The UK has launched a multi-billion pound national wealth fund to power green invest and infrastructure development in an effort to grow the economy.
So far £7.3bn in state funds has been allocated so investments can be made “immediately” in areas such as ports, manufacturing and renewable energy.
The move is part of Labour’s plans to grow the economy through planning reform, housebuilding targets and the creation of state-owned power company Great British Energy.
Economic growth is a core goal of Labour’s time in government – their investment plans are predicated on the increased tax yields a larger economy brings, rather than borrowing to invest.
What’s a national wealth fund?
Many nations including France and Australia have funds that put money into sectors they want to see developed and grown. Such funds aim for a financial return on the money they put in for future generations to fuel further state spending.
A task force, comprised of former governor of the Bank of England Mark Carney, Barclays chief executive CS Venkatakrishnan and Aviva CEO Amanda Blanc had been advising Labour on setting up such a fund since March.
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What will it do?
The UK’s national wealth fund will invest in and grow “new industries of the future”, the Treasury said, and encourage the private sector to put their money in too.
In the run-up to the election, Labour had identified hydrogen projects and difficult-to-decarbonise industries like steel as potential beneficiaries.
The creation of thousands of jobs in clean energy “industries of the future” will be helped by the national wealth fund, according to Ed Miliband the energy security and net zero secretary.
In turn, this funding will boost the UK’s energy independence and tackle climate change, he said.
Initial government financing may help funnel money into project investors may otherwise not back, supporters hope.
“The national wealth fund will reshape the way we approach public, private risk-sharing, providing private investors with the confidence needed to fund the technologies and infrastructure needed to drive growth and create new jobs”, said the chair of the national wealth fund taskforce and CEO of the Green Finance Institute Dr Rhian-Mari Thomas.
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How will it work?
The fund is being given to the existing UK Infrastructure Bank, founded three years ago, to avoid creating an investment vehicle from scratch.
The UK Infrastructure Bank has committed £3.3bn of funding and unlocked nearly £11bn in private investment, according to Treasury figures.
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To be effective across the UK the national wealth fund will work with local partners including regional mayors, the Treasury said.
The fund’s work began on Tuesday morning when a meeting of the task force was convened by Chancellor Rachel Reeves and Mr Milliband.
Business response
NatWest boss Paul Thwaite said the fund has the potential to accelerate the green energy transition and “address some of the fundamental barriers that have existed to date”.
Unions alike have welcomed the announcement.
“This announcement shows steel, automotive and energy workers that Labour is serious about investing in our industrial base and the towns it supports. Public investment is an urgent first step in boosting strategically important industries that have been neglected for the past 14 years,” said the general secretary of the Trades Union Congress (TUC) Paul Nowak
“Trade unions are eager to work with the government – and employers – to ensure that new investment delivers the 650,000 quality jobs, stronger growth and climate action that working people need.”
What next?
The government will move to bring forward legislation to give the fund statutory footing, “making it a permanent institution at the heart of the country’s long-term growth and prosperity”, the Treasury said.