A Citizens’ Wealth Fund would create billions for investment

But it is worse than that, because this country is missing a huge opportunity, and one that is being exploited by more sensible governments around the world. Other countries have realised that it is mad to keep their pension funds divided into tens of thousands of relatively tiny jam jars of cash. They have smashed the jam jars, pooled the pension funds – and created gigantic sovereign wealth funds which they are using to invest in high-yield assets. The Dutch, the Canadians, the people of Singapore – they are all using pension-fund cash to invest tens of billions in infrastructure and housing, some of it in London.

We welcome that investment, of course. We are grateful. But is it not absurd that we are not able to call upon British pension funds to perform the same function? If we amalgamated our local authority pension funds, we would have a war chest of £180 billion; and if we added in all the public-sector pension funds, we would be talking hundreds of billions – and suddenly we would be able to direct those vast UK assets to the support of projects that are both socially useful and vital for the economy.

We will need to spend £100 billion in the next 10 years on power stations, if we are going to keep the lights on. If we pooled our pension fund assets, and created a Citizens’ Wealth Fund, we would be able to get those schemes going – from new roads to new tunnels to hundreds of thousands of new homes for sale or rent (to say nothing of the new four-runway hub airport we need). And these investments would be attractive, because typically they would have a much higher yield – 7 or 8 per cent – compared with the 2 or 3 per cent currently achieved by pension fund managers in bonds or gilts. Roads and tunnels can be tolled; airports have charges; railways have passengers – and so on.

There would be a decent revenue stream from such investments, which is more than can be said, frankly, for the investments made by British public-sector pension fund managers over the past 20 years. They piled into the banks, and lost colossal sums in the crash of 2008 – eight times more than it cost to bail out RBS. The NHS alone has a black hole of £300 billion in its pension fund, and across the public sector it is hard to see how we will meet our obligations to future pensioners.

In London, the local authority pension fund is already paying for 80 centenarians – people who have been retired for 40 years. Their numbers will swell inexorably as people live longer and longer; and you may be interested to know that the life-expectancy of the average Londoner has risen by about 18 months just since I have been Mayor. How are we going to pay for all these people?

Part of the answer is to increase the returns of the pension funds, with bolder and more strategic investments. And if we pooled those funds, we would find big and immediate savings in bureaucracy – perhaps £5 billion a year; enough to pay for an aircraft carrier or something more useful.

What is the obstacle to this plan? It is the vested interests, of course. For decades now, the public-sector pension fund has been the place where you stick old Doobury, the good egg who is coming up for retirement, the soon-to-be-ex-employee who is looking for another string to his bow. The little pension funds will fight for their independence; they will make all sorts of spurious arguments about the need for “localism” in managing this dosh, when of course the advice is all sub-contracted to the same legion of investment managers, and what they really care about is their fees and their tickets to Wimbledon from the investment managers and their golf-club bragging rights.

The vested interests must be ruthlessly overridden. It is time for Britain to have its own Citizens’ Wealth Fund, deploying our assets in a useful way, helping us to bolster the pensioners and cut pointless public expenditure at the same time. Away with the later Roman Empire, and forward with 21st-century Britain.

3 thoughts on “A Citizens’ Wealth Fund would create billions for investment”

  1. Forget it Boris! What you propose will never happen as our fund managers (and politicians) are too greedy and are quite happy to continue working and milking the pensions forever. I agree our pension schemes are completely laughable but nobody in this country has any guts to change the system. I am happy to voice this opinion as I am a widowed pensioner myself, and if I had no extra sources of income (created by my own self), I would now be living on handouts and raiding the dustbins in time-honoured fashion.

  2. I am not convinced that there are 39,000 ‘funds’ with available assets.

    According to the Pension Regulator’s 2013 report on public service pension schemes 22,000 employers have 12.5m staff in the 7 main public sector pension schemes which are managed in 4 central and around 200 local funding mechanisms. Of these 7 only one scheme – local government (in 100 local funds) – is funded and has any assets, in equities, property etc.

    While these assets might be sold and proceeds put into a single fund, the unfunded schemes would surely need to convert onto a funded basis before they could support infrastructure.

    The Pension Policy Institute (2005) also identified other much smaller government schemes (such as those for MPs, the Judiciary, Research Councils and the UK Atomic Energy Authority) with total active membership of around 31,000 people, and the largest 7 quasi-public sector schemes with around 345,000 active members. Even adding schemes created since then, since not all are funded, you won’t really be “talking hundreds of billions”.

