Minister Edward Heath faced opposition when he considered moves allowing Scotland to benefit directly from North Sea oil revenues, it has emerged.

Government documents released under the 30-year-rule reveal that the Tory PM was concerned abut Nationalist opinion and the state of the Scottish economy.

However, some Cabinet members warned that such a move could backfire and "resurrect difficult and controversial issues now dormant".

Mr Heath's request led to an outpouring of confidential minutes and memos between departments, including the Scottish Office, the Exchequer, and the then Department of Trade and Industry.

!0 Downing Street
There was opposition within the Cabinet
Chancellor Anthony Barber and Scottish Secretary Gordon Campbell were against any move to pump oil revenues directly in to the Scottish economy.

The issue of North Sea oil revenues has remained a hot topic of debate in topic to this day, with the Scottish National Party arguing that Scotland has been cheated out of its fair share by the UK Treasury.

The documents from 30 years ago revealed that there were concerns then about Nationalist calls for Scotland to receive the oil revenue.

Heath asked government departments in early 1972 to explore "novel arrangements" to help revive Scotland's economy with "its own resources".

However, departments played down the idea of diverting revenue and instead backed the promotion of the oil industry in Scotland.

Ministers feared changes in the financial relationship between Westminster and Scotland "would resurrect innumerable issues now mercifully dormant".

'Psychological gains'

Initiating the review in January 1972, senior Downing Street civil servant Robert Armstrong wrote: "As you know, the point has recently been put to the Prime Minister that the benefits of oil production brought ashore in Scotland should accrue, and be seen to accrue, to the Scottish economy.

"The Prime Minister sees considerable force in the arguments.

"It would be difficult to stress too highly the psychological gains which would come from the revival of the Scottish economy being seen to be something from which Scotland was achieving from its own resources, not just by the grace and favour of the Government at Westminster or of English industry."

He added: "The Prime Minister understands that novel arrangements may be required to achieve this result."

However departments voiced concerns about taking oil revenues away from the Treasury.

A senior official at the Scottish Office said in a memo to Downing Street on 25 January: "These oil discoveries have raised speculation in Scotland on the financial aspects and will continue to do so.

Oil worker generic
Ministers preferred boosting the industry
"The Secretary of State (for Scotland, Gordon Campbell) considers that there are ways in which the Government can help the Scottish economy to benefit soon from the oil developments, such as appropriate infrastructure works."

But the official added: "Mr Campbell would not wish to see direct payments from the oil revenues, as these would be too late to be really useful and would raise a new principal causing difficulties if applied in other contexts.

"On the general question of the financial relationship of central Government with Scotland, the present has been evolved over many years and the types and amounts of grants, for example to local authorities for housing and education...follow formulae which recognise special circumstances and needs where they exist.

"Mr Campbell considers that to dismantle this system, besides being a Herculean task, would resurrect innumerable issues now mercifully dormant."

In a memo on 7 February, 1972, Treasury officials said they too were looking at "aspects" of the Prime Minister's request.

The Treasury argued more strongly and said "...Scotland takes a markedly bigger share of public spending than she contributes to public revenue".

"We are looking at the latest expenditure figures to confirm that they will tell the same story."

Departments unanimously suggested that aims could be better met by investment in infrastructure and the fostering of fabrication yards and supply companies.

Treasury officials later said there was "no question of hypothecation" of oil revenue to finance Scottish expenditure.

See also:

27 Sep 02 | Scotland
11 May 02 | Scotland
08 May 02 | Scotland
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