FOR many Scots, the striking poster of Margaret Thatcher with fangs that dripped oil instead of blood sums up the waste of the profits from the “black gold” discovered in the North Sea.

Instead of setting up a Norway-style oil fund, the revenues propped up the failing British economy and bankrolled the unemployment receipts that followed the Tory Prime Minister’s de-industrialisation programme of the 1980s.

To rub salt into the wound, it emerged only this century that a secret government memorandum of the early 1970s that predicted how profitable the oil could be was never made public, due to fears it would boost the case for Scottish independence.

The infamous McCrone Report was composed by Professor Gavin McCrone, then chief economic adviser in the Scottish Office, was published in its entirety by The National last year.

Read more from our McCrone 50th Anniversary special edition here:

Professor Sir Tom Devine, of Edinburgh University, said it was “political dynamite”. “Arguing that the economic case for independence was now transformed, it predicted that Scotland could become the ‘Kuwait of the North’ with the nation’s currency becoming the strongest in Europe with an inevitable rise in living standards,” he said.

“The paper strikingly concluded: ‘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’.”

It was in October 1970 that BP struck oil 110 miles off Aberdeen in what was later to become the giant Forties field. This and later discoveries coincided with a massive hike in global oil prices during, and in the aftermath, of the Yom Kippur Arab-Israeli conflict which meant that even marginal fields off the Scottish coast became viable.

The SNP leadership soon grasped the political potential of the discovery, according to Professor Devine, with Gordon Wilson, who later led the party, coining the slogan “It’s Scotland’s Oil”.

The National: Professor Tom Devine has weighed in on the controversy around Edinburgh Castle's Redcoat Cafe

“The ‘It’s Scotland’s Oil’ campaign from 1971 brilliantly exported the stark contrast between the fabulous wealth off Scottish coasts and the fact that the nation was then suffering the worst rate of unemployment in Europe and remained yoked to a British state stumbling from one economic crisis to another,” said Professor Devine (above).

“The nationalist campaign gave a new and much more robust credibility to the idea of Scottish independence because it seemed to undermine the old assumption that Scotland did not possess the economic resources to survive outside the Union with England. The posters which appeared all over the country displayed the ‘black stuff’ pouring out from the large capital ‘O’ in the word ‘oil’.”

Professor Devine said the oil issue helped to explain the SNP’s success in the General Election of October 1974 when the party won just over 30% of the Scottish vote, with 11 MPs, and came second in 16 of Labour’s Scottish seats.

“The result startled the UK government because, as Professor Gavin McCrone later opined: ‘If it had gone to up to 35% or 36% it would have been a complete landslide, so it was quite a precarious position for the Government’,” Professor Devine said.

He believes that although the short term political impact of oil was considerable it was “not in the event decisive”.

“UK ministers saw the riches of the North Sea as a panacea for Britain’s serious economic problems and were determined to defend this vital resource against separatism at virtually any cost,” said Professor Devine.

“Official estimates of future untapped oil supplies were withheld from the public and instead the message went out that that the oil boom would be ephemeral and the SNP’s assertions to the contrary were roundly and vociferously condemned as mere nationalist rhetoric propaganda.”

The huge rise in popularity of the SNP in the second 1974 general election did help to convince Labour of the need to secure some form of Scottish devolution in an attempt to “see off the nationalist beast”, according to Professor Devine.

However, he argues that Scots were still unlikely at the time to support more radical solutions to the “Scottish question”, with the 1979 referendum demonstrating they were not over enthusiastic about the cosmetic proposals on offer in the Bill.

Professor Richard Finlay, of Strathclyde University, said the oil find was so significant because at the time of its discovery the predominant narrative in Scotland was one of economic decline, which had a starting point in the Great Depression of the 1920s.

This, he said, was because Scotland had an economy built and designed in the 19th century that essentially worked to the parameters of the 19th century.

In 1947 a Government report into the Scottish economy concluded that it was too reliant on a narrow range of heavy, old-fashioned industries and needed to diversify into more modern industries.

“The big problem is that this never really takes place,” said Professor Finlay. This led to the predominant, pessimistic narrative in the 1960s and 1970s of Scottish economic decline.

Read more from our McCrone 50th Anniversary special edition here:

“It dominates the way the way people see the economy and North Sea oil is important because it seems to offer a solution to that problem,” he said.

However, he added that it was debatable whether it was a factor in promoting the rise of the SNP at the time.

“To say that it’s ours and the English can b***er off would probably not be something that would resonate with everyone in Scotland,” said Professor Finlay.

“While it might have won some converts through that approach there is probably a danger that it would alienate some other people as it feeds into the narrative of ‘narrowminded, nasty, selfish nationalists’.”

William Wolfe, who was leader of the SNP, later said that had the McCrone information been available before the 1974 election “we would have won Scotland and it would have been a much wealthier and happier place”.

Even arch anti-devolutionists like Labour’s Tam Dalyell said he believed its publication could have aided independence.

However, voters at the time had no idea how extensive the find was going to be.

Finlay said there were also questions over the extent to which people were aware that the oil was funding the British Government of the 1980s. He said even unionists would agree the oil was not used well.

Paradoxically, however, despite the misuse of the oil revenues, the Scottish economy did begin to diversify towards the end of the 1980s as had been recommended decades previously. It started to develop a broader base, partly thanks to the development of technologies associated with oil, as well as the growth of “Silicon Glen” and the computer industry and the development of the financial, food and drink and tourism sectors.

Professor Finlay said that had Scotland depended entirely on the oil sector the economy would have been subject to wild fluctuations in price, although a Norway-style oil fund could have mitigated any problems.

“One of the things people look to is Norway’s example to say that shows how it was a wasted opportunity,” he said.

The National: Labour has written to the head of the Treasury questioning whether recent communications comply with civil service and legal guidelines (Chris Ratcliffe/PA)

In the decades that the McCrone Report was concealed by both Labour and Tory Governments, over £300bn of oil tax revenues flowed to the UK treasury – but what does it mean for the independence movement now that the oil price has dropped so much?

“I don’t think it means that much at all if you look at the wider spread of the economy,” said Professor Finlay.

“For example in terms of exports we are ahead of the rest of the UK and the things we are exporting are well known, such as Scots beef, whisky and seafood which are all high quality high value exports. Scotland has about a fifth of all UK food exports.

“Edinburgh is one of the big financial centres outside Frankfurt and London and if you think about tourism, Scotland is the second most popular destination after London. Scotland exports £5bn worth of electricity to England and another big success is the gaming industry. Even if you don’t have oil you still have all these and those are the kind of things you want in an economy. You want a diverse portfolio so that if something goes bad it doesn’t take the entire economy down.

“The McCrone Report is evidence of the duplicity of the British Government and for many it will reinforce that counter factual argument that you could have had a better future and you could have been like Norway but in terms of the here and now it probably would make not that much difference.

“It’s done, it’s past and there is nothing you can do about it.

“In any case, it was based on speculation. Even if it had been published would people necessarily have believed it?”

It is more important to look at the economic challenges ahead, said Professor Finlay, such as making sure the working population is highly skilled, productivity increases and Scotland makes the most of its natural resources in the green revolution.

“Arguably one of the things you want to do is say ‘well you missed the oil revolution but the one you don’t want to miss is the green revolution’, particularly in energy generation and wind and wave power,” said Professor Finlay.

Sir Tom Devine’s comments are based loosely on two of his books, The Scottish Nation, which has now sold over 100,000 copies in the UK alone, and Independence or Union: Scotland’s Past and Scotland’s Present. Both are available in Penguin paperback.