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Tuesday, 15 August 2017

Draining the North Sea

One of the most frequent assertions made by critics of the government's austerity programme is that the UK is 'the fifth richest country in the world'. This is correct, in terms of the recorded turnover of the economy, the Gross National Product. But the country has been living on its reserves of capital, goodwill and material assets for many years [probably since 1915], and has disgracefully been wasting the talents of its people; not least, by selling off their inventions to foreign companies who then reap the profits from the ideas. The medium-term prospects are bleak, even before one considers the idiocy of the politicians who the rest of us allow to remain in control. The position paper on the Brexit process, issued today, dreams of a customs union of undefined size, shape or duration: more like something from a naive fourth-former than from the government of a great country: I will leave that concern aside today, and look instead at two basic facts.

First, coal. Britain led the world into modern industrialisation, using the abundant coal resources under the ground and under the surrounding seas [as in County Durham, where pits stretched a couple of miles beneath the North Sea]. The entire coal mining industry [with trivial exceptions] has been shut down, as other countries use old British ideas to develop uses for coal that do not involve atmospheric pollution. If we decided to return to those developments, we would be far down the queue.

Second, oil. Before North Sea and Irish Sea oil reserves were discovered, I grew up in Lancashire with the legend that the Romans' main reason for coming to Britain was to exploit the 'Tockholes Treacle Mines': a tale vindicated when oil was found in the area; and now a focus of protest as [further west, towards Blackpool] fracking is under way. When I was an undergraduate in Durham the university was demonstrating that there were potentially massive oil reserves under the North Sea. This geological observation was confirmed, and oil deposits are still being found offshore all around the United Kingdom.

The availability of that oil came just as Mrs Thatcher's deindustrialisation of the heartlands of production was developed, and it helped to balance the country's payments while a huge proportion of the population was deprived of the context in which they could work profitably, providing exportable commodities to exchange for the imports that are inescapably necessary. Instead of building up a massive investment portfolio, as Norway and the Gulf oil-exporting countries have done, the UK just mitigated the accumulating deficit with the rest of the world by its sales of oil [and by not needing to import so much as oil as would otherwise have been needed] as the unemployed and early retired were maintained, exiguously, on benefits.

Then, in 2016-17 [according to figures from HM Revenue and Customs, published early in July], the amount paid in tax by the companies that exploited our diminishing oil and gas reserves declined so far that the rebates paid to companies for decommissioning former oil and gas wells [and other permitted expenditure] exceeded the amount of tax payable. It was bound to happen one year: our luck means that it pretty well had to occur at the very time when Brexit loomed. Back in 2011-12, when Osborne was just stepping up the austerity programme, net revenue from oil and gas was £10.9 billion; in 2016-17 the net figure was MINUS £312 million.

The numbers will get worse, with occasional relief as new wells are opened and new ways of exploiting abandoned reserves give a short extension to the 'life' of some facilities.

These facts are so horrific, in their implications for Britain's economic survival [let alone, its tenure of the fifth place in the big league table] that they have largely been passed over by the media. We must not forget them: they must be a spur to new action and new thinking about the whole shape and future of the economy.

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