Welcome to the Treasury Select Committee on Tuesday 1 July 2025. Today we are looking at the National Wealth Fund. We are delighted to have as our first witness the chief executive of the National Wealth Fund, John Flint, who has been involved in dealing with these issues in his previous role. He was, of course, formerly chief executive of HSBC. For the purposes of today, most usefully, he is the former chief executive of the UK Infrastructure Bank, which he started in September 2021. Mr Flint, I will start by asking what the difference is between the UK Infrastructure Bank and the National Wealth Fund.

As you referenced, the National Wealth Fund was born out of the UK Infrastructure Bank, but the key difference is that the mandate has changed. The mandate for the UK Infrastructure Bank was focused on delivering finance for economic infrastructure. We now have a broader mandate to support the industrial strategy of the Government. We are growing again as an organisation. We have been asked to grow from roughly 300 people to circa 400 people. There is a bigger mandate, more human resources and more skills. We are going to have to recruit to staff some of the new sectors that we do not currently have expertise in. We have more financial capacity. The notional capacity has grown from £22 billion to £27.8 billion. Perhaps more significantly, the risk budget has gone up as well. The risk budget, or the economic capital budget, has gone from £4.5 billion to £7 billion. That is quite a significant increase in the appetite for risk. There is another change in flight, which relates to how we are intended to support local authorities, the cities and the regions. It was born out of an existing organisation, but it is quite different now.

The extra £5.8 billion sounds like a lot to many people but, percentage-wise, it is not so significant. You talk about the industrial strategy and the new skills. Which areas are you going to be focusing on that are different from what the UK Infrastructure Bank was focusing on?

We do not choose the sectors. The Chancellor does that. The latest strategic steer made our new priority sectors clear. There is some overlap with the old ones, but there are some differences too. Of the new priority sectors, clean energy remains in place. That has been more than half of our activity to date, and I fully expect that to continue to dominate our agenda. We have also been asked to support digital and technologies, transport and advanced manufacturing as priorities. We have been encouraged to work out what role we can play with respect to life sciences and creative industries. There are three sectors that were priorities previously, waste, water and natural capital, that are no longer priorities, but we have permission to continue to play a role there, given that we have developed skills and capabilities. We will be busy across all those sectors.

Do you set the direction or does the Chancellor?

The strategic priorities are set by the Chancellor and then, as the accounting officer and chief executive officer, it is for me to organise the resources of the organisation in pursuit of her priorities.

Do you have a dialogue with the Chancellor about her strategic priorities?

I see the Chancellor through various set-piece meetings, but I would not say that I have a dialogue with her on it, no.

Can I go back to the UK Infrastructure Bank? We had many conversations. I visited you as the Minister when you were set up, and I took the legislation through. I want to home in on what is different specifically. I certainly get the greater specificity of an industrial strategy. You reasonably say that what we, as the previous Government, tasked you with before was looking at, broadly, economic infrastructure. It is difficult to be explicit about what you would actually rule out, though, in terms of what is different. It is an elegant characterisation that I would expect from you, but, at the same time, there are many things that could have been characterised as specifics within the industrial strategy now that could have been construed as economic infrastructure then. Is that not true?

Yes, it is true. The engine that we built is the engine that is serving the National Wealth Fund now. That ability to originate, execute and risk manage a transaction through its life is everything that we built in the previous three years. I know there is a bit of political tension around that. I like the fact that the Government chose to repurpose and use us and build on what we had achieved under the previous Government, rather than starting again, because we are productive now. The rate of our capital commitment, since we became the National Wealth Fund in October, is up 80% on what it was before, so that very pragmatic decision, from my point of view, allows us to build on it.

I am not going to linger on that. That is quite superficial, but it is getting to the heart of what is different. Can I ask, following up from the Chair’s comment, about the relationship you have with local authorities? I recall discussing the potential for collaboration. You employed people who would almost invigorate some of our larger metropolitan and local authorities and metro mayors, with the functional expertise to define the pathway for investment in infrastructure projects. Again, that was true then and is the same now, is it not?

The problem that we identified and described then is the same problem that you can identify today. Where we had got to was that we developed a lending function for local authorities, so cheaper than PWLB, for projects relating to infrastructure. We developed an advisory function, which, in the last 18 months or so, has become very productive. We have now executed eight loans. We have executed 67 different pieces of advisory into the local authority space. The grit of the problem remains that many of the local authorities are very resource-constrained. The reason that we have done only eight financings is that there simply are not enough projects being transitioned from vision into something that is investable. We have been asked to consider how we can develop resource inside the National Wealth Fund that the local authorities can use to plug that gap. The original problem looks very similar. We have made some progress—I think modest progress—in being part of the solution. The next intervention, if you like, is for the National Wealth Fund to develop local authority early-stage project development resource inside the fund, which is quite a different thing.

You talked about the new skills that you will have to bring in and the extra 100 people. Can you give us some examples? Are some of those related to the issues that Mr Glen has highlighted in local government?

Yes. Of the 100, 20 of the incremental headcount are earmarked for exactly this. We have a consultant working with us at the moment, who has long experience of being in local government, to help us figure out quite what the shape of those 20 people will be. Are we recruiting people with project management skills, planning skills, procurement skills, et cetera? It is clear that it is going to be different from the financial intermediation skills we have brought on. Twenty will be for that. The rest of it will be for general growth of a machine that now needs to produce more. Our business plan for this year sees the rate of capital commitment go up by 100%, so we have to be able to cope with that growth. There are also some skills gaps. If we are going to play a credible role in advanced manufacturing, we are going to have to do a bit of recruitment there, because we did not have those skills in the old organisation.

I know that Ms McEvoy has a strong interest in the regional side of things. If I was a local government leader, say an elected mayor, and I had an investment plan or an idea, do I approach the National Wealth Fund? Does the National Wealth Fund approach me? How would these people be deployed to support that investment locally?

For the larger local authorities, there is a relationship already in place. There is already a dialogue, and we know what their plans are. Those relationships are all different. The ones that you would expect to be more advanced are more advanced. They have a vision and a set of projects in their investment pipeline. We can scrub that with them and work out which ones we might be able to work on. There are some others that are not ready yet. They do not have that investment pipeline. Our advisory services at the moment can go some way to helping with that, but one thing we have learned is that it is not enough, which is why there is this extra resource, or this extra unit, to plug the gap.

I have a couple of things. You spoke yesterday about the banking industry’s risk appetite. You have this extra risk budget. Do you want to explain what you were saying and what you think? We will touch later on how you are going to try to bring in money from other sectors as part of what you do. What are your particular concerns about the banking industry, and what do you think it should be doing differently?

We were established with a fundamentally different risk appetite to the market, which makes perfect sense. There is no point in deploying public money in competition with them. In rough terms, probably the best way to think about it is, if you think about the amount of equity that you need to support the risks you are taking, under UKIB we had the ability to take about four times as much risk as the banking system per pound deployed. With the new increase in our economic budget, we can take roughly five times as much risk, which is fantastic. That gives us lots of latitude. We have lots of latitude to be creative here. We have big risk budgets. We are not subject to regulation, so there are lots of ways that we can be productive. The comment I made was not just about the banking industry, actually. It was the finance system. I have had the privilege of sitting on both sides of the fence now. One penny that has really dropped for me in the last few months is the structural rigidities of private pools of capital. They behave in a particular way, often because they are regulated in a particular way, and have to do things within the boundaries. They have to colour within the lines all the time. That means that, when you are facing a challenge such as the climate transition, and faced with the costs of financing that, their ability to really lean in is limited. The point I have been making for a while is that, from a risk perspective, the Government cannot be faulted for their risk appetite. In the four years that I have been in this role, there has been plenty of appetite for risk. We have always been encouraged to take it and been supported when we do. My growing concern is—and we know that the Government are fiscally constrained—that this will not be enough. My provocation yesterday was that I would encourage the stewards of private capital to go back and challenge themselves on their risk appetite. £7 billion of economic risk budget is enormous for a new arm’s length body, but in the context of the pools of private capital, it is tiny. If we could nudge them into making a bit of a shift, we would all benefit. There is another thing. I do not know whether it got picked up yesterday, but the country’s growth outcomes are, for me, largely consistent with the country’s risk appetite generally. I have been trying to nudge that conversation along.

It is easy for you to say from where you sit now, but you were chief exec of HSBC for all those years. What is the advice you would give your former self now, and how would you do it?

