by Andy Beckett
Across the Firth, a great windowless pale cube of a building – the old welding shed – drew nearer. But just before we reached it, we turned into a huge car park, empty except for a few cars in the corners. ‘You used to be fighting for a space in this car park,’ said the taxi driver. Now it was used by a couple of dozen workers making wind turbines in the welding shed; the rest of the dock complex was shut.
I got out and walked across the car park in the low sun. Moss was thickening against the kerbs of the parking spaces. At the far end, there was a pair of rusted gates and, past them, a stretch of waste ground scattered with rusted rig parts like the spines of dinosaurs. Beyond the waste ground stood the stump of a decapitated crane, the cube-shaped building and a distant rectangle of dark water flanked by long stiff fingers of concrete: the dock itself.
In the seventies, the dock was operated by Highland Fabricators, a subsidiary of the American conglomerate Halliburton. But in the Highlands and Whitehall it was regarded, nevertheless, as a kind of British miracle. Workers moved from the dying Glasgow shipyards to take jobs there, and Greek cruise ships had to be hired and moored in the Firth so that they had somewhere to live. The country roads around Nigg had to be regularly closed by police so that deliveries of rig components could be squeezed along them. The largest parts had to be floated in via the Firth. And all the while the yard built rigs: twenty-four hours a day, seven days a week. On 10 May 1974, Ronald McIntosh visited:
… [We] picked up a small helicopter for Nigg Bay … [The pilot] said that if you were prepared to work hard, the opportunities in north-east Scotland were unlimited now. I can quite believe this – you get a most exhilarating feeling of growth and expansion wherever you go here… At Nigg Bay … we were then shown the most impressive piece of ironmongery I have ever seen – the production platform they are building for BP for use in the Forties field. It is built on its side on the top of an enormous raft at the bottom of the biggest dry dock in the world. When it is finished they will fill the dock with water and float [the rig] out to the site, where they will fill one side with water until it is vertical. They will then fix it to the seabed … Special paints … are supposed to give it a life of twenty-five years.
When I got back into the taxi, the driver nodded at the remains of the dock in the distance. ‘You can get two rigs in there, easy,’ he said, slipping into the present tense. ‘There were two rigs when I was there. Effortless.’
He offered to drive up the steep hill behind Nigg so that we could get a better look. Just below the crest, he switched off the engine. A cold wind rocked the gorse bushes outside and crept in through the car windows. We looked down at the dock in the sunshine. With its quaysides fully visible and its sheds as big as aircraft hangars, it seemed almost the size of a town. ‘You can’t really comprehend the size of that dock,’ said the taxi driver. ‘It was huge when you were in it.’ But the dock was empty now except for water and rubble. The driver sighed, and rested his chin on a clenched fist. ‘There’s nothing here now. The yard closed two years ago. They tried for an aircraft-carrier contract last year, but they didn’t get it. The smelter closed in ’79. It’s just call centres around here now. I know a lot of boys in the call centres who are trained welders. They need Nigg to reopen.’
The energies North Sea oil awakened in Scotland were not, however, simply economic. There were also political consequences. These would prove more problematic for the British government.
The Scottish National Party (SNP) was created in 1934. Its early membership was an uneasy coalition of left-wing and right-wing nationalists, of advocates of devolution for Scotland and advocates of full independence. The new party, moreover, had been founded at an unsuitable moment. With the Depression still lingering across northern Britain and authoritarian nationalism on the rise across Europe, to most voters the SNP seemed at best an irrelevance and at worst – the party had a fascist fringe – a politically toxic development. During the Second World War and the immediate post-war period, little changed. The SNP switched jumpily between tactics, endured splits, made sometimes crude attacks on the English, and won a single parliamentary seat at a by-election in 1945, which it lost again within months. At the 1959 general election, the party attracted 0.5 per cent of the Scottish vote.
