The National Wealth Fund has taken over the U.K. Infrastructure Bank, set up by the previous government. The new government is adding Ā£5.8 bn in current plans to the Ā£22 bn of inherited investment potential in the Infrastructure Bank and widening its remit and powers a bit. The Infrastructure Ā Bank lost Ā£22 m in its last reported year, 2022-23.
The idea is to finance projects and ideas the private sector is nervous about, and to crowd in private finance to projects by putting up some of the capital or offering guarantees. Taxpayers should expect returns from these investments at a minimum to cover the taxpayer costs of borrowing all the money to put up the capital. Let us call that 4.5%. It would also be good to provide for capital repayment at say 3% a year. A private investor would clearly Ā expect Ā a risk or equity addition to the return, say at least 5%. That takes the total to 12.5%.
It seems unlikely the National Wealth Fund will aim for this. They may well be satisfied with a low single figure return, and may at least in early years run with more losses. They need to guard against being seen as the Ā last resort for high risk projects the private sector thinks will go under or as a first resort for a potential private sector consortium that sees the Fund as capable of absorbing risk through guarantees or high risk debt tranches which gives the private investors a less risky ride.
The state borrowing at 4.5% to invest in projects should ensure that the overall portfolio can avoid losses and pay for the borrowings.
November 2, 2024
ā Will the National Wealth Fund make a profit?ā
No. If the private sector is ānervousā about the projects the fund finances they are probably risky.
The sort of people the fund will employ will not be capable of dealing with such risk (the usual assortment of overpaid cronies). Itās not their money anyway.
So it will inevitably be susceptible to hare-brained schemes from chancers who make money pulling the wool over peopleās eyes – harnessing energy from the power of tides etc, etc.
November 2, 2024
Please see my post below, should our kind host wish to post it. In fairness it is important to look at the people involved and their history.
Again, I make no judgement on those mentioned.
November 2, 2024
Someone (or a smaller businesses) borrowing for business or property development from a bank is likely to pay something like 9%, 4% over base plus in and out fees of perhaps 2% and legal costs. So they need profits well in excess of this circa 10% level to cover them. If you rent out property you do not even get proper tax relief so you need far more than that.
The logic of having IHT for some but not for others like government or our King of Deluded Climate Hypocrisy is that after a few generation everything will end up in the hands of the ones who pay no IHT people. At 20% or 40% this does not even take that long.
Income tax, NI employer and employee are all taxes on transfer of money from a business to an employee. Spit into three levels to disguise how high the taxes are. On top of this we have enforced workplace pension deductions too. They can easily take about 60% of your income if on higher rate taxes, then they take council tax and commuting to work costs off you and when you spend it another 1/6 is VAT if on petrol 60% is tax. They are only split into three so it looks less bad and to push up tax complexity another tax in itself you have to pay for payroll services on top.
Reeves promised not to increase NI but has done so. For one of my businesses the wage bill increase with the minimum wage increases and maintaining differentials plus the NI changes mean it would have to increase prices by about 8% to balance the books (will customer pay this?) plus my component suppliers and delivery people will be in a similar position. So if they do that my position will be even worse still. This budget will not work it will destroy the tax base and collect less tax over a few years in the end.
November 2, 2024
It will also push up inflation and interest rates, make many leave the country or not bother to work so hard, or to go black market with bartering, cash in hand and living off benefits. The first female Chancellor and perhaps the worst and the most dishonest budget ever – even given the stiff competition. This budget and net zero are an appalling combination – total insanity.
So Leonardo DiCaprio Endorses Kamala Harris and Bashes Trump for Ignoring Climate Change: āHe Continues to Deny the Scienceā asked about his recent flight he say he flew commercial – so that is OK then. First class causes up to three times as much CO2 per head so did he even fly economy? Or like Emma Thompsonās hypocrisy was it first class?
Actress Dame Emma Thompson has been defending her decision to fly from the US to attend a climate change protest in central London. Well dear try economy for a change that saves at least half the fuel per head and you are not that big so would fit in quite easily. Or go first class and shut up perhaps?
November 2, 2024
LL
There TWO NIC’s. The one ‘I think’ she promised to NOT raise was personal. I do not believe she ever meant employers.
ENIC Is a tax on jobs – first coined here on this website and kindly taken up by our kind host.
November 2, 2024
The differential is the wage that dare not speak it’s name.
Soon it will be better to stack the shelves for Ā£1 an hour less than your manager who has to worry about the job after hours.
November 2, 2024
I very much doubt it. It will be down to the financial judgement of those running it and givernment pressure, neither of which bode well.
November 2, 2024
Exactly, thus it will lose even more than at present.
Amazing that politicians with absolutely no business, commercial, financial, or management experience, think they can actually judge what may be a good investment, when many cannot even understand the effect of taxation, let alone human nature.
November 2, 2024
If the private sector is nervous of such projects then we can be sure they will turn out to be white elephants.
No one in government has ever tun a business so what makes them think they will be successful. Of course itsnot their money they’re risking so they won’t care.
What’s the betting it’s spent on carbon capture or similar vanity projects which will do nothing to help the planet, just virtue signalling from the government.
I see Packham is suingthe government for not bankrupting us quickj enough. A thoroughly unpleasant character no doubt part funded by the Brussels Broadcasting Company.
November 2, 2024
Well paid bureaucrats with gold plated pensions working with one-term politicians to “invest” someone else’s money on schemes the private sector won’t touch.
What could possibly go wrong?
A sound use of my taxes and method to increase debt. Let’s start with HS3, a high speed train link from Torquay to Aberystwyth! A 30 mile bridge across the Bristol Channel and a 40 mile tunnel under the Brecon Beacons should do it.! Solar panels on the carriage roofs, etc.
November 2, 2024
This isnāt like Norwayās Sovereign wealth fund which is built on accumulated income from hydrocarbons. It is just money switched from one trouser pocket to another and rebranded. Pointless.
November 2, 2024
No doubt this quango will be stuffed full of labours friends who will have little idea about what investment means.
Let’s not expect anything good – labour have yet to prove they can get anything right.
November 2, 2024
I wonder if they would think it such a good idea if their pensions were invested in it.
November 2, 2024
There is literally no limit to what ātheyā will take our money off us for – public āservicesā, grand houses like Chequers and Chevening, risky investments, overseas aid, putting illegal entrants to the country in hotels, gold plated pensions- the list goes on and on and on. Itās no wonder there is no money for Winter Fuel for hard up pensioners who have paid so much tax they didnāt have any money left to save for retirement.
November 2, 2024
Labour are making it so economically unattractive for the private sector to do ANY projects that maybe there will be a few low-risk ones this fund can pick up. I would still expect them to make a loss on those.
OAM I see the OBR have said the recent budget will result in additional growth in 2070. What superb models they must have to be able to predict economic conditions 50 years ahead.
November 2, 2024
Czechia is taking a share in Rolls Royce and pressing ahead with SMRs while also ordering the much simpler and cheaper large reactors from Korean KEPCO. Their nukes were built in 7 years in the UAE and provide a large proportion of their future energy. The UK is still going for the EDF European Pressurised Reactors which are already delayed and masivover budget.. Czech nukes already provide 33% of their electricity already.
They seem to have politicians and civil servants who can work out that intermittent wind and solar are not going to work. They even have an expanding car industry. They use government investment sensibly. Maybe we should ask them to manage the UK for us.