The Conservatives pledged to set up regional Wealth Funds for investing in our country. They should use the Autumn Statement to fulfil their manifesto promise.
At 10:34pm on the 12th September, Norway’s sovereign wealth fund reached the value of $1trn.
Funded through the revenue from North Sea Oil – but now much more diversified – it secures financial security for Norwegian citizens for generations to come. A huge contrast, then, from the UK.
When the North Sea oil boom began in the late 1970s, Britain used its vast new oil revenues not to ensure long-term stability – ostensibly a Conservative doctrine – but to give tax cuts to the rich.
And while Norway has seen decades of investment (it’s fund was established in 1996 – better late than never), last year North Sea oil in the UK became a net drain on the UK’s finances – costing the taxpayer nearly £400m.
It’s a stark contrast – the $1trn public fund in Norway for improving lives and the long-term success of the country, and the situation now in the UK where, instead of using North Sea oil as a spring-board for success, we are now in the absurd situation of subsidising a major polluter.
Not only are we not getting anything out of it – to invest in greener energy for example – it is draining our resources.
Labour’s policy on the issue is fairly clear: under plans outlined by John McDonnell, they would set up a national Sovereign Wealth Fund for the UK, to secure long-term investment in our economy.
Here’s where things get weird. In June’s election, the Conservatives pledged to set up regional Wealth Funds too:
“Future Britain funds People have long talked about the need to create UK sovereign wealth funds. We will now make this a central part of our long-term plan for Britain. We will create a number of such funds, known as Future Britain funds, which will hold in trust the investments of the British people, backing British infrastructure and the British economy.
“We anticipate early funds being created out of revenues from shale gas extraction, dormant assets, and the receipts of sale of some public assets. We will encourage pension funds with an interest in joining Future Britain funds to do so.”
This is fairly Red Tory territory. The absurd ‘problem’ is that the Conservatives didn’t win a majority, so the plan could be dropped. But it seems like fairly safe DUP ground too – they’re keen on ‘investment’, having bunged a £1bn bonus for Northern Ireland by pledging to vote with the Tories on key issues.
So the question is – when is it going to happen?
On November 22nd, Phillip Hammond will present his Autumn Budget. The Tories are facing pressure on the public sector pay cap – arguing there’s no money to pay for across-the-board rises. (The irony is that, if it were even true, it would in part be due to Conservative incompetence under Thatcher – killing the cash cow that was North Sea oil.) This would be one hell of a curveball.
A Sovereign Wealth Fund for the UK – backed by all major parties – could be a great unifier, particularly in a hung parliament, and with such a need for infrastructure investment following cuts to capital expenditure over the past seven years.
How to fund it? Here’s one idea: print the money. The Bank of England has spent at least £435bn on Quantitative Easing for the banks – at no upfront cost to the taxpayer (other than inflating house prices). Quantitative Easing for Investment could establish long-term revenue stream for the vital changes our economy needs.
Hammond is relatively sensible by Tory standards. He should look at Norway – and the state of our housing, energy and transport sectors – and do something historic in November. What a legacy it would be.
Josiah Mortimer is Editor of Left Foot Forward. Follow him on Twitter.
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