Everybody who is running a publicly listed company can reasonably hide behind their fiduciary responsibilities. The advice I would give to my former self is, “Do much better at engaging with your shareholders and giving them choices.” I personally like the idea of very regular climate resolutions for publicly listed companies, so that the chief execs and the boards know at all points what their shareholders really want. At the moment, there is a lot of good-faith guessing going on about what is in the best interests of shareholders. We are deploying public money on behalf of everybody in the nation by taking significant risk in the hope that we will generate a modest positive return. The pools of private capital are sitting back and saying, “I will finance the green transition, but these are my terms. I still need a 10% or 12% return on equity. I still need the following IRRs,” et cetera. I get all of that. Everyone is acting rationally within the context of their constraints. My fear is that, if we do not change anything, we will not have enough resource to get there. It will not be enough.

Do you think shareholders have a higher risk appetite?

We need to find out.

That is a fair point. You have announced that you will be standing down this summer. Do you know what you are going to be doing next?

No, I have not committed to anything yet.

Do you know whether the recruitment process has started for your role?

Yes. I am not formally involved in that.

Will it be September that you stand down, or the summer?

It is the middle of August.

Thank you for coming today.

Just one thing?

I am sure the applicants will be looking and listening with interest.

It is a fabulous job. The intellectual content of this role is brilliant. It is the most complex puzzle, with some interesting stakeholder management as part of the mix. The key personal attribute for whoever is next is that they need a spine, thick skin and self-confidence. I have the privilege of deploying public money, so I know that everybody therefore has a right to have an opinion. We are trying to solve complex problems, and you have to be able to back yourself. That is, for me, the most important thing. This is not a job for the faint-hearted.

Let me try to answer this in two ways. The immediate priority is that the pipeline is very busy right now with a lot of complex transactions. The first thing is to get up to speed with that and do not let it slow down, because there is some really good momentum in there. The second is to complete the hiring and the growth from the old mandate into the new mandate. The third is this resourcing challenge for the local authority piece and really getting clarity with the shareholder about exactly what is required there, so that we are good. The thing that I never managed to properly resolve was the comms challenge for the organisation. When I started in the autumn of 2021, in my mind, I had always figured, “It is a start-up organisation, so we will have to spend a year or so explaining ourselves and then it will get easier.” The fact is that it just has never got easier, with hindsight for lots of good reasons. That is the thing that I feel is still very incomplete. Whoever is in this seat is going to have to continue to do a lot of advocacy, explaining and market positioning. You have to be nimble with that, because, with one shareholder, as the shareholder’s priorities change, you have to shift with it. That is the thing that I will step away feeling is not complete.

I am really sorry that they are not here so we could have the debate together, because that is nonsense, bluntly. We have not taken the cream off the top of anything. Under the previous Government, we had a very strict additionality discipline, so we deployed capital only where it was absolutely necessary. Where it was not, we walked away. We have a slight loosening of that discipline now, where we are encouraged to anticipate weakness at the sector level, so we have more room there. It is simply not the case that we have done that for the pension industry, but their comment reinforces my comment about the rigidities of the pools of private finance. The pension industry is effectively saying to the Government, or to the public sector, “We want risk of the following shapes and sizes. You”—the National Wealth Fund—“transform that risk so that it works for us.” We will do some of that. We will have to do some of that, and we will have to get better at it. We should accept that challenge, but there is only so much of that we can do before our capacity is gone.

Yes, I am confident we can. I say that because we are four years in and we have always operated within the constraints of public sector pay. For clarity, as public servants, the staff of the NWF are very well paid. In the context of the private sector, they are not so much, or not at all. We have found it not easy but possible to recruit the right talent to fulfil this mandate. I have no doubts that we will be able to do the same again. If we were trying to build a 10,000 or 20,000-person organisation, I might be less confident. We need to find the people with the right skills at the right point in their career where these roles are really appealing, and I am very confident that we can do that.

I struggle to figure out how we might do that without providing finance, because the key essence of who we are is an intermediary. We provide that finance. If the entrepreneurs can source private finance, they are better off doing that. Everybody would like us in their deals, but I think the market also understands that often we can be seen to be the last call in town for the business. It continues to make sense for that validation to come through the provision of finance. Everybody would like us in their deals. We have to say no to a lot of opportunities, sometimes because we are not needed, and that is a good conversation, and sometimes because we do not think that the opportunity or the business model is appropriate or good enough, and that is a much tougher conversation. As a final thought on the entrepreneurs or the growth capital piece, we can play a role as part of the solution to this problem, but only part of the solution. Our minimum ticket size is £25 million. Given the request to double the rate of deployment, we cannot do that by dropping the minimum ticket size. We have part of a role to play, but we should not promise or pretend that we are going to be the solution to that problem.

We do not see it that way at all. The feedback we get is, candidly, different from the feedback you suggest. We have lots of flexibility in how we operate. The quickest we have turned around a deal from hearing about it to executing it was three weeks. Having come out of HSBC, there is no way we would have managed to do that there. That was a small transaction, as it turned out. The longest has been three years. It was a great transaction at the end, but this was a company that was struggling to raise private finance at the same time. If American firms are quicker than us to make decisions, it probably means that they are quicker to say no. We care about customer service in that sense.

That is a great question. We have not spent any time thinking about that, but we probably should. If you think about small businesses in clean energy supply chains, as of today they might come to us or they might go to the British Business Bank, the Crown Estate or Great British Energy. We have to stitch that together in a more coherent way.

That was the first transaction that we committed. It was a pretty straightforward local authority loan. It was actually executed by PWLB and then novated to us afterwards, because we were very new at the time. The nice thing about that transaction is that it financed a piece of infrastructure that was delivered on budget and on time. That quay is now being used, is unlocking the hinterland behind and is allowing the economic development of that area. From our perspective, it was a success.

Further to the Chair’s earlier questions, you are coming across as someone who is really knowledgeable about this organisation and really passionate about its mission. You are not moving to anything specific after you depart. I wondered whether you could tell the Committee why you are leaving.

I came to build a new organisation for HMT four years ago, and I feel that I have done that. It has been a huge privilege. I have really enjoyed it, but it is complete from my perspective. I would like a new challenge now.

You were not asked to leave by any Minister?

No, not at all.

I want to talk about the size of the National Wealth Fund at the moment. We have had evidence showing that it is significantly smaller than comparator organisations in France and Germany. We have heard from you about your determination for funding from the National Wealth Fund to be additional. Do you think the National Wealth Fund is at the right scale right now?

Yes, for now it is fine. Remember that we have capacity of £27.8 billion and have committed just over £6 billion, so there is still £21 billion to go. We have a £7 billion economic risk budget. We are currently holding £1.2 billion of economic capital, so there is plenty of scope. KfW in Germany is decades old, and in France the collection of organisations have a long history. Given that this organisation is only now entering its fifth year, we have laid the foundations. I hope that, if it continues to perform, in decades’ time, it will be approaching a similar scale to some of the other policy banks that you reference.

You think that it is at the right place in its journey at the moment, but there is more growth. What is the ideal size of the UK National Wealth Fund?

I do not think I can give even an educated guess to that. At what point in time? I suspect that much will depend on the transition to net zero. If net zero remains a legally binding commitment, I suspect the National Wealth Fund will have to do a lot of heavy lifting. That might be a driver of accelerated growth, but what is the time horizon? Is it five years, 10 years or 20 years? This could just continue to grow with the economy.

How would you make sure that, at each point in that growth, you are true to the objective of the fund, which is to generate additionality?

Every time we enter a transaction, there are various things. Does the transaction meet the mandate? Is it consistent with the legal powers that we have? Is the financial risk correct? We also put it through an additionality test: is it meeting the additionality disciplines that we have been set? The additionality disciplines have flexed a little bit, so we have more latitude now. At a transaction level, we answer that question at every deal. We have a story or narrative around every deal. At the end of the year, we produce an annual report and accounts, and we begin to stitch all of that together to tell a portfolio impact story. In terms of how the organisation has been built, for the three years where the strict additionality discipline was necessary, it was a really good discipline for us, particularly since most of the people I brought into the organisation were from the private sector, where we did not have that lens. Being required to have that lens has meant that we have built strong muscles in that area. It was culturally interesting when we got permission to be a bit broader in our thinking. The first couple of discussions were, “Why? We do not want to do that.” We have got our heads round it now. You can be comfortable that we will continue to be additional. We have quite intense monitoring or supervision from the shareholder. We have quarterly shareholder meetings. We have a sponsor team that interacts every day.

You can see the risk, if there is an intention to generate additional investment into these key sectors and the National Wealth Fund grows, that the focus on additionality could decline. Can you see the risk I am highlighting?

If I may, I think that risk sits on your side of the table, not ours, because we will operate to the guidance that you ask us to operate to.

We will come on to the role of the Government in the next panel. I want to drill into this question about the relationship between the British Business Bank, Innovate UK and the National Wealth Fund. We have heard from other witnesses about the 23 different organisations that are involved. You have talked about the people who are coming into your organisation to help navigate that environment. Are you confident that the relationships are functioning as best they can at the moment, or is there still a journey to go on to make sure there is a smooth relationship for businesses that are coming to you for investment?

