Jake Waterfield: Introducing ‘LUKE’ – a vision of what a Conservative-backed UK Sovereign Wealth Fund should look like

Jake Waterfield is a young finance professional in London. He ran the 2025 London marathon to raise money for St Bartholomew’s Hospital who saved his life in 2024. 

With Labour having launched the National Wealth Fund (NWF) in October 2024, the Conservatives now have an opportunity to go further – to champion a true sovereign endowment that helps secure the UK’s long‑term prosperity.

Norway’s Sovereign Wealth Fund, built primarily on oil revenues from the North Sea, is the best-known example of a disciplined saving and investment vehicle used to benefit all residents of a country. We catastrophically missed that chance in the 1980s, but today we still have the opportunity to design something more diversified, and potentially just as successful, that could turn one‑off revenues into lasting wealth for the UK.

To add some further historical context, Norway’s sovereign wealth fund was created in 1990 after the discovery of North Sea oil, with the explicit aim of saving petroleum revenues for future generations rather than allow them to distort the domestic economy. Structured as the Government Pension Fund, it has one arm that invests globally (Norges) and a smaller domestic arm (Folketrygdfondet). This dual structure ensures diversification while maintaining a domestic presence.

Over three decades, the fund has grown into the world’s largest sovereign wealth fund, exceeding US$2 trillion (£1.6 trillion), and is considered one of the most successful examples of prudent fiscal stewardship, helping Norway secure prosperity for future generations.

This was a missed opportunity for Britain – had we chosen to channel our North Sea oil revenues into a sovereign wealth fund in the 1980s, it could have mirrored Norway’s long‑term savings model. Instead, successive governments of both parties spent the windfall, leaving Britain without a lasting asset base. Estimates vary, but a fund today could plausibly have been worth £1 trillion, even with conservative returns and partial saving. Norway’s rules allow the government to withdraw up to 3 per cent of its Sovereign Wealth Fund each year.

If the UK applied the same discipline to a £1 trillion fund today, the 2024 Autumn Budget would have enjoyed a permanent £30 billion annual boost – enough to transform borrowing forecasts or cut taxes. To put that in perspective, Liz Truss’s infamous 2022 mini-budget sought £45 billion in unfunded tax cuts – only slightly more than the yearly inflows such a fund could have delivered alone.

The National Wealth Fund announced in late 2024 is a small step forward, but with £27.8 billion of assets, it’s closer to a mid‑sized green investment bank than a sovereign endowment, whilst also lacking permanent revenue streams. This scale makes it negligible compared to true sovereign wealth funds – as mentioned, Norway’s fund exceeds £1.6 trillion, making it 58x larger whilst supporting a population that’s 1/12th (8 per cent) the size of the UK – Singapore’s Temasek and GIC together manage around US$1.2 trillion (£0.9 trillion) on behalf of its just six million citizens. Without comparable depth, a UK endowment has no ability to genuinely reshape national finances.

If Britain is serious about learning from Norway, it must therefore go further than the NWF. That means ring‑fencing specific revenues and placing them in a professionally managed fund insulated from day‑to‑day politics, with statutory independence, transparent reporting, and a board appointed on cross‑party consensus. Without such governance safeguards, a UK SWF risks becoming another short‑term policy lever rather than a genuine endowment. The answer, in my opinion, is the formation of LUKE (the Long-term UK Endowment).

Some argue that a UK Sovereign Wealth Fund should only invest in UK equities, Gilts and other assets, to boost confidence in domestic markets. Whilst there is some merit to this, which we will touch on later, LUKE’s primary mission must be to maximise returns for taxpayers, wherever the best opportunities lie – whether that’s across Europe, or further afield.

By diversifying internationally, the fund would not only secure stronger returns but also avoid the classic symptoms of “Dutch disease”, where excessive domestic investment can distort the local economy. Globally focused, LUKE would act as a true endowment by providing a steady income while protecting the economy from volatility.

The next question, naturally, is where LUKE’s initial funding would come from now that Britain has already spent most of its North Sea oil windfall. Studies on this very point have produced some promising results – carbon pricing revenues, royalties from offshore wind and other renewable generation, dividends from strategic state holdings, and recycled proceeds from public asset sales could all be channelled into the fund. None of the seeding for the fund should come from additional borrowing.

The Government’s recent final sale of its historic stake in NatWest is a good case study, having received a total of £35 billion from the gradual disposal over the last 10 years, including dividends and fees. Proceeds from this one asset alone exceeded the current size of the NWF, showing how recycling even a single disposal could seed a fund larger than Labour’s NWF. Despite this, the privatisation of the Royal Mail in 2013 provides a warning that any asset disposals must be prudently timed, not rushed fire‑sales that short‑change British taxpayers.

Sceptics will argue that Britain’s political culture makes it hard to ring‑fence revenues. That is true, but LUKE could be established by statute, with cross‑party agreement, so that its rules are as binding as the Bank of England’s independence. Despite its success, Norway now faces a new challenge – welfare outflows financed by the SWF have reached the point where they just about exceed annual revenues. This has sparked fierce debate between Høyre and Labour over sustainability versus generosity – a reminder that LUKE would need ironclad fiscal rules to avoid the same discussions.

Some will, of course, argue that Britain cannot afford a SWF whilst we are running deficits and carrying excessive debt. I agree that the “don’t-save-while-in-debt” argument is politically intuitive, but it’s economically short‑sighted. LUKE is not about diverting everyday tax revenues – it is about ring‑fencing temporary and exceptional revenues (à la NatWest) that would otherwise be spent once and lost. By recycling these revenues into a permanent endowment, LUKE would transform temporary windfalls into lasting wealth. Far from worsening the deficit, a protected rules‑based fund could provide a predictable annual income stream that stabilises budgets and reduces borrowing over time.

Given LUKE’s global mandate, if appetite remains for a more domestically focused vehicle, LUKE could have a smaller sister fund, as Norway does. The Local Economic Investment Authority (LEIA) would be tasked with nurturing local projects and boosting confidence in UK markets.

The Conservatives now have a chance to seize the initiative – Labour’s NWF may be a useful policy tool, but it is not the kind of endowment that can transform the UK’s future.

Together, LUKE and LEIA would form a balanced pair, one an outward‑looking endowment, the other an inward‑focused catalyst.