sovereign wealth funds

IsEveryoneUsingMyName

There is always lots of talk about the success of the Norway sovereign wealth fund. Could the UK government start one with the view to reducing national debt or starting to cover the rising state pension costs? Or have we missed the boat?

dunstonh

https://forums.moneysavingexpert.com/discussion/6668674/sovereign-wealth-funds

The UK government effectively used North Sea oil and gas to reduce debt. At that time, the country was in no state to build a sovereign wealth fund. Now that the current government is looking to shut down North Sea, it seems unlikely that there's going to be any area that could be tapped into to generate much of a sovereign wealth fund. The Norwegian government is much more sensible and is utilising its resources to generate wealth for its people, which is something that the current UK government refuses to do

JoeCrystal

Don't forget that unlike Norway, the UK was 'sick man' of Europe at the time. Besides, it was used to pay for major tax cuts and cover the massive unemployment benefits at the time.

QrizB

Could the UK government start one with the view to reducing national debt or starting to cover the rising state pension costs?

A bit like this?

https://en.wikipedia.org/wiki/National_Wealth_Fund_%28United_Kingdom%29

Xbigman

You also need to compare the size of the Norwegian and UK economies to their respective North Sea assets. The Norwegian economy was tiny and their North Sea income was more than they could spend. They Sensibly set up a wealth fund with the spare income. The UK didn't have any spare income. Could we set up a wealth fund today? No, we're broke.

Darren

Storcko14

https://forums.moneysavingexpert.com/discussion/comment/82001733#Comment_82001733

As well as that, it also went towards subsidising the privatisation programme and right to buy - both voter friendly policies of the time. Norway did jam tomorrow, UK did jam today.

BlackKnightMonty

The Shetland Islands have a Sovereign Wealth Fund. It is a tremendous asset for the community.

finbaar

I do want to get very political about this. However, I understand the limitations we have here! Let's just say that due to the choices made by the government of the time all of the oil revenue wasn't directed at long term investment. It was just spaffed on tax cuts etc.

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/82002462#Comment_82002462

But let's not forget how high those taxes were at the time. Especially compared to now

QQQQQQQQ_Y

https://forums.moneysavingexpert.com/discussion/comment/82002483#Comment_82002483

Yes. Taxes in 1979 were approximately 39% of GDP whereas now they are approximately 39% of GDP and now we have no sovereign wealth fund and no North Sea oil.

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/82002770#Comment_82002770

The OBR and OECD data shows that in the mid-60s, the tax burden was around 30% of GDP and fluctuated between 30 to 34% through the 70s and 80s.

The tax peak in that period was 1982 at 33.9% of GDP.

The OBR put the burden at 36.3% of GDP in 2023-24, with projections to rise to roughly 37.7% by 2028-29.

Statista (using ONS data) puts tax revenue at about 28.4% of GDP in 1993/94 and around 36.1% in 2025/26. And let's not forget that in the mid-90s, the UK was almost running a budget surplus and did indeed do so later in the 90s. Are we ever going to see such a thing again?

Taxation relative to GDP isn't necessarily an ideal measure to use as it takes all taxes across corporate and individual. Let's not forget that income tax was 33% at the basic rate band and 83% at the higher rate. Investment in some cases was taxed up to 98%. Capital Transfer Tax, the tax before inheritance tax came in, could reach 75% on its highest slice.

Over the years, the burden of taxation has been spread wider with a range of newer taxes and of course, the addition of VAT.

Broadly, the tax take as a share of GDP has moved within a band rather than exploding in any one particular area, but who pays the tax has shifted significantly. The main winners have been high earners and large wealth holders. The main losers have been employees and consumers (due to VAT and indrect taxes). Current policies are hitting all those who have had 30 to 40 years of better taxation. I.e., the self-employed (sole trader, partnership or limited company), businesses, higher earners and those with wealth.

Despite the highest tax take since the war, it's still not making much of a difference to the deficit. And without North Sea gas and oil, either spending has to come down, or taxation has only just started, and a drift towards 1970s levels of personal taxation is coming our way.