The UK government’s newly created National Wealth Fund could be either a world-taking or a green world-remaking institution; it is up to us to ensure the latter.

Delivering large-scale investment in new capital and infrastructure is essential to decarbonisation and to ameliorating the UK’s longstanding economic malaise, which even the Financial Times refers to as an investment famine. In functional terms, decarbonisation is an investment and economic coordination problem. Malcoordination of this grand project risks insufficient investment and frictions such as inflation and other forms of economic volatility. Private investment and market coordination are incapable of delivering and managing this process well, even with heavy public subsidisation or backstopping. Instead of relying on private investment decision-making and the rhythms of market coordination, robust institutions of public coordination and decommodification of critical systems or sectors can deliver well-synchronised investment as well as broader economic stability and prosperity through the transition. Put differently, the process of decarbonisation is a matter of building the green mixed ownership economy, where multi-scalar and pluri-formed but systemic public ownership in and decommodification of critical sectors can begin to: one, socialise investment-decision-making to divorce it from the profit imperative and liquidity preference of private capital; two, integrate and coherently plan investments and economic activity; and three, in total, employ the collective-risk bearing capacity of the state to restructure, stabilise, expand or phaseout production networks.

A dynamic and muscular strategic state holding company and paired green developmental financing institution would be an invaluable weapon towards driving and managing a democratically coordinated transition. Such an institution would drive decarbonisation by wielding a full suite of public investment tools from guarantees and subsidised financing to both bold and strategic equity stakes and the holding of a suite of strategic public enterprises on its balance sheet to coordinate and deliver investment throughout the full field of the economy in transition. Such an institution would be defined by its use of public investment tools to: finance public infrastructure projects and capitalise public options for capital investment and production that might be necessary in some sectors; employ risk-bearing equity to not only deliver and synchronise necessary capital expenditure by private producers but transform the corporation through its control rights; drive and manage synergies from tech transfers to investment coordination to revenue recycling across its holdings; and socialise investment decision-making and the allocation of social surplus at the macro level.  

An initial assessment of the vague details on the National Wealth Fund that the new government announced this week make clear that while the institutional design has significant potential, on its current capitalisation and potential initial composition, it falls well short of such a dynamic and muscular institution. Last week, the government announced that it had created the fund by directing officials to align the already existing UK Infrastructure Bank (which has a mandate to support net zero) and the British Business Bank (which has experience in venture capital investing) under the banner of the National Wealth Fund and its new and additional £7.3 billion in funding. This starting capitalisation is simply too low: in the wake of its creation, even the Times ran a feature citing several private financiers claiming “a fund of between £50 billion and £100 billion was required instead.”  There is room for creative conscription and reform of the Crown Estate to support the NWF, but such a development has not yet been announced at least.  

Further intimations of the contours of the institution came from a simultaneously published consultation report by the National Wealth Fund Taskforce convened by the Green Finance Institute. The recommendations of the report were mostly anodyne and did indeed stress the importance of public equity investment, that the fund should be a strategic tool for industrial policy as opposed to a revenue maximising wealth fund, and included a cheeky footnote calling for the NWF’s debt to be excluded from Public Sector Net Debt calculations, as is the norm for development finance institutions in Europe. Moreover, the decision to seed the NWF from these two existing institutions is par for the course considering the government is keen to set it up and begin investments quickly. And the partnership between an equity or state holding company arm with a development bank is in fact ideal from a strategic planning and coordination perspective, coming close to Saule Omarova’s proposal for a National Investment Authority in the US context, based on New Deal era Reconstruction Finance Corporation, save of course for lack of robust funding.  

Yet the composition of the Taskforce itself gives great credence to the criticism that the NWF will be nothing more than a weak derisking vehicle aimed at furnishing rents for the private portfolio glut that will be toothless to deliver decarbonisation nor growth prerogatives. Despite the government’s commitment that the fund’s initial focus sectors will be the development or greening of steel, auto, ports and supply chains, CCS and green hydrogen, the taskforce had no trade union or even business or industry representatives. Instead, it was made up entirely of the titans of private finance such as Brookfield’s Mark Carney and the Dame CEO of Aviva Insurance Amanda Blanc.

To deliver a robust institution and with it the green transition, the task at hand is now to push for greater capitalisation and more ambitious development as it is further institutionalised — key to which will be negotiation of a different division of labour between state and capital brought into being by the fund’s investments than the pervasive derisking agenda would have it. Between here and the total socialisation and decarbonisation of the economy, many permutations of public versus private production and financing at the project, firm, sector and economy level are possible. And indeed, a key aspect of a robust strategic state holding company as a tool for building the green mixed economy is its structural ability to coordinate, shape, create and transform across various permutations to plan and orchestrate necessary investments and rewiring of production and consumption networks. A key lever for developing an adequate institution will be pointing out what permutations are necessary in concrete projects and sectors to deliver concrete goals: from steel decarbonisation to clear requirements for building supply chains. From the outset, the fund lacks funding and is susceptible to employment towards principally private finance’s aims.  But, now founded, it can be made susceptible to contesting claims and institutionalisation on different terms over time, which is a matter of articulating and building power for democratic, decommodified and decarbonised economy.  

The design and ambition of the Fund matters, not just in and of itself, but as a signal of how far Labour are willing to break from the confines of market coordination to deliver on their growth and decarbonisation missions. As a potential institution of the green mixed economy — or indeed secureonomics, in the parlance of the new Chancellor — the contest over the Fund has strategic ramifications. If Labour are to deliver jobs, climate ambition and economic renewal, the case for ambition is overwhelming.