  3. I love this idea! We so need innovation in government. It’s so Victorian! And there is huge duplication in pension administration, and in the public and private sectors generally. Successive Governments have promised to cut red tape and have delivered, as you say, “an unstoppable growth in non-jobs and sinecures, funded by the state and which no one has the guts to curtail.” We are indeed becoming like the late Roman or Byzantine Empires, the only difference being that our capital is Brussels rather than Rome or Constantinople.
    Not sure how the combined fund would make money for its holders, or how the market would recover if a wall of money moved out to public projects. But no need to be picky. Let’s stay with the big picture.

    THINGS IN THIS LIFE CHANGE VERY SLOWLY, IF THEY EVER CHANGE AT ALL
    So why does nothing change? Albert Einstein put his finger on the cause when he said “We cannot solve a problem with the same thinking that created the problem in the first place.” The conventional approach is to reorganise. But reorganisation is worse than nothing. It causes fear, uncertainty and doubt, reducing productivity while people work out where they fit in the new organisation. “We trained hard, but it seemed that every time we were beginning to form up into teams we would be reorganised. Presumably the plans for our employment were being changed. I was to learn later in life that, perhaps because we are so good at organising, we tend as a nation to meet any new situation by reorganising; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralisation. (Charlton Ogburn, “Merrill’s Marauders”, Harpers Magazine, January 1957, incorrectly attributed to Petronius Arbiter)
    Leaders ignore any radical idea which would make the organisation more economic, efficient and effective, remaining welded to the traditional, bureaucratic, unsystematic command and control hierarchy. But “facts do not cease to exist because they are ignored.” (Aldous Huxley) Ironically, by letting go and empowering their people to contribute they would increase their control and effectiveness without changing the organisational structure. Pull is more effective than push.

    HOW TO WIN THE NEXT ELECTION
    A similar approach to government would give the political party which proposed it a landslide victory.
    The turnout in the Scottish referendum was 84.5%. The turnout in the 2010 UK general election was 65.1%. Would you like the turnout in general elections to be higher? Why do you think the turnout was nearly 20% higher in the Scottish referendum? Could the cause be reproduced to increase the turnout in general elections?
    Voters in the Scottish Referendum knew they could make a difference. Voters in a general election know they can’t. Governments are rarely elected by a majority of the voters. The only political power we have is to vote for one politician every 5 years. Once elected, politicians do what they like without asking us. We live in an oligarchy. Consequently people are disillusioned with politicians and political parties.

    DEMOCRACY INSTEAD OF OLIGARCHY
    In this internet age, it makes no sense for 646 Members of Parliament who cannot represent the varied views of millions of constituents to travel and sit together to watch the Cabinet’s will become law. Parliament is an anachronism. The internet is a more economic, efficient and effective way of gathering the views of people. Real democracy could take £200 billion (30%) off the cost of running the UK by replacing unproductive politicians and senior civil servants by a few co-ordinators. I’m not recommending a guillotine in Parliament Square, though the saving in pensions would be substantial. I’m saying that we would be better off in every way by replacing politicians and back office civil servants and governing ourselves through social networks.
    John Major said, “If the answer’s more politicians, you’re asking the wrong question.” That’s why devolution is nonsense. It results in more politicians and more cost. Conversely, if the answer’s less politicians, you’re asking the right question.
    The internet could create real rather than apparent democracy. The disfranchisement of our oligarchic political system could be replaced by a dynamic democracy emancipating the electorate and harnessing the power of mass creativity. Only those who chose not to participate would be disfranchised, but their disfranchisement would be voluntary rather than involuntary as at present.
    The internet could be used to gain a far better and more current understanding of voters’ wishes, manage their expectations of the feasibility, time and cost of meeting those aspirations, and allow the electorate to vote on these managed expectations immediately. People tend to like some policies from all parties. Instead of having to choose one set of policies once every 5 years, they could vote on individual issues as they arise.
    As John F Kennedy said “And so, my fellow Americans: ask not what your country can do for you – ask what you can do for your country. My fellow citizens of the world: ask not what America will do for you, but what together we can do for the freedom of man.”

    MAKING IT HAPPEN
    Making electronic voting secure is a technical issue but one thing people are good at is overcoming technical issues. Persuading politicians to give up their power is the more difficult task.
    Does this mean the end of politicians? No, but it means replacing talking heads by people who can translate the people’s wishes into reality.
    To avoid the democracy leading to chaos with unmanageable volumes of diverse opinions on what should be done, the business management system would enable productive collaboration by providing a framework within which people can express opinions, and a mechanism for creating the agreed outcomes from available resources.

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