Citizens' Wealth Fund



Boris Johnson likes to play the fool, but the London Mayor has a sharp political brain as he demonstrates here with a comment piece in The Telegraph in which he calls for the creation of a Citizen's Wealth Fund to help generate economic growth.

Now this is not a millions miles removed from the SNP's call for an 'oil fund' for Scotland to provide a lasting legacy from the great natural resource of North Sea Oil, except Bojo's idea is based on harnessing the power of the country's public sector pensions funds.

Now I'm sure it's a whole lot more complicated than just 'bish, bash, bosh' and as if by magic a Citizens' Wealth Fund suddenly appears. 

But if you ask me, Boris is spot on when he says that they key lies in tackling all the vested interests involved which are many and powerful.   

A Citizens' Wealth Fund would create billions for investment


By pooling public-sector pensions, we could cut taxes as well as finance major building projects

It's time to smash all the little pension funds and build one, massive UK-wide one Photo: PA



By Boris Johnson - The Telegraph

It is a classic feature of a civilisation in decline that it is afflicted by an unstoppable growth in non-jobs and sinecures, funded by the state and which no one has the guts to curtail. It is the task of Tories to do the curtailing.

We want to cut taxes, don’t we? We want to cut spending, yes? Well, let me suggest a policy that would not just enable us to save billions a year – more than enough to take a penny off income tax, simply by cutting bureaucracy – but would help us pay to build the homes we need, and finance the roads, railways, power stations and airports that this country is crying out for. It would help us to cover the cost of the vast and growing army of older people; and it would end an absurdity – an ontological explosion in the public sector of a kind that has not been seen since the jobbery and Buggins’-turnery of the later Roman Empire.

To explain this opportunity, let me ask you a question I recently posed to a senior member of the Government. How many public-sector pension funds do you think there are in the UK? I asked. “I don’t know,” he said. “A few hundred?” Keep going, I said. “A thousand?” he hazarded. I pointed upwards. His eyes rolled. “Ten thousand? You tell me!”

I told him. There are more than 39,000 public-sector pension funds in this country – each with its own trustees, each with its own managers and advisers and accountants. Every quango, every university, every branch of local government has its own pension fund, from British Nuclear Fuels to the Meat and Livestock Commission to the seven – yes, seven! – that were created to manage the pensions of those who were involved in the London 2012 Olympics.

The waste is extraordinary. Think of all those advisers and investment managers taking their fees – their little jaws wrapped blissfully around the giant polymammous udder of the state. Think of the duplication.

But it is worse than that, because this country is missing a huge opportunity, and one that is being exploited by more sensible governments around the world. Other countries have realised that it is mad to keep their pension funds divided into tens of thousands of relatively tiny jam jars of cash. They have smashed the jam jars, pooled the pension funds – and created gigantic sovereign wealth funds which they are using to invest in high-yield assets. The Dutch, the Canadians, the people of Singapore – they are all using pension-fund cash to invest tens of billions in infrastructure and housing, some of it in London.

We welcome that investment, of course. We are grateful. But is it not absurd that we are not able to call upon British pension funds to perform the same function? If we amalgamated our local authority pension funds, we would have a war chest of £180 billion; and if we added in all the public-sector pension funds, we would be talking hundreds of billions – and suddenly we would be able to direct those vast UK assets to the support of projects that are both socially useful and vital for the economy.

We will need to spend £100 billion in the next 10 years on power stations, if we are going to keep the lights on. If we pooled our pension fund assets, and created a Citizens’ Wealth Fund, we would be able to get those schemes going – from new roads to new tunnels to hundreds of thousands of new homes for sale or rent (to say nothing of the new four-runway hub airport we need). And these investments would be attractive, because typically they would have a much higher yield – 7 or 8 per cent – compared with the 2 or 3 per cent currently achieved by pension fund managers in bonds or gilts. Roads and tunnels can be tolled; airports have charges; railways have passengers – and so on.

There would be a decent revenue stream from such investments, which is more than can be said, frankly, for the investments made by British public-sector pension fund managers over the past 20 years. They piled into the banks, and lost colossal sums in the crash of 2008 – eight times more than it cost to bail out RBS. The NHS alone has a black hole of £300 billion in its pension fund, and across the public sector it is hard to see how we will meet our obligations to future pensioners.

In London, the local authority pension fund is already paying for 80 centenarians – people who have been retired for 40 years. Their numbers will swell inexorably as people live longer and longer; and you may be interested to know that the life-expectancy of the average Londoner has risen by about 18 months just since I have been Mayor. How are we going to pay for all these people?

Part of the answer is to increase the returns of the pension funds, with bolder and more strategic investments. And if we pooled those funds, we would find big and immediate savings in bureaucracy – perhaps £5 billion a year; enough to pay for an aircraft carrier or something more useful.

What is the obstacle to this plan? It is the vested interests, of course. For decades now, the public-sector pension fund has been the place where you stick old Doobury, the good egg who is coming up for retirement, the soon-to-be-ex-employee who is looking for another string to his bow. The little pension funds will fight for their independence; they will make all sorts of spurious arguments about the need for “localism” in managing this dosh, when of course the advice is all sub-contracted to the same legion of investment managers, and what they really care about is their fees and their tickets to Wimbledon from the investment managers and their golf-club bragging rights.

The vested interests must be ruthlessly overridden. It is time for Britain to have its own Citizens’ Wealth Fund, deploying our assets in a useful way, helping us to bolster the pensioners and cut pointless public expenditure at the same time. Away with the later Roman Empire, and forward with 21st-century Britain.

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