If my noble friend waits for one minute, I shall explain the detail of the amendment. That will take care of the 50% point. Since I think there is possibly an indication that other uses should be made for this revenue, I will come to that immediately after that point. If I have not answered those questions in a couple of minutes I invite him to intervene again.
I turn to the details of my amendment. As I have said, it is an enabling amendment. It does not require the Government to do anything now, but it does indicate a direction of travel. The enabling provision is subject to five provisos. The first, as my noble friend Lord Forsyth has just pointed out, is that the Government should get 50% of the revenue from shale gas. That is part of the fairness argument: 50% for us, knowing that at least some of it will be spent on projects that will benefit future generations, and 50% put aside for those generations directly.
Secondly, the fund should support long-term public policy objectives. That underpins the philosophy and approach behind it.
Thirdly, the fund may invest overseas, as well as in the United Kingdom. That is necessary to ensure that the fund obtains the best returns. In that context, it is
worth noting that the Norwegian sovereign wealth fund now owns more than 1% of the entire world’s quoted equities.
Fourthly, no more than 4% of the fund may be paid out in any one year. The need for a limit is obvious. Without one the fund would almost certainly be drained very quickly indeed. My proposed maximum level of withdrawal, 4%, is calculated based on a 2% long-term rate of real return and a 2% allowance for inflation. That level should mean that a well managed fund should be able to operate long into the future.
Finally and most importantly, proposed subsection 2(e) provides that the operation and activities of the fund must be transparent and open to public scrutiny. If noble Lords read the literature, it is clear that transparency has been a vital part of creating trust and confidence among the Norwegian public in the operation of their fund.
So much for the reasons for the fund and the detail of my amendment. Before I conclude, let me briefly address the reasons given for not having a fund, which I think underlie the intervention from my noble friend Lord Forsyth. There are essentially three of them: first, this is not the right time to do it because we do not yet know how large and profitable the shale gas development will be. That is absolutely true. My answer is that the amendment is permissive—it requires only an indication of the direction of travel. I hope the House will not think me unduly cynical if I say that, in the absence of any specific prior commitment, I believe the chances of establishing a sovereign wealth fund once the revenues are beginning to flow are even closer to zero than the chances of the Government accepting my amendment tonight.
The second reason is that any revenue from shale gas should be used to reduce the deficit. Again, that is a perfectly understandable argument, but one that undermines the concept of intergenerational fairness. In any case, under my amendment, half the proceeds are available to reduce the deficit. However, to suggest that all should be used for that purpose is akin to me saying to my children, “I was going to leave you a decent sum of money, but I’m afraid I’ve been living beyond my means and I’ve run up debts. I don’t wish to take difficult decisions to reduce my standard of living, so I’m afraid that if you want your inheritance, you’ll have to take all my debts with it—or, of course, I could use your inheritance to pay off my debts”. We need to face the consequences of our own actions and not slide them on to a future generation.
The third and last reason revolves around the most feared word in Treasury-speak—hypothecation, the sin that dare not speak its name. If one consults the Oxford English Dictionary, hypothecate is defined as:
“Pledge … by law to a specific purpose”.
I argue that the establishment of a sovereign wealth fund which has no specific purpose would require an unusually broad interpretation of the concept of hypothecation. Of course, in reality, this is all a smokescreen. The real reason for Treasury opposition is that it always opposes policies that in any way diminish its direct day-to-day control over every aspect of our national life.
To conclude, this enabling amendment is designed to balance the long-term national interest against short-term political expediencies, to enable future generations to share in this potential windfall and to encourage Governments to follow the saving practices they so urgently suggest we individually adopt.
8.30 pm