FINTRANS-UK: Off-Balance-Sheet Financing of Large-Scale British Transformations

The FINTRANS-UK project tackles one of the most pressing issues of our time: financing the Green Transition. This transition involves significant changes to housing, mobility, infrastructure, and our consumption and production patterns. While we have a broad understanding of the technical steps needed, the crucial question remains: how do we finance these changes? Historically, the British state has used off-balance-sheet fiscal agencies (OBFAs) to fund large-scale transformations, such as wars and post-war reconstruction. These agencies, which include national development banks and government-sponsored enterprises, operate outside the government’s main balance sheet, providing the necessary fiscal flexibility without directly impacting national debt or budget deficits. Despite their importance, OBFAs are often overlooked or misunderstood in academic literature. The FINTRANS-UK project aims to shed light on the historical use of OBFAs and explore how these mechanisms can be applied to the current challenge of decarbonising the UK economy. By examining past instances where OBFAs were used to finance significant transformations, the project seeks to develop a comprehensive understanding of their role and effectiveness. The project has three main objectives. First, it will map and analyse the historical use of OBFAs in the UK over the past century, focusing on their role in financing large-scale transformations. This includes creating a detailed database and visual representations of these agencies and their impact on the UK’s monetary and financial systems. Second, the project will explore how the introduction of OBFAs has altered the UK’s monetary architecture. By understanding these changes, the project aims to provide insights into how similar mechanisms can be used today to support the Green Transition. Finally, the project will develop a policy proposal for using OBFAs to finance the Green Transition in the UK. This proposal will be based on historical insights and contemporary needs, offering practical tools for policymakers in finance ministries and treasuries, financial market participants working in the climate finance field, as well as the wider audience interested in or concerned by the challenges posed by the Green Transition. The potential benefits of this project are significant. For policymakers, it provides both a historical context and actionable strategies for leveraging OBFAs to finance decarbonisation efforts, addressing the need to achieve environmental targets while managing fiscal constraints. For financial institutions, it offers insights into the potential of OBFAs to mobilise private capital for sustainability goals. For the public and research communities, it enhances understanding of innovative financial mechanisms and their ability to drive large-scale societal transformations. In summary, the FINTRANS-UK project is highly relevant for stakeholders in economic policy, financial markets, and environmental sustainability. By offering a novel approach to financing the Green Transition, the project draws on historical lessons to develop practical, forward-looking solutions that address contemporary challenges in policy and practice.