There are two quite distinct parts to that. The public finance institution landscape is very complex, but the boundaries are reasonably clear. The demarcations are quite clear. You get into real difficulties where there are clear overlaps. There are no clear overlaps between what we do and the British Business Bank, for example. You can be comfortable that is not your biggest problem. For somebody in the private sector who might want to seek public finance, I have huge sympathy for their challenge in knowing where to go. That is not getting better. That challenge is getting a little worse, because there are more public finance interventions now available. We have referenced supply chains for clean energy. It requires some further thought. There was an ambition floated that the Government might reorganise some of this and try to simplify the PuFin landscape. I completely understand why that decision was not taken at the time. You cannot do everything all at once, but I would encourage HMT not to close that file. If you have a proliferation of subscale public finance institutions all facing into similar organisational challenges of hiring the right people, finding the right systems and risk managing effectively, doing that multiple times is not the most efficient way to do it.

The modern industrial strategy suggests that there is a little overlap between yourselves and the British Business Bank. I hope we can drill into that with it, or with the Minister later. This is your moment. What would that environment look like in a more ideal setting? You have alluded to the fact that there are a number of different organisations in this space. What is the first step to either rationalising or making that journey a bit more straightforward for the customer?

I would go back to the change in the fiscal rules and how that change might unlock the role that financial transactions can play in the way Government allocate resources. This is a huge opportunity for the Government. It is only a few months into that, but all the potential upside remains available. In practice, that means that HMT in particular is going to have to get very comfortable being an intermediary—not just being a control function, but taking risk across the capital spectrum, broadly across the economy. Once the scale of that opportunity is realised, I hope it will become clear that the way to do that organisationally is to consolidate all of the intermediation into one single Government-owned balance sheet, so that you can get the benefits of risk aggregation and risk diversification and have all the benefits of economies of scale. From a governance perspective, you are doing it once and doing it well. That is an opportunity. It is a medium-term opportunity. The change in the fiscal rules and the role that financial transactions could play really lend themselves to that opportunity.

Leaning into your point about risk. The National Wealth Fund has registered quite significant losses. Should the National Wealth Fund be profitable?

Yes. I think that, over time, we should be modestly profitable. If we can get to a state where we are taking risk—and we will be taking losses along the way, but getting to a position where the National Wealth Fund is not a drain on the taxpayer—that is a solid foundation for future growth. It changes the narrative completely. If we are not a drag, making the argument to continue to do more of what we do will be easier than if we are a drag. It will take several more years to get to a point where we know whether we are profitable.

There were higher losses in the last year than there were in the year before. What are the reasons for that?

It is accounting. Sorry, I do not mean to be dismissive.

Most things are accounting.

The way to think about losses is that they are in two buckets. When we take risk, the accountants require us to set aside capital for the expected losses, and that does not create a loss. As the transactions live, if the credit risk or expected performance of the company deteriorates, we might take bigger provisions. If you increase the amount of capital, that will run through the P&L. If you revalue an equity position lower, it will run through the P&L. The losses seen last year would all have been unrealised losses. The next bucket comes when you actually recognise that money is gone and is not coming back. We have not crystallised losses yet. That will come. That is part of the business model. That is why. At this stage, in the early years of the balance sheet, you are seeing volatility through expected credit losses and revaluations.

I want to talk about the National Wealth Fund’s objectives. It is not just supporting growth. It is also regional growth, getting to net zero, the industrial strategy and a whole range of social objectives alongside, of course, the growth objective. How do you think the National Wealth Fund should help us to meet these?

Which objectives do you mean?

I mean supporting regional growth, getting to net zero and the other objectives that are not just a portfolio-based thing. Rather than saying, “We are having profitability on these investments,” there are other objectives that are built into the National Wealth Fund. Doing those—clearly there is a multiplicity—there might be trade-offs. How do you incorporate them?

This is a really live debate inside the fund at the moment. Everything we do has to be in service of the climate transition or the growth mission. We have our priority sectors and this big pipeline of activity coming into us. How do we decide what becomes part of the portfolio, given that we need to become profitable over time, operate within our risk budgets and crowd in at roughly three to one? We know that the Government care deeply about creating good-quality jobs and that our investments need to be geographically dispersed. You have this multifactor maths problem to solve, which is great fun. As a result of all the different things we have to solve for, no single transaction is ever going be perfect. We have not done anything yet that hits every objective. We try to be thoughtful at a portfolio level to make sure we are building something that is going to meet and aggregate all those objectives. We have a really high-quality impact function in the organisation, which is resourced largely through the recruitment of public sector economists, who are really good at this stuff. We also try to use their skills to influence the shape of a transaction. When somebody comes to us wanting public finance, that is a point of quite strong leverage for us. We can look at a transaction and see whether we can incorporate requirements for the National Wealth Fund that will shift the performance of a transaction in a particular area. An example that comes to mind is that we have been quite busy in the broadband sector helping the Government amplify the BDUK grant programme. In some of the early transactions we did, we were happy to provide finance, but we gave the network operators a list of the postcodes that we really cared about. These were the postcodes where we thought that high-speed broadband would have the biggest social impact. Our financing was conditional on them meeting that objective. We are thoughtful about it. It is a complex challenge.

It would be. Do you have metrics at the portfolio level, or is it strategic? Are you qualitatively saying, “This meets the regional growth objective. This investment does not,” or is there a metric that allows you to look across all the portfolio investments and say, “Okay, we are hitting this target in so many ways”?

Yes, both. Every time we close a transaction, we have an impact narrative that we publish on the website, which will tell the impact story as an economist would tell the story. Once a year, when we publish our annual report and accounts, we pull it all together and say, in aggregate, “This is where we have got to.” For example, the £6 billion-odd of commitments we have made to date have supported or created 21,000 jobs. We can see that by region and project.

You leverage in private sector capital with your own capital. How are you ensuring that the private sector is also meeting those social objectives? Do you see each project as meeting the objective and, if you like, you are putting in a pound to meet it, but the private sector is putting in the other three to four?

That is interesting. I am not sure that we have that much influence over whether the private sector’s role is meeting the objectives. We can define our role, but there are limits as to how much we can influence it.

I appreciate your candour. Moving on to a related topic around other investment banks, there is Bpifrance and KfW, which is in Germany. You will know others as well. What do you think Government should learn about the design and mandate of those examples?

It is fair to say that the Government have already learned a lot from them, because I know that those organisations were studied when we were set up four years ago. Those organisations were studied again when the current Government were coming into office. A lot of the learnings from those organisations are already embedded. Obviously, they are in a very different state of maturity from us, so you cannot do the side-by-side comparisons. You can take comfort that the Government have incorporated a lot of the learnings.

KfW can issue its own debt. Do you wish you were able to issue your own debt?

We are not able to now, and I do not think that should be a priority for quite a long time, if ever. We take all our funding from Treasury. There is a lot to like about the simplicity of the market understanding that, if you want to understand UK Government risk, DMO is all you need to understand. I grew up in markets, and I am not sure that complexifying it would be a good idea.

You mentioned the 21,000 jobs that you have created. Do you define what a job is? Is it six months or six weeks? Is a job a real job?

We do, but I could not tell you what the definition is; forgive me.

If you could write to us that would be really helpful. We get different definitions of what a job is from different bits of Government. From the conversations we have had with colleagues, we know that there is overlap with different things. I did not even mention the UK Green Investment Bank, so these things have come and gone. Are you saying that you think there should be only one public financial institution, so that you should roll up with the British Business Bank? Would that be more logical?

My recommendation would be that a medium-term objective is to consolidate all financial intermediation. Please remember that I am new to the public sector, but I see a Government machinery that is very comfortable and very well versed in allocating grant pots. It knows how to do that really well. The change in fiscal rules means that Government have to build a completely new set of muscles and get really comfortable being a lender. It is so much easier to do that if you decide to do it once, in a single instance.

That is really helpful. Thank you very much.

If it is a football club, they have a pretty ambitious appetite, I guess.

Let us not get into that. Let us keep it harmonious.

There is plenty of appetite. Take a step back. When you are looking at the world, the world has got very strange in the last few months. The UK looks good right now on a relative or comparative basis. There is a Government with a big majority, institutions that work, respect for the rule of law, et cetera. The biggest consumer of capital internationally is on a different track right now. We have a window and a moment where we can appear to be different. If you look at the Tees Valley, Manchester or Leeds, why have those areas been able to attract international or inward investment? There are some common themes across all of it. There are leaders with a vision who are prepared to get things done and, to use a phrase my former boss used, break a kitchen in order to make an omelette. They have found the energy to stand projects up and get them to the point where you can sit down with an investor and say, “This is what an investment would bring you. This is what is on offer.” The potential for us to play a role doing more of that is significant. I would be optimistic about it. We are frequently asked, “Show us your list of investable proposition.” We need to nail this concept of investable proposition to the table and be really clear who is responsible for getting it to that point, which is why we have been asked to do this early-stage project development work.

