A National Investment Bank? Come off it Corbyn

It seems almost everyone thinks that the Tories have this election in the bag. With the latest ComRes poll giving the Tories 50% of all votes, it’s not hard to see why. But perhaps there is good reason for this. Labour leader, Jeremy Corbyn is not just a friend to controversy, he also seems to flirt with very silly ideas. One of many is the idea of a national investment bank, which he says would enable £500 billion worth of investment in infrastructure and industry. This would allegedly create one million new jobs, which might seem like a nice thing until you remember that unemployment in the UK is now hovering around 5% – the best it has been in a long while.

Corbyn’s idea seems even more preposterous when you also consider the current national debt of 1.6 trillion. But the idea of a National investment bank is not just unnecessary, it is foolish. The track record of the idea is really rather shocking. Tony Benn’s similar National Enterprise board in the 70s threw money at all kinds of wacky things. From British Leyland motors, to British leather, money was spent where it would create no wealth. Meanwhile private industries in the tertiary and quaternary sectors grew and those industries that Benn’s National Enterprise Board tried to protect simply fizzled out.

There is no reason that a rebranded version of Benn’s failed project would do any better. It would just lavish taxpayer’s money on projects run by those with political connections, creating arbitrary jobs in Labour seats. And even if you concede that the National Investment Bank’s job creation is a good thing, the kind of jobs that it aims to create are not going to help the kind of people who need helping. Gone are the days when building roads required hard unskilled labour. The kind of people who are likely to be employed to build infrastructure nowadays are engineers, operators of technical machinery, and other skilled and educated individuals who are unlikely to be unemployed.

A national investment bank has the potential to really hurt private investment too. The enormous amount of borrowed money required to pull it off would mean issuing extra bonds, which in normal times means competing with private firms for investment funds. Private firms would have to pay more to borrow, or re-consider their own investments – meaning less private capital spending on factories, machine tools, training, R&D, and housing. So when the government borrows to fund its own investment, private investment has to fall. Occasionally government investments are worth it, but boondoggles like the Millennium Dome are de rigeur. When even the most switched on venture capitalists find it difficult to pick sound investments, technocrats with no commercial experience are likely to find it impossible. Because of this, the national investment bank is not just unnecessary, but completely unworkable.


  1. Economically:

    The fall in umemployment has been achieved through a number of dodgy measures: the expansion in low-tech service jobs such as waiting or serving at a franchised chain restaurant or retail work in large franchised stores, the expansion of ”self-employed” gig economy jobs such as uber driver or deliveroo driver that class someone as employed even if they don’t get much in the way of work, the expansion of zero-hour contracts that mean even those working less than 16 hours a month are still ’employed’ even if they receive very large state top-ups to their income from unemployment support budgets, and the classing of people who are sanctioned from unemployment benefits as ”no longer looking for work”. These statistical tricks have boosted the unemployment figures while delivering real-terms drops in average wages and dramatically reduced levels of worker’s rights.

    The cost of the National Investment bank would be less than the money the Conservatives have squandered since 2010, and it would deal with the investment crisis and the productivity crisis in the UK – we are far, far below our major European competitors (FRA,GER) and those further afield (US,JAP,CHI) in terms of our productivity and the level of investment we draw into our economy from abroad. This is after we were one of the most attractive FDI investment destinations in the 2000s.

    It is also worth mentioning that France, Germany and China all sold core government services to UK councils and the main UK government through part-state owned enterprises (Sita, EDF, China Nuclear General Power corporation) and both Germany and France already have programmes in place (KFW bank, wholly state-owned, and the Banque Publique d’Investissement in France) as well as numerous smaller countries with hugely successful Sovereign Wealth funds such as Norway, Saudi, Dubai (and France’s Fonds stratégique d’investissement).
    The fact that massive Tory donors have the same business model as the national investment bank would seek to implement is telling of the fact that there is no coherent economic argument against the National Investment bank, especially not in a country that has still not recovered in terms of living standards and real wages from the crash caused in 2008.

    Finally, Britain has a record trade deficit that is widening all the time – as imports are now more expensive and exports cheaper due to the fall in the value of the pound, this trade deficit will widen if nothing is invested in the UK (exports would be cheaper to sell abroad, but the change was not long enough ago for substantial production capital to be utilized and begin production of goods yet). We need to invest in production to narrow this trade deficit, otherwise we are going to continue to have a huge trade deficit when we leave the EU, and banks which export services will move themselves to the mainland, taking a substantial slice of our service exports with them. Investing in manufacturing will narrow our trade deficit with the view to providing a surplus in years to come.

    And, politically, how on earth can you make the argument that ”Private firms would have to pay more to borrow, or re-consider their own investments – meaning less private capital spending on factories, machine tools, training, R&D, and housing” when we already have a chronic shortage of investment in these areas delivered by the private market, or that the people who would be helped are ”skilled and educated individuals who are unlikely to be unemployed” – I’ll remember those words when I am next arguing with someone who says ”Scrapping Trident would mean a loss of British jobs”.


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