How Labour slashed Shetland Charitable Trust’s oil revenue
In this ViewPoint contribution, local author and former trustee of Shetland Charitable Trust Dr Jonathan Wills takes a deep dive into local and national history to reveal how Shetland “got a pittance from oil and gas” and asks what this means for community wealth building from the wind industry
TRYING yet again to lessen the load on the bulging filing cabinets in my ‘office’, in the corner of the grandbairns’ playroom, I’ve been going through old files, chucking out stuff that no longer seems as relevant as it once did, and also finding stuff that now seems very relevant indeed.
Among the bric-a-brac was a piece I wrote for The Shetland Times back in 2009, after I became aware of some research by the Scottish writer and broadcaster George Rosie. This revealed how close Shetland came to failure in the early 1970s when island politicians had the cheek to ask for some local control over the oil industry – and for a miniscule slice of its spectacularprofits. I say ‘miniscule’ advisedly, as you will see.
I first met George Rosie when he visited Unst in 1975 to write a piece about the Muckle Flugga for The Sunday Times Magazine, in which he described me as “a burly man with the makings of a spectacular gut”. He was the first to notice this tendency and we’ve been friends ever since.
At the time I was nursing my political wounds after being Labour candidate for Orkney & Shetland at both of the 1974 General Elections, losing my deposit in the second. In that role I’d played a minor part from 1972 onwards in trying to persuade senior Labour politicians of the merits of the Zetland County Council Bill, then going through a bruising parliamentary select committee hearing against determined Tory opposition. Kay Carmichael, one of Harold Wilson’s researchers, asked me to write a position paper on the council’s private parliamentary bill and its implications. In my innocence I wrote that the Government should consider giving similar powers to every council in Scotland. It turns out that I was seriously “off message”: senior figures in the Labour Party were just as determined as the Tory Prime Minister Ted Heathand his local acolytes to stamp on Shetland’s impertinent attempt to open a small crack in the armour plated partnership between Big Government and Big Oil.
The material George Rosie discovered at the National Archives in Edinburgh and London showed that, as soon as they returned to power in February 1974, Labour ministers were using civil servants for party political purposes in their increasingly desperate attempts to turn the tide of Scottish Nationalism, epitomised by the SNP slogan “It’s Scotland’s Oil”.
The late Jo Grimond, at that time Liberal MP for the Northern Isles, had been taunting the SNP from the start that it wasn’t Scotland’s oil but Orkney’s and Shetland’s. It was a handy debating point, despite the fact that both counties had, for better or worse, legally been part of Scotland since at least the early 17th century. The idea fuelled fantasies among local home-rulers (including me for a while, I’m sorry to recall) of a new Nordic Commonwealth in which an oil-fuelled Shetland micro-state would take its rightful place at the top table of nations. This eventually produced the Shetland Movement and, many years later, Captain Calamity’s delusions of insular grandeur.
For Graham Kear, a senior servant in the newly-created Department of Energy, Jo Grimond’s clever crack sparked the ingenious idea that Shetland and Orkney, in whose “territorial waters” most of the oil and gas did indeed lie, might be split off from Scotland, to remain as a detached part of what would be left of the United Kingdom of Great Britain if Scotland went it alone. It’s hard to believe this crackpot notion was ever entertained at the highest levels of government but it was.
A letter on 30 September 1975 from Labour’s Energy Secretary Anthony Wedgwood Benn (yes, that Tony Benn, the socialists’ patron saint) explained why. Writing to Edward Short, Labour’s minister for constitutional affairs, Benn revealed his fears about additional payments by the oil companies to local government. This possibility was “in the case of Shetland already the reality” and Benn warned that “If taken further by a Scottish Assembly¹ such changes could actually distort the economics of offshore exploitation, to the extent of influencing development decisions on particular fields with consequences for oil production.”
It was also important to “retain appropriate mechanisms for the UK Government to call in planning applications” for such developments as the port of Sullom Voe, Benn added. Above all, a forthcoming Government White Paper “should not commit us to detailed policies which would conflict with our decision to reserve the formulation and execution of energy policy to the UK Government”.
Councillors accused of blackmailing the oil companies
Correspondence between civil servants revealed strongly political views (not to mention ignorance and wild imaginings) about the threat posed to national unity and corporate comfort by Shetland’s bold little private Act of Parliament and our paltry levies on the oil companies. In February 1975 a memo from Jack Fleming in the Cabinet Office to his colleague Gavin McCrone (yes, that Gavin McCrone) in St Andrew’s House revealed the extent of officialindignation about what Shetland was doing to Labour’s new friends in the oil industry:
“It should perhaps be made clear that the ZCC Act itself did not give the County Council a power to levy charges. What it did was give them wide powers of control which then enabled them to blackmail developers into making payments.” [National Archives of Scotland SEP1/2732]
Blackmail? Fleming was mistaken, for the ZCC Act did indeed give the council the legal right to act as port authority for Sullom Voe and therefore to levy charges for services provided to oil and gas tankers. Fleming, in his lazy ignorance like so many before and since, had confused the council’s extra planning and compulsory purchase powers with its new function as a harbour authority for the tanker port.
He also didn’t understand the difference between harbour charges and the voluntary “disturbance payments” made by the oil companies between 1978 and 2000, under an agreement signed in 1976. These were nothing to do with the ZCC Act but the result of a private agreement between the council and the companies.
