Baron Myners "Capitalism without owners will fail" LAPFF 2013

The final speaker was without being at all disrespectful to the others, the best. Former City fund manager, Marks & Spencer Chairman, self professed trade unionist and former Labour Government Financial Minister, Baron Paul Myners.

Unfortunately this session was also held under "Chatham House Rules" which means I cannot report on what he said.

Which is a great pity but I understand that he is writing a book (with help of a top pension blogger and fellow founder member of "Struggle") so I assume there will be opportunities for us all to hear him in the future.

Paul actually joined in on the previous debate on investor collaboration but I assume his response to my question is also top secret? He did say it was nice to see me again (which I think is okay to report?).

This is my one and only Paul Myners story - normally at such conferences he tells me off for being on the Tower Hamlets Council pension committee that sacked him and Gartmore Group as our fund manager in 1990's. Being sacked by Tower Hamlets LGPS he has described as "the worse day of his life".  This time I introduced myself as a Newham Councillor which probably saved me.

:)

Media Standards debate: LAPFF 2013:

This debate was with Martin Hickman (left) who use to be a journalist with the Independent and wrote a book on hacking with Tom Watson MP and with Evan Davies from "Hacked off". Cllr Kieran Quinn chaired.

Somewhat ironically but fully justified in the circumstances this fascinating debate was held under "Chatham House rules".  So I cannot post on this but will say if you have a chance to go and listen to Martin and Evan on this topic then please do.

I had a short chat with Evan afterwards about Libel reform (I declare a interest) and he said that he will be in touch about the threat to "no win, no fee" defence success fees in libel cases.

Only worry about your pension if there is another Russian Revolution...

I recently went to an "off the record" Chatham House rules debate on whether closed defined benefit pension schemes should invest in equities (shares) or not?

Now, I doubt very much that all that many people will share my keen interest in such matters, but if you currently contribute to a funded defined benefit pension scheme or if you have a frozen one from a previous employer then you should. 

This is your money, your "deferred pay" and unless you at least try and take an interest in it then who will you blame if it all goes horribly wrong? 

The argument goes something like this. Pension funds which are "closed" (for some reason it wasn't made clear in the debate but I assume it was funds that were closed to new members and future accrual of pension benefits by existing members) are concerned about the long term not the short term and that the strength of the employer "promise" to the scheme to fund it until it pays out all its obligations is more important than anything else. Such schemes can afford to hold illiquid assets which have attractive tax efficient returns with a low probability of risk. So why invest in risky, liquid and unstable equities? 

The alternative argument was that equities should be part of a mix of investments. Admittedly returns in equities in recent years have been appalling but "No means Never" and you should not throw the baby out with the bath water. UK Pensions PLC have massive pension shortfalls in funding liabilities and the only way to close this gap is the long term historic out performance from equity investments. Past performance is not guarantee of the future but the long term equity premium over bonds is an accepted market compensation for risk. 

Why this is important is that if the trustees of your pension scheme gets this equities and/or bonds decision wrong, then your scheme may end up in the tender mercies of the Government Pension Protecting Fund (PPF).  The PPF is a very good thing but most people would lose out financially if their pension had to be rescued by it. 

So the lesson is if you are in such a scheme then take an active interest in it and in the trustees that run it on your behalf. Read the stuff they send out to you, ask questions, take part in elections of member nominated trustees, turn up to any meetings and even consider standing yourself to be a trustee. Make sure that your scheme is run in the interests of the beneficiaries and not by any vested interests (and there are many). 

Apparently there is an argument that the only real danger to equities not out performing bonds is if the economy suffered from something completely dramatic as the Russian revolution of 1917. 

I hesitate to point out that next week is in fact the 95th anniversary of the Bolshevik Revolution and the Storming of the Winter Places. I hope they will keep "Pleb Gate" locked up for this anniversary.

Update: I have just been reminded that the number one issue with closed schemes is that they cost far, far more to run when closed than if they were kept open. Pension funds need new blood, new contributors to stop them becoming mature and cash deficit. Millions of workers are simply being cheated and conned out of a decent retirement while employers are often being mislead and badly advised. While many DB schemes and Government regulations need to be updated they do not have to be closed. If they are closed then it is in the real long term interests of the workers and employers that they should be reopened. 

Wipe the National Debt Slate Clean: One-off International Wealth Tax to Save the World?

Recently I went to a "Chatham House" style briefing where a respected financial figure gave their view on the world economic outlook. It was pretty grim to say the least. The speaker argued that we are basically stuffed and leverage (debt) is the key worldwide problem facing both the private and public sector. We all face years and years of recession and cuts in our national income (GDP) before this debt is paid off. All in all a pretty dire doom and gloom prediction.

The speaker was less forthcoming about possible solutions but did mention a recent study in Boston had recommended that there could be a one off international wealth tax which could be be used to pay off and resolve the debt crisis at a single stroke. I was the only one at that meeting to openly express a view that this seemed a "good idea".

There was the counter argument that you could never get the wealthy to agree to such a measure, they have too powerful economic and political domestics interests to allow such a tax to be considered and that there would be a "flight of capital" from any country or continent that would want to adopt such a measure. I was not convinced.

When I got home I searched for this study. I found the original report by the Boston Consultancy Group (BSG) from September 2011. The BCG is a leading world wide management consultancy firms, who are not at all a "leftie" organisation.  Check out their solution. In ancient times debt use to be wiped clean on special occasions. So why not now?

To pay for this wipe out of debt they propose a "one-time wealth tax" on financial assets and other taxes on property. Only for those with assets above 100,000 euros.

I also think that the wealthy have enjoyed in recent years unprecedented growth in their share of national income and the value of their investments.  So they will still be ahead even if they did have to take  a substantial "haircut". Remember, if we don't deal with this debt mountain and we face the armageddon of decades of depression, then surely it is in the interests of the wealthy that they pay this one off tax to preserve the long term value of their remaining capital?

I also think that people underestimate the ability of liberal western democracies to take drastic action when they are up against the wall. If their economic survival is at stake then you can rule nothing out.

The first successful modern day capitalist revolution had its roots in Boston in the 18th Century. Who knows, the next one may have already started in Boston in the 21st Century.