A United Kingdom Investment Bank is needed more than ever. It makes little sense to be seeking large scale and relatively costly long-term finance for the infrastructure projects so vital to our future productivity when we can raise it more cheaply at home.
Gemany has had such a bank since 1948, the Kreditanstalt fuer Wiederaufbau (KfW), described by some as the 'safest bank in the world.' One subsidiary provides finance for housing, energy, transport and student loans (€47.6 billion in 2014); another lends to Germany's famed Mittelstand, the Small and Medium-sized Enterprises which have for so long been the engine of the German economy (€20.4 billion in 2014). Its overseas development subsidiary lent €7.4 billion in 2014 for projects in water supply, energy and finance in developing countries.
KfW is owned by the German Federal and state governments. 90pc of its funding is raised on the debt markets.
We already have some of the elements which could form part of a UKIB. The Student Loan Company and its ever increasing portfolio could remain in public hands (as it should) rather than being sold off. An increasing amount of DFID funding is in the form of 'returnable capital' (i.e. loans). Rather than leaving this with a department which is not set up to manage such money, the lending could be done through the UKIB. The Green Investment Bank could become a subsidiary, for the long-term benefit of the nation, rather than being privatised.
When I have asked why a UKIB could not be established now, I have been told that it is likely that it would not receive EU approval. Apparently Germany has a specific exemption for KfW because its formation predated the formation of the EEC. No such obstacle can be put in our way outside the EU. Another reason for acting now is that we will presumably no longer be able to part of the European Investment Bank which lends money to some projects in the UK. That needs to be replaced.
A UKIB would not only provide much needed capital for infrastructure and business, it would also offer a reliable home for investment by UK pension funds and other domestic savings.
To counter the fear that a UKIB would simply become a piggy bank for the wilder proposals of politicians, it would need to be set up with a clear charter which would be fulfilled independent of political interference by professionals of the highest calibre. It would also be expected to generate a surplus. Its shareholders would be the UK Government, the Devolved Administrations and (if they wished to) local government.
In my view, there is no time to lose. KfW has served Germany well and a professionally-run UKIB will do the same for the United Kingdom.