Then it found momentum. During the sixties, the Scottish economy showed signs of underlying decay – whole streets of factories shutting, industrial towns expiring – sooner than the English. The Conservative Party, which had seemed negligent about this issue when it was in government, began steadily to lose credibility and support in Scotland. Meanwhile, Labour turned against the idea of devolution. More political space had opened up for Scottish nationalism. The SNP improved its fund-raising, broadened its party organization and curbed its wilder policies and members. At the 1964 general election it almost quintupled its vote, to 2.4 per cent. In 1966, it won 5 per cent. In 1970, 11.4 per cent. Labour and the Conservatives were alarmed by the trend and made concessions – in 1968, Heath announced his party supported Scottish devolution; in 1969, Wilson set up a Royal Commission to investigate the question – which further legitimized the idea of self-rule without actually satisfying the desire for it.
One major obstacle to independence, however, was the doubt surrounding Scotland’s ability to sustain its own economy and its own acceptable level of government spending. The SNP had maintained for decades that both were quite possible, but during the late sixties the Wilson government and less biased British academics published evidence that Scotland was, in fact, heavily dependent on the rest of the UK. Then came North Sea oil. Its discovery gave the SNP a highly effective new argument. Most of the oilfields were off the coast of Scotland; if the country left the Union, the argument went, it alone would get most of the oil benefits. Scotland would no longer be one of the rustiest corners of a corroding UK; it would be a modern, rising nation, ‘the most prosperous country in Europe’, as the most ambitious SNP propaganda put it.
From 1971, the party put increasing emphasis on the oil issue at elections. From a memorable core slogan – ‘It’s Scotland’s Oil’ – populist promises poured out like so much North Sea crude: ‘How would you like your granny’s pension doubled? With £825 million every year from Scotland’s Oil, self-government will pay.’ The quadrupling of the world oil price during 1973 and 1974 massively amplified the appeal of the SNP’s strong, graphic leaflets. In the February 1974 general election, the party’s share of the vote in Scotland doubled again, to 21.9 per cent. In the October election, it reached 30.4 per cent, well ahead of the Conservatives and not far behind Labour.
The rise of the SNP, like the simultaneous revival of the Liberals, was both a cause and a symptom of the beginning of the end for the old post-war British politics, with its incrementally shifting ideas and predictable domination by two parties. More immediately, the SNP now had eleven parliamentary seats, at a time when the government had a majority of only three. Given the usual pattern of modern by-elections, this majority was unlikely to last long. Sooner or later, the Labour administration would be negotiating with the SNP for its survival.
‘The Scots have really got us over a barrel here,’ commented Peter Mountfield, a senior Treasury civil servant, in a confidential memo about North Sea oil in April 1974. There was a ‘plausible case’, a colleague wrote, ‘for arguing that [the oil] is Scottish’. Mountfield concluded: ‘An independent Scotland can go it alone.’ During the mid-seventies, the SNP began to behave in some ways as if that situation had already come to pass. It established informal relations with OPEC and with Norway, the other main country with North Sea oil. It became friendly with the US consul in Edinburgh, a wily conservative called Richard Funkhouser, who saw Scottish nationalism as an understandable equivalent to the American ‘states’ rights’ movement and wanted to reduce America’s dependence on the Middle East by seeing North Sea oil extracted as fast as possible, whatever the means. The SNP also quietly secured allies and converts in the Aberdeen oil companies and
in the Edinburgh banks that were thriving by financing them. In 1975, the party bought an expensive headquarters building in North Charlotte Street in Edinburgh’s New Town, a quick walk from the traditional hub of Scottish banking in Charlotte Square.
A North Sea oil bonanza and Scottish self-rule, it seemed, were twin inevitabilities. In October 1973, a few weeks after the world crude price began to leap, the Royal Commission on Scottish devolution and other constitutional questions which Wilson had set up four years earlier finally reported. It supported the establishment of a Scottish parliament. In 1975, the proposed powers of the assembly were published in a White Paper, together with details of where it would be housed: in a handsome former school building with broad stone steps and neo-classical columns which stood, appropriately enough, on the same prominent Edinburgh hillside as the American consulate. The SNP continued to call for full independence but tacitly accepted the parliament as a stepping stone by arguing that the assembly should be granted more powers. In 1976, legislation for Scottish and Welsh devolution was presented to the Commons with Labour and SNP support.
