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Oil wealth key to Thatcher's legacy, analysts say

© AFP

Text by Adam Mitchell

Latest update : 2013-04-17

Britain's former prime minister, Margaret Thatcher, benefitted significantly from North Sea oil and the rapidly increasing tax revenues it provided as she came to power, analysts and observers said Wednesday.

As the UK says goodbye to Margaret Thatcher, the former prime minister’s legacy cannot be separated from the boon of North Sea oil and gas, which came on line in earnest just as she won power, observers and analysts said on Wednesday.

Lady Thatcher’s funeral has provided flashbacks of the bitter politics of the 1980s, with her defenders heralding her as the saviour of the country’s pride and prosperity and her detractors lamenting a rapid process of de-industrialisation that caused joblessness and unrest.

The election victory that brought Thatcher to power in 1979 followed a period of social and economic strife culminating in the so-called Winter of Discontent, in which the country struggled with disruptive strikes and high rates of inflation and joblessness.

That situation made the ramp-up of North Sea oil in the late 1970s all the more of a bonanza.

“Britain is a tragedy,” the former US Secretary of State Henry Kissinger told President Ford in 1975, adding that the country had “sunk to begging, borrowing [and] stealing until North Sea oil comes in”.

And as Thatcher came to power, the revenues did indeed start to climb dramatically.

According to official figures, UK government revenues from oil and gas jumped from £565 million in the 1978-79 tax year to £2.3 billion in 1979-80, and rose to over £12 billion in 1984-85.

“[Tax revenue from North Sea oil and gas] has certainly been a major boost for the UK,” Jason Kenney, Head of pan-European oil and gas Equity Research at Banco Santander told FRANCE 24 on Wednesday.

The tax revenues from oil have proved to be a “real windfall,” he said.

Oil funded dole queues

Part of Thatcher’s disputed legacy is her policy of closing state-run businesses she judged unprofitable. In 1984, her government unveiled a plan to close 20 pits with the loss of 20,000 jobs.

The mine closure plan, which resulted in disruptive strikes and violent clashes, was a high profile example of a policy of industrial change that swelled the numbers of people claiming out of work benefits.

“[There is] no question that the welfare bill that generated would not have been sustainable without North Sea oil revenues,” Anthony Barnett, founder of the website Open Democracy, told FRANCE 24.

Writing in the Guardian newspaper on April 11, the former mayor of London Ken Livingstone made a similar point.

“Almost the moment she stepped over the threshold of Downing Street the economy was engulfed in an oil bonanza,” wrote Livingstone, one of Thatcher’s principal left-wing sparring partners during her time in office.

“Instead of using this windfall to boost investment for longer-term prosperity, it was used for tax cuts,” he added, criticizing his old rival.

Comparison with Norway’s sovereign fund

Many observers have drawn an unfavourable comparison between the UK’s use of its oil wealth, and that of its North Sea neighbour Norway.

“Norway got the same benefit, it put its money away, it has this enormous sovereign wealth fund,” the chief political commentator of the Financial Times, Philip Stephens, said in a Tuesday audio broadcast on the newspaper’s website.

“We spent it,” he said.

Of late, Britain’s tax revenues from North Sea oil and gas have stuttered amid a wave of shutdowns, including by French oil major Total at the Elgin/Franklin field it operates there.

Yet hydrocarbons have continued to provide a significant stream of tax revenues to the governments that came after Thatcher left office in 1990.

Scottish nationalists claim future revenues

Their continued importance continues to stoke the ire of Scottish nationalists, who claim the oil and gas fields for Scotland whose shores they largely hug.

An independent Scotland would indeed have a “major resource” if it opts for independence in a referendum scheduled for 2014, the UK’s business secretary, Vince Cable said recently.

Date created : 2013-04-17

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