1972. The discovery of oil in the North Sea, stirred Prime Minister, Edward Heath’s concerns about the poor state of the Scottish economy and perceiving a need for change, he initiated a policy review.

His secretary wrote to Cabinet members;

“As you know, the point has recently been put to the Prime Minister that the benefits of oil production brought ashore in Scotland should accrue, and be seen to accrue, to the Scottish economy.

The Prime Minister sees considerable force in the arguments, believing it would be difficult to stress too highly the psychological gains which would come from the revival of the Scottish economy being seen to be something from which Scotland was achieving from its own resources, not just by the grace and favour of the Government at Westminster or of English industry.” Adding: “The Prime Minister understands that novel arrangements may be required to achieve this result.”

Heath’s proposals created alarm at Westminster and led to many “on and off the record” meetings and an outpouring of confidential minutes and memos between various factions within and outwith government and the civil service,

Primary contributors objectors were: Gordon Campbell, (later Baron Campbell of Croy) the Scottish Secretary of State and head of the Department of Trade and Industry and Anthony Barber, the Chancellor of the Exchequer,

Baron Campbell of Croy

In stating their opposition to Heath’s proposals, the Westminster establishment voiced concerns about taking oil revenues away from the Treasury.

A senior official at the Scottish Office, in London, wrote in a memo to Downing Street:

“The oil discoveries have raised speculation in Scotland on the financial aspects and will continue to do so. But, the Secretary of State for Scotland, Mr Campbell, would not wish to see direct payments from the oil revenues, as these would be too late to be really useful and would raise a new principal causing difficulties if applied in other contexts.

On the general question of the financial relationship of central Government with Scotland, the present has been evolved over many years and the types and amounts of grants, for example to local authorities for housing and education…follow formulae which recognize special circumstances and needs where they exist. Mr Campbell considers that to dismantle this system, besides being a Herculean task, would resurrect innumerable issues now mercifully dormant.”

In a memo, Treasury officials said they too were looking at aspects of the Prime Minister’s request and argued against it strongly, saying that Scotland took a markedly larger share of public spending than she contributed to public revenue.”

The same Treasury officials later said there could be: “no question of hypothecation” of oil revenue to finance Scottish expenditure.

Other Unionists in opposition to Heath’s proposals presented a uniform front, unanimously suggesting that aims would be better met by investment in infrastructure and the fostering of fabrication yards and supply companies.

Their strident opposition to Heath’s proposal garnered support, and culminated in the submission of an alternative proposal, transferring all revenue gathered from the oil bonanza to the Treasury in Westminster.

The Unionist consensus was that, “any change in the financial relationship between Westminster and Scotland would resurrect innumerable issues, (a veiled reference to Scottish Independence) now mercifully dormant”.

Edward Heath, blindsided, and out-voted in cabinet, accepted their proposal. Scotland has been ripped off since.