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.