Conservative MP and former employee of HSBC Bim Afolami has called on the Treasury to establish a 'Recovery Fund' of £15bn, which would be allocated to FCA-regulated fund managers to invest in the shares of small- and medium-sized businesses in efforts to deliver "transformative growth after Covid-19".
The MP for Hitchin and Harpenden, who previously backed calls for post-Brexit deregulation of the City, said in a report published today (16 June) that the shares purchased by the UK Government could be sold back to the public at a later date with discounted shares offered "to lower-paid NHS workers and young people".
Writing on behalf of Westminster think-tank, the Social Market Foundation, Afolami is expected to float the plan in the House of Commons later today.
The report, Unlocking Britain, suggests that the £15bn would be borrowed via gilt issuance and be invested via the government's British Business Bank, which would allocate the money to commercial fund managers "meaning there was no political control over which companies received investment".
Afolami said the bank would select fund managers who are already "active in making investments into private companies" and would be responsible for "achieving broad geographic and sectoral coverage, at a capped, reasonable cost to the Exchequer".
The fund would make equity or "quasi-equity" investments, with some converted from debt, into private, UK-incorporated companies with the majority of their operations and revenue produced in the country. Eligible companies would have revenues of £5m to £100m, the report said.
Companies must also have been trading profitably in the year prior to the Covid-19 lockdown, have the potential to be successful in the long-term and have the need for more working capital to resume growth.
Sale of the Government's stake in investee companies would then take place "once the economic recovery is secure", with "special incentives to encourage the widest uptake from the general public".
Afolami's Recovery Fund is one of ten ideas outlined in the report, which also suggests abolishing district councils and forcing private schools to make online learning available for state-educated children in efforts to "accelerate economic recovery".
Among the suggestions, the report also recommends ISA savers be able to invest directly in British companies, which it said could be worth up to £6bn a year for companies in need of support.
Afolami said: "We should use the financial power of the state to provide short-term support for small and medium-sized British companies, then in the long term to widen ownership of British business and give more people a stake in the economy. This plan would deliver a strong recovery and a fair economy.
"The Recovery Fund wouldn't involve politicians picking winners, it would use professional fund managers to invest the money where it would do the most good, in exchange for the Treasury getting a share of the firms that are supported."
Director of the Social Market Foundation James Kirkup added: "We will need new economic thinking to get us out of the coronavirus recession and the idea of governments investing in companies to support the recovery should be studied carefully.
"A sensible economic partnership between the state and the private sector is something people of all parties should embrace. So too is a stakeholder economy where ownership is spread more widely."