So we start out with near irrelevant comparisons:
More than 30 years ago the British Government started receiving significant tax revenues from North Sea oil and gas. This windfall has provided about £200 billion for successive governments, but as North Sea operations enter their final stages, the country has precious little to show for this vast sum of money.
In stark contrast, when Norway struck oil in the same sea it diverted its surplus revenues into a pension fund for the country’s future. This is now worth about £300 billion — approximately £55,000 per Norwegian citizen.
So we\’ve the number there for N Sea oil. £7 billion a year or so. Ignoring inflation (\’coz I\’m too lazy to work it out) this is about 1% of total government expenditure. Adding it all up together it\’s only a little larger than this year\’s deficit. While it\’s a nice tidy sum to have in the terms of the economy as a whole it\’s an irrelevance, near a rounding error.
Norway is rather different. There\’s under 5 million people there instead of our 65 million. Their economy is about $250 billion. £160 billion or so. So the oil taxation was near 7% of their economy each year and the fund is nearly twice their annual GDP.
This is, I think you\’ll agree, an entirely different situation.
It is constantly investing in new businesses and projects both within Norway and beyond.
Ah, no, not quite. The Petroleum Fund was set up to invest outside Norway. There is a separate fund financed from national insurance payments which invests inside Norway. The reason for this was to avoid Dutch Disease. The well known problem of large natural resource finds (large in relation to the size of the host economy) leading to either/both an appreciation of the currency and, if spent at home, inflation. Thus screwing the other parts of the economy. The solution is to keep the revenues from those natural resources outside the host economy and out of the currency which you don\’t want to appreciate.
As the Norwegians have done.
That is, the entire point of such a fund is *not* to invest at home. Which is why the Norwegian fund (recently renamed the Global Fund just to make it obvious as opposed to the Norway fund which invests at home from NI contributions) doesn\’t do so.
And now for our third and more important error:
Across the EU, companies and industries that pollute are finally having to pay for the greenhouse gases they emit. Between 2012 and 2020 the UK Government is set to raise £40 billion from the auction of emissions permits, according to the Committee on Climate Change. After 2020 yet more should flow into government coffers under this EU emissions trading scheme. However, it will only be temporary; as we successfully decarbonise the economy, the amounts are likely to tail off. That means that Britain must be quick in deciding what to do.
It would be a mistake to use the money to plug the structural budget deficit when we need to renew our economy. The scale of the investment needed to green the British economy is huge — £800 billion-£1 trillion between now and 2030.
Recent cross-party support for the creation of a “green investment bank” is fortuitous, as it provides exactly the institution needed to marshal the revenues from emissions trading.
Quite apart from the problems with hypothecation of taxes (there is no link whatsoever between what you can raise in tax from a sector and what you might want to spend on any other plan or project) there\’s a much larger one here. All of the economics of such taxation (cap and trade fees are indeed counted as tax) states that it should be revenue neutral. The benefit comes from having people pay the costs of their actions. Not in what we spend the money on but in that people have to pay to pollute. This changes their incentives: Hurrah!
But there\’s nothing here at all which states that the government\’s take from the entire economy should rise as a result. We\’re not, by changing polluter\’s incentives, stating that more government is better. So other taxes should fall to make the charges revenue neutral. Even Gordon Brown (yes, really, even Gordon Brown) has got this point. Landfill Tax was instituted as a tax of precisely this kind (leave aside whether it was a sensible one or not). Employer\’s national insurance payments were reduced by the same amount the tax collected.
Because green taxes should be revenue neutral. We want to change people\’s incentives, which payment of the tax does, not raise revenue per se.
For example, improving Britain’s domestic housing stock so it reaches a good level of energy efficiency would create around 750,000 jobs between now and 2015. According to the Government, clean coal technologies could be worth £6.5 billion a year to the British economy up to 2030, and support the creation of as many as 100,000 jobs. Similarly, offshore wind farms could provide employment for more than 70,000 people in the UK by 2020.
Such jobs are a cost of course, not a benefit.
So, how come we\’ve got such nonsense being spouted? The clue is here:
James Cameron is vice-chairman of Climate Change Capital, the environmental investment and advisory group
Yes, he thinks he\’s going to get to run that £40 billion fund bless his little cotton socks. Just another banker looking for fees from your wallet.