No money to invest? It’s a myth
WHAT Chancellors don’t say in their Budgets is always at least as illuminating as the measures they trumpet. It tells us which subjects they would rather sweep under the carpet and whose interests they think can be sacrificed without too much electoral damage.
On the latter point, there was a deafening silence for savers. Perhaps Philip Hammond feels anyone with anything left over to squirrel away is low on the list of priorities. Yet with inflation at 3 per cent, doing nothing for savers amounts to a cut in returns in real terms, as my colleagues point out in our personal finance pages.
Britain’s savings ratio has plunged since the financial crisis: it is 5.9 per cent now and is expected to fall further. The savings culture, one of the biggest casualties of the financial crisis, is being eroded further, leaving individuals and families with very inadequate safety nets – and fragile household finances do not augur well for the longterm health of the economy.
Similarly, there was nothing on care for the elderly, although the Government knows full well that a crisis is coming closer. Debtladen operators such as Four Seasons are in dire financial straits and the next big accident following the Southern Cross debacle a few years ago looks as if it is just waiting to happen.
Mr Hammond kept stumm on pensions, but in this case no news was good news. He had been loudly lobbied to snatch tax-free pension lump sums and other benefits from the baby-boom generation in the name of helping millennials. A confiscatory raid on older people would, as the Chancellor no doubt realised, be a whacking great vote loser.
Not only that, it wouldn’t actually help the young. The best way to do that is not through vindictive fiscal policy aimed at assetstripping the middle-aged, but by giving young people a better chance of well-paid employment in a healthy economy.
Which brings us to the most important news on Budget Day: the dire growth forecasts. However much Mr Hammond might have wanted to, he couldn’t fudge these inconvenient numbers, now that forecasting for the economy and public finances has been turned over to the independent Office for Budget Responsibility (OBR).
He did, however, omit to mention how the UK economy is doing compared with other leading nations. This was a favourite topic with his predecessor George Osborne, who used to delight in pointing out how Britain was outperforming its G7 rivals.
Mr Hammond, however, tried to draw a veil of discretion over the latest figures from the OECD, which were published just two days before the Budget and showed that year-on-year, the UK had the weakest growth of the major seven economies.
There will be plenty of political debate over whether the OBR is being too gloomy and whether or not the economy is already being damaged by Brexit.
The truth is that productivity has been poor for years, because of chronic underinvestment in infrastructure, housing, education and skills.
We could have tackled underinvestment long before Brexit was on the agenda. We certainly should be doing it now.
Another thing the Chancellor didn’t say is that we may still be living in austerity Britain but there is no shortage of money to invest – quite the reverse.
Pension funds, insurance funds and sovereign wealth funds have at least £3 trillion in their coffers, according to Legal & General. Much of that is earning very low or negative returns and could be put to far better and more profitable use in housing, urban regeneration, clean energy, transport and backing small firms.
That would pay dividends for society and the money managers, and help rebalance the economy away from London. It would also help provide better jobs, and pensions, for maligned millennials.
Fund managers have £3 trillion in their coffers earning very low returns