The trouble with oil funds

Infrastructure spending is often said to stimulate long term economic growth. But you have to build it in the right place. For example, the last Labour administration in Scotland maxed out its PFI credit card building lots of new schools. These may have provided a few temporary construction jobs but have boosted neither growth nor educational outcomes. You could say something similar about some of its transport projects.

But it’s not just that government is bad at allocating resources. Sometimes it runs out of worthwhile projects to allocate them to. This is the trouble with the concept of an ‘oil fund’ or a ‘sovereign wealth fund’.

In essence these funds are fancy names for government taking citizens’ money and investing it on their behalf. As I write for Think Scotland this week, you have to question why we can’t just make our own decisions about whether to invest and what to invest in.

The Abu Dhabi fund invested in Manchester City Football Club. Even the much heralded Norwegian fund seems to have run out of worthwhile projects and is helping to build a shopping centre in Kent. Thank goodness the Scottish Government, expert squanderer of taxpayers’ money as it is, has not gone down a similar route!

For since Scotland gets its oil money via the Barnett Formula it could invest the whole lot in assets. Instead it splurges it on benefits and public sector wages. Rather that than more Borders Railways, I suppose.

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