My Lords, first, I thank my noble friend Lord Hodgson for his amendment and for the most eloquent way in which he explained the merits for the Norwegian people of having a sovereign fund. Of course, shale represents a huge economic opportunity for the UK. It could potentially create thousands of jobs, generate significant business investment and provide substantial revenue for the Exchequer in future.
However, unlike the offshore industry in Norway, the shale industry in the UK is still very much in its early stages. The Norwegian Government’s petroleum fund was established in 1990, as my noble friend said, but that was nearly 20 years after oil first started being produced and when the levels of revenue were well known. In the UK, shale gas is still in the exploration phase. My noble friend said that it was a potential but as yet an unknown. The Government will not be able to forecast the scale or timing of shale revenues until more work is done to determine the extent of gas that can be technically and commercially recovered. It would therefore be inappropriate to indicate now how potential future revenue would be used. As a result, the Government have no current plans to assess the possibility of creating a sovereign wealth fund from this revenue.
I recognise the arguments behind this amendment. Diverting future revenues from government finances to a specific shale fund, or one created by revenue from other natural resources, would come at a cost. Shale revenues may also be needed to make up for shortfalls elsewhere. The UK continental shelf is a mature basin and oil and gas revenues from the North Sea are declining; the Government would likely need to either raise additional tax revenue elsewhere or cut spending to maintain the fiscal balance. The Government consider that, in general, hypothecation, or earmarking revenues for a particular spending purpose, is not always an efficient way in which to manage the public finances. Like all government receipts, revenues are remitted to the consolidated fund to support general expenditure. My noble friend Lord Teverson recognised that fact. Once it goes to the Treasury, it becomes slightly difficult to extract it—but that is because of the methods that we have used, whichever Government have been in power. It allows the Government to allocate resources most efficiently across the economy.
I thank all noble Lords for contributing. It has been a very informative debate, which has raised some very important points. The noble Lord, Lord Davies, said in his concluding sentence that I should be sympathetic to this proposal. Is it something that the Labour Party will put in its manifesto for the next general election? It would be interesting to know how that debate would follow.