Monday, August 21, 2023

Opinion

Powerless in the face of Britain’s crises, Rishi Sunak has now entered his self-pitying era


Nesrine Malik
THE GUARDIAN
Sun, 20 August 2023

In this article:

Nesrine Malik
Sudanese-born journalist and author

We are used to the fact that Rishi Sunak only has two speeds: blandly repeating his five political “priorities” and dutifully affirming the nastiest of his party’s rhetoric. When he’s not answering questions by reciting the five pledges, he’s attacking lefty lawyers, “woke nonsense” or inventing cruel ways to detain and deport asylum seekers. Both, to a certain extent, are performances: the robotic recitations to make clear that, after a series of reckless Tory prime ministers, a grownup is back in charge. The rightwing populist setting, meanwhile, is designed for his own party and the Tory press.

But sometimes another Sunak appears in flashes in a third speed: the self-pitying and frustrated prime minister. One who seems to say: look, you don’t understand how much I’m sacrificing for you people.

Just last week, the prime minister told ITV News that he is enduring political pain in the cause of bringing down inflation. His argument seemed to be that by not doing what people want – increasing government spending to mitigate the cost of living – he is serving the long-term good. “It might make everyone feel better in the short term to borrow lots of money to do lots of things,” he told political editor Robert Peston. “I’m not going to do that.” It is now a familiar piece of Sunak rhetoric. Earlier this year, he justified his refusal to give what he termed a “massive” pay rise to nurses in England on similar grounds. He even spoke of not making his “life easier” during the Conservative party leadership contest against Liz Truss last year. It seems a surprise to him, or at least something that has not yet sunk in, that being prime minister is not about his own personal martyrdom.

On some level, Sunak’s pained parent doling out hard truths persona is familiar from Thatcherite ideology: a morality tale in which self-sacrifice pays out. But Sunak delivers it with condescending impatience rather than sobriety, revealing something deeper about himself. It is hard to avoid the impression that here is a man who has eschewed a peaceful private life making even more exorbitant sums of money in finance in order to publicly serve – and is now annoyed that it’s all a bit more of a pain than he frankly has the patience for. The British people are not shareholders who he can placate with a PowerPoint presentation spelling out the financial picture, but people who have pesky feelings about being able to eat and house themselves, who are rightly making demands about an economic system that has failed them.

Some of this is personality. It is now abundantly clear that Sunak is increasingly impatient with – and distant from – a public that just doesn’t grasp how much he and his government are doing for them. Last week, the Liberal Democrats accused Sunak of being “woefully out of touch” when he appeared to tell people struggling with high energy bills that they don’t quite understand that, sure, bills are high, but they could be even higher. “A typical family will have had about half their energy bills paid for by the government over the past several months,” he said. “Now you wouldn’t have quite seen that because you would have still just got your energy bill, it would have been very high and you’d have been: ‘Oh my gosh, what’s going on?’ but what you wouldn’t have realised, maybe, is that before that even happened, £1,500 had been lopped off, and the government had covered it.” In other words, the public would do better to see the numbers that are not on their bill rather than those that are actually on it, and stop asking so many silly questions of this very busy man.

What’s more, last month, he got testy when a radio interviewer pressed him on his use of jets and helicopters to get around, saying it was “an efficient use of time” for someone so busy, and rounded on the interviewer with one hell of a strawman, accusing him of thinking “that the answer to climate change is getting people to ban everything that they’re doing, to stop people flying, to stop people going on holiday. I mean, I think that’s absolutely the wrong approach”.

There is an argument that these are inevitable PR glitches on the part of someone under constant scrutiny. I am sometimes told by Sunak supporters that he is just not good with the media; he is genuinely hard-working and liked by his team. But these tetchy statements betray a real sense of powerlessness, misdirected at the public and the media. He is indeed backed into a corner, not just by his own limitations, but by his party and ideological positions. Those Thatcherite convictions are either already played out – there is little left to privatise – or preventing him from actually fixing the ailing British economy. He will not raise taxes on assets or capital gains, or genuinely consider price controls to keep inflation in check, or contemplate, Maggie forbid, borrowing to invest in the sort of green tech or insulation that liberates consumers from the gouging of energy companies and the whims of distant warmongering strongmen. What is exposed is an isolated man who is out of moves.

He is restrained even further by his own fractious party. There is no amount of hard graft that will vanquish the troublesome Johnsonites, Brexit obsessives and loudmouths who say refugees should “fuck off back to France”. They can only be appeased and domesticated with jobs in cabinet. And so he is stuck, unable to look inward and admit Tory policies are the problem, or outward to confront his own party’s excesses. He is a man, to adapt the words of the comedian Stewart Lee, “trapped between two different forms of cowardice”.

But I don’t want to spend too much time picking on Sunak. After all, his style of political petulance isn’t confined to him: it is a feature of a dead-end consensus in Westminster. It is echoed in Keir Starmer’s scolding about all the “tough” and “hard” decisions that he has to make when pressed on the pledges he has watered down or abandoned. Both party leaders agree that people’s expectations must be tempered, horizons narrowed. It speaks volumes about the direction of British politics that, as a general election looms, their job is finding more ways to promise nothing.

Nesrine Malik is a Guardian columnist
UK
LONDON
Bidding war for Labour insiders as City prepares for red shift RED TORIES

Melissa Lawford
TORY TELEGRAPH 
LOVES CONSERVATIVE LABOUR LEADER SIR KEIR
Sun, 20 August 2023 

Labour’s lead over the Tories has prompted a scramble among companies to hire those in the know - Leon Neal/Getty Images Europe

After 13 years of Tory government, business leaders are facing up to the fact that a new party may be in Downing Street next year – one that many have no experience of working with.

