Reeves and Labour leader Keir Starmer’s plan is to use public money to persuade international investors to pump funds into UK renewable energy and other green schemes. They’ll do this by putting up £7.3billion of taxpayers’ money, then asking the private sector to stump up another £22billion.
Reeves think the private sector will be keen to invest on the assumption that if the government is backing a project, it can’t fail. Personally, I’d argue the opposite.
Labour calls it the National Wealth Fund. Reeves reckons it will be “a crucial tool in our armoury towards bringing about growth”.
Like many, she is looking enviously at the Norwegian wealth fund, which is now worth a staggering £1.3 trillion and is designed to help finance the Norwegian welfare state for generations.
Sadly, we have nothing like it. And Reeves’ plan won’t change that.
Instead, it’s going to create a heap of problems and cost the taxpayer far more money than it ever raises, as former Labour chancellor Gordon Brown has demonstrated.
Those with long memories will recall the Private Finance Initiative (PFI), and shudder.
Brown used this to pour money into public infrastructure such as roads, schools and NHS hospitals, without the cash appearing on the government balance sheet.
This means it does not show up on the national debt.
What could go wrong with that? Apart from everything.
PFI contracted private companies to build and manage public projects.
It was originally launched in 1992 by Tory Prime Minister John Major, on the grounds that the private sector is better at delivering services than the public sector.
But it really picked up steam after Tony Blair’s government won power in 1997, as Gordon Brown used it to spend, spend, spend without alarming the voters.
PFI was suppose to boost accountability and efficiency for public spending, but inevitably, it ended up doing the exact opposite.
It invested in more than 700 infrastructure projects but in 2018 the National Audit Office found little evidence of any financial benefits. In fact, PFI projects typically cost 40 per cent more.
In 2018, former chancellor Philip Hammond put a stop to new PFI projects. However, but existing private-public partnerships will continue to run for decades.
Taxpayers are forking out more than £10 billion a year in charges for ongoing deals. And we will continue to pay them until the 2040s when the total cost will hit £199billion, the Audit Office said.
Now Reeves is going to subject us all to this again.
Labour’s Wealth Fund task force includes Mark Carney, the former Bank of England governor loved by the left despite being widely lampooned as an “unreliable boyfriend” for never making his mind up about interest rates.
It will also include senior figures from big private companies such as Barclays, Aviva, Equitix and Brunel Pensions.
The money will be pumped into green tech such as heat pumps, wind turbines and car batteries, in parts of the country where jobs are short (and Labour MPs plentiful).
Green investments are notoriously risky. Just ask Germany, which pumped hundreds of billions into solar panel production only to see its industry wiped out overnight by cheap Chinese imports.
The Labour left are up in arms. They reckon the private sector will walk away with the profits, while the taxpayers nurse all the losses.
Which is exactly what happened with PFI.
The left are now lobbying to pack the task force with trade unionists and social campaigners, which can’t end well.
Personally, I can’t see how Reeves can create a National Wealth Fund when we are sitting on a £3trillion national debt timebomb.
The chances are that Reeves’ cunning plan will only make that debt bigger. And no prizes for guessing who’ll pay.
