by George Rosie

1979 And All That

September 14, 2009 | by George Rosie

1979 And All That – George Rosie


MUCH AS I HATE the idea of sharing an enthusiasm with Margaret Thatcher we both agree that the 1980s television series Yes Minister and Yes Prime Minister were among the funniest programmes ever. The way that Sir Humphrey Appleby manipulated his hapless minister Jim Hacker invariably had me in stitches. It seems that Mrs Thatcher regarded Yes Minister not only as brilliant satire but also as a genuine insight into the ways of Her Majesty’s senior civil servants. When I first read that, I thought she was over-egging the pudding, something to which she was prone.

Now I’m not so sure. Having spent some of the last few weeks in the government archives in London and Edinburgh I’ve decided that Maggie may have had a point. All too often the languid, Oxbridge-educated, London-centric and occasionally cynical figure of Sir Humphrey emerged out of the blizzard of letters, reports, memoranda, minutes of meetings, and draft speeches that swirl around the progress of the devolution project of the 1970s. Which, of course, ended in the rigged referendum of March 1979.

What the records make clear is that the Sir Humphreys of Whitehall thought that devolution for Scotland was a bad idea. So they quietly did their best to ensure that if a Scottish Assembly (the word parliament was never used) ever happened it would never get its hands on the revenues that were beginning to flow from North Sea oil. And, perhaps more worryingly, some did what they could to undermine the SNP, then an opposition party with 11 MPs in the Palace of Westminster.

There’s no doubt that the SNP surge in the early 1970s rattled both Westminster and Whitehall. The general elections which produced Harold Wilson’s second Labour government also produced six Nationalist MPs (in February 1974) then another five (in October 1974). The SNP’s propaganda campaign that “It’s Scotland’s Oil” seemed to have put the nationalists on an unstoppable rise at a time when the British economy needed every penny it could extract from the oil and gas underneath the North Sea.

The hostility of the Civil Service is evident in the archives. When Duncan Wat-son, then Deputy Under Secretary of State at the Foreign and Commonwealth Office (FCO), saw a draft of the devolution white paper in July 1975 he wrote, “It seems to me inevitable that the grant of ‘local autonomy’ will lead to demands for more and to increasing political pressures which any Government of the day will find it difficult to resist. I fear, in short, a slippery slope… It seems to me important, therefore, that opposition to fragmentation should be not merely a matter of presentation, but the essence of a clearly-seen policy.”

It’s not hard to see why Sir Humphrey was so worried. Then, as now, the British economy was in dire straits. In the wake of the Arab-Israeli war of October 1973 oil prices had soared, petrol shortages and rationing were familiar hazards, electricity black-outs had made a comeback, millions had been on a three-day week and inflation was soaring away (it peaked at around 25%). Things got so bad that in 1976 the Chancellor of the Exchequer was forced to go cap in hand to the International Monetary Fund to beg for funds to bail Britain out. Just about the only glimmer of light in the economic darkness was North Sea oil and now that was under threat from the SNP’s oil campaign.

As Wilson’s government saw it, the best way to head off the SNP was to deliver Labour’s promise of a directly-elected assembly in Edinburgh. The hope was that this would be enough to satisfy the constitutional hankerings of the Scots and secure North Sea oil for the United Kingdom. Whitehall’s strategy of minimising the powers of any elected assembly in Edin-burgh, while at the same time doing what it could to undermine the SNP, has been unknown. In effect, it’s the secret history of home rule.

At the heart of the story is a group of officials from the Cabinet Office Constitution Unit (COCU), which was set up to make devolution work. At their head was John Garlick, a former Post Office engineer and then Second Permanent Secretary at the Cabinet Office. As his deputies Garlick appointed the brilliant Michael Quinlan and Stuart Scott Whyte, once a senior official at the Scottish Office. Whether Garlick knew it or not, Whyte had already voiced doubts about devolution vis-à-vis North Sea oil.