I cannot give you an answer, because it depends on so many different factors. Planning is one of them, which I know the Government are reforming.

You have leaned in heavily on visionary leadership.

Absolutely, yes.

It is a challenge for us as politicians to create the visionary leaders.

In the spirit of being entirely transparent, I am not familiar with the social values clause in the context of our work, so I would probably need to come back to you.

The more fixed constraints we have, the harder it will be to deploy money.

No, we are fine. We have all the freedoms we need to be effective.

That is very helpful. Thank you.

This is the stage where I make my every-hearing plea for short answers, Mr Flint. We have four strategic priority areas: clean energy, digital tech, advanced manufacturing and transport. The Chancellor’s statement also says that you should support investments in dual use. Do you think that there would have been a benefit to having defence as one of the sectors you focus on?

No.

Will you focus on space, which is important for Glasgow and various other places?

Yes, we are likely to be a little busy in space because of the dual-use applications.

What about more frontier technologies such as nuclear fusion?

You should expect the National Wealth Fund also to be active in nuclear. We are active in nuclear. We have not been active in nuclear fusion to date. As per our mandate, there is no reason why we could not be if it was a priority for the Government.

Presumably, it would have to reach a certain kind of technology readiness level to be investable and be more for you, as opposed to one of the other institutions.

That is exactly right. At this stage, it is a TRL that would be below where we would like to invest.

Looking at your statement of intent, you mentioned various wider sectors: life sciences, creative industries, water, waste and the circular economy and natural capital. The National Wealth Fund has limited funds and limits on its sector expertise, which is why you see investment funds and trusts focusing on sectors, and often they are more successful. Is there a risk that you are going too broad with these wider sectors? Would it be better for the National Wealth Fund to pick four sectors and just go for them, particularly given that you mentioned that clean energy is likely to dominate quite a lot of the investment in any event?

That is a really good question. We do not set our own priorities. We are given them, and then we have to decide how to meet the Government’s objectives within those priorities. We have developed capabilities in wastewater and natural capital. We are unlikely to grow those. The incremental resource is going to have to be pointed to the new priorities, but we are also not going to waste those resources, and we have a bit of a pipeline in them. The benefit of having a broad range is that it gives us the ability to be flexible and solve problems as they emerge. One of the many things we have learned in the last four years is that you understand the market today and three months later it is different. When I started out, the consensus was that you would never have to get busy in offshore wind. The market works, the technology is great and people like to finance it. Two years ago, we spent the summer holidays getting very busy in offshore wind because of the problems with some of the allocation rounds. You could not anticipate it. The nice thing now, with the mandate we have, is that, if there is a specific problem to solve in the water sector that is not currently on the horizon and it meets our objectives, we can flex into that.

Someone might say on the other side that the particular problem may come from a politician saying something is a particular problem. We are a small trading nation off the north coast of Europe, so we are better off focusing on a few priority areas and getting growth in those areas. What would you say to that counterargument? Is that a risk?

There are trade-offs with every choice that you make. My job is to make sure that we serve the priorities that the Chancellor set us.

We heard from our academic witnesses last week that the National Wealth Fund is a misnomer. Do you agree?

It is not the optimal name, but I can give the Committee every assurance that it does not matter.

In your earlier answer, you spoke about additionality and how, under the previous Government, there was a rigorous enforcement of additionality. Are you implying that the additionality rule has now been changed? That is what you are talking about when you are describing risk appetite. Can you explain how that is expressed?

I should be clear. It was our interpretation under the previous Government that we were not to deploy money where it was absolutely not necessary. We applied that on a transactional level. For example, we did some debt work around track-1 CCUS. We had assumed that, because it was a new technology at big scale, we would be needed. In the final analysis, having done all the work and got approved to invest, it was clear that the other banks were happy to do it all, so we stepped back and did nothing. If you keep that example in mind, the new guidance says to us, “When you think about additionality, do not just think about it at a transaction level. Think about the sector and the role that you can have in anticipating weaknesses and vulnerabilities and trying to get ahead of things so that sectoral weakness does not happen.” If we were to go back in time with our new approach to additionality, we probably would have taken a small ticket in those CCUS deals. We have just done a transaction with ScottishPower, which is an investment-grade company with an investment-grade parent. Could I argue that there is no way that the projects that we financed would not happen without our money? I could not argue that. When you look at the financing needs for all the TOs, it will overwhelm the sterling market’s capacity. That is a case where we are anticipating a weakness and signalling to the market that we have a role to play, and we have used the new definition of additionality.

Would you agree that success of this institution will depend on whether it is able to crowd in funding, as opposed to crowding out private sector funders?

Yes. I am very comfortable that we will not be crowding out, but yes, crowding in is a big part of our success.

Finally, how are you going to immunise your successor against political interference in the projects that you finance?

I get asked this question a lot. In good faith, I have not received any political pressure on projects. Politicians introduce lots of things for us to look at, and we make our own decisions, but I have never had, in four years, any pressure from anyone to change my decision or do something irrespective of our views. It has been a good experience in that regard.

Could I take you back to what you said about private finance, banks crowding in and what governs that? You suggested that engaging their shareholders in a conversation about risk, relative risk and different outcomes is one way of doing that. Frankly, individual shareholders are basically investment managers who are governed by other factors as well. Are there any other specific interventions that you think could be made from a regulatory point of view? I am thinking in the realms of disclosures and demonstrating the opportunity costs of not investing in a higher risk profile. You will have thought a lot about this. Could you say something more to the Committee, please?

You highlight exactly the problem as I see it, which is that the end shareholder, the citizen of the UK, is intermediated by a bunch of other people making decisions on their behalf. The situation now is that, when we deploy risk capital, we are doing it on behalf of 67 million people. If the shareholders of Lloyds, Barclays or HSBC decide to take more or less risk, they are doing it on behalf of 500,000 people of the 67 million. If you look at the way that risk and reward is being shared, all of the risk is being socialised, because the private pools of capital are still sticking rigidly to their fiduciary objectives. That point you highlight is the one we have to unpick. How do we find a way to get to the reality that the Lloyds shareholders, ultimately, are part of that 67 million, and how do we find a way to find the man or the woman in the street, the citizen, and not the intermediary sitting in an office block somewhere?

I wish we knew the answer to that question.

Me too. We need to find one.

Thank you very much indeed. Thank you for your time today, and thank you for your nearly four years serving as chief executive of the UK Infrastructure Bank and now the National Wealth Fund. We wish you well in the future.

It has been a pleasure.   Witnesses: Lord Livermore and Neeraj Patel.

Welcome back to the Treasury Select Committee on 1 July 2025. We are continuing our discussions about the National Wealth Fund. I am delighted to welcome Lord Livermore, who is the Financial Secretary to the Treasury and the Minister responsible for the National Wealth Fund. He is joined by Neeraj Patel, who is the deputy director for the National Wealth Fund at His Majesty’s Treasury. Welcome to you both.

Lord Livermore, when we received evidence from a panel of academics last week, they all described the words “National Wealth Fund” as a misnomer. Can you talk us through the thinking of why this organisation was called the National Wealth Fund?

First of all, thank you very much for inviting me today to address you. It is a great pleasure to be here. There is never a perfect name for any organisation. It contributes to the nation’s wealth, so that is perfectly fair as a name. There are other national wealth funds around the world. It does a similar role to those. There is no specific reason why it was called that as opposed to anything else.

We just heard from Mr Flint that this is a way of taking debt issued by the Debt Management Office and deploying it to crowd in. It is a money-losing organisation at the moment, but there is a vision for how it might contribute to the nation’s economic growth. As a Treasury Minister, how would you describe your role? How hands-on is your role? How do you prevent this organisation from suffering from very specific direction from Treasury Ministers? How independent is its role?

What is the Treasury’s role in terms of the National Wealth Fund? It is to set the strategic direction for the National Wealth Fund. The Chancellor sets a strategic steer once each Parliament. She has set out the strategic steer for the National Wealth Fund in terms of the sectors that we would like it to focus on in particular. Its core mission is to address access to finance issues for large, capital-intensive projects. That is what it exists to do. We have set the sectors in terms of the Government’s growth mission and clean energy mission. The strategic steer sets that out. We set specific KPIs for the National Wealth Fund to deliver against. We will monitor progress against those KPIs. The National Wealth Fund is operationally independent in the projects that it chooses to invest in. It will invest in those projects against very clear investment principles. The investment principles are that projects should support the Government’s growth and clean energy missions, be capital intensive, generate a positive financial return and crowd in private capital. They have a very clear set of investment principles. As I say, they are operationally independent against those. We set the objectives for the organisation, and we monitor progress against that.

