V1558 – Sovereign Investment Bill 2019 (Repeal)

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Andrew97
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B1558 – Sovereign Investment Bill 2019 (Repeal), TSR Libertarian Party


Sovereign Investment Bill 2019 (Repeal)

A bill to repeal sovereign Investment Bill 2019


BE IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and consent of the Commons, in this present Parliament assembled, and by the authority of the same, as follows:-

1: Repeal;
(1) V1537 is hereby repealed.

2: Commencement, Short title, and Extent
(1) This Act may be cited as Sovereign Investment Bill 2019 (Repeal) Act 2019
(2) This Act extends to the whole of the United Kingdom
(3) This Act comes into force in upon royal assent



Notes

Mr Speaker, while a sovereign wealth fund sounds like a brilliant idea on paper when it must be funded via borrowing it crashes into the brick wall of reality. Here we shall set out three arguments against the formation of a debt based SWF as set out in V1537: one fiscal, one philosophical, and one based on unintended consequences, quite naturally this will be done in reverse order.

1. Unintended consequences

Section 2(9) of the Act has the unintended consequence of bankrupting the British Monarchy in the middle of the decade as it withdraws the primary source of income for the Royal Household is removed starting in fiscal year 2022-23 owing to the Crown Estate being merged into the funds.

2. Philosophical inconsistency

Just a few months ago we saw those behind the SWF demanding the privatisation of Cardiff airport on the grounds that it is not for the state to run such services, something which also applies to operating a financial institution with exceptions only able to be reasonably made for assets the government naturally controls as part of the day to day functioning of the modern British state, for instance the Crown Estate and any pension funds that may exist as part of a pension scheme for public sector workers.

3. Fiscal (ir)responsibility

Given this fund will be funded from borrowing above and beyond that which would otherwise exist, with the exception of the ~£14bn property portfolio provided by the Crown Estate, any investment in the fund will provided by borrowing, because of this for the proposal to make any sense requires one of two assumptions to be made:
1) That near zero borrowing rates will be maintained in perpetuity
2) Equities bubbles will constantly grow bigger and bigger without bursting.

Provided below are two spreadsheets estimating the net present value of the proposed fund, the first only goes to 2200 to get a picture of the values over multiple generations, the second has everything hidden with the exception of the fund value as a proportion of GDP to observe the value over millennia. The following assumptions were made:
1) Near zero borrowing will not persist, instead the cost of borrowing will gradually increase by 50 basis points per annum until hitting the pre-crash average of about 5%
2) Inflation will, in the long term, average out at 2.8%, the long term average since pretty much any point of your choosing between 1990 and 2008 until pretty much any reasonable point of your choosing up to today
3) Real GDP growth will average at about 2.5%, an approximation of the average rate for the period from 1990 to 2008
4) The return on the fund will be 5.5%, based on the optimal blend of investments as set out in the Act

Further to this there are 4 tabs, two including the value of the Crown Estate and two excluding it, and two assume the £15bn investment is a lump sum given at the start of the year and the other 2 spread equally over the year. The best case for the SWF is, trivially, Crown Estate included and lump sum at the start of the year.

Column X shows the net present value (NPV) of the fund, that is how much the fund is worth in today's money less the amount spent on the fund in today's money.

What we see is that even in this best case scenario the NPV of the investment is very modest until the end of the century, indeed it peaks in the mid 2030s at a mere £33bn before rapidly dropping off as the cost of borrowing racks up before going negative in the mid 50s and remaining negative for two decades. Examining the same model excluding the Crown Estate shows that the new elements of the fund are even worse, with the initial peak being only £12bn and becomes negative a decade earlier, in the mid 40s.

Even in this best case scenario the NPV at the turn of the century is a meagre £400bn, which sounds like a lot until you consider you have seen 620% real GDP growth over the same period, with real GDP sitting at about £15tn in today's money.

Examining Section 6(6) makes the Act even more farcical, it states that when the value of the fund hits 110% GDP any excess can be used to pay down the deficit, there's one small problem: the fund would not hit 110% of GDP until the 37th century, there's long term planning, and then there is this.

Mr Speaker, it is abundantly clear that the fund was proposed with no real effort put into calculating either the cost or the return; it is a fancy thing foreign governments do with existing assets that they have to manage regardless, or that they do backed by a major commodity to help transition the economy when that commodity stops generating revenue; there is a reason these funds are not funded by debt in the real world: the numbers simply don't add up.

