North Sea Oil

It occurs to me every once in a while that just about nobody ever mentions North Sea Oil anymore. It used to be quite a common cause for comment.

In the seventies, it was thought of as the magical coming source of wealth that was going to transform Britain into the new Kuwait. In the eighties, it certainly allowed the government to cut (other) taxes faster than would otherwise have been the case. There were perennial worries about the Dutch disease of uncompetitiveness caused by an inflated exchange rate coupled with excessive domestic consumption. David Owen, iirc, wanted us to create a national provident fund on the Norwegian/Kuwaiti model - a sovereign wealth fund if you prefer - which would have neutralised the economic impact; it would also, and not in my opinion coincidentally, have cancelled out the political boost which accrued to the Tories.

Now, of course, production is in rapid decline and the positive boost to revenues and balance of payments is being reversed. Perhaps this is why no one wants to talk about it. But it seems to me that it must be, if not the elephant in the room, at least the hippo. For as long as the revenues continue to decline, there will be a permanent gap in revenues which must be replaced with additional taxes on the remaining productive sectors of the economy. The extraordinary boom which ended in 2008 must have masked this effect. But it would be very interesting to know how big it has been and will be.

I wonder if anyone has done any analysis on this point. Do let me know if you know of any!