The following article was written by Alex Ralph and Lauren Almeida and published on The Times
Less than a week after the Labour government was elected, the chancellor and the business secretary unveiled plans for a new National Wealth Fund to begin investing “immediately”.
Backed by £7.3 billion of public capital, Rachel Reeves and Jonathan Reynolds have tasked Whitehall officials with aligning the existing UK Infrastructure Bank and British Business Bank under the new umbrella to “mobilise” private funds for the transition to a low-carbon economy.
“There is no time to waste,” Reeves said. The launch of the fund, a central plank in Labour’s manifesto, is vital to the party’s drive to boost Britain’s sluggish economic growth by unlocking private investment.
Labour’s intentions have been welcomed by City financiers and fund managers. However, some — including one familiar with Labour’s discussions — warned that the size of the fund is “pretty trivial” and that ensuring independence from political interference as well as generating returns will be critical to its success.
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Labour has set a target of mobilising private capital ahead of public funds at a rate of 3:1 and has identified five sectors — green steel, green hydrogen, industrial decarbonisation, gigafactories (for the production of electrical vehicles and grid-scale batteries) and ports — to hit Britain’s underlying 2050 “net zero” greenhouse gas emissions target.
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The idea of Britain creating some sort of sovereign wealth fund has been advocated by several City and Westminster figures over the years, including Euan Munro, chief executive of Newton Investment Management, and politicians such as John Penrose, chairman of the Conservative Party’s policy forum, who made the case in a pamphlet titled Time to Think Big for the think tank Reform in 2020.
Penrose, who worked at JP Morgan, the US investment bank, and McKinsey, the consulting firm, before serving as Conservative MP for Weston-super-Mare from 2005 until the general election, is more sceptical.
“Sadly, it isn’t the UK sovereign wealth fund that our country desperately needs to fix long-term structural problems … Instead, it’s a much less ambitious idea. It could still be worthwhile if it gives a leg-up to new, clean and green UK technology jobs and growth, but only if the government sticks to the report’s key recommendation of arms-length independence from political interference.”