So you would anticipate that, if there were political pressure due to British Steel or a bioethanol plant closing because of tariff issues, politicians would come under pressure to do something about it, but the National Wealth Fund would be immunised from that by these strategic steers?

Yes, absolutely. I certainly would never consider any political pressure being applied. There is an ongoing dialogue between us and the National Wealth Fund, which is an extremely good and positive thing. You want the National Wealth Fund to be delivering effectively against the Government’s objectives, particularly in the two missions that we have identified, the clean energy mission and the growth mission. The better the dialogue between us and them, the more they will understand what we are trying to achieve in policy terms and therefore the better they will be at achieving that themselves. It is probably good for Government. There is a huge amount of expertise in the National Wealth Fund in terms of the private sector. We can learn an enormous amount from them. A two-way dialogue benefits both parties. That is a very good thing. In terms of political pressure, they are operationally independent. It is entirely up to them to decide what they want to invest in. In terms of your specific point about certain sectors, it is not for them—they say this explicitly in their objectives—to invest to save specific industries that are in distress. That is not their role. If the Government were to choose to do that—it is open to any Government to do that—the National Wealth Fund would not be the route for them to do it.

Lord Livermore, could I follow up on this whole principle of crowding in private banks’ money? You will have seen the article by John Flint—we just discussed it with him—about the problem of the rigid lens with which private institution banks and pension funds decide to invest alongside the National Wealth Fund. He suggested this morning that there should be a dialogue with shareholders around the opportunity costs of investing in a narrow sphere and not taking on that risk. He says there is some dissonance between shareholders’ aspirations and intermediaries’ investment decisions. Have you had any conversations with the Economic Secretary about what could be done to create more transparency around the opportunity costs of not taking the risk that he says currently does not happen sufficiently with private banks?

I have not discussed that specific point. I am very happy to go away and do that, because I absolutely see the point you are making. I would mention two specific things. You mentioned crowding in and risk, so it is worth focusing on both of those. I agree that the crowding-in principle can be quite constraining for the National Wealth Fund when it comes to making commitments and getting money out of the door. We have slightly changed that criterion so the National Wealth Fund now needs to crowd in at sector level, not just individual project level. Sometimes you can treat the additionality principle as something of a science when perhaps it is a bit more of an art, and a bit more judgment is required. The crowding-in principle slightly loosens that constraint and enables them to deploy their capital more readily. In terms of risk, one of the key reforms that we are seeking to make to the National Wealth Fund is in response to the quite broad-based feedback that we received when we were in opposition, and when we came into government, that public finance institutions should take more risk. We have increased the amount of economic capital available to the National Wealth Fund from £4.5 billion to £7 billion to enable them to do that.

I recognise the decisions that the Government have the legitimate prerogative to make around sectors and taking more risk. I am trying to emphasise that—there is probably little political dispute around this—the challenge is to get private capital pools to take on a reasonable additional level of risk alongside the NWF, which would magnify the effect of the investment in the sectors that, as you rightly say, you have broadened the criteria of the National Wealth Fund to adopt.

That is exactly why the National Wealth Fund exists: to crowd in that additional funding and to de-risk those investments.

That is a conversation that we are having already with institutional investors. This is building on the back of the work the Treasury is doing with the pensions reforms. We are in dialogue with the Bank of England and the Prudential Regulation Authority on how we can adjust Solvency UK to think about crowding in more insurance capital. They are consulting on this over the summer. There are a number of areas. We can come back to you, if you prefer, on how we are crowding in institutional investment.

The matching adjustment of Solvency UK, which allows you to profile investments against a new set of returns, is one thing. This is about the transparency around not investing at a higher risk profile generally, pension funds and banks. Unless the regulations stipulate that they need to demonstrate the returns that they could or will get from other sectors versus what they do, the man on the street, the individual shareholder, is not going to see what is going on. Do you see the point I am making?

Yes, of course. There is an ongoing conversation on how we can try to bridge some of that in terms of transparency and dialogue with some of those institutional investors, and then translate that down to the ultimate beneficiaries, be they in pension funds or elsewhere. The National Wealth Fund is working with a lot of these institutional pools of capital, but it is also going through us and using the Treasury to broker some of those conversations. The likes of infrastructure investors or private equity pools have a regular dialogue with the Treasury or the Office for Investment. We are on a journey towards making that a lot more cohesive and joined up.

Talking about being cohesive and joined up, one of the things that Mr Flint talked about was that we have seen the UK Green Investment Bank; we have seen the UK Infrastructure Bank; we have the British Business Bank. Every Government come in and set up an investment body, and often they get changed. He talked about, in the long term, there being some sense in thinking about bringing together the British Business Bank and the National Wealth Fund. Lord Livermore, is that something you are considering?

It is definitely something that we have considered. We came into government having listened to many people say that the public finance landscape was confusing. We came in with the intention to have greater alignment. As a result, we reviewed the whole landscape. The response coming from industry was very clear that their primary concern was access to finance. That is what mattered most to them. They wanted better access to finance. That is why these institutions were set up in the first place; it is why we are doing what we are doing. The primary interest was access to finance. The concern that industry had was that it would be very distracting if we were to go down a merger route. It would stop the money getting out the door. What they most wanted was the finance. Instead, we have done three things. We have increased the financial capability of the public finance institutions by 40% since we have come into power. There is more money there in terms of access to finance. Secondly, we have put in place a programme of reforms to try to get that money out the door more effectively. Finally, we have set up a forum. What is it called?

It is the strategic public investment forum.

We have set up the strategic public investment forum.

I think we are going with SPIF.

The purpose of that forum is to create far greater co-ordination between the CEOs of the various public investment institutions that you mentioned. One of the things that we really want to achieve through that is a “no wrong door” policy. Whichever finance institution you contact, they are fully informed and, if they are the wrong one for your particular requirement, they will steer you to the right one. Currently, there is not that level of join-up. That is a really useful way of proceeding. As I say, we have now put in place those reforms. We have increased the amount of money available. Let us see those reforms bed in and then let us see where we get to.

We heard from Mr Flint that he would not characterise it as a dialogue. You have talked quite a bit about a dialogue between the Treasury and the National Wealth Fund. One person’s dialogue is another person’s regular formal meetings. Could you describe what you mean by dialogue between the Treasury and the National Wealth Fund?

The dialogue should exist at many different levels. There should be a dialogue between the Chancellor and John Flint; there should be a dialogue between me, the CEO and the chair of the National Wealth Fund. Officials should be in near-permanent contact. There should be an ongoing conversation. As I say, there are huge advantages to that ongoing conversation. One of the gaps that we have tried to address, as we have moved from UKIB to the National Wealth Fund, is the alignment with the Government’s agenda. One of the issues that had been identified with UKIB was that the sectors that it focused on were perhaps too narrow, and we wanted it to focus on a slightly broader range of sectors. Clearly, in order for the National Wealth Fund to respond and invest in the sectors that we would like to see it invest in, it needs to understand the Government’s agenda; it needs to understand our priorities. From their point of view, the conversation, which I hope is near‑permanent, at an official level is really important to them understanding that. As I say, they have all this private finance expertise. There is an enormous amount of expertise within the organisation. Clearly, we want to see more private finance coming in behind the additional public finance that we have put into the economy. We want to see that private finance coming in to finance infrastructure in particular. Learning from their expertise is enormously valuable. Throughout our organisation, the Treasury, and their organisation, the National Wealth Fund, there should be that kind of constant dialogue at many different levels.

What checks and balances are in place to make sure that within that dialogue there is no political interference around operational decisions? Mr Flint was confident that there is no political interference, but what measures are in place to prevent that?

I hope he would say that we have never sought to do that, and we never would. They are absolutely operationally independent. It is not for us, in any way, to direct any investment that they seek to make. As I say, they have very clear investment criteria. They have four specific investment criteria in terms of being aligned with our objectives, ensuring that there is a return, et cetera. They will stick to those investment criteria. It is not for us to direct them; they are operationally independent. Do you want to comment on the specific measures to prevent that?

The work that the National Wealth Fund does is governed in practice through managing public money and accounting officer principles. John Flint is the accounting officer for the National Wealth Fund. There are mechanisms in place, if he felt that he were acting outside of his AO role, through which he would be able to raise that. We are very confident that he has not had to do that, and he does not look at that lightly. We should think about the regular checks and balances that you would have in place with all of our arm’s length bodies. We have mirrored best practice in setting up both the National Wealth Fund and previously UKIB, and we have the recently published financial transaction control framework, which talks about all of this happening at expert level outside the Treasury for fiscal credibility and market credibility. That is something we prize very highly.