In retrospect it seems odd to have given the job of helping set up a Scottish Assembly to a man who thought it a big mistake. But civil servants often have to implement government policies they dislike and Whyte went on to play a central part in the fraught debate about how to handle the ambitions of the Scots and how much devolution of power was needed to satisfy them.

But first, the Scots had to be persuaded that separatism would be bad for them. Judging by the official papers the men of COCU saw that as their priority. They saw it as their mission to persuade, cajole and threaten the Scottish majority into resisting the blandishments of the SNP and remain within the fold of the United Kingdom.

That theme was advanced by Garlick in a long letter of March 1975 to John Liverman the chief economist at the Department of Energy. Garlick stressed the need to ensure that any Scottish Assembly, of whatever political complexion, did not have the power to choke off or slow down the flow of oil. In Garlick’s view the government’s priority should be to “Demonstrate that an independent Scottish economy would have serious weaknesses: to persuade majority opinion in Scotland that Scot-land’s future should lie within a unified economy; and by this means lend stability to devolution arrangements which, amongst other things, make it possible for UK oil interests to be safeguarded.”

For the next five years securing North Sea oil for the UK was at the top of White-hall’s agenda. Document after document makes that clear. Whitehall’s strategy was two-pronged. First, make sure that the proposed Scottish Assembly did not have the powers to interfere with the production of oil and, secondly, do what was necessary to halt the SNP by persuading the Scots that independence, even with the oil money, would be bad for their economic health.

Not that everyone saw it that way. One such was Gavin McCrone, then chief economist at the Scottish Office and a well regarded academic economist. When McCrone saw Garlick’s letter to Liverman he responded with a paper he’d written in the dying days of Edward Heath’s Tory government, prior to the first General Election in 1974. Entitled The Economics of Nationalism Re-examined it still makes interesting reading, even if only as an essay on what might have been.

McCrone refused to accept the Whitehall view that oil wealth might be too much for Scotland to handle. Nor did he expect an independent Scotland to be shunned by the EEC (as some politicians were arguing). “North Sea oil could have far-reaching consequences for Scottish membership of the EEC because of the tremendously increased political power it would confer,” he wrote. “As the major producer of oil in Western Europe…Scotland would be in a key position and other countries would be extremely foolish if they did not seek to do all they could to accommodate Scottish interests.”

McCrone concluded with flourish: “This paper has shown that the advent of North Sea oil has completely overturned the traditional economic arguments used against Scottish nationalism… For the first time since the Act of Union was passed, it can now be credibly argued that Scotland’s economic advantage lies in its repeal.”

COCU’s reply was a paper by Whyte. Entitled The Economics of Nationalism, it came to the unsurprising conclusion that any gains in the prosperity of an independent Scotland due to the oil revenues would be more than wiped out by what its author saw as “increased vulnerability and risks for the future.” In other words, all those oil revenues would be bad for Scotland.

If Whyte expected a groundswell of support from elsewhere in Whitehall he must have been disappointed. His paper met a salvo of criticism from, of all places, the Treasury. James Shepherd, one of the Treasury’s economic advisers, wrote that Whyte’s paper “seriously overstates the degree of difficulty which an independent administration would face, particularly in the short to medium term…It is far from clear that independence would make internal inflation worse: probably the reverse…The consequent rise in living standards should help in restraining inflationary wage demands…The case falls very far short of suggesting that Scotland would be likely, on balance, to be economically worse off if independent.”

A polite but withering response came from Assistant Secretary Michael Buckley. He wrote: “If the UK discovered enough oil under the English Channel to ensure that we would get net exporters of oil to at least the end of the century, and if we were reliably promised that the real price of oil would be ten times its present amount, would we be thrown into despair by the consequent economic problems? I imagine not.”

The resistance of McCrone and the men from the Treasury seems to have changed Whyte’s mind. In a reply to Buckley he conceded, “There can be no doubt that an independent Scotland would be better off with oil revenues than without them.” But he went on to insist that the Government’s aim must be “to convince a majority of Scottish opinion that a reasonable devolution package represented a ‘first best’ solution and not a first step on the way to separatism.”

