Where is my oil money?

antrobus

puk999 wrote: »

Let's hope lessons have been learned and the vast riches to result from fracking are looked after better.

Well that would the question wouldn't it?

If there is indeed gas there that can be fracked, and does generate a big wodge of cash for HMG, do you think said cash should be (a) used to pay down the national debt or (b) spent on buying stakes in Vodafone and Nestle and buying up South Korean steel plants (or whatever else it is the Norwegians invest in) ?

Glen_Clark

Imagine landowners compensation claims for subsidence etc etc if there were to be any fracking in England. I doubt if the frackers would make any money, but I am sure the lawyers would.

pip895

Don't see the point in a wealth fund whilst you have National Debt - Should we be running down the National Debt to protect future generations YES. Should we have avoided adding to the National Debt whilst we were enjoying the windfall of NS Oil YES.

Wilkins

pip895 wrote: »

Don't see the point in a wealth fund whilst you have National Debt - Should we be running down the National Debt to protect future generations YES. Should we have avoided adding to the National Debt whilst we were enjoying the windfall of NS Oil YES.

That's a good point, but the investment case would be that long term returns from a SWF should comfortably exceed interest payments.

Scarpacci

I think a wealth fund can make sense even while there's national debt, it just becomes a question of when has the debt reached a point where it's safe to invest. The returns from a wealth fund will generally outstrip the interest on government debt. So I think the issue is whether the debt's too large to pose a problem itself, above and beyond the cost of just servicing the debt. So long as total UK debt isn't scaring the markets, I don't think there's reason to avoid investing just to achieve a lower debt.

Whether we have a wealth fund or not, the issue of the deficit (rather than debt) should be focused on getting government spending under control - rather than hoping for windfalls which may temporarily ease the pain.

cepheus

Launching a National sovereign wealth fund whilst in debt sounds a bit like having a mortgage and savings at the same time. We can also print money, so it's of doubtful value! That's no excuse for squandering the oil money on dividends and property bubbles though. It's scandalous that during the Thatcher/Major/Blair period period growth was worse than during the decades preceding it without oil.
Don't think Fracking is another freebie to be squandered. Extracting it won't be cheap and there will (rightly) be substantial opposition from environmentalists. I have no doubt they will be careful to start with, but there are substantial unknowns regarding the leakage rates many years down the line when the concrete corrodes. they will have to be plugged with the methane gas having 25 times the GHG warming effect of CO2. I wonder who will pay for that?

Masomnia

I think it's easy to cherry pick the bits of a society you like and leave the rest.

I talk to my Norwegian friends about this stuff quite often, and the cultural difference is pretty obvious. They're happy enough that a pint of beer costs £7 because of the taxation. Would people in Britain accept that? I suspect not. Why should you pay all that tax when there's a sovereign wealth fund? And of course it's not exactly progressive. Taxation is much higher generally, VAT is something like 25%, wouldn't be seen as a progressive move here; but they're happy with it, and they feel like they get value for money.

As I say a lot of poorer (and I guess richer!) Brits would not be happy paying 25% VAT when there's £100,000 in there sitting in government coffers supposedly in their name.

Scarpacci

Masomnia wrote: »

I think it's easy to cherry pick the bits of a society you like and leave the rest.

I talk to my Norwegian friends about this stuff quite often, and the cultural difference is pretty obvious. They're happy enough that a pint of beer costs £7 because of the taxation. Would people in Britain accept that? I suspect not. Why should you pay all that tax when there's a sovereign wealth fund? And of course it's not exactly progressive. Taxation is much higher generally, VAT is something like 25%, wouldn't be seen as a progressive move here; but they're happy with it, and they feel like they get value for money.

As I say a lot of poorer (and I guess richer!) Brits would not be happy paying 25% VAT when there's £100,000 in there sitting in government coffers supposedly in their name.

Without veering off track, I think the VAT levels in Scandinavian countries actually point to VAT not being the regressive tax people here believe. A tax on consumption, with so many of life's essentials exempt/zero-rated, seems like a perfectly fine tax. The rich pay far more VAT, while it perhaps saves the poor from some bad behaviour. High VAT discourages profligate spending and (along with duties) discourages spending on many of life's ills (alcohol, tobacco, etc.).

I think their VAT level and wealth fund both paint a picture of a country that recognises gaily spending money away today is foolish in the long-run. Meanwhile our government seems to want a "consumer led" economy with reckless spending, while they spend all the money they have and much they don't have on government spending most of which leaves little behind in the long-run. I know which government is likely to come out better in the long-run.

CLAPTON

wouldn't it be good if every country had a sovereign wealth fund

each country would need to start at say 2 or 3 time GDP and then add slowly each year
obviously all the money would have to be invested abroad with a good rate of return

if every country did this then in say 20-30 years the entire world would be able to retire and no-one would need to work ever again.

a win win for everyone

BillJones

CLAPTON wrote: »

would you prefer the 'fracking' riches should be invested abroad or should they be used to reduce the deficit and hence the national debt?

Some reducing the debt, and the rest getting rid of the 45% tax rate.

Higher earners were asked to bear a larger share of the tax burden in the downturn, it's time to stop taxing them at such a high rate, and let them keep more of their earnings.