Plan for investment fund is ‘major mistake’

There are still many questions about where the 20 billion euros from the National Investment Fund should go to. This followed from a hearing in the Lower House of Parliament at which, among others, Bas Jacobs, Professor of Public Economics, was present. He called the fund's approach of assessing investment plans based on their contribution to economic growth a 'major mistake'.

The finger on the sore spot

The hearing focused on the question: what should the money from the Growth Fund be invested in? According to the NOS, this immediately put the finger on the sore spot: a large amount of money is being borrowed for which there is no clear goal. According to Jacobs, the plans for the fund should not be assessed on the basis of their contribution to the growth capacity of the economy, but on the basis of the extent to which they increase the overall welfare. ‘This means, for example, that a private project with only private proceeds should not be financed with public money, even if it leads to an increase in GDP.'

Bureaucratic blunder

Jacobs also has some reservations about the committee that will soon be allowed to decide where the money will go. The ten members of this committee will be appointed by ministries. According to Jacobs, this procedure is a 'bureaucratic blunder', and the committee itself is insufficiently expert: the members would not know how to weigh social interests against each other. In addition, there will likely be some conflicts of interests among committee members, given that some members have commercial or financial interests in the investment allocation.

Shortcomings

Following the hearing, Jacobs prepared a position paper explaining and substantiating his views on the investment fund. In this paper, he states that he believes it is very good that the government is developing policy to increase public investment, but that the National Investment Fund still shows too many shortcomings. The fund does not focus on government investments in education, research, innovation, energy transition and infrastructure. Scientific research shows that it is precisely in these areas that public investments can generate substantial returns.

Professor
More information

Read the full article from NOS, 28 October 2020, here (in Dutch). 

Want to read more about Jacobs' views on the National Investment Fund? You can download his position paper above (in Dutch). 

Or view the full hearing in the Lower House of Parliament here (in Dutch). 

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