Can a sovereign wealth fund turn Britain's chances around?
One of the understandable fears about Brexit is the UK’s decline in power and prestige. If that’s true – and Brexit goes ahead – we’re going to have to find solutions.
A commentary for the Economist entitled ‘Britain’s Decline and Fall’ states that in the aftermath of Brexit: “The country has not cut such a pathetic figure on the world stage since Suez.” With this background, options for funding public services like the NHS have consisted of unoriginal methods – with the Resolution Foundation suggesting increasing income tax and reversing the planned cuts in corporation tax.
But there exists more popular and longer-term methods of funding extremely popular spending commitments and public services. One solution to the long-term funding of public services may lie in an institution that many other nations have created: the sovereign wealth fund.
The most famous sovereign wealth fund is that of Norway, created with revenues from the large surpluses from the nation’s petroleum sector, and which was used to invest in government pensions. As of May 2018, the Norwegian Oil Fund is worth approximately $195,000 per Norwegian citizen. It is a powerful force on the world stage, known to ‘flex its muscles‘. Saudi Arabia’s SWF is similarly going global to diversify its economy (and no doubt increase its influence).
The idea of creating a sovereign wealth fund for the UK has already been suggested by Shadow Chancellor John McDonnell. It’s particularly useful for Labour as they would be able to spend money on popular institutions like the NHS, without the image of fiscal profligacy or the unpopularity linked to raising taxation.
The only major obstacle to the creation of such a fund is over how enough money could be pooled to create the fund. But money does exist that could be harnessed into a long-term wealth fund to buttress the strength of the UK economy in uncertain times.
The first source of funding which could be utilised is royal finances: specifically, the Duchies of Lancaster and Cornwall which provide funding for the Monarch and the heir to the throne respectively. By the end of March 2017, the Duchy of Lancaster had a net income of £19.2m, whilst by the end of March 2018 the Duchy of York had an operating surplus of over £22m.
Although these Duchies are described as Crown bodies, an information tribunal in 2011 ruled that the Duchy of Cornwall specifically was a public body as “In a modern day context, the duchy is carrying out the public function or service of providing an income for the undertaking of an extremely important constitutional role for the UK”. This means that funds could be re-directed into the creation of a sovereign wealth fund.
Coupled with this, the Queen receives 15% of the annual surplus of the Crown Estate as income which in 2016 was worth nearly £43m. But in lieu of these sources of funding, the monarchy could be generously funded by lump sum budget from the state which is how the Spanish fund their royal family.
Alongside this money, the National Fund is a registered charity that was formed in 1928 with an anonymous £500,000 donation for the purposes of paying down the UK national debt after World War One (now worth £475m). This cash could be used to make up a new fund if the Attorney General is successful in releasing the money. Other organisations have suggested ‘Quantitative Easing for the People’, created by the Bank of England, which could be employed to fund a new institution.
Altogether, harnessing money to put into a sovereign wealth fund would in the long term not only help reduce the burden on the tax payer – but also signal that in the aftermath of Brexit, the UK is serious about remaining a global economic power while properly funding our services.
Alex Manzoor is a History student at the University of Cambridge.
Like this article? Left Foot Forward relies on support from readers to sustain our progressive journalism. Can you become a supporter for £5 a month?
Leave a Reply