-------------------------------------------

Original Act: https://www.thestudentroom.co.uk/sho....php?t=6248274

To 2200: https://drive.google.com/file/d/1Vr9...ew?usp=sharing
To 4000: https://drive.google.com/file/d/1TpH...ew?usp=sharing
Last edited by CatusStarbright; 1 week ago
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Jammy Duel
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Mr Speaker,

The relative silence from the advocates of the SWF tells this house all it needs to know.

Could they answer very simple questions about their proposals such as why their magic money tree doesn't exist IRL if it is so great? No

Did they offer any explanation as to how it actually helps the country? No

Did they even bother to deny that after half a century we will have thrown over a trillion pounds at it and have no return? No

If even the advocates cannot defend the white elephant why should it be kept while we run an underlying deficit of £108bn? Quite simply: no, the only sensible course of action is to vote aye!
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Rakas21
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(Original post by Andrew97)



Sovereign Investment Bill 2019 (Repeal)

A bill to repeal sovereign Investment Bill 2019


[field defaultattr=]
BE IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and consent of the Commons, in this present Parliament assembled, and by the authority of the same, as follows:-

1: Repeal;
(1) V1537 is hereby repealed.

2: Commencement, Short title, and Extent
(1) This Act may be cited as Sovereign Investment Bill 2019 (Repeal) Act 2019
(2) This Act extends to the whole of the United Kingdom
(3) This Act comes into force in upon royal assent[/field]


undefinedNotes

Mr Speaker, while a sovereign wealth fund sounds like a brilliant idea on paper when it must be funded via borrowing it crashes into the brick wall of reality. Here we shall set out three arguments against the formation of a debt based SWF as set out in V1537: one fiscal, one philosophical, and one based on unintended consequences, quite naturally this will be done in reverse order.

1. Unintended consequences

Section 2(9) of the Act has the unintended consequence of bankrupting the British Monarchy in the middle of the decade as it withdraws the primary source of income for the Royal Household is removed starting in fiscal year 2022-23 owing to the Crown Estate being merged into the funds.

2. Philosophical inconsistency

Just a few months ago we saw those behind the SWF demanding the privatisation of Cardiff airport on the grounds that it is not for the state to run such services, something which also applies to operating a financial institution with exceptions only able to be reasonably made for assets the government naturally controls as part of the day to day functioning of the modern British state, for instance the Crown Estate and any pension funds that may exist as part of a pension scheme for public sector workers.

3. Fiscal (ir)responsibility

Given this fund will be funded from borrowing above and beyond that which would otherwise exist, with the exception of the ~£14bn property portfolio provided by the Crown Estate, any investment in the fund will provided by borrowing, because of this for the proposal to make any sense requires one of two assumptions to be made:
1) That near zero borrowing rates will be maintained in perpetuity
2) Equities bubbles will constantly grow bigger and bigger without bursting.

Provided below are two spreadsheets estimating the net present value of the proposed fund, the first only goes to 2200 to get a picture of the values over multiple generations, the second has everything hidden with the exception of the fund value as a proportion of GDP to observe the value over millennia. The following assumptions were made:
1) Near zero borrowing will not persist, instead the cost of borrowing will gradually increase by 50 basis points per annum until hitting the pre-crash average of about 5%
2) Inflation will, in the long term, average out at 2.8%, the long term average since pretty much any point of your choosing between 1990 and 2008 until pretty much any reasonable point of your choosing up to today
3) Real GDP growth will average at about 2.5%, an approximation of the average rate for the period from 1990 to 2008
4) The return on the fund will be 5.5%, based on the optimal blend of investments as set out in the Act

Further to this there are 4 tabs, two including the value of the Crown Estate and two excluding it, and two assume the £15bn investment is a lump sum given at the start of the year and the other 2 spread equally over the year. The best case for the SWF is, trivially, Crown Estate included and lump sum at the start of the year.

Column X shows the net present value (NPV) of the fund, that is how much the fund is worth in today's money less the amount spent on the fund in today's money.

What we see is that even in this best case scenario the NPV of the investment is very modest until the end of the century, indeed it peaks in the mid 2030s at a mere £33bn before rapidly dropping off as the cost of borrowing racks up before going negative in the mid 50s and remaining negative for two decades. Examining the same model excluding the Crown Estate shows that the new elements of the fund are even worse, with the initial peak being only £12bn and becomes negative a decade earlier, in the mid 40s.