In Whyte’s eyes what might be at stake was the stability of the whole UK. What, for example, would be the attitude of the rest of the UK to Scottish Independence. He surmised that it would one of extreme hostility, especially if, consequently, the rest of the UK experienced significant hardships. Nor was Whyte without support. He had a staunch ally in Graham Kear, an Under Secretary at the recently-formed Department of Energy (DoE), which was resolute enemy of devolution.

Kear appears to have suggested to Whyte that if the SNP got its way and throttled back oil production by half to 50 million tons per annum it would cause serious job losses in Scotland. It was a line of argument that appealed to Whyte who wrote to Kear in May 1975 asking “if it is possible to make some attempt to calculate a possible loss of jobs, particularly in platform construction yards.” Kear replied, arguing that if six oilfields were developed instead of 12 it would indeed take a heavy toll on oil-industry jobs.

Which may, or may not have been the case. But what is certain is that none of the great platform-building yards that thrived in Scotland in the 1970s and 1980s – at Nigg and Ardersier on the Moray Firth, at Ardyne Point in Argyll, at Loch Kishorn in Wester Ross, at Methil in Fife – now has any oil industry work. Nor do the module-building yards on the Clyde. Britain’s policy of extracting every drop of oil from the North Sea as quickly as possible meant that Scotland’s ‘oil boom’ was very short lived.

While one set of Treasury mandarins had established that the Scots would be much better off if they could lay their hands on the oil revenues another set was trying to find ways of preventing that happening. At the beginning of May 1975 a simple suggestion emerged from within the Treasury – why not slow the whole process down? That might give the SNP time to run out of steam and the UK economy to recover. The idea came from a Treasury rising star, Assistant Secretary David Walker.

His put his argument in a letter and ‘minute’ to his boss, Deputy Secretary Elizabeth Hedley-Miller. Walker suggested that the business of devolution “seems bound to bulk significantly larger in our consciousness from now on, and I fear that the very existence of the problem, or threat, will have a wholly adverse effect on our external debt management.” What worried Walker most was the effect that an independent, or even devolved, Scotland might have on the UK’s foreign creditors.

Walker’s plea to put the brakes on devolution went down well. His idea was circulated around the upper reaches of the Civil Service and the Bank of England. His paper was passed up the line to Sir Douglas Hen-ley, the Second Permanent Secretary at the Treasury who was due to meet Chancellor Denis Healey at Chequers. It was suggested to Henley that he should “draw the attention of senior Ministers to the numerous grave reasons why they should pause and reflect before becoming committed to early legislation on devolution.”

Healey seems to have got the message. In his account of that Chequers meeting Tony Benn, then Secretary of State for Energy, records that “Denis Healey said ‘I am not speaking against the principle of devolution but I am urging caution on speed and content because of the danger of separatism. Therefore I do not want legislation in the next session.’ Roy Jenkins agreed.” It was another four years – far longer than was anticipated – before the devolution question was finally put to the people of Scotland. By which time they were weary with the argument.

Putting the brakes on devolution was one Treasury idea. Another was to stop assigning North Sea oil and gas revenues to the relevant UK ‘economic regions’ (i.e. East Anglia and Scotland) and to create a new ‘offshore economic region’. That particular idea emerged in May, 1975 in a letter from James Shepherd to Michael Buck-ley, spawned in a Treasury department labelled CSO (which no one at the modern Treasury could identify).

Having “found out what the CSO is now doing” Shepherd told Buckley that there are “two possible approaches” to the problem of how to ascribe oil and gas revenues. “(i) To define a separate ‘off-shore’ region to which is attributed GDP equivalent to some basic value of the oil and gas extracted. (ii) To split up the Continental shelf between existing regions and treat exactly as for onshore activities.” It was the first option that appealed to Shepherd and Buckley. And that is what happened. The British sector of the North Sea was redefined as a separate economic region which, to some extent, removed North Sea oil from the political argument and weakened Scotland’s claim to the offshore oilfields. That may not have been the Treasury’s intention but it was certainly the happy result.

