King Charles Street should be famous, but isn’t—perhaps by being named for the only British head of state to lose their head to democracy just up the road in front of Banqueting Hall. This narrow street is permanently sunless and gloomy, with little traffic running E-W between massive buildings—the Foreign & Commonwelth Office to the North and a monolith known as GOGGS (Government Offices Great George Street) to the South. It should be famous because that’s where HM Treasury lives.

You might think that Number 10 in the far better known Downing Street just to the North or the Cabinet Office, a little further up Whitehall yet, would represent the seat of real power for this United Kingdom. The media certainly thinks so. But major decisions in matters of state—whether to raise taxes, go to war or enhance welfare—are always rooted in what the gnomic mandarins of GOGGS permit.

The Heart of Imperial Britain: Clive of India dominates St Charles St with the Churchill War Rooms entrance on the right

Filling the splendid Edwardian edifice to the right (built 1908-17) is a formidable collection of fiscal minds who actually run this country. As of September 2013, Sir Nicholas Macpherson KCB, Permanent Secretary to HM Treasury since 2005 (and currently the longest-serving PS in all Whitehall), disposed of the following top staff.

Ostensibly reporting to The Chancellor, George Osborne MP, through Nick (as he is known) this high-powered lot—plus 66 Deputy Director minions—cost us all a cool £3.682m in salaries. As they are all sworn to work for the good of the country, irrespective of party in power (Nick has seen off two chancellors already) this should seem like a snip if it makes the other 63m rich. Except, for some time now a major question has been going unanswered: which country?

On 13 February HM Treasury published a letter from Nick to the Chancellor, advising him against entering into a currency union with an independent Scotland. The publication of personal advice from a Permanent Secretary to a Minister is highly unusual and calls into question just who they are working for.

In the 1970’s HM Treasury was in the thick of a strategy to downplay the importance of North Sea oil so that short-term gain could be made at the expense of SNP attempts to portray it as a vital strategic resource. In the 1980’s HMT was instrumental in selling off UK oil assets and settling for a steady stream of oil tax revenues, rather than be an active participant or to divert earnings into an oil fund, both of which Norway chose to pursue. In the 1990’s, they were up to their starched evening collars in the UK’s disastrous flirtation with the ERM and their scheming abetted Irn Broon’s notorious “pension stealth tax” that reduced the value of retirement funds by at least £100 billion.

So when we roll up to the present day and find Osborne dismissing any currency union and Cameron pitching that the UK is far better placed to develop North Sea oil further—both on the backs of HM Treasury advice, it is time to ask for whose benefit those 90 fiscal super-gnomes are beavering away and look this fiscal gift horse in the mouth. It would be unfair to accuse them of serving the payroll vote like Scots Labour MP always do—habitually rubbishing independence because it threatens both their ego and their job. But it must be hard to see 10% of their domain and most of the oil disappear from their clutches and not be tempted to do what you can to prevent it.

That said, the HMT cohort listed above are products of the formidable British Civil Service; they’re not daft. So let’ds see just how well they have done in general down the years before anyone dismisses the clear recommendations they are giving to keep Scotland in the Union as just self-serving gobshite. First, we’ll examine the outline of the UK economy in the 30 years since Thatcher came to power and oil became a factor in the economy. Then, we’ll compare that performance with a couple of neighbouring countries with and without oil of their own.

Those 30 years were split between 18 years of Tory rule, dominated by Thatcher, followed by 13 years of Labour rule dominated by Blair. Key elements of government spending from each period are compared in the graph below.

Graph 1—Change in UK Government Expenditure & Debt 1980-2010 (Source HM Treasury)

This chart is something of an eye-opener because it shows that ‘small government’ Tories actually increased spending more in every department on their watch, as compared to supposedly ‘tax and spend’ Labour—even  into debt in an attempt to sustain it. Supposedly HM Treasury was providing both governments with their shrewdest advice how best to exploit Britain’s resources (including oil) and standing in the world to maximise the benefits for its citizens. If we compare with nearby small countries, we should be able to see the formidable exercise of shrewdness backed by clout exemplified.

