York Big Tent Ideas Summit 1. (Partner: New Capital Consensus)
View the other York Big Ideas Summit and Festival reports HERE.
Facilitator: Nick Silver, economist and co-founder Radix and Climate Bonds.
Provocateurs:
- Sir Steve Webb, former Pensions Minister,
- Martin O’Malley, Group Chief Auditor, Aviva,
- Magda Polan, economist and former chair of Radix fellows.
There is a large pool of capital in the UK waiting for investment, which is being mis-
invested, Radix co-founder Nick Silver told the York summit. Instead, it is invested in
low yielding opportunities, leading to more investment in foreign infrastructure than
there is in the UK.
One of the themes debated was: ‘Is low capital a myth and if so why is that the
case?’ Magdalena Polan, the former chair of Radix fellows, said that asset managers respond
to incentives and regulation. The structure of the industry is fragmented, and local
regulation becomes ‘sub-optimal’ on a global level.
As for what is wrong with the UK’s savings and investment system and what needs to
change – Aviva chief auditor Martin O’Malley provided some examples of sustainable
investment at Aviva. We need policy changes that support certainty and stability, but
he warned that was hard to achieve unless the policy environment was cohesive.
Former Lib Dem pensions minister Sir Steve Webb blamed politics for undermining
defined benefit pension schemes – and retailer Sir Philip Green, whose business
collapsed with the loss of 11,000 jobs and a £571 million pension deficit, leading to
an outcry that eventually forced Green to pay £353 million to the pension scheme.
Take risk off to protect the pensions, Webb argued. A lot of money would generate
little return as, at present, neither trustees or company have any incentive to do
better. Change incentive structure, reward investing for growth.
The discussion heard that political debate should move toward reforming the system
to deliver for the people it is supposed to serve.
One audience member said: “Of course, we want a return on investment and to
invest in infrastructure.” How to find a project that meets both of these criteria … it’s
hard. A lot of infrastructure investment doesn’t earn a return. The government
should find schemes that are suitable for investment.
Magda Polan called for the role of government in the public sector to be ‘anchor
investor’. Other governments do long-term investment better, she said – especially in
Central and Eastern Europe. “The UK is already facing a drop in capital investment
from Brexit. It is the government’s responsibility to ensure stability, not the private
sector.”
Radix’s new capital consensus project has now launched. See here for details.
