Labour's National Wealth Fund is a dud and a lie

Labour’s National Wealth Fund is a dud and a lie

Labour’s National Wealth Fund is a dud and a lie – according to the experts.

The new organisation was launched this week – but is it really all it claims to be.

According to journalist Andrew Neil

This is not a National Wealth Fund in the way this term is normally understood. Such Funds are the accumulation of government surpluses invested into relatively safe assets so the Fund grows over time. This UK Fund is financed by money borrowed by the state to invest in risky green new technology ventures, some of which will fail, others will have uncertain returns. It’s not about investing in more wind power so why the Treasury uses that illustration suggests even it does not understand what it’s meant to do.

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And there’s this, too:

You already have a “wealth fund”. The Consolidated Fund sits at the Bank of England and can provide all the £ you need. A real “sovereign wealth fund” (eg Norway) serves a completely different purpose and does not fund government domestic spending.

For information, here‘s Wikipedia‘s definition of a “sovereign wealth fund”:

sovereign wealth fund (SWF), or sovereign investment fund is a state-owned investment fund that invests in real and financial assets such as stocksbonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. Sovereign wealth funds invest globally. Most SWFs are funded by revenues from commodity exports or from foreign-exchange reserves held by the central bank.

Some sovereign wealth funds may be held by a central bank, which accumulates the funds in the course of its management of a nation’s banking system; this type of fund is usually of major economic and fiscal importance. Other sovereign wealth funds are simply the state savings that are invested by various entities for investment return, and that may not have a significant role in fiscal management.

The accumulated funds may have their origin in, or may represent, foreign currency deposits, gold, special drawing rights (SDRs) and International Monetary Fund (IMF) reserve positions held by central banks and monetary authorities, along with other national assets such as pension investments, oil funds, or other industrial and financial holdings. These are assets of the sovereign nations that are typically held in domestic and different reserve currencies (such as the dollareuropound, and yen). Such investment management entities may be set up as official investment companies, state pension funds, or sovereign funds, among others.

All clear?

Let’s look at Labour’s National Wealth Fund, now:

So the UK version is an attempt to encourage private investment by matching(?) it with public funds.

Doesn’t this mean any profit from such investments go to the private firms? How is that a national wealth fund, then?

It seems to This Writer that the following comment is appropriate:

“National Wealth Fund” exposed as nothing more than an investment vehicle for banks and investors, it is not a fund investing Britain’s wealth (we only have debt, not wealth).

Malcolm Reavell, who commented above on the differences between a real national wealth fund and what Labour is offering, has provided the following diagrams showing how they differ, so we can all understand.

Here’s a real sovereign wealth fund:

And here’s the Labour version:

The differences should be readily apparent.

Finally, here’s Yanis Varoufakis explaining why Labour’s version of a National Wealth Fund is rubbish:

It seems we can all look forward to a series of creative excuses in the future.

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