Does Britain need a sovereign wealth fund?

In both David Cameron’s speech on Thursday and Ed Miliband’s last week, both party leaders set out their vision for how Britain can compete in the ‘global race’ amid growing competition from the rising economies of the Asia Pacific region and beyond.

What is now clear is that we have very different visions for what that race will look like, and of what Britain’s strategy should be. The Conservatives want to see our country locked into a scramble to the bottom: a downward spiral of falling wages, declining living standards and wasted potential. Labour, on the other hand has a vision of an ambitious Britain – one building infrastructure, investing in skills and growing small businesses in a race to the top.

For us to be successful a player in this fast-changing global environment though, we need to be able to invest in home-grown success stories, as well as exploring opportunities in booming economies abroad.

At the Co-operative Party Conference taking place this weekend, I have outlined plans to modernise the Crown Estate and the way its £8.1bn portfolio is managed on behalf of the whole country. Currently 1960s legislation restricts the Crown Estate’s activities to property and land investments in the UK.

This is clearly a wasted opportunity. Countries across the world including the largest, Norway, and individual US states such as Louisiana all hold these kinds of assets in Sovereign Wealth Funds. These state-owned bodies work to maximise the returns from crucial national property such as oil, creating an investment bank for future liabilities such as pensions, as well as vehicles for investing in nationally-important priorities such as infrastructure projects and in bringing new technologies to market.

Reform of the Crown Estate presents us with an opportunity to create a Sovereign Wealth Fund for the UK. By allowing the Estate to invest in other sectors of the UK economy such as manufacturing, green technologies and in advanced engineering, we can help ensure that home-grown businesses have the investment they need to export and compete in the global economy.

By allowing investment in booming foreign property markets, the Fund would strengthen our links with these growing economies, and improve access to these markets for British businesses.

As with all investments, this is a change which would need to be carefully planned. Long term targets and specialist investment staff would be needed to ensure that the Crown Estate continues to invest with caution and care, growing the already £250m it contributes to the UK economy each year.

If managed correctly, the modernisation of the Crown Estate into a Sovereign Wealth Fund for Britain, would alongside Labour’s plan for regional banks, help strengthen access to capital for British business.  It would help drive new co-operation between international business and the United Kingdom.  Crucially wealth relies not only on the talent and imagination of our entrepreneurs it also depends on creating the conditions in which they can succeed.

A sovereign wealth fund could help strengthen our business links with the growing economies in the G20, improving access to new technologies and new markets which Britain can benefit from.  Ultimately this would be part of a strategy for winning the global race for the many, not the few, with international co-operation crucial to its success.

Gareth Thomas MP is the MP for Harrow West and the Chair of the Co-operative Party