Yet, in the British seventies, little in politics or economics – perhaps even less than usual – was inevitable. As the rest of the decade would demonstrate, it was one thing to generate excitement and support for dramatic solutions to national decline such as devolution and North Sea oil; it was quite another to turn them into practical realities. For all the excitement about oil in North Charlotte Street, Downing Street and Fleet Street, for all the frenzied North Sea activity in Nigg and Aberdeen and elsewhere in the Scottish north-east, it was well into 1975, almost five years after the discovery of the first oilfield, that the crude actually started coming ashore. That year, British production was a tiny 34,000 barrels a day. In 1976, it was still insignificant – 253,000 barrels a day – compared to the major oil nations and to Britain’s oil needs. It remained relatively small in 1977 – 792,000 barrels – and in 1978 – 1,119,000 barrels. It was not until 1979 that the output of the North Sea approached the level that it has maintained since, and it was not until 1985 that Britain’s oilfields reached their first production peak.
By the oil-industry standards of the day, the whole process was impressively quick. Offshore drilling operations in difficult locations, when they were undertaken at all, often take decades to become properly productive. Yet for the often beleaguered and jittery governments of the seventies, the state of progress in the North Sea could be a torment. Even on the new frontier of the British economy, the country’s old economic problems could not be easily escaped. Inflation in particular hugely swelled the cost of getting the oil. BP anticipated spending between £300 million and £350 million bringing the Forties field into full production, but spent £800 million. Meanwhile, the amount of foreign equipment imported for use in the North Sea meant that the offshore industry did not, as expected, reduce Britain’s trade deficit – it increased it. Between 1974 and 1978, Healey writes in his memoirs, ‘We were getting little benefit from North Sea oil. The capital investment required made it a net drain on our balance of payments … Even in 1978, North Sea oil was making good only half the impact of the [1973–4] OPEC price increase on our balance of payments, and was not yet producing any real revenue for the Government.’
During the sixties and early seventies, Conservative and Labour governments alike had rushed to parcel up the British sector of the North Sea into small rectangular ‘blocks’ attractive to oil companies. Licences to explore and extract oil from these subdivisions were – rather astonishingly, in retrospect – given away, except for a single auction under Heath which showed what a less panicky policy might have yielded: Shell and Esso were prepared to bid £21 million for a single block which turned out to contain no oil at all. The tax regime imposed on the North Sea oil companies by Whitehall was, at first, just as naive and generous: the conglomerates were allowed to reduce their British tax liabilities to almost nothing by combining their profits and losses in the North Sea with their profits and losses in the Middle East. ‘Between 1965 and 1973,’ the Public Accounts Committee of the House of Commons discovered to its horror in 1973, ‘the oil majors’ corporation tax liability in the UK was £500,000.’
Through the Scottish oil-shale industry, through BP and through the Anglo-Dutch conglomerate Shell, Britain had been heavily involved in the oil industry since the beginning. Yet by the early seventies, after decades of cheap Middle Eastern fuel and seemingly more pressing domestic issues, there were few British politicians who knew much about oil: the diminishing but politically charged business of coal mining was of much more interest. After the oil crisis, and as the scale of the North Sea’s potential became obvious, this fog of ignorance started to lift. In 1974, Wilson appointed as a junior energy minister Thomas Balogh, a left-wing economist critical of the oil companies and of Whitehall’s lenient treatment of them in the North Sea. In November, legislation was successfully introduced to tax their North Sea profits at 45 per cent. From a low base, the contribution of North Sea oil revenues to the government’s income began to climb steeply: 0.3 per cent in 1976–7, 0.6 per cent in 1977–8, 1 per cent in 1978–9. By the North Sea’s mid-eighties peak, a full tenth – and arguably a politically decisive tenth – of national tax receipts would be coming from its unlovely metal archipelago.
