Earlier this month, Charles Randell asked whether the Government could force us to invest in ourselves.
Randell is the former FCA Chair is someone who will tell you he earned the biggest monthly pay-packet for him and his law firm by sorting out Government problems in the financial crisis. Government intervened in the financial affairs of British Banks – that means you and me paid off the creditors who could have sunk bigger institutions than Northern Rock and Bradford and Bingley (mentioned below).
He is no bleeding liberal, he’s a lawyer with the best credentials. Here’s his cute legal argument on what Government’s can do to make investment in Britain happen.
If so, the question is whether it would be justifiable interference as a proportionate means of pursuing a legitimate public interest objective…
Back in the day when advising on the nationalisation of Northern Rock and Bradford & Bingley I knew a thing or two about these sorts of issues. Thoughts from those who are currently more expert than me in these areas would be appreciated!
It will take more than the Government to make us invest in ourselves
The hardest challenge…. is to enact a cultural shift to go alongside the policy reforms. Almost a third of respondents to a recent YouGov survey thought investing was like “gambling”. This despite the fact that cash savings are eaten away by inflation and the housing market has underperformed equities over the long run. If that attitude continues, the UK will indeed be gambling — with the future of its market.
Whether it is ordinary folk or John Ralfe, we believe that investment in our companies equity is a risk. Other nations see our shares in a different light
It is not Government who will make us invest in Britain, it is our Government to convince us that Britain is a good place to have our money.
Right now we seem to be happier to invest in certainties at Royal Ascot than send our money to Paternoster Square. We would like to think that Field of Gold and Trawlerman are more fun to invest in than organisations like Wise, Unilever’s Walls Ice Cream or Hargreaves Lansdown. There was a time when investing in BT or British Gas, BP , BA or our water companies was seen as patriotic. I started selling unit-linked investment when this was happening
BT’s initial offer in 1984 was oversubscribed by three times, we were then a country fired up by Margaret Thatcher and her Government to recover from the post-war slump in confidence that led to the 1970s industrial strife and to a reaction against the optimism I was born into.
This is a very good article by the FT Lex opinion team. They point at what is happening
There are several factors behind the trend. At one end of the scale, pension funds have been shifting focus away from equities in general and domestic equities in particular. Scottish Widows’ plan to slash its allocation to UK equities builds on a decades-long pattern. At the other end, individual households in the UK are far more likely to hoard cash or invest in property than buy stocks.
Toby Nangle was promoting equities and British equities the same thing during the weak to those whose ears weren’t bunged up with arguments about growth being “too complex”. I wonder if he had a part in this article, I’d be surprised if he didn’t agree with the FT’s conclusion that Government is to use Torsten Bell’s rallying cry “get real”. It may have been him who wrote these words…
The government is trying to fix the first part. Moves to consolidate small pension schemes, free up surpluses in defined benefit schemes and better measure the value for money offered by different schemes should all boost UK investments, even if only marginally.
On Tuesday (June24th) Ros Altmann and I will be having a conversation on Pension PlayPen. We should debate how tax-payers get what they have paid tax for- growth! Ironically, we don’t have confidence that Britain can make itself grow- while others do!
People invest elsewhere because the figures say the UK is a bad investment.
To invest in the UK overweight is throwing money away.
It’s a clear issue, if you want investment in the UK make it look like a good bet.
Forcing people to put their savings into UK businesses, who are then legislated into using money to pay more taxes, salaries or whatever else, is basically a stealth tax on savings and pensions.
UK businesses are legislated out of contention.
Tax policy alone appears business hostile and consumer hostile. Why would anyone want to invest here?
I don’t think pension trustees should be investing in “good bets”, Dave C.
There is an investment case to be made for investing in quality, dividend-paying UK listed companies, in UK gilts (and maybe some corporate bonds) paying decent, inflation-adjusted yields, and in UK rental property paying decent (rather than exploitative) rents.
But in the earlier blog featuring Tom McPhail
we both agree that it is not the role of government to mandate such asset allocation if it lacks prudent investment potential.