Nothing to show for our oil?

The purchase by Norway's £400bn oil fund of a half share in Sheffield's Meadowhall shopping centre raises yet again the question of whether the UK has squandered the riches of the North Sea.

Why is Norwegian oil money being deployed to buy prize assets here while we have no oil money to spend in Norway?

In simple terms, during the oil boom our governments spent their North Sea winnings on cutting national borrowing and keeping down taxes. Whatever came in went straight into the day-to-day budget..

In contrast , for the last 16 years Norway has squirreled away its North Sea money in a national oil fund. Today it uses the income from the fund -- just the income, mind -- to cover 11% of its national spending.

And, ironically, now that we are buying Norwegian gas in large quantities, we too are contributing to Norway's colossal nest egg, one of the biggest sovereign wealth funds in the world.

The £348m purchase of 50% of Meadowhall is the result of a new policy of buying into property round the world. It comes after a £452m investment in London's Regent Street last year.

Norway is the biggest investor in shares across Europe, so its holdings took a knock during the financial crisis. Now, like Middle Eastern sovereign wealth funds, it is picking up trophy properties.

"The purchase gives us exposure to one of the largest and most dominant shopping centres in the UK," said Karsten Kallevig, chief investment officer for real estate.

So the taxpayers of Norway will be saying a big "Thank You" to the shoppers of Sheffield. By spending in Meadowhall, they will help local stores pay their rent and Norwegians will pocket a share of the rental income.

The oil fund's official name is the Government Pension Fund, but the word "Pension" in the name is a bit misleading. The benefit for Norwegians isn't restricted to pensions.

What happens is that 4% of the fund, or £16bn currently, is diverted each year to subsidise government spending. Effectively, it keeps hospital beds open and helps pay for benefits.

The fund keeps growing, though, because levies on oil and gas production and on oil companies bring in an extra £30bn annually. As the oil carries on gushing and oil prices stay high, the Norwegian nest egg can't stop getting bigger.

In the UK the Callaghan government of the 1970s flirted with the idea of setting up an oil fund but, in a time of mounting economic crisis, it was too tempting just to grab the money. And it has been ever since.

Norway started on the same route but had second thoughts after the oil price collapsed in the 1980s. The idea of its fund was to try to smooth out the bumps from fluctuating prices and preserve the gains from the oil bonanza for future generations.

Professor Alex Kemp, an oil expert from Aberdeen University, says the British public has missed out because a fund wasn't set up here in the 1980s.

"We could have introduced a fund and that would have been the right time because these revenues were extremely high," explains Professor Kemp.

"We didn't do it because the Treasury wanted the funds to reduce the public deficit. We broadly speaking consumed the benefits rather than invested them."

To be fair, the Norwegians had more money to play with: their oil production is higher and the proceeds are enormous in comparison to the country's population of just 5 million.

Could we have done it? Well, the Shetland Islands did.

When oil started arriving at Sullom Voe and ships docked nearby, there was a flood of cash. The council set up an oil fund which still stands at £185m today, even after upgrading roads, ferry terminals and local swimming pools.

In Scotland, the SNP's Alex Salmond has long advocated setting up a special fund supported by North Sea oil revenues. However, it is unclear when that could happen, given the pressure on the Scottish government's budget.

Now that North Sea oil is well past its peak, there's little prospect of ever amassing a fund in the UK like Norway's.

UPDATE: Just for the record, Orkney has an oil fund too. It's worth £171m. Annual withdrawals are supposed to be no more than £4.7m, but the council can take out more if it wants - and has done in the past.