The National Wealth Fund registered a loss in the last year, and that loss was higher than in the previous year. What would it take for the Treasury to intervene on the level of loss? What kind of monitoring are you doing? What would it take for you to intervene?

We have ongoing monitoring of their balance sheet. As I say, there is a very close relationship between us. It is not like there are any surprises. It takes time to build a portfolio of investments that will generate a positive return. We are absolutely clear, in terms of their investment criteria, that each individual project should intend to make a financial return. Equally, as we talked about before, there is a strong desire for the National Wealth Fund to be able to take more risk, and therefore, as any investor would, they will occasionally make losses at individual project level. At portfolio level, they are very clear that the return on their investments must at least be the cost of borrowing plus their own operational costs. That is a very clear principle. As I say, we have absolute visibility of their balance sheet. We can see how, over time, they will achieve that. It is not like there would ever be any surprises there. As I say, we have that constant visibility.

Is the Treasury’s strategic risk appetite currently aligned with the National Wealth Fund?

Yes. As I say, the National Wealth Fund seeks to build on the success of UKIB. I should place on record my thanks to John Flint for the incredible work he did, alongside the work of the previous Government, including John Glen, in taking that through Parliament. This is an evolution of what went before. We are looking to build on the strengths of the previous organisation. As I say, there were certain things that we wanted to do. We wanted to take UKIB to the next level by becoming the National Wealth Fund. We wanted to increase its capability and capacity. One of the key insights that we received, which is broadly shared, was that the National Wealth Fund should take more risk. One of our reforms is to increase the level of economic capital available to the National Wealth Fund from £4.5 billion to £7 billion, so they have the ability to take more risk. Their portfolio is deliberately riskier than a commercial bank’s portfolio would be. We are fully aligned, to answer your question.

What I am getting at is that the losses were higher in the most recent year. Does the Treasury have confidence that it is on the right track in terms of the level of risk?

Yes, absolutely.

Lord Livermore, we know we need to create a lot of jobs in areas that do not have them at the moment. That is clearly a matter of public debate at this point in time. In the north and the midlands, where I am, employment is low and wages are low. There simply are not enough good jobs. How can the National Wealth Fund help to ensure that we have those good jobs where we need them?

First, I completely agree with the objectives that you set out in terms of there being good jobs right across the country. The National Wealth Fund is part of the Government’s wider growth mission. The growth mission specifically stipulates that growth should be felt right across the UK. There are many things that we are doing within the growth mission to make sure that is the case. The industrial strategy would be a major component of that. The National Wealth Fund also has a very clear mandate in terms of its regional impact. So far 80% of investments made by the National Wealth Fund have been outside of London and the south-east. Ensuring that those investments are across the UK and are creating jobs is important to the National Wealth Fund. The National Wealth Fund has a very clear and specific objective, which is to plug the access-to-finance gaps that we have been discussing in larger capital-intensive projects. That is its primary purpose. Job creation is absolutely one of the success metrics. We want to see jobs created. One of the things that the National Wealth Fund is now working on, since its transition from UKIB, is improving some of those impact metrics. In the course of this year, and in the autumn when they report on their progress against the strategic steer that the Chancellor has given them, they will publish slightly more sophisticated metrics for assessing the growth and job creation impact of their investments.

I want to pick up on that metrics point. You are right that the National Wealth Fund’s mandate is about capital-intensive projects, and job creation is secondary. Some capital-intensive sectors have more labour than others. The German national wealth fund, the KfW, can fund home retrofitting. Retrofitting homes is relatively labour-intensive. In one sense, it is an investment that feeds through to wages quite quickly at this point in time, given where this country is and other countries like us around the world are. Politically, we are very aware of the Biden trap, as it were. Thinking about the metrics side and what those feed into, how do the metrics that you see feed through to portfolio design and your thinking about job creation? Has that thinking been done, or is it yet to be done in terms of whether job creation would sit inside the metrics and the portfolio?

The primary objective of the organisation is to plug access-to-finance gaps in larger capital-intensive projects. That is its No. 1 mission. Does that mean it creates jobs as a result? Yes, it does. We want it to create jobs, but the guiding principle is not to invest in those areas that create the maximum number of jobs. Some of the early-stage technologies that we would like it to invest in may be capital-intensive and may not create, in and of themselves, a huge number of jobs, but they may then result in a better supply chain, which will then create more jobs. Yes, job creation is one of its metrics, and we want to improve the reporting against that metric and make that more sophisticated, but we are not setting that up as the primary objective because the primary objective, as I have been saying, is to make investments happen that otherwise would not have happened. A lot of the capital-intensive investments that are happening will create really good and high-quality skilled jobs. That is absolutely a positive thing, and that is exactly what we want it to do. When the National Wealth Fund is making its investments, its investment criteria are clear. They are not primarily there to maximise the number of jobs in each investment; they are there to plug access-to-finance gaps, which in and of itself will create jobs.

If you saw two investments that had the same access-to-finance impact but the job creation numbers were different, you might choose the one that creates more jobs. If another project were plugging a bigger gap in finance but not creating jobs, you would take the access-to-finance one. Does that make sense? I am trying to figure out how the job creation metric fits within it.

With £27 billion to play with, I hope they would be able to do both the projects that you describe. That is what we would want them to do. If there are access-to-finance issues in both the projects that you describe, we would want them to invest in both.

That is very helpful. Thinking about some of the international examples—we heard about this from John Flint—what do they teach you about the design and mandate of the National Wealth Fund?

In the design, we looked across the world at things that work, but clearly we have sought to build something for the UK’s specific circumstances. We are building on the success of UKIB; we are seeking to address the gaps that still existed after the creation of UKIB specifically for the UK finance landscape. The National Wealth Fund fits within the growth mission. We have also, for example, changed the fiscal rules so that we can prioritise investment, and stop investment being cannibalised for day-to-day spending, so we get more public investment. It is part of a suite of reforms specifically for the UK landscape.

Finally, we heard from John Flint that at this point in time he does not need the National Wealth Fund to issue its own debt, but in the future that may be an option. Do you see that as being an option or an end goal for the National Wealth Fund in the future?

No. The most efficient way is to finance it in the way we are currently financing it.

There is unity from our witnesses.

We heard evidence from the New Economics Foundation, which recommended that the National Wealth Fund takes a lot more equity stakes in the projects that it invests in to try to avoid the Government socialising the risks and privatising the profits, as they put it. Is that something the National Wealth Fund will look to do?

Yes, absolutely. Equity investment is a core product that the National Wealth Fund offers.

I know it is a core part of the offer, but is it something that you are going to look to step up? Are you going to do more of that and less of the other types of support that you provide? Is it still an option among a suite?

I do not know whether we would seek to change the balance. The balance will depend on the different projects that come forward looking for access to finance and what the most suitable way of financing them is. We have increased the capitalisation of the National Wealth Fund by giving it an additional £5.8 billion. In an ideal world, it will do more of everything. We would not seek to dictate the specific blend of that. You would think that the market would dictate that in terms of the projects that come forward looking for finance.

The New Economics Foundation’s point is that the market has broadly dictated that. Of course, they will want to have fewer strings attached, if they can get it, but that is not always in the public interest. Are the Government going to take a stronger approach to taking equity stakes in companies? The market may not be too used to that, to begin with, because they have been used to a different deal, but ultimately it works out better for the taxpayer. Are you telling me that the Government are not going to be particularly pushing on this?

Working well for the taxpayer comes down to the stipulation that there should be a return at portfolio level so that taxpayers gets their money back at the end of the day, which is a very good thing, and we get the investment in the industries in which we need to see investment.

That is absolutely right. Going back to the point that the Minister made earlier on giving the National Wealth Fund additional economic capital, the way that works in practice is that, every time they make an investment, they have to set aside an amount of loss-absorbing or economic capital to account for it. With equity, you put aside more. The fact that they have a higher limit means they can partake in more equity deals, which is something we will likely see as the portfolio evolves over the coming years. That is something we welcome, but they are operationally independent. If they see some brilliant deals in debt and guarantees coming down the line, and they are better at meeting all of their investment principles than an equity deal, that is their judgment. They have done the due diligence; they have the investment expertise. We trust their judgment in making that decision.

Just going back to the idea that the National Wealth Fund needs to take more risk, with that comes political risk as well. Will you be in front of the TV cameras to defend it if the National Wealth Fund’s projects have failed? Is the Chancellor prepared to do that? Who is going to be the spokesperson that explains to the public that these project failures are part of the plan?

