On November 2, 2011, the Centre for Global Studies hosted a roundtable, chaired by Robert Skidelsky and myself, on proposals for a UK National Investment Bank at the House of Lords.
Below is a press release that summarises the discussion and conclusions.
London, 2nd November 2011: Roundtable on a UK National Investment Bank
On Monday, the ONS reported that the British economy has grown by only 0.5% over the past year: private sector demand is depressed by deleveraging and uncertainty, while public sector demand is constrained by the government’s austerity strategy. Britain needs to rebalance its economy away from reliance on credit-fuelled private consumption and towards investment and exports. And the public has lost confidence in banking as a socially useful activity.
A national investment bank presents a potential solution to these problems. Robert Skidelsky at the Centre for Global Studies and Felix Martin at Thames River Capital invited leading figures from the British private and public sectors, as well as representatives of the European and Nordic Investment Banks, to discuss the merits of this solution at a one day conference in Westminster.
The discussants agreed that a national investment bank could meet three broad, interlinked objectives:
- In the short term it could boost aggregate demand
- In the long term it could contribute to the structural reform of the UK economy
- It could strengthen the UK’s financial architecture
Similar to the Nordic Investment Bank or the German KfW, a national investment bank would fulfil these functions by providing finance for critical infrastructure and SMEs, with a view to maximising economic and social, as well as financial, returns. The bank’s objective in infrastructure finance would be both to provide finance and to provide a much-needed focal point for project identification and preparation. The bank’s objective in SME finance would be to improve the intermediation of private sector savings to SMEs both via the capital markets – for example by co-ordinating the securitisation of SME loans – and via commercial bank lending – for example via guarantees. These programmes would both increase demand in the short term and build a stronger British economy in the long term. Finally, the bank could receive an additional mandate to help promote financial stability, and thereby strengthen the UK’s post-crisis financial architecture. By deploying the national investment bank as its agent for intervention in dysfunctional credit markets, the Bank of England could maintain more explicitly its focus on monetary policy.
There are three main – and not mutually exclusive – options for the institutional structure for such a bank. First, a new institution could be set up. Second, it could take the form of a significantly expanded Green Investment Bank. And third, the bank could emerge out of the government’s ownership of RBS.
The discussants agreed that innovative thinking on how to restore confidence and growth in the British economy was needed and that a national investment bank was one promising avenue.