A UK Sovereign Wealth Fund

Columns are the author’s own opinion and do not necessarily reflect the views of Onward.

We Brits are good at inventing things, but when it comes to growing brilliantly creative entrepreneurial firms into big world-leading companies we fall short. Our startups are snapped up and shipped abroad so jobs and wealth migrate overseas. Our savings lag behind our peers, which leaves us over-reliant on foreign investors. And our pay-as-you-go welfare state, once a beacon of post-war progress, now spends billions on benefits that aren’t curing poverty and faces ever-rising costs as our ageing population writes IOUs that our children will struggle to repay.

This arithmetic simply doesn’t add up. If we carry on down this path, we face a future of higher taxes, deeper borrowing, slower growth and long-term mediocrity.

The government tried to address these problems last year, by launching a so-called National Wealth Fund. But in practice it is a small, technocratic policy bank – not a true, citizen-owned sovereign wealth fund – and it won’t fix the deeper structural issues.

So it’s time for a new approach. One that doesn’t just bandage symptoms but treats the long-term underlying causes of these problems as well. Enter the UK Sovereign Wealth Fund: a bold, long-term proposal to transform Britain into the biggest and fairest asset-owning democracy on the planet.

The new fund would do three things:

• Create an anchor investor to help British startups grow and prevent “founder flight” so innovation—and jobs—stay on home soil.
  
• Slowly build an investment fund to underpin all UK retirement-age benefits, so they would ultimately be paid with dividends from the fund rather than by taxpayers.
  
• Build a reservoir of patient, long-term capital to boost domestic investment and economic resilience, so we aren’t dependent on foreign investors to help our economy grow quickly in future.
  

The Fund would start slowly, becoming the legal owner of existing state-owned commercial investment vehicles like parts of the British Business Bank or the Infrastructure Bank. And it would take on state-owned commercial land and property assets like the Crown Estate, Somerset House or Greenwich Palace. Plus the Crown’s existing rights over future mining, drilling and resource extraction, of everything from gravel for building, to Cornish lithium mines or drilling for the last of our North Sea oil.

Those assets would belong to voters, not to politicians, and be managed on their behalf by fully independent trustees with the same powers and duties as any other pension or insurance fund, to prevent government meddling. Once the Fund grows big enough to fund all the retirement-age benefits we’ve promised ourselves when we retire, the trustees would take over paying them and write a public letter to the Chancellor saying National Insurance contributions should be cut.

It would be a transformational moment. The demographic timebomb of state benefits for more and more pensioners being funded by fewer and fewer working-age taxpayers would have been defused, creating a more sustainable and affordable financial future for our children and grandchildren. Plus the UK would have a huge, commercial, anchor investor so British startups could grow into world-beating firms without having to move abroad. And our economy wouldn’t be nearly so dependent on foreign investors in future either.

But the new Fund would be much more than a big, valuable financial instrument to rebalance our economy. It would rewrite our social contract too, because every citizen would own an equal stake in its wealth, with retirement benefits paid in dividends from assets they collectively own rather than as taxpayer-funded handouts from the state. It would reduce dependency and make every Briton an equal shareholder in the nation’s future as well.

Previous generations built the NHS and the welfare state to forge a new Britain. Creating a UK Sovereign Wealth Fund is our chance to do the same. By fixing some big underlying problems, we can carve out a legacy that will truly last.