National Investment Fund is needed to boost investment in green
technologies and achieve a net zero economy, says report New
public body should take strategic stakes in firms to secure
future jobs and prosperity from transition to net zero
The UK is at risk of falling behind in
the global race to achieve a net zero economy without strategic
public investment in green manufacturing technologies, according
to a new report by the IPPR think tank.
In the US the Biden administration has
just marked the first anniversary of its Inflation Reduction Act,
aimed at boosting domestic investment in clean energy
technologies and infrastructure and creating green jobs. The EU
has meanwhile responded with its own Green Deal Industrial
Plan.
IPPR says without urgent government
action, the UK will remain on the starting blocks of the race to
capture the green industries of tomorrow. A new, green industrial
strategy is needed, with the government setting a clear direction
for investment that will deliver prosperity, levelling up,
reduced emissions and restoration of nature.
The report,
Growing green: A proposal for a
National Investment Fund calls for a new UK-wide public body to help finance
investment in net-zero industries. The proposed National
Investment Fund (NIF) would provide finance for investment
projects in green manufacturing. In doing so, it would encourage
(or “crowd-in”) private companies to make strategic investments
that they would not otherwise make.
The NIF would provide equity finance
to firms, supplying funding in return for becoming a part-owner
of the business and sharing in its success and future profits –
analogous to the type of investment offered on the BBC’s
Dragon’s
Den.
Initial funding to the NIF itself
would be provided by the Treasury, but it would be further
supported by tax revenues from North Sea gas and oil, or by
levies which IPPR is urging be imposed on share dividends and
‘buybacks’ - effectively diverting excess profits and “economic
rents” from fossil fuel activities into productive investments in
a future green economy.
Among detailed recommendations
on how the NIF would work, IPPR calls for it to:
-
Invest via equity finance in
companies willing to
expand green manufacturing activities and to decarbonise heavy
industrial processes
-
Aim to
support firms that are
important to the UK’s future economy and to grow the economy in
more deprived regions, rather than aim for an immediate return on its
investment
-
Operate alongside existing funding
schemes like the British Business Bank, the UK Infrastructure
Bank and research grants from UKRI to
‘crowd in’ additional
private financing
-
Encourage the companies in which it
owns a stake to reinvest profits in growing the economy and in their own
staff rather than
paying out excessive dividends.
-
Operate under formal
transparency and
accountability rules, reporting annually to ministers and Parliament on
its value for
money in terms of
regional rebalancing, decarbonisation, job creation, boosting
domestic supply-chains, technology development and
others.
Simone Gasperin, IPPR
Associate Fellow, said:
“The National Investment Fund is a
policy proposal for our time. The UK needs to finance and
coordinate strategic industrial policy projects that will deliver
a net zero transition through economic prosperity and inclusion.
The cost of inaction on people’s livelihoods will be too high,
while there are huge opportunities to be captured by the
government co-investing with private companies.”
George Dibb, Head of the IPPR
Centre for Economic Justice said:
“For the UK to hit net-zero our
households and businesses will need to buy new green products –
from electric cars to heat pumps. We have a choice: do we want to
make those products in the UK with all the jobs and prosperity
that come with green manufacturing, or do we want to import them
from abroad?
“The USA and EU are making major
investments to secure the manufacturing and technologies of
tomorrow, and its time the UK stepped up. Our proposal for a
National Investment Fund is a practical way for the UK government
to crowd-in private sector investment by strategically supporting
companies and taking a share in their future
success.”
