The CIVITAS Essays on a British Sovereign Wealth Fund.

Reading the publication produced by CIVITAS, was music to my ears! This collection of essays on the creation of a British Sovereign Wealth fund would have been thought of as irrelevant, pointless with little enthusiasm by policy makers in the UK, four years ago when I first started my PhD at University of Sussex Business School . During my VIVA defence only a few days ago, I was delighted to refer to this publication as I have written a whole chapter on a British Sovereign Wealth Fund in my thesis. As you may have guessed by now, I am an advocate for creating a British Sovereign Wealth Fund.

I was so impressed with the calibre of contributors in the CIVITAS publication which included: David G. Green, Eugene O’Callaghan, The Rt Hon John Penrose MP, The Rt Hon Liam Byrne MP, Professor Adam Dixon , John Crompton, Dag Detter, Richard Hyde, Hari Menon, Rachel Neal (Edited by Jim McConalogue). (The publication can be downloaded at: https://www.civitas.org.uk/publications/sovereign-wealth-funds/ )

Great collective minds can lead to great ideas and innovation, and the contributors were not short on ideas. These included utilising a fund for future savings, a Social Wealth Fund with one-off payments, developing UK's manufacturing, energy self-sufficiency and supporting the business sectors. With so many competing and sometimes overlapping ideas it can be difficult to determine the best solution. That is why I believe that the UK should create a Sovereign Wealth Fund with multiple mandates comprised of two separate funds to address the most pressing needs.

1. Sovereign Partnership Fund (SPF)The UK's 10-point plan for a Green Industrial Revolution is a policy for transforming the economy towards sustainability, supporting industries and creating jobs. Furthermore the drive towards Net-Zero Carbon Emissions will require ￡400 billion of investment in infrastructure. In both cases the government plans to attract investments from the private markets. The Office for Investment (Ofi) was created to attract large capital from Sovereign Wealth Funds and through Sovereign Investment Partnerships (SIP) with Mubadala and QIA has secured pledges close to ￡20 Billion. I believe that the Ofi assets should be transferred into a Sovereign Partnership Fund. The benefit of SIP is that the government remains a stakeholder in important strategic assets, would be selective on who the partners would be and attract large capital to ensure that important projects are completed.There is another dimension to the SPF, it can be used to invest in high growth British Start-ups that require large patient capital. Therefore the SPF can act like a Sovereign Venture Fund, providing capital but also taking stakes in companies. This will ensure that the technology ecosystem remains strong in the UK, securing jobs and innovation. The British Private Equity & Venture Capital Association (BVCA) is doing a great job to highlight the importance of the sector to the UK economy. Competition from overseas may deter promising firms to remain in the UK therefore SPF can be used to ensure that our competitive advantage remains in place.While I remain pro-business and value Foreign Direct Investment, Vulture Capitalism has consistently raised its ugly head. Good businesses have been overloaded with Debt, Dividends squeezed out, little spent and ultimately we see jobs destroyed and good companies go under. SPF can step in and take over businesses with significant value the same way that the Banks were saved by the government. However this would be an option of last resort and should only be used where value can be gained. SPF should be able to sell such assets at a profit when deemed suitable.
2. Future Savings Fund (FSF)The UK government has not historically been good at long term saving for anything. That is why a Future Savings Fund (FSF) should be ring-fenced so that it can be built up. The financial crash of 2008 and the pandemic have demonstrated both how badly the UK has been prepared for such crises, and also how innovative we can be to meet the challenges we face. Building up the FSF will take time but it can be used to support the treasury with future public pension liabilities of which ￡1.2 to ￡2.2 trillion is unfunded. The focus of the FSF should be financial returns though it can be used to invest in alternative assets too. The UK will need to build up assets of ￡100 to ￡200 billion to see significant returns, this is possible. The Australian Future Fund is a great example of a fund that is transparent, well managed and has seen significant returns annually.The SPF and FSF can be constituted under the umbrella of a British Sovereign Wealth Fund. Where SPF funds makes significant returns it can provide further funding for the FSF.
3. Sourcing the FundSourcing a British Sovereign Wealth Fund remains challenging but there are options, some of which have been discussed in the CIVITAS essays. I would state that UK Government Investments (UKGI) , the Crown Estate and #British Business Bank should be consultant to identify which assets should be used to generate funding for a British Sovereign Wealth Fund. Independently they are doing a good job and should remain independent. The UK many other natural resources and assets that could be used but I prefer the state attracting investment via SPF rather than selling all assets. The British People should always have a stake.

These are some of my ideas, many good ones have been discussed in the CIVITAS essays. We can learn much from the Irish and Australian funds, but all ideas need discussions and an understanding on what the priorities are. We can have a Sovereign Wealth Fund if the Labour Party come to power in Autumn, but discussions should continue.