The UK has launched a multi-million pound national wealth fund to boost green investment and infrastructure development in an effort to grow the economy.
So far, £7.3 billion in state funding has been allocated so that investments can be made “immediately” in areas such as ports, manufacturing and renewable energy.
The measure is part of the labor movement plans to grow the economy through planning reform, house construction goals and the creation of a state energy company Great British Energy.
Economic growth is a central objective of the Labor Party’s time in government – its investment plans are based on increasing the tax returns that a larger economy brings, rather than borrowing to invest.
What is a national wealth fund?
Many nations, including France and Australia, have funds that invest money in sectors they want to see developed and grown. These funds aim for a financial return on the money they invest in future generations to fuel more state spending.
A task force, made up of former Bank of England governor Mark Carney, Barclays chief executive CS Venkatakrishnan and Aviva CEO Amanda Blanc, had been advising Labor on the creation of such a fund since March.
What will it do?
The UK’s national wealth fund will invest in and develop “new industries of the future”, the Treasury said, and will encourage the private sector to invest their money too.
In the run-up to the election, the Labor Party identified hydrogen projects and hard-to-decarbonise industries such as 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 secretary of energy security and net zero emissions.
In turn, this funding will boost the UK’s energy independence and combat climate change, he said.
The government’s initial funding could help funnel money to the project’s investors, who would not otherwise support it, its backers hope.
“The National Wealth Fund will reshape the way we approach public and private risk sharing, providing private investors with the confidence they need to finance the technologies and infrastructure needed to drive growth and create new jobs,” said the president of the national wealth fund working group. and CEO of the Green Finance Institute, Dr. Rhian-Mari Thomas.
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How will this work?
The fund is being handed over to the existing UK Infrastructure Bank, founded three years ago, to avoid creating an investment vehicle from scratch.
The UK Infrastructure Bank has committed to funding £3.3 billion and unlocked almost £11 billion in private investment, according to Treasury data.
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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.
Work on the fund began on Tuesday morning when a task force meeting was called by the Chancellor Raquel Reeves and Mr Miliband.
Commercial response
NatWest boss Paul Thwaite said the fund has the potential to accelerate the transition to green energy and “address some of the fundamental barriers that have existed to date”.
The unions welcomed the announcement.
“This announcement shows steel, automotive and energy workers that the Labor Party is serious about investing in our industrial base and the cities it supports. Public investment is an urgent first step to boosting strategically important industries that have been neglected in the past last 14 years”, he stated. the general secretary of the Trade Union Congress (TUC) Paul Nowak
“Unions are eager to work with the government – and employers – to ensure the new investments deliver the 650,000 quality jobs, stronger growth and climate action that workers need.”
What’s next?
The government will move towards introducing legislation to give the fund a statutory basis, “making it a permanent institution at the heart of the country’s long-term growth and prosperity”, the Treasury said.
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