https://morningstaronline.co.uk/article/labours-public-private-plans-are-just-return-dreaded-pfi-era
SOLOMON HUGHES warns Reeves’s proposed national wealth fund hands City financiers control over billions in public money for big business — and we get… to pay!
HOW will Keir Starmer’s Labour try to “grow the economy?” The short answer is it is going to try to use public money to persuade international investors to put cash into “growth” industries.
It’s the return of the public-private partnership. The big danger is that, like Labour’s last public-private partnership, the private corporations will get all the growth, while the public sector gets ripped off.
The main economy-grower Starmer is promoting is Rachel Reeves’s proposed national wealth fund. It will invest in key industries like “green energy” and other modern manufacturing sectors.
There is a strong Labour case to run a national bank investing in key industries: the 1945 Labour government set up two such banks, the Industrial and Commercial Finance Corporation and the Finance Corporation for Industry, which lent growth capital to small- and medium-sized industries or larger manufacturing firms respectively.
Labour argued that the City avoided investing in these crucial sectors, exacerbating the 1930s Depression. Both government-founded investment funds were very successful. Jeremy Corbyn’s Labour proposed similar publicly owned national investment banks.
But Reeves’s plan makes public money subordinate to private investment. She told the last Labour conference: “For every pound of investment we put in, we will leverage in three times as much private investment.”
Labour plans to invest £7.3 billion in the fund, and so attract around £22bn private “co-investment.” Reeves says private money will be attracted because the government cash will be “encouraging and derisking investment” from international finance: investors will assume that if the government has a stake in, say, a car battery factory, that it is a “sure thing” and won’t be allowed to go bust or lose money for shareholders.
But what happens if the publicly backed investments hit trouble? Say the car batteries come out too expensive, reducing profits, or need extra investment to fix production problems — will the private investors insist that the public investor take the losses? And if the profits are bigger than expected, will both parties benefit equally?
There are some major signs Reeves’s deals will favour the big private investors. First, because it is putting in more of the money, they can call more of the shots. This is not really a national wealth fund because most of the money will not be national.
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https://morningstaronline.co.uk/article/labours-public-private-plans-are-just-return-dreaded-pfi-era