Key Takeaways
- • Chancellor John Healey announced an Energy Wealth Fund at the Jackdaw gas approval announcement, with £2bn of initial funding housed within the National Wealth Fund, according to the BBC.
- • Internal Treasury modelling, calculated for the first time, estimates a hypothetical British sovereign wealth fund could have been worth roughly £1tn had the UK's £200bn in historical North Sea receipts been invested without withdrawals, growing at a rate comparable to Norway's fund.
- • Norway's sovereign fund holds about $2.4tn, and its design contrasts with the UK plan: Norway must invest abroad, while the UK fund will invest domestically in green energy.
- • The announcement came the same week UK national debt passed £3tn for the first time.
Summary
The United Kingdom has announced an oil fund after decades of debate. Chancellor John Healey unveiled the Energy Wealth Fund at the Jackdaw gas approval announcement on Wednesday, with £2bn of funding housed in the National Wealth Fund. Healey said the proceeds of oil and gas now coming ashore "can be invested for the future generations," adding that a fund created when North Sea oil was first discovered in the 1980s would be worth "probably a trillion pounds" today.
For the first time, Treasury officials calculated how much a missing British fund could have been worth. The figure comes from internal Treasury modelling, which assumed the UK's historical North Sea receipts of £200bn had been invested with no withdrawals and grown at a rate comparable to Norway's. An insider described the outcome as a "missed opportunity," stating that systematically investing those receipts could have built a substantial national asset.
The comparison with Norway is central to the debate. Norway's fund, which began in earnest in 1996, now holds about $2.4tn, and it draws down roughly 3% of its value each year to help fund a fifth to a quarter of government budgets. The fund is obliged to invest abroad and has grown substantially through holdings in US big tech. The UK plan differs: the Energy Wealth Fund is designed to invest domestically, particularly in green energy, and may struggle to match Norway's performance. Norway's state also retains control of its oil companies and receives a share of their profits.
The UK's energy tax revenues are forecast to decline as North Sea production slows, though Jackdaw and extensions to existing fields may ease that rate of decline. The BBC notes that the announcement coincided with national debt reaching £3tn for the first time. Critics of the Thatcher era argue that peak oil revenues were spent on pre-election tax cuts, while others point to wasteful spending under later governments. The BBC also notes that the Energy Wealth Fund's £2bn is not expected to approach the scale of Norway's fund, which started with an equivalent sum of NOK 2bn thirty years ago and is now worth more than a thousand times that amount.
For the first time, Treasury officials calculated how much a missing British fund could have been worth. The figure comes from internal Treasury modelling, which assumed the UK's historical North Sea receipts of £200bn had been invested with no withdrawals and grown at a rate comparable to Norway's. An insider described the outcome as a "missed opportunity," stating that systematically investing those receipts could have built a substantial national asset.
The comparison with Norway is central to the debate. Norway's fund, which began in earnest in 1996, now holds about $2.4tn, and it draws down roughly 3% of its value each year to help fund a fifth to a quarter of government budgets. The fund is obliged to invest abroad and has grown substantially through holdings in US big tech. The UK plan differs: the Energy Wealth Fund is designed to invest domestically, particularly in green energy, and may struggle to match Norway's performance. Norway's state also retains control of its oil companies and receives a share of their profits.
The UK's energy tax revenues are forecast to decline as North Sea production slows, though Jackdaw and extensions to existing fields may ease that rate of decline. The BBC notes that the announcement coincided with national debt reaching £3tn for the first time. Critics of the Thatcher era argue that peak oil revenues were spent on pre-election tax cuts, while others point to wasteful spending under later governments. The BBC also notes that the Energy Wealth Fund's £2bn is not expected to approach the scale of Norway's fund, which started with an equivalent sum of NOK 2bn thirty years ago and is now worth more than a thousand times that amount.
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