I am very happy to do that. Any investor should expect to suffer some losses. That is inherent in an investment portfolio.

My point is that this is well understood in the world of finance, but it is not very well understood in the world of politics. There is probably going to be pressure, maybe even from this Committee, from Opposition politicians or the Government’s own side about high-profile project failures. Are you and the rest of the Government prepared to make that argument to the British public?

Yes. It depends on what we mean by the failure of a project. There will be projects that come forward looking for investment that will be invested in by the National Wealth Fund but may not reach full maturity. Any investor would expect to see that. Across the entire portfolio, we would expect to see a return on investment. That is very clear. That money will be returned. You simply will not get the amount of investment that we need to see unless you are aware that some projects will fail. As you say, that is well understood. If some individual projects do not go ahead, there will be plenty of others that do.

The Government probably need to be prepared to make the argument, because it is something that the public will not be used to. Finally, my colleague Rachel Blake spoke about the year-on-year losses that we have had so far. You have said that is okay because these are early days. How long could we tolerate year-on-year losses before the National Wealth Fund is scrutinised further?

What is the timescale on which you would expect to see that?

We would like to see the National Wealth Fund making a return by the end of the forecast period, as is currently in the OBR’s forecast. If that does not materialise in forecast after forecast, that is a conversation we will need to have with the board of the National Wealth Fund and the leadership team. We will also need to think about whether the strategic steer that we have set is too restrictive. The strategy that the Chancellor has set out for the National Wealth Fund is enduring for this Parliament. If there is some unforeseen circumstance or change in broader market conditions, geopolitics or the interest rate environment that is so significant that it impacts the entire portfolio, not just a specific deal or a number of deals, that is a judgment that we would take, subject to how that forecast evolves.

Yes. Just to confirm to the Committee, when is the end of the forecast period?

I think it is 2029-30, but I can confirm with you.

I appreciate that feedback. At a headline level, the key job at hand is to take the National Wealth Fund to the next level. It has an increased amount of capital, which the Government have given to it for this Parliament. It has an increased risk appetite. It has an increased number of sectors to focus on. It has new products and tools that it can deploy, such as performance guarantees or blended finance. The organisation is growing on its strengths. The role for the new chief executive is to harness all the good potential that the organisation has had so far and deploy all that capital and expertise up and down the country. On the feedback points you raise, you said that aspects of Government or others in the industry are saying the National Wealth Fund has this money to spend. I must stress that this is money to invest. The Government are investing this money with a view to making a return. It is not a pot of money that is there for expenditure. That is a misconception that we are working very hard to correct. On the feedback that the National Wealth Fund is not taking enough risk, we have given it an additional amount of risk capital that it can and should deploy. That is something we are expecting it to do over this Parliament. Could you play back some of the other points that you made?

The Green Book is primarily about how the Government invest their money. For example, in the spending review, when the Government allocate capital investment, we want to make sure the Green Book is not biasing investment towards London and the south-east, and against the entire country. That is slightly less relevant when it comes to the National Wealth Fund because it is operating under its own specific investment principles and it has a very clear regional lens. For example, it has a local authority function that works closely with all local authorities. It is specifically trialling some strategic partnerships with a handful of mayoral authorities to take forward that regional function. We have tried to strengthen the regional function. As I have said already, 80% of the investments that the National Wealth Fund has made have been outside London and the south-east. That is really important. The other thing we have noticed in terms of working with local authorities is that sometimes the capacity, and to an extent the expertise, does not always exist. One of the things that the National Wealth Fund does as a policy bank is that—I am oversimplifying a lot—it waits for investable projects to come to it. That capacity and expertise in local authorities does not always exist to do the early-stage development of certain projects. We are now looking at how we can give the National Wealth Fund, within its local authority function, that early-stage development function. It can help provide that expertise and that capacity to local authorities, exactly as you describe, so they can have better-formed projects to bring to the National Wealth Fund, which it can in turn fund.

I think the latter. They should be more proactive. That is absolutely one of the key reforms we would like to see. Again, I stress that I am radically oversimplifying, but essentially their job is to wait for investor projects to come to them. We would like to see them going out and being much more proactive. You asked my colleague about the role of the new CEO. One of the criteria that we would like to see this new CEO bringing to the role is proactivity. We want them to be making the case for the National Wealth Fund—not waiting for projects to come in, but going out and finding those projects. That particularly applies in a local authority function. That is why this project development role is really important. Proactivity is something that I would like to see more of.

On the strategic priorities, the sectors are clean energy, digital technologies, advanced manufacturing and transport. We are in a very different world now. Would there have been benefits to defence being one of the strategic priorities?

In terms of dual-use technologies, defence is one of the things that we would like to see the National Wealth Fund investing in. The Chancellor has said that specifically. Defence is mentioned numerous times within the strategic steer. We are very aware of the importance of defence. You mentioned advanced manufacturing and digital technology. Many of the dual-use technologies that the National Wealth Fund will hopefully be investing in will be applicable to defence. We will see the investments you describe.

Given the changing world that we are in, is it likely that defence will be included as a separate sector over the next two years, or at least kept under review? Time is marching on, so we need short answers.

“Yes” is the shortest answer I can give you. As I say, defence is mentioned in the strategic steer. The National Wealth Fund’s objectives are to invest in the Government’s growth mission, and defence is a key pillar of the industrial strategy. The National Wealth Fund exists to plug access-to-finance gaps. If a defence project came along that was of the right size and had an access-to-finance gap, there is absolutely nothing to prevent the National Wealth Fund from investing in that project.

Will the National Wealth Fund have a focus on space, which is important for the Scottish economy?

Yes.

What about frontier technologies such as nuclear fusion? Is there a point at which you think a technology needs to be ready before for the National Wealth Fund can invest in it?

As I say, if it meets the National Wealth Fund’s investment criteria, if it is a capital-intensive project that has an access-to-finance issue, and they think it is a project to fund, I do not see why there would be any restrictions.

Very quickly, they look at technology readiness levels. They will think about how commercialisable the technology is. If it is early-stage but they have been able to demonstrate their ability to commercialise and generate a return to the Exchequer, it is very much in play.

The National Wealth Fund has increased funding, but it is still limited. You will probably get more bang for your buck by focusing on a smaller number of sectors and getting those sectors right. In addition to the core sectors, the National Wealth Fund is focusing on or having a role in life sciences, the creative industries, water, waste and the circular economy and natural capital. These are all sectors mentioned in the National Wealth Fund’s statement of intent published in June 2025. Is there a risk that a lack of focus will creep in and there will be insufficient focus on the core sectors that the Chancellor has identified?

I do not think so. One of the key reforms that we have sought to put in place is broadening the number of sectors that the National Wealth Fund can invest in while keeping some clear priorities. We have clear priorities of clean energy, digital technology, advanced manufacturing and transport. They are the key priority sectors that they will invest in and, I suspect, that the majority of their projects will come in. Equally, as I say, it is about access to finance, growing the economy and getting higher levels of investment into our economy. I do not see why they should not invest in really good projects, as long as they meet their investment criteria.

This is linked to the National Wealth Fund due to the ongoing low levels of investment in the UK economy, both private sector investment and public sector investment. When we came into government, the UK had the lowest levels of private sector investment in the G7. That had been a sustained problem for multiple decades. We have had sustained levels of low private sector investment. The IMF has repeatedly identified low levels of public investment as a major constraint on growth. Through the growth mission, we are trying to address both those things.

The core to the growth mission is a recognition that we need to grow the supply side of the economy, because we recognise that growth does not come from Government; it comes from businesses and from investors. The objective of the growth mission is to increase the level of investment in the economy. As I say, that is partly through public sector investment. We have increased public sector investment by £113 billion over the course of this Parliament. We are investing that, as you saw in the spending review, in growth-intensive parts of the economy, particularly transport and housing. We then need to increase the level of private sector investment in the economy. That is done through a platform of economic stability, because that gives investors the confidence to invest and it gives the Bank of England the space to cut interest rates, as they have four times since the general election. The job of Government is not just to stand back and leave investors to it; it is to systematically dismantle and remove the barriers to investment that they may face. That is the programme of reform that we are embarked on as a Government. That includes regulatory reform and, probably most importantly, planning reform. So many investors say to us that they would like to invest in the economy, but they get tied up for years in planning. The planning reforms are the most pro-growth and pro-investment things we can do. Skills reform is another example. Speak to any employer, and they will say that skills are one of their major barriers to investment. As I say, we are systematically trying to remove the barriers to investment, and we are investing ourselves and creating a platform of stability.

We are doing the right things. There is a Lloyds report out today that shows business confidence at its highest level since 2015. We are doing the right things. As I say, we are creating a platform of economic stability on which to invest, we are trying to systematically remove the barriers to investment that businesses face, and we are investing ourselves.

