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The UK government’s mission to get the economy on track and achieve the fastest growth in the G7 will only be delivered by significantly powering up investment in Britain’s booming clean economy. With economies around the world recognising the net zero opportunity, and increased competition for green investment, governments are moving swiftly to establish comprehensive packages of public investment to drive clean growth. The National Wealth Fund can be a critical pillar of the UK’s approach, with a clear focus on driving private investment into the growth industries of the future.
The Chancellor has an opportunity at the upcoming International Investment Summit on 14 October to set out how she will use the National Wealth Fund to kickstart the UK’s clean economic engine. With UK growth sluggish and the country at risk of missing out on the huge investment potential that the transition offers, it is vital that the Fund’s mission – to drive clean growth – is clearly established from the outset.
Based on analysis of public bank design processes in the UK and other countries, E3G’s latest briefing sets out recommendations to inform the design and delivery of the Fund, including the case for a clean National Wealth Fund; key design questions for the Fund and lessons to be learnt from the UK Infrastructure Bank (UKIB); recommendations for mission, objectives and institutional structure options; and how the Chancellor can create the right enabling conditions for the Fund to deliver.
E3G’s key recommendations for the Chancellor:
- Establish the Fund’s clean growth mission. The Fund’s objectives should include: driving net zero and resilient growth; supporting good jobs and a just transition for workers; and boosting the UK’s industrial competitiveness and productivity by ensuring the UK is an attractive place to produce clean goods and services.
- Launch a sequencing roadmap for the design of the National Wealth Fund, with a clear timeline for consultation and policy development. Use this opportunity to appoint an independent expert with sufficient public banking and innovative financing experience to lead the design process and commit to a period of active stakeholder engagement with a broad range of actors to support the design.
- Grant the Fund the authority to deploy catalytic capital with a higher risk tolerance than typically seen in the financial sector. This mandate is essential to enable the fund to deliver a step change in the UK public finance landscape, above and beyond the existing role of UKIB and other institutions. The Fund should learn from best practice in developing a flexible risk tolerance that delivers benefit to the taxpayer – including consultation with VC funds and impact investors who often adopt comparatively greater risk while maintaining high return potential.
- Commit to an urgent review of the impact of fiscal rules on the capitalisation of UK public banksincluding looking at international best practice to understand how any liabilities issued by the Fund and the UKIB can be excluded from measures targeted by fiscal rules like public sector net debt (PSND).
- Embed the Fund within a coordinated, coherent policy framework to ensure its investment decisions can support a clean Industrial Strategy, underpinned by a whole-of-economy Net Zero Investment Plan.
Read the briefing in full