Labour v Tories 2015: It's ideological

Last week I watched Ed Balls give a typically combative speech at the RSA about Tory spending and taxation plans if they won the next election.

On Sunday morning I again saw Ed interviewed on the BBC Andrew Marr programme who then went on to interview Tory Chancellor, George Osborne.

Ed's message on both occasions was not just an anti-Tory rant. I thought that he made an convincing case that in this election there was a clear economic ideological battle going on between Labour and the Conservatives.

Labour are planning to eliminate the deficit by making cuts but also by increasing wages and making sure that the rich pay their fair share in taxes.

The Tories are not only planning to make massive cuts to public spending to clear the deficit, they have announced plans to go even further and reduce government spending to the same share of national wealth as in the 1930s (35% of GDP). When interviewed by Andrew Marr, Osborne did not deny these plans. The Tories are cutting not because they need to but because they want to.

This is an resumption of an age old fundamental ideological battle between the left and the right in British Politics. Ed argues persuasively that the only way that a future Tory Government would be able to reduce public spending to the level of the 1930s, is not only to further slash and burn public services but they will have to something even more damaging, such as introducing charges for the NHS. No other country only spends 35% of GDP on public services without charging for health services.

On this point Labour financial plans are more credible than the Tories. There is clear red water between Labour and the Tories. A battle of ideas between those of us who believe in fairness and equality and that the role of the state is to enable such change and those who think the state has little or no such role and that such things are better left to the "market".

So the choice is clear. People must decide what sort of society they want to live in and they must vote or note vote accordingly and then live with the consequences.

Tomorrow Investor – Royal Society Arts

On Saturday I was really pleased to have been invited as an “expert” witness by the RSA to address a “citizen Jury” on pension activism.

I’ll post on this separately but I had an enjoyable day and very appropriately for such a venue, my faith in the basic decency and common sense rationalism of the “great British public” has been fully restored.

I was there because the RSA are launching a new project called “Tomorrow’s Investors”. Last week they held a keynote lecture to mark the event.

“Much of the money invested in company equities is held on behalf of ordinary citizens, often saving for retirement and other major life events. Yet it appears that many of those citizens have little consciousness of their role as owners.

Should investors be more involved with their investments, with a greater awareness and understanding of the broader implications?

Would a greater degree of involvement yield better results – both financially and ethically?Speakers to include: David Pitt-Watson, founder and chair of Hermes Equity Ownership Service; Jasmine Birtles, journalist, broadcaster and finance expert; Paul Myners, Chairman of the Personal Accounts Delivery Authority; and Penny Shepherd, Chair of the UK Social Investment Forum.

Top "Labour & Capital” blogger, Tom P was also there, and has as usual captured the debate wonderfully in this post (see selection below) so I won’t need to add anything apart from a few observations.

I think it's fair to say the real action was the split between the views of Pitt Watson and Myners. David sketched a more optimistic picture, arguing that the democratisation of ownership through funded pensions and other savings had already started to have an influence on the nature of ownership. He gave the example of the success of UNPRI.

Myners was far more critical, arguing that there had been very little real progress. Most institutional shareholders didn't take ownership seriously, SRI barely figured on the radar of company boards (as an influence on them), trustees were still spoon-fed by advisers and still focus on short-term performance despite its irrelevance.

I think the broad consensus from our little group was that although the Pitt Watson view was the one we would like to believe, the Myners perspective seemed to fit more with our own experiences.

I thought that Paul Myners was being deliberately provocative - shock horror. There are still huge problems to overcome, but as David pointed out there has been an enormous change in living memory. I actually think that Myners is actually on on board with New Capitalism although unsurprisingly off message.

Even if he is a "trade unionist" and “someone who wouldn’t join the Labour Party because it is not sufficiently left wing for my taste”. Which is a somewhat unusual statement for the Chair of a Hedge Fund to say? As was his suggestion that stamp duty ought to be increased to 5% in order to encourage long term ownership (not traders).

He advised the unions to concentrate on the disparity in Executive pay “the self appointed managerial elite are raping the resources of companies”. So called “independent” external advisers on executive pay are called “Ratchet, Ratchet and Ratchet”.

We need someone like Myners to remind us how far we have to go. Hopefully, at some stage he may have some slightly more constructive remarks. But I agree (and I am sure that David would as well, but is too polite to say so) that the majority of pension trustees need to be more independent minded and stand up to professional advisers. There again to do this they need support and training. Who can do this other than the unions?

Jasmine Birtles was very entertaining and brought us back to planet earth, she remarked that on her money web site she has worthy features on ethical investment, but no-one reads them. The most poplar stories tend to be “how to get rich without really doing anything”. While Penny Shepherd combated Paul’s negativity and took him to task.

I was fascinated when David pointed out that the BT Final Benefit pension scheme (run of course by Hermes and owned by the scheme) only cost 0.2% in annual charges (I repeat 0.2% pa). While modern DC (defined contribution, money purchase, stakeholder, personal pension - what ever) Pension charge at least 1.5% which could swallow over the years up to 40% of the fund in charges.

Come back DB schemes – all is forgiven.