Even in this best case scenario the NPV at the turn of the century is a meagre £400bn, which sounds like a lot until you consider you have seen 620% real GDP growth over the same period, with real GDP sitting at about £15tn in today's money.

Examining Section 6(6) makes the Act even more farcical, it states that when the value of the fund hits 110% GDP any excess can be used to pay down the deficit, there's one small problem: the fund would not hit 110% of GDP until the 37th century, there's long term planning, and then there is this.

Mr Speaker, it is abundantly clear that the fund was proposed with no real effort put into calculating either the cost or the return; it is a fancy thing foreign governments do with existing assets that they have to manage regardless, or that they do backed by a major commodity to help transition the economy when that commodity stops generating revenue; there is a reason these funds are not funded by debt in the real world: the numbers simply don't add up.

-------------------------------------------

Original Act: https://www.thestudentroom.co.uk/sho....php?t=6248274

To 2200: https://drive.google.com/file/d/1Vr9...ew?usp=sharing
To 4000: https://drive.google.com/file/d/1TpH...ew?usp=sharing
Mr Speaker, the poll appears not to be clickable.
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Andrew97
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(Original post by Rakas21)
Mr Speaker, the poll appears not to be clickable.
Sorted.
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Jammy Duel
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(Original post by Rakas21)
Mr Speaker, the poll appears not to be clickable.
I guess even with two weeks to look for one you can find no fault and are merely voting for this white elephant because it is yours rather than a genuine belief that being tens of billions out of pocket while looking for any dodgy investment you can get to spend the money as required is actually a good thing.
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Connor27
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Let’s save the last Conservative government’s compassionate spending and save the SWF!

Vote no on this Bill!
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Jammy Duel
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#7
(Original post by Connor27)
Let’s save the last Conservative government’s compassionate spending and save the SWF!

Vote no on this Bill!
Translation: let's keep the deficit at £108bn and climbing, although I can't explain why that is good
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Bailey14
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This bill has my support and I have voted for it.
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LiberOfLondon
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#9
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https://m.youtube.com/watch?v=cMTAUr3Nm6I
I advise members of the House that want to know how I voted to look at the link.
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CatusStarbright
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Aye. Let's end this.
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Jammy Duel
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#11
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Lib Dem abstain whip, or just lib dems being lib dems?
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LiberOfLondon
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(Original post by Jammy Duel)
Lib Dem abstain whip, or just lib dems being lib dems?
Never seen a whip to abstain before.
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Rakas21
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(Original post by LiberOfLondon)
Never seen a whip to abstain before.
Only time I recall is once or twice years ago when we’d done a deal for something else in return for abstention.
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Jammy Duel
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(Original post by LiberOfLondon)
Never seen a whip to abstain before.
Pretty sure it isn't, it's just funny how many LDs are abstaining rather than voting for, given the opponents didn't even reject the conclusions. There are some that abstain on everything, not that many though.
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LiberOfLondon
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(Original post by Jammy Duel)
There are some that abstain on everything
I think I know exactly who you mean
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The Mogg
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Ah, it's been years since I've been able to speak in the division lobby. My first course of action as a proud proxy of the glorious Labour Party will be to vote Aye on this bill.
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SoggyCabbages
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Andrew97

Mr Speaker I intended to vote Nay on this bill but I'm not sure I did, crisis of confidence. Is it possible for you to check, and change to nay?

Many thanks.
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Andrew97
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(Original post by SoggyCabbages)
Andrew97

Mr Speaker I intended to vote Nay on this bill but I'm not sure I did, crisis of confidence. Is it possible for you to check, and change to nay?

Many thanks.
Will change to nay in final result.
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SoggyCabbages
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(Original post by Andrew97)
Will change to nay in final result.
Cheers big ears. x
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Jammy Duel
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(Original post by SoggyCabbages)
Andrew97

Mr Speaker I intended to vote Nay on this bill but I'm not sure I did, crisis of confidence. Is it possible for you to check, and change to nay?

Many thanks.
IS there any particular reason given this will cost over £1tn over the next half century with a negative return, something the opponents of the bill don't even deny? Nor did they deny the fact that it will almost certainly lead to waste owing to the funds that must be invested in green and export businesses likely exceeding what can be invested
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