Britain is to have a sovereign oil fund similar to Norway’s, Chancellor John Healey announced yesterday. The Energy Wealth Fund will have an initial £2 billion, housed in the overall National Wealth Fund. The aim is to create something similar to Norway’s fund, worth $2.3 trillion, which is often praised as a model of financial foresightedness.

The announcement excited all the alternative historians who are broadcasting their counterfactuals. What if Margaret Thatcher had used the proceeds from North Sea oil to set up a wealth fund instead of making tax cuts? Even Healey told the BBC that ‘we’d have a sovereign wealth fund now that would be worth probably a trillion pounds’ if we’d copied Norway’s model. But would we have been able to make a fund as effective as Norway’s? And do we still have the chance to?

Norway’s sovereign wealth fund is actually two funds: the Government Pension Fund Global and the Government Pension Fund Norway. The latter is a smaller fund invested domestically, while the global fund takes the taxes from the oil and gas sector, money from exploration licences and dividends from the partly state-owned oil company, and invests them in foreign equities, bonds and real estate. It’s this one that is colloquially known as the ‘Oil........

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