The UK risks losing out to the US and EU in the global race to a net zero economy unless the government increases green investment by taking a stake in the companies of the future, a thinktank has said.
The left-leaning Institute for Public Policy Research said Britain needed a “national investment fund” (NIF) that would back new firms and secure a share of any future profits for the public as it called for the state to adopt a “Dragons’ Den” type approach to supporting enterprises.
The IPPR said the UK needed its own version of Joe Biden’s Inflation Reduction Act – which offers US federal government subsidies to support clean energy, infrastructure and green jobs – and the EU’s proposed green deal industrial plan.
Simone Gasperin, an associate fellow at the IPPR, 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.”
Under the thinktank’s proposal, the NIF would provide finance for investment in the green industrial sector, with the aim of encouraging private companies to make investments they might otherwise be reluctant to make. The IPPR said the plan would strengthen the UK’s manufacturing sector and help level up the economy.
Governments of left and right have been reluctant to back the idea of the state taking a strategic stake in private firms since the 1970s. The National Enterprise Board created by the Labour government in 1975 ended up primarily concerned with keeping loss-making firms afloat and generated a longstanding aversion in Whitehall to “picking winners”.
Keir Starmer has vowed to launch a publicly owned clean energy company, which may invest in emerging technologies, in its first year of government if Labour gains power.
The IPPR said it was important to revive the idea of an active, modern industrial strategy.
Initial funding to the NIF 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 the thinktank said should be imposed on share dividends and “buybacks”. This would divert excess profits from fossil fuel activities into productive investments in a future green economy, it added.
In exchange for the financial backing, the state would become a part-owner of the business and share in its success and future profits. The IPPR said this would be analogous to the sort of investment provided to budding entrepreneurs by tycoons in the Dragons’ Den BBC TV series.
In its report, the thinktank said that “in the global green race to reap the benefits of the transition to a net zero economy, the UK is at severe risk of being left behind. While other countries recognise the need for green investment and industrial policy, the UK government is sitting on the sidelines.”