What may have annoyed the Government particularly was that in 1976 the council created a charitable trust. It didn’t need an Act of Parliament to do this as councils already had that power. There is no reference to a trust, charitable or otherwise, anywhere in the ZCC Act, although many who have not read it assume otherwise. What the councillors did next was to hand over all the disturbance payments to the new trust, thus avoiding Government “clawback” of the rate support grant which, then as now, funded most of the council’sactivities. Over time these payments would amount to some £82m which, after being invested, created the current value of the Shetland Charitable Trust, around £400m, after making grants for charitable purposes amounting to well over £300m. That’s in addition to the council’s own reserves, largely generated by Sullom Voe port revenue, which are worth about the same amount, depending on the day to day fluctuations of the stock markets.
Ministers disapproved of the disturbance payments
In 1976, the year the Disturbance Agreement was signed, Fleming wrote to Graham Kear, a civil servant at Benn’s Department of Energy, referring to their recent telephone conversation:
“We also discussed the payments being made by the oil companies to Orkney and Shetland and I pointed out that the Government had never approved of these payments and indeed had taken steps to ensure that they were moderated. I think it is important that we should avoid any suggestion that they were approved of by the Government still less that the Government encouraged companies to pay them.” [National Archives, Kew, POWE63/1259]
This is astonishing arrogance. Ministers’ disapproval was irrelevant. They had no power to interfere in a legal, voluntary arrangement between a local authority and a group of commercial companies. The letter revealed that the Labour Government had been telling the oil companies to reduce the size of the disturbance payments, i.e. “had taken steps to ensure that they were moderated”.
Those of us who were around at the time were under the impression that the payments would initially be two pence for each barrel of oil shipped, reducing to a penny a barrel later on. Lo and behold, the agreement the council eventually signed was for payments per metric tonne, not per barrel. There are 7.14751 barrels in a metric tonne, so Shetland got a seventh of what we might have got if Labour ministers had not interfered backstage. Some moderation:“hamstringing” might be a better word.
“Mony a mickle maks a muckle” is an old saying but few people now realise how very little Shetland’s council and charitable trust actually received.
Fortunately, not all Labour politicians were against the ZCC Act, as it had become after Labour returned to power in 1974. It had been bogged down for two years in a Commons Select Committee where the Tories tried desperately to neuter it. Dr Gavin Strang MP, a committee member, had had backed it from the start, and not only because his wife Bettina, née Morrison, had Bressay connections. The late Eric Varley MP, as an energy minister, eventually rescued a scaled down version of the ZCC Act in a compromise to get the planning permissions for Sullom Voe moving and the terminal built, in the vain hope that the oil revenues would rescue the Labour Government from economic crisis and electoral defeat. In the event the oil revenues would finance the mass unemployment and sado-monetarism of the Thatcher years, encouraging the corporate arrogance that in its turn fuelled the financial bubble that collapsed in 2008 and now nurtures the fat cat billionaires who own our former nationalised industries.
In the light of what George Rosie’s research revealed, the achievements of Shetland’s then County Clerk and General Manager, Ian R. Clark, and a determined band of local politicians seem all the more remarkable. Councillors such as A. I. Tulloch, Edward Thomason, Alex Morrison, George W. Blance and John Butler, who put community interests before party loyalties, are no longer with us, alas.
Even if, through no fault of their own, what they achieved was a seventh of what might have been, over the last half century the oil money that Labour wanted to cut enabled Shetland Islands Council, through the charitable trust, to provide services well above the general level of Scottish local authorities.
How Shetland in fact got a pittance from oil and gas
“Mony a mickle maks a muckle” is an old saying but few people now realise how very little Shetland’s council and charitable trust actually received. My grandson, Louie Wills, and I recently built a very wide and deep spreadsheet, trying to work out what percentage of the total market value of Sullom Voe’s oil and gas shipments went into the coffers of the council and the trust.
It was complicated and the answer we came up with was so obviously, ridiculously small that I did the sums again, twice, after Louie had to go back to London. I got the same result. The arithmetic confirmed that the total value of Sullom Voe oil and gas cargoes, taking account of fluctuations in the average oil and gas price and the average US$:£ exchange rate, was approximately £172,335,628,116 (£172.34 billion) between first oil shipped in October 1978 and 2025.
The income to the council from its harbour profits over the same period was an estimated £336,716,637 (£336.72 million). I say ‘estimated’ because accurate figures were not readily available to us for some years, such as 2015, 2018 and 2020, for example. Add to this the Shetland Charitable Trust’s disturbance payments of £82 million and you get a total income to Shetland’s public funds of about £418,716,637 (£418.72 million).
This comes to 0.24% of the wholesale price of the oil and gas. That’s right, just under one quarter of one per cent of the value came our way. But even that tiny share was enough to transform our islands, mostly for the better.
The Shetland public’s income stream from wind power will now be a tiny fraction of what was envisioned before some people (who know who they are) stymied the charitable trust’s plan to secure 45% of the Viking Wind Farm profits.
However, the bizarre fact is that the so-called ‘community benefit’, as a proportion of the value of the energy that could be sold (once the UK Government sorts out the National Grid chaos), may be a bigger share than we got from oil. In cash terms, though, it’s still only about a tenth of the average annual oil and gas revenue we received between 1978 and last year. It seems there’s work still to be done…
Notes:
(1) Which at that time looked like happening in 1979.
