The King’s Speech confirmed that a bill would be introduced to establish a National Wealth Fund (NWF). This fund will bring together existing publicly owned banks – the UK Infrastructure Bank (UKIB) and the British Business Bank (BBB) – under one umbrella to coordinate public and private investment to fund technologies and infrastructure needed to drive growth.
To meet the UK’s targets to boost the economy, energy security and tackle the climate emergency, it’s vital that the NWF is established on the right footing, with the potential to grow into a fully-fledged policy bank. Unless it has a clear green transformation mission and can borrow outside the UK’s fiscal rules, the NWF will not deliver the investments at the scale and pace needed.
Greenpeace and other civil society organisations Including Positive Money, New Economics Foundation, ShareAction and e3g support the development of a NWF that can coordinate sufficient public and private investment into the projects that will deliver a fair green transition, economic prosperity across the UK, and a low carbon energy and transport system.
To be successful the NWF must begin by having:
- A mandate to invest in green industries, with the aim of supporting the government’s industrial strategy and economic missions including the net zero transition, and quality, green job creation.
- A strong and formalised role for real-economy, industry, academia, and civil society, particularly trade unions in its governing structures.
- The ability to leverage its balance sheet and issue its own debt enabling it to mobilise the necessary levels of investment outside of the Government’s fiscal rules.
Analysis
- The NWF bringing together UKIB and BBB offers an opportunity to build an enhanced public banking ecosystem to coordinate public and private investment. Currently the UKIB and the BBB are banks in name only. They distribute a fixed amount of money allocated by the government. They could instead leverage their assets by using those funds as a base to issue their own liabilities (borrow) and make those funds available to both green energy projects and businesses as well as to other financial institutions.
- If empowered to issue its own liabilities, the NWF would be able to meet private finance’s demand for productive safe assets, while crowding-in a much larger quantity of capital towards the real economy and a just green transition.
- The planned £7.3 billion government funding could, if the NWF had appropriate powers, mobilise more than £180 billion or around £228 billion if including the UKIB and BBB’s balance sheets.
- Without this power, there is a risk that the NWF will be unable to deliver on its goals. As an operationally independent institution, such liabilities should be excluded from measures targeted by fiscal rules, in line with comparative organisations in France and Germany.
This analysis is based on the work of both Positive Money and CETEX .