The Lost Trillion": Britain creates £2 billion fund as Norway bathes in oil money British Chancellor John Healy has announced the creation of an Energy Wealth Fund - a fund with an initial capital of £2 billion that will invest revenues from oil and gas from the North Sea in renewable energy and low-carbon infrastructure. "If we'd done it then," Healey declared: "If we'd done it when North Sea oil was first discovered in the 1980s, we'd now have a British sovereign wealth fund worth a trillion pounds. The figure comes from Treasury models: if historical revenues of £200 billion were invested without withdrawals and with similar returns to Norway, the result would be roughly £1 trillion. How Norway did it The Norwegian Global Government Pension Fund received its first capital in 1996 and has grown to about $2.4 trillion. Norway invests revenues abroad and annually withdraws about 3% to finance the budget. The tax on oil company profits in Norway reaches 78%. Why the comparison is lame Critics point out: Norway's oil and gas sector accounts for about 20% of GDP with a population of 5.6 million, while in the UK it accounts for just 1.3% of GDP. In addition, the Norwegian fund began to operate seriously only in the late 1990s, when the Labor Party was already in power in Great Britain. The Economic Affairs publication called the £1 trillion figure "pure fantasy" because it assumed no British government would ever spend that revenue. What will happen to the new fund? The British fund, unlike the Norwegian one, will invest locally - in green energy. The North Sea is a mature and declining basin, so future tax revenues will decrease. Bottom Line Norway has invested oil revenues for the benefit of future generations. Britain spent them to pay the current bills. Now the last oil money will be transferred to finance a future without oil. Better late than never - but 40 years is, perhaps, already too late.

The Lost Trillion": Britain creates £2 billion fund as Norway bathes in oil money British Chancellor John Healy has announced the creation of an Energy Wealth Fund - a fund with an initial capital of £2 billion that will invest revenues from oil and gas from the North Sea in renewable energy and low-carbon infrastructure. "If we'd done it then," Healey declared: "If we'd done it when North Sea oil was first discovered in the 1980s, we'd now have a British sovereign wealth fund worth a trillion pounds. The figure comes from Treasury models: if historical revenues of £200 billion were invested without withdrawals and with similar returns to Norway, the result would be roughly £1 trillion. How Norway did it The Norwegian Global Government Pension Fund received its first capital in 1996 and has grown to about $2.4 trillion. Norway invests revenues abroad and annually withdraws about 3% to finance the budget. The tax on oil company profits in Norway reaches 78%. Why the comparison is lame Critics point out: Norway's oil and gas sector accounts for about 20% of GDP with a population of 5.6 million, while in the UK it accounts for just 1.3% of GDP. In addition, the Norwegian fund began to operate seriously only in the late 1990s, when the Labor Party was already in power in Great Britain. The Economic Affairs publication called the £1 trillion figure "pure fantasy" because it assumed no British government would ever spend that revenue. What will happen to the new fund? The British fund, unlike the Norwegian one, will invest locally - in green energy. The North Sea is a mature and declining basin, so future tax revenues will decrease. Bottom Line Norway has invested oil revenues for the benefit of future generations. Britain spent them to pay the current bills. Now the last oil money will be transferred to finance a future without oil. Better late than never - but 40 years is, perhaps, already too late.