Siren Sounds

Growing the size of the economy was a central promise from the Labour Party during the election campaign. This week, they hit the ground running, with Chancellor Rachel Reeves announcing the creation of a National Wealth Fund (NWF). It will align the UK Infrastructure Bank and the British Business Bank to invest ￡7.3bn in the ‘new industries of the future’, aiming to attract ￡3 of private cash for every ￡1 of public funding put in via the NWF, which, if successful, would take total investments to around ￡29bn.?

In theory, all very nice. But the devil, as always, will be in the detail.?

The NWF isn’t a Sovereign Wealth Fund, which I’ve previously cautioned against in the case of the UK . Nevertheless, as Emma Duncan warns in The Times (paywalled), even this isn’t without risk. Germany, for example, channelled around €200bn of subsidies into the solar panel industry, only for China to outflank them. China’s largesse has been good for consumers outside of China who are being subsidised by Beijing, but less good for the German government (or, rather, German taxpayers).

When it comes to government-backed investments, we need to ensure the right governance structures,?talent and?incentives are in place. Singapore’s GIC is proof that this is eminently possible, but this interview with Managing Director Lim Chow Kiat shows how disciplined we would need to be : “The unique thing is not what most people see. The most unique thing is the governance arrangement. The government makes it very clear and is very disciplined about that – to leave GIC alone to just focus on making money. It is hard for a lot of governments to do that.”

(One of our ten recommendations in Backing Breakthrough Businesses was to bolster the independence of the British Business Bank to enable it to act in the best possible way and over a longer time horizon.)

Last week, UK Finance and Global Counsel argued that the government should consider ways to force early-stage growth companies to repay tax breaks if they leave the UK. This would have the unintended (though obvious) consequence of making the UK less attractive for entrepreneurs and investors, as well as set a bad international precedent for protectionism.

The rise of economic protectionism is also something that The Economist raised this week around UK pension funds . It can see the case for removing barriers that prevent funds from investing in domestic assets (for example,?we think Stamp Duty Reserve Tax should be abolished ), or the consolidation of small private-pension plans to give them economies of scale to invest in private markets as we saw in France, but it warns against increasing calls to limit their ability to invest outside the UK.

Protectionism, even if not explicitly badged as such, is one of those ideas that often sounds like common sense for many people. There’s a reason why, centuries after economists first exposed its folly, politicians of all stripes are attracted to it. But something making for a good sound bite doesn’t necessarily mean it makes for good policy. It’s heartening to see our leaders so focused on the pursuit of growth – but that focus can’t be a substitute for rational decision making.

On the Cards

After an intervention from Tony Blair, Business Secretary Jonathan Reynolds has ruled out introducing digital ID cards .?

First and foremost, we don’t need cards (digital or otherwise). We already have lots of digital identities – i.e. unique identifiers, attributes, and credentials that represent us in digital interactions. Currently, those associated with the government are fragmented – e.g. GOV.UK Verify, NHS Login, HMRC Government Gateway, your Council Tax account etc.?We just need to bring some order to it by giving each person (and business) a singular digital identity that sits above all this.

Blair framed this around controlling immigration, but I respectfully disagree with this approach. As I argued in an essay collection for which he wrote the foreword , the prize of getting this right is much more appealing: the end of bureaucracy. To name just a few: health check-ups based on age and medical history automatically scheduled; tax forms automatically filled in; benefits paid automatically; training offered based on individual skills and trends.?Things could only get better.

Great Minds

As reported in The Guardian , Rachel Reeves is poised to announce an economic advisory council to boost UK growth. It will be headed by innovation expert John Van Reenen, who is a strong pick. His work on Lost Einsteins shows why we need to take seriously our failure to support the best and brightest born into low-income families. Meanwhile, he was a (all too rare) level head during Brexit debates on EU immigration. Great hire.

Maestro, please

BBC Maestro has asked us to share an opportunity. They are working with a (as yet unnamed) major entrepreneur on a new course and are looking for entrepreneurs at different stages of their journey who would like to have the opportunity to speak to this person about a particular challenge or decision they are facing. This won’t be a pitch so much as a chance to get insight and advice from a serial entrepreneur who built a $250 million dollar business in four years.

They are looking for a mix of entrepreneurs at different stages. Drop them an email?to find out more.