The Scottish government will reportedly be advancing its case for a new oil stabilization fund next week. Finance Secretary John Swinney wants a fund to smooth oil and gas revenues so as to provide a permanent source of wealth and revenue for future generations:
“We want to harness the benefit of oil revenues now for future years. An oil fund can provide greater stability, protect our economy and support the transition to a low carbon economy. Norway’s oil fund is worth over £200 billion – despite the first instalment being made as recently as the mid 1990s – and Alaska’s oil fund even gives money back to its citizens every year.”
So the Scots look set to join the SWF bandwagon. It seems like a smart move based on sound logic. However, there seems to be two other factors at play here.
First, the announcement of a Scottish SWF seems to highlight the UK government’s failure to manage resource revenues. The UK has taken heat for this over the years, and the lack of savings has proven disastrous during the recent financial crisis (as Chilean President Michelle Bachelet recently made clear). So a SWF in Scotland is another rebuke of past UK policy. As Swinney said:
“The UK Government has wasted the resources from the North Sea…The UK Government can no longer oppose the people of Scotland enjoying the oil legacy they are entitled to and, for that to happen, the Scottish Parliament must assume responsibility for our geographical share of North Sea revenues.”
Second, the UK government announced in April the creation of a ‘strategic investment fund’ worth roughly one billion dollars. The mandate for that fund was to invest in domestic technology firms and protect the UK technology industry during the financial crisis. So perhaps the Scottish SWF reflects a ‘whatever they have, we should have’ mentality.
Whatever the motivation, a Scottish SWF seems sensible. More generally, SWFs clearly remain popular around the world. I think the Scottish fund brings the total number of new SWFs announced in 2009 to eight!