Un­less we make cap­i­tal­ism more in­clu­sive, his­tory will judge us poorly

The Sunday Telegraph - Money & Business - - Business - NIGEL WIL­SON

It’s time for busi­ness to ar­tic­u­late and back in­clu­sive cap­i­tal­ism. In­vest­ment-led growth drives pro­duc­tiv­ity and in­creases real wages. It can also make ne­ces­si­ties, es­pe­cially hous­ing, af­ford­able. Ev­ery­one, in par­tic­u­lar the young, should se­cure a stake in UK wealth.

In west­ern economies, real wages have failed to rise any­where whilst prof­its have been ris­ing ev­ery­where. Ef­fi­cient ap­pli­ca­tion of tech­nol­ogy has made man­u­fac­tured im­ported lux­u­ries such as con­sumer elec­tron­ics and cars cheap. How­ever, pub­lic pol­icy has made ne­ces­si­ties like hous­ing, en­ergy, ed­u­ca­tion and health­care ex­pen­sive. This wasn’t sup­posed to hap­pen. Cap­i­tal­ism should be in­clu­sive, rais­ing ev­ery­one’s stan­dard of liv­ing. The so­lu­tion is not to try to tax wealth cre­ation, but to en­cour­age in­vest­ment through pos­i­tive, con­struc­tive col­lab­o­ra­tion be­tween gov­ern­ment, busi­ness, fi­nance and reg­u­la­tors.

Many of the UK’S cur­rent mar­ket fail­ures are un­in­tended con­se­quences of the 1980 Hous­ing Act and 1986’s “Big Bang”. The goal of cre­at­ing a house-own­ing democ­racy through “right to buy” should be ap­plauded, but it wasn’t com­ple­mented with a “need to build” pol­icy. While 100,000 coun­cil houses a year were sold, house build­ing de­clined 50pc along­side ex­ces­sive price in­fla­tion. The Big Bang made Lon­don the heart of the global fi­nan­cial sys­tem, but there was min­i­mal trickle-down to other cities.

We know ur­ban­i­sa­tion and in­no­va­tion de­liver eco­nomic growth. Lon­don is our best ex­am­ple. How­ever, its wages, in­vest­ments and op­por­tu­ni­ties ac­cel­er­ated away from our other great cities. Un­like many other in­vestors who don’t yet see Manch­ester or Birm­ing­ham as equiv­a­lent to San Fran­cisco or Bos­ton, L&G does. En­light­ened lo­cal po­lit­i­cal lead­ers faced with the down­side risk of Brexit need our sup­port as they seek in­vest­ment. De­vo­lu­tion should lead to in­clu­sive cap­i­tal­ism. In­vest­ing to solve the hous­ing cri­sis is not about im­port­ing cheap for­eign labour. It is about up-skilling through in­vest­ing in hi-tech Uk-based man­u­fac­tur­ing along­side “at­ti­tu­di­nal” changes in plan­ning and a de­crease in “Nim­by­ism”. The out­come: 100,000 high-qual­ity af­ford­able houses that coun­cils and oc­cu­pants need.

Pos­si­bly the big­gest mar­ket fail­ure is later-life liv­ing, with only 2pc of all new homes built for over-55s. They have £1.5 tril­lion of hous­ing eq­uity, some of which is “un­der-em­ployed cap­i­tal” be­ing used nei­ther to in­vest in new pur­pose-built hous­ing nor to pro­vide an in­come in later life. The ur­gency of our care home cri­sis may en­cour­age plan­ners and politi­cians to raise their game. Only 7,000 dwellings with care fa­cil­i­ties are be­ing built an­nu­ally.

Life­time mort­gages are an im­por­tant so­lu­tion. The in­dus­try is in its in­fancy. With en­abling reg­u­la­tors, po­lit­i­cal sup­port and en­light­ened in­sti­tu­tions, last year’s £2bn could be­come £20bn by 2022. This ad­di­tional £18bn would pro­vide a 1pc eco­nomic boost dur­ing the pe­riod of max­i­mum Brexit un­cer­tainty. Else­where, the UK is de­vel­op­ing an in­sti­tu­tional mar­ket for build-to-rent hous­ing. Plan­ners are sup­port­ive, recog­nis­ing “gen­er­a­tion rent” ex­ists and rent in­fla­tion is too high.

Too many com­pa­nies ex­ces­sively fo­cus on cost-cut­ting and un­der-in­vest for long-term growth. The UK is a world leader at cre­at­ing start-up busi­nesses, but a lag­gard in scale-ups. We have seven of the top 30 world univer­si­ties, but none have the com­mer­cial fo­cus of Har­vard. Bri­tain hasn’t cre­ated an Ap­ple, Ama­zon or Face­book. Never has tech­nol­ogy been so ex­cit­ing nor cap­i­tal so widely avail­able, yet so poorly used.

His­tory will judge us badly if we can’t step up. Long-term in­vestors like Wood­ford and In­vesco sup­port our suc­cess­ful firms and best univer­si­ties. We need more. For in­clu­sive cap­i­tal­ism to work, all stake­hold­ers need an emo­tional, phys­i­cal and fi­nan­cial stake in its suc­cess.

Nigel Wil­son is chief ex­ec­u­tive of Le­gal & Gen­eral

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