In November 1975, a week before the publication of the first devolution White Paper, a message went out in the diplomatic bag from Foreign Secretary Jim Callaghan. It advised Britain’s ambassadors and consuls how to field questions on the thorny topic of Scottish nationalism and/or devolution.

“As the White Paper makes clear,” wrote Callaghan, “the Government completely rejects separation if asked whether this would still apply if one of the nationalist parties were to gain a majority in the Scottish Assembly you will say that is a very hypothetical situation. It is clear that the Nationalist parties are supported by only a minority of people and that even among that minority many do not want complete separatism.”

Callaghan added: “If asked whether the Scottish Executive will get a share of North Sea oil revenues, you should say that North Sea oil is a source of revenue for the whole of the United Kingdom. Through the block grant Scotland will receive a fair share of those revenues in accordance with her relative needs. Those claiming the oil for Scot-land seek the removal of oil revenues from the pool of national resources. Their claim for oil is a claim for separation, to keep all the benefits of oil.”

Then in February 1977, at the behest of his civil servants, Anthony Crosland, then Foreign Secretary, wrote to the new Prime Minister Jim Callaghan to say that the FCO had come up with a way to keep the North Sea oil fields out of the hands of the Scots. Simply change the undersea border between Scotland and England so that it ran north-east instead of east and then persuade Orcadians and Shetlanders to declare UDI from Scotland and extend their subsea borders southeast. That way the Scots would be left with hardly any oil and the stuffing would go out of the SNP’s idea of an oil-rich independent Scotland.

If there is one exchange of letters that reveals the mind-set of the London-based civil servant it is that between Brian Willott, then Assistant Secretary at the Department of Industry, and Gavin McCrone. Willott was worried that North Sea oil and gas revenues could strengthen the pound’s exchange rate to such an extent that it would cripple Britain’s exports while swamping the economy with consumer imports. The answer, he advised McCrone in September 1976, was to spend the money on Britain’s infrastructure.

But the infrastructure Willot wanted the money spent on was in and around Lon-don and the southeast of England. In particular, he mentioned the road network between the container docks at Tilbury on the Thames up to the Midlands of England. The oil cash, he wrote, “could be used for the improvement of the north and south circular roads (in London) to motorway standards and to build an outer ring road. Building of the proposed Channel Tunnel might be reconsidered.”

McCrone’s reply was scathing. “The notion that North Sea oil revenues could be used for the improvement of the north and south circular roads may well appeal to the commuting civil servant but it is impossible to present it as a measure to strengthen the UK economy and it would be political suicide for any Government that was anxious to retain seats in Scotland.”

McCrone may have had right on his side, but Willott had the might. When the devolution project foundered in 1979, the Labour government toppled and Margaret Thatcher’s Tories swept to power. Devolution was a dead duck. There was no prospect of the Scots getting at the oil revenues. Most of the money went to pay for the unemployment that the Thatcher’s reforms brought. But the “outer ring road” that Willott had foreseen emerged as the (hugely expensive) M25 and the Channel Tunnel was “reconsidered” and indeed built (also at huge expense). Meanwhile Scotland’s heavy industries were swept away in the economic blizzards of the 1980s and early 1990s. And McCrone’s political warning was borne out – for years there was not one Tory MP north of the border. Today there is one.

The devolution years between 1974 and 1979 certainly “dished” the SNP. The 1979 general election reduced their number of MPs from 11 to two and pitched the party into the wilderness for nearly 20 years. Now the SNP are back, in power in Edinburgh, but much of the oil has gone, and they’re no nearer to getting access to the revenues than they were 30 years ago. One way or another, the Whitehall mandarins succeeded in doing what they set out to: ensuring that the oil money was kept away from the Scots and dragging things out until the SNP ran out of steam.

Most of the Whitehall warriors of the 1970s went on to the usual rewards – knighthoods and gongs. Others found top jobs in the civil service, big business, the City of London or quangoland. It may be coincidence but when Sir John Garlick, the man at the head of the COCU responsible for putting devolution in place, died a few years ago his warmest obituary was penned by Tam Dalyell MP, devolution’s implacable enemy.


 

 

 

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