The Government’s emphasis on capital investment is clear. You have spoken about skills and planning. There are other things that it aspires to do with the grid and access to energy. I note the reference to the Lloyds survey today; there are numerous surveys that do not look so positively on the economic outlook. It is quite clear that, coming into government last July, tax was at a historically high level. What assessment have you made, as a Government, of the combination of the effect of the Employment Rights Bill, which is an as-yet-unscored up to £5 billion from the Government’s own impact assessment, and the effect of the national insurance changes on businesses’ willingness and appetite to invest? One has to acknowledge that that is another factor that underpins the overall trajectory of business investment decisions.

You are quite right. In terms of business surveys, clearly there are significant global headwinds at the moment. The Government have to respond to a whole suite of rising trade tensions. You talk about some of the difficult decisions we have had to make on tax in particular. You will know that, when we came into government, we faced a £22 billion black hole in the public finances.

You would not expect me to agree. The OBR does not.

We had to address that. I talked about creating a climate of investment confidence. Unfunded spending commitments are not a way to create business confidence. Not giving the Bank of England space to cut interest rates will not create business confidence either. We have restored stability to the public finances. That has given the Bank of England the confidence to cut interest rates four times since the general election. That is essential to creating the investment climate that we all want to see.

As the Minister for Growth, I want to understand what you think about when you think about growth. Is it just the rate? Is it 0.7% or 0.8%? Is it about achieving the highest possible number? Are there other things you are considering when going for growth?

The Chancellor has said that growth cannot just be numbers in a spreadsheet or lines on a graph, and I absolutely agree. In terms of what we are looking at, the growth mission within the Government’s plan for change sets out three specific metrics for the growth mission. No. 1 is the highest sustained level of growth in the G7. I know it is just one quarter of growth, but we are currently the fastest-growing economy in the G7. It sets out sustained increases in living standards measured by RHDI. They are currently forecast to grow four times faster than in the previous Parliament. Wages have so far grown more in the first 10 months of this Government than in the first 10 years of the previous Government. That is important. We also want to see GDP per head growing under this Government. GDP per head fell under the previous Government. It is forecast to grow by 5% under this Government.

A lot of those are still about rates. There is a bit of inequality mixed in there, by making sure the per head living standards element goes up. What about the environment, for instance? There are probably lots of ways that you could achieve good growth that might be damaging to the Government’s long-term net zero possibilities. Are you going to decline big growth opportunities that are in conflict with your net zero objectives?

We have a mission-based approach to Government. We have a clean energy mission and a growth mission. Those two things should go hand in hand.

Sometimes they do not.

That may be, but investing in clean energy is absolutely core to what the National Wealth Fund does. Investing in clean energy is good for growth. You need growth to fund the clean energy investments, and you need the clean energy investments to drive the growth for the future. Those two things absolutely go hand in hand. Of course, it is any Government’s purpose, mission and objective to balance and manage trade-offs. Of course, those trade-offs exist, but we will do that in the right way.

I totally accept that clean energy can generate growth, but sometimes there are opportunities in front of you, such as airport expansions, where you might feel, “In the name of growth, we are going to press this button, even though it may be detrimental to net zero ambitions.” If growth continues to be stagnant over a long period of time, do you worry that the Government will be more tempted to press that button?

I am confident that we can meet our net zero objectives and expand Heathrow and other airport capacity in the UK.

We were talking earlier about foreign investment. You have had some very strong views about that. You have talked about concierge services and so on. It was reported yesterday that we have had the biggest drop in foreign investment for many years. You have touched on some of the issues around regulatory reform, planning reform and skills reform. As Growth Minister, how will you try to turbocharge that? Do you want to expand on it? In response to Ms Blake, you talked about having a one-door approach. You have talked before about a concierge service. Is there anything else you would like to add about how we can tempt foreign investment into the UK?

Since this Government have been in power, we have seen over £100 billion of inward investment coming into the UK. That is a substantial amount of investment.

To be fair, some of that would have been delivered by the previous Government. It is not all new under this Government, is it?

No, of course. In the limited time that we have had, we have done a good job. You talk about a concierge service, and I have spoken about that before. We have set up the Office for Investment. My colleague Baroness Gustafsson is the Minister for Investment. She has set up the new reformed Office for Investment. It will offer a range of services, depending on the scale of investment, from an individualised concierge service for the biggest amount of investment to online help for smaller amounts of investment. They are there to offer the services that you describe. They are also there to create a joined-up picture of investment right across Government so that everyone is doing the same thing. Most importantly, they are there to offer proactivity, to show the hunger for investment that we ought to be showing, and to find foreign investors who might want to come to the UK and convince them of the advantages of investing in the UK. Right now, the UK is an incredible place to invest. It is a very stable economy. We speak to many businesses. We are doing all the right things in terms of removing those barriers to investment. The UK is a very attractive place to invest. The Office for Investment is there to go out, speak to those investors and try to bring them back to the UK.

What else could be done? Over the years, we have had companies and financial investment in the UK. I am thinking about Siemens in the north-east. There was a great belief that was going to create huge jobs and opportunities back in the 1990s, but one day they just closed down and moved because there were better offers elsewhere, in that case in Europe. What do you need to do to make sure it is not volatile, that it is long term and sustained?

Clearly, there is always an evolving global picture. Investors will make the decisions that they make, but it is about not being complacent and constantly ensuring that we have the best environment for investment. For example, we have published a tax road map, giving certainty in terms of corporation tax, et cetera. We can give some certainty; we can give stability. That is the most important job for Government when it comes to investment.

I just wondered how proactive the Office for Investment is. We had Siemens on the panel last week. It had not been made aware of it. It has a huge investment portfolio in the UK. I would have thought that it would be the sort of company that the Office for Investment would be trying to reach out to proactively, saying, “We can make this much more straightforward for you,” giving them directions to the National Wealth Fund, the British Business Bank or whichever of the PuFins is appropriate. We were all quite surprised to hear that evidence from Siemens.

Yes, I am surprised by that as well. What you describe is exactly what the Office for Investment is and should be doing. I will talk to my colleague, the Minister for Investment, but that is exactly what it will be doing.

Pension funds are a big subject. We have a Bill in front of the House next week. I should declare that Dame Harriett and I are both trustees of the parliamentary contributory pension fund. We follow this from both directions. A good pension fund will diversify its portfolio to spread the risk. There is big encouragement to get UK pension funds to invest in the UK. We also want to see pension funds from elsewhere invest in the UK. We are welcoming other funds to come to the UK, but we are asking UK funds to be a bit more UK-focused. Is there not a bit of a contradiction?

I do not see a contradiction. We want to see UK pension funds investing more. The previous Government started this under the previous Chancellor at Mansion House. This Chancellor has continued that in her Mansion House speech, and she will do so again on 15 July at her next Mansion House speech. We want to see UK pension funds investing more into the UK. They invest a disproportionately low amount relative to their international peers. We want to rectify that in the way that we are doing. Do we want international pension funds to invest in the UK? Yes, absolutely. In the last month, I have met the Canadian pension funds and the Australian pension funds. They have had massive success in creating a critical mass of money to invest through their own pension systems. They see the UK as a prime destination for investment right now. They see us as very stable relative to international peers. They see us systematically dismantling barriers to investment, particularly through planning reforms and regulatory reforms. They say to us that we are doing exactly the right things. They will always want us to go faster. Government do not always move as fast as investors would like them to move, but they absolutely see us doing the right things. We have the right agenda. We will see a lot of that money coming into the UK.

It is still quite a long-term approach, though, because it will take a while for pension funds to divest and reinvest.

They have a lot of money waiting to invest.

The foreign ones have money.

Yes, absolutely.

Just before we finish, the chief executive of the National Wealth Fund is leaving in the summer. The recruitment process is under way. Is that right? When do you expect to make an appointment?

Very shortly. I am confident that we will have a successor in place by the time John leaves in the summer.

There will not be a gap?

No.

That appointment will formally be made by the Chancellor, but who is on the appointment panel? Is there a politician on the panel?

It will be the chair of the National Wealth Fund and a representative of the Treasury.

It will be the Second Permanent Secretary from the Treasury and the chief executive of UK Government Investments.

There will be no politicians on the panel. It will go through you, Lord Livermore, to the Chancellor for agreement. Thank you very much indeed. Can I thank our witnesses, Lord Livermore, Growth Minister, and Neeraj Patel, deputy director for the National Wealth Fund, both of whom are responsible for the National Wealth Fund at His Majesty’s Treasury? The transcript of this panel and the one before will be available on the website uncorrected in the next couple of days. Thank you to our colleagues at Hansard and Bow Tie for their work on that and on the broadcasting. Thank you to our witnesses.