Graph 2—Comparison of Three Small Neighbours to UK, 1980-2010 (Source OECD)

So comparing how expenditure in neighbours increased over the 30-year period under discussion, it can be seen that the UK increased its health spending greater than the others but in every other case (except vs Irish defence spending) lagged behind, even though debt accrued during the period outstripped all three countries. This looks like poor performance, with smaller countries—even those like Ireland, often derided as in an ‘arc of insolvency’ still outstrip the UK is providing for their citizens without mortgaging their future through debt.

However, it could be that small countries suffer, as strange bedfellows like Lamont and Cameron both maintain, from dis-economies of scale, so let’s revisit this from the point of view of spend per capita.

Chart 3—Government Spend and Total Oil Receipts per Capita 2010

The salient points from Chart 3 can be summed up as:

• Norway, Denmark & UK spend comparable sums on defence; Ireland spends barely 25% as much
• Health spend per head each year is comparable, ranging from UK ‘s £2,042 to Norway’s £3,401.
• Despite its huge outlays on Social programmes, UK still only spends half the amount Norway or Denmark do to provide theirs
• Total spending on its citizens in Norway or Denmark is twice that in UK or Ireland
• Ireland may have eye-watering debt but it has no oil; UK debt is highest of the others.
• Despite having the largest share, UK taxpayers have benefited least from North Sea oil

Put bluntly, not only does the relative size of the UK seem to have provided its citizens with no advantage over countries one tenth its size but two of the three cases cited beat it on every count and supposed ‘basket case’ Ireland does just as well. There seem to be three plausible explanations for this:

1. Despite their size, resources and ‘clout’, large countries operate at a disadvantage.
2. HM Treasury is fiscally incompetent
3. HM Treasury does not work to benefit all citizens but a subset of them

The sheer economic beefcake that is the USA soon disproves 1. The reputation of the UK Civil service in general and the fiscal wheezes dreamed up by the gnomes of the Treasury to lightfinger ever more money out of unsuspecting punters rather gives the lie to 2.

The most stunning statistic in all the charts and figures is that, while even the Danes have each benefited by twice as much oil revenue as the UK, the Norwegians have fifty-fold; in Norwegian Krone (NKK), they are each millionaires. If you want some detail why that should be, try Dude, Where’s My Oil Money? in the Guardian on January 14th. To quote in part:

“For a few years, the UK enjoyed a once-in-a-lifetime windfall – only, unlike the Norwegians, we’ve got almost nothing to show for it.

“All this was kick-started by Margaret Thatcher, the woman who David Cameron claims saved the country. The party she led still touts itself as the bunch you can trust with the nation’s money. But that isn’t the evidence from the North Sea. That debacle shows the Conservatives as being as profligate as sailors on shore leave.”

Don’t like the Grauniad’s take on the affair—how about the New Statesman?

“…nothing better illustrates her failure to invest in Britain’s long term future than her mishandling of the giant windfall she was gifted on entering Number 10 from booming North Sea oil revenues.

“Tony Blair said in 1987 that North Sea oil was “utterly essential to Mrs Thatcher’s electoral success”. But history should also record that Thatcher missed a trick in not diverting some of the proceeds of oil revenue into an oil fund, like Norway and others did.”

To be un-Britishly blunt: HM Treasury was complicit with Thatcher in making the worst economic decision ever made in the UK. For all their Oxbridge/Civil Service training, the gnomes of King Charles Street blithely frittered away £165bn on “current spending, including covering the costs of large-scale industrial restructuring and funding expensive tax cuts to woo middle England.” Given all that, Chief Gnome Sir Nicholas Macpherson wading in to prop up the Union, though deeply unprofessional and blatantly self-serving, is hardly surprising.

But what is surprising is that Scots are not livid with righteous anger they are not yet sitting on a nice £90,000 nest egg in their own rich, progressive country and are still being lectured by economic pygmies how to squander the other half of their own North Sea oil riches left. Our 90 top fiscal gnomes on their £3.682m in salaries seem dedicated to shafting Scotland in the process. They have form.

The real mystery of the whole sorry story is why we let them.