For a time in the second half of the seventies the Labour left’s hopes for the oilfields moved beyond the purely fiscal: they also wanted to bring them under effective British government control. The chief architect of this ambitious strategy was a well-known Labour maverick who would quickly become even more unpopular than Balogh with the North Sea multinationals: Tony Benn. When Wilson made him energy secretary in 1975, the position may have been intended as a demotion – and may have been widely seen as a political dead end – but Benn, typically, acted as if it was the opposite. Still pursuing his enthusiasm for state intervention in the most important areas of British business, he proposed the partial nationalization of the North Sea. The oil companies, he envisaged, would work as contractors for the state-owned British National Oil Corporation (BNOC) in return for access to the North Sea’s increasingly valuable deposits. Unfortunately for Benn, most of the Cabinet did not share his confidence that the particularly footloose and hard-nosed element of international capitalism that was the oil industry could be made the servant of British socialism. His colleagues’ fears proved accurate. The multinationals responded to Benn’s plan by threatening to hold back their North Sea operations, and his scheme was scaled down to a few measures – such as BNOC acquiring the right to buy and then sell on 51 per cent of the local crude – that established the impression of British government control of the oil territory but little more.
In 1978, another grand Benn scheme for the North Sea also sank with little trace. This time he proposed that the growing tax revenues from the oilfields should be put into a national Oil Fund and used to revive Britain’s struggling onshore heavy industries. The Norwegian government was already pursuing a version of this strategy, husbanding its oil money in a kind of national deposit account for the decades to come. But Benn’s idea was again rejected by the Cabinet. The state’s immediate fiscal needs were too urgent, it was widely felt, for Britain to be able to afford such a policy. Instead, the great North Sea windfall would continue to be treated as an ordinary source of Whitehall revenue and be swallowed up by the day-to-day needs of hungry governments. Not for quite a time, until after the long British crisis of the seventies and afterwards was over, would it be obvious that this had not been a wise strategy. In 2008, the economist John Hawksworth of the accountants PriceWaterhouseCoopers calculated that, had Britain’s tax revenues from North Sea gas and oil been invested rather than spent, they would now be worth £450 billion, and would give the British government control of one of the world’s largest sovereign wealth funds.
There was one area of the country heavily involved with North Sea oil, however, that did take this path. The Shetland islands are a thin, shatter
ed diamond of windy seashore and treeless grassland, 150 miles north-east of mainland Scotland and not that much further from Norway and the Arctic Circle. The islands are at the centre of ancient sea routes and fishing grounds, but they do not have a large, natural harbour and are too cold for most agriculture. Before the oil, Shetlanders lived by fishing, crofting, making knitwear and providing a strategic base for the British military in wartime. Prosperity arrived infrequently and did not linger; people often found adequate incomes only by joining the Royal Navy or by leaving Shetland altogether. Between 1901 and 1971, the population of the islands dwindled by almost half.
The discovery of oil nearby changed all this. First came the supply ships for the rigs, boxy and gleaming as tugboats on steroids, moored along new quays beyond the small grey harbour of the islands’ small grey capital, Lerwick. Then came the oil industry’s planes and helicopters, defying the fog and gales of Sumburgh, Shetland’s tiny airport. By April 1979, there were more aircraft movements between Aberdeen and Sumburgh than between London and Paris. But the biggest transformation of the islands – and the one that was politically startling, even by the standards of the British seventies – involved a sea loch north of Lerwick called Sullom Voe.
During the early stages of the North Sea era, in 1971 and 1972, the islands’ unusually powerful and far-sighted local authority, the Zetland County Council (soon to be renamed the Shetland Islands Council), worked out that the coming boom could be both a local economic opportunity and a social and environmental catastrophe. The council anticipated, correctly, that the oil companies would need a land mass as close as possible to the new oilfields to bring ashore their pipelines, refine their crude and load it into oil tankers. The council hired professional consultants to look at where the oil industry might best be accommodated. The consultants chose Sullom Voe, at the time little more than a disused base for Royal Navy flying boats. The council bought up land around the loch. Then its chief executive, Ian Clark, went to talk to the oil companies.
