Rachel Reeves speech: what did shadow chancellor say about National Wealth Fund at Labour Party Conference?

The Labour Party Conference 2022 is taking place in Liverpool, with the UK’s main opposition party and its leader Sir Keir Starmer seeking to demonstrate to British voters that they are a viable alternative government.

Several key policy announcements have been made at the conference. Labour has pledged to increase police numbers in a bid to better fight crime, as well as reverse the cut to the top rate of income tax implemented by Chancellor Kwasi Kwarteng in his mini budget last week.

The key moment on Monday (26 September) was a speech by shadow chancellor Rachel Reeves. In it, she took aim at Liz Truss’s belief in trickle down economics and said a Labour government would bring in a minimum wage that “reflects the real cost of living”.

One of the more eye-catching policies revealed by the shadow chancellor was a plan to create a ‘National Wealth Fund’. But what does this policy idea mean - and how does Labour say it would work? Here’s everything you need to know.

What is a National Wealth Fund?

A sovereign wealth fund - or a ‘National Wealth Fund’, as Labour has called it - is a state-owned investment fund. While we currently haven’t got one here in the UK, the idea of such a fund is not a new one.

Countries like Russia, Norway and Singapore all have their own versions of a wealth fund, with the idea being that they take profits from investments or state surpluses and put them towards public infrastructure or spending.

In the case of Norway, the fund has used surplus revenues from the country’s energy and fuel sector - it is a major oil and gas producer, supplying the UK with around half of its gas imports - to invest in stocks, real estate and sovereign debt, amongst other things. The profits from these investments are then put towards pensions and the welfare state.

The Norwegian sovereign wealth fund is the biggest in the world, holding more than $1 trillion in assets.

Russia’s wealth fund is derived solely from oil and gas revenues - its energy production companies, like Gazprom, being state-controlled - and is used as more of a ‘rainy day’ piggy bank by the Kremlin. It has been used in recent months to prop up the Russian economy after the West imposed sanctions on the state for its invasion of Ukraine.

Singapore’s fund has used its foreign reserves - these being currencies like the dollar and the pound - to invest in the markets with the aim of growing their value above the global rate of inflation. The city state’s fund is used to supplement its annual budget, while also acting as a buffer against any global downturns.

While sovereign wealth funds can be a way of making a country and its citizens more prosperous, concerns have been raised about how they are used. For example, there are worries rogue nations could use them to target sensitive industries in foreign countries.

How would Labour’s National Wealth Fund work?

Shadow chancellor Rachel Reeves has pledged to set up a National Wealth Fund (NWF) if Labour gets into power at the next general election. She said the NWF would “build British industry” by investing in green projects of national significance, like battery factories.

The British public would then retain a stake in these projects, with the aim being that they would provide a return to the taxpayer. Exactly how the profits from these investments would be used has not been outlined.

The plan would form part of Labour’s Green Prosperity Plan - announced last year - and would receive an initial £8.3 billion that would then be invested in a bid to generate returns for the taxpayer.

According to the PA news agency, it is likely to be modelled on the wealth funds of Norway and Singapore. The shadow chancellor said the policy is a “real plan for the climate”, a “real plan for growth” and a “real plan for levelling up”.

Progressive think tank the Institute for Public Policy Research (IPPR) said the Labour Party’s pledge was a “welcome policy”.

“Not only would this increase the UK's dire levels of investment, it would give every citizen of the country a share of the UK's future economic growth,” said Dr George Dibb, head of IPPR’s Centre for Economic Justice.

“By investing in projects that set a clear direction towards net zero, this could catalyse private sector investment and decisively shift our economy on to a dynamic new trajectory that will deliver sustainable growth for the benefit of all.”