With Labour enjoying a 17-point lead over the Tories, Sir Keir Starmer looks increasingly likely to sweep to power. That prospect is sparking a scramble to figure out how to deal with the government in waiting.

“Public affairs and comms consultancies are getting CEOs asking them what are we doing in preparation for this potential change, do we have the right contacts and connections?” says Lucy Cairncross, managing director at VMA Group, a recruiter that specialises in public affairs.


“We didn’t hear those kinds of conversations happening in 2019. It wasn’t high up on their agenda because they would have thought it’s not going to happen. This time, clearly, there is a shift.”

PR firms and City advisors are rushing to hire current or former Labour insiders who know how the party works and can help get things done.

“We made a conscious decision at the start of the year to hire senior people with a background in centre-Left politics. The value of their stock is currently climbing,” Nick Faith, director of WPI Strategy, says.

“We work with organisations from pretty much every sector of the economy and they are all gearing up for the possibility of a potential change of government.”

City firms are rapidly undergoing a facelift – and they are trying to look like Keir Starmer.

Perhaps the clearest example of the shift is Hanbury Strategy.

The London-based lobbying and communications company has close ties to the Tory party and was set up by a former close ally of Dominic Cummings, Paul Stephenson, who ran PR for the Vote Leave campaign. However, Chris Ward, Sir Keir’s former deputy chief of staff, joined Hanbury last year and launched a new Labour Unit in September.

“Every business and every trade body in the country is making a contingency plan at the moment for a Labour government,” says Alec Zetter, a public affairs headhunter at recruiter Ellwood Atfield.

It is an increasingly expensive procedure: there is a shortage of talent, meaning companies must pay a premium to attract those with real insight.

Labour has been out of power for more than a decade, and many of those who worked under the party’s last leader have been written off.

“There aren’t that many credible people from the Corbyn period because so many of them were avowedly anti-business and of course it’s a long time since Labour were in government, so there aren’t that many Labour advisers who also have government experience,” says Nick King, managing director of Henham Strategy.

One senior public affairs figure says: “Clients are more and more likely to want a Labour offering, and in a classic case of supply and demand, given there is not a lot of supply, Labour people are definitely attracting higher salaries now.”

Many of those who served under the Labour Party’s last leader, Jeremy Corbyn, have been written off - Eddie Mulholland

Former MPs are in particular demand. Luciana Berger, who quit Labour in protest in 2019 before later rejoining briefly, joined iNHouse Communications last year and became a senior adviser this summer.

Anna Turley, who served in Corbyn’s shadow cabinet, has joined Arden Strategies, as has the party’s former head of business relations, Ellie Miller.

Instinctif, the City advisor to several FTSE companies, took on former Labour shadow minister Tom Harris in July 2023 to expand its Navigating Labour Unit.

Former shadow deputy leader of the House of Commons Melanie Onn, who left the Commons in 2019, has joined Blakeney Communications.

“For good people who are able to do the role really well and have really good contacts, there is always going to be a bit of a war for that talent,” says Cairncross.

If it becomes even more clear that Labour could win the next general election, there could be a “tipping point of going hell for leather” in throwing money at Labour-connected people, she adds.

Consultancies that have sold themselves for years on having expertise dealing with the Conservative Party know that their currency will slide fast if Labour win the next election.

A current Labour source says: “I get some kind of call probably once a month. It started last year when the Tories properly began to implode.”

Those who have worked with Starmer, the shadow chancellor Rachel Reeves or the shadow business secretary John Reynolds are most in demand.

Firms are seeking people who have worked with key figures in the shadow cabinet such as Rachel Reeves - Eddie Mulholland

However, many of those working for Labour now won’t consider a move because they know they may get their first opportunity to work within government, says Faith.

The public affairs sector is also losing staff to Labour, as people return to the party ahead of the election. “I know loads of people seconding jobs into Labour from business,” says Ward.

Demand for Labour expertise is strongest in finance, tech and net zero adjacent industries.

“Any industry that is under particular pressure from a net zero agenda, for example, they are absolutely trying to talk to what they perceive will be the next government around what their responsibilities and contributions will be,” says Zetter.

Ward adds: “Then you also get very large employers who are asking: what is Labour going to do on employment rights and taxation for large companies?”

Labour are happy to answer these questions. When Starmer launched his “Prawn Cocktail Offensive 2.0” last autumn, it marked the second phase of a long push to try and woo businesses to the Left.

“The first phase was basically decontamination – basically trying to convince people that the party is no longer Jeremy Corbyn,” says Ward. “The second phase is carpet bombing – meeting every business or anyone who will meet you. That is what they are doing now and have been for the last year or so.”

The third phase will be a calculated, targeted programme of engagement with a much smaller group of businesses that Labour can trust, he says.

As the circle gets smaller and the election draws nearer, the value of insiders will only go up.
UK
Sunak to spend £100m of taxpayer cash on AI chips in global race for computer power


James Titcomb
Sat, 19 August 2023 

Rishi Sunak

Rishi Sunak is to spend up to £100m of taxpayer money on thousands of high-powered artificial intelligence chips in an effort to catch up in a global race for computing power.

Government officials have been in discussions with IT giants Nvidia, AMD and Intel about procuring equipment for a national “AI Research Resource” as part of Rishi Sunak’s ambitions to make Britain a global leader in the field.

The effort, led by science funding body UK Research and Innovation, is believed to be in advanced stages of an order of up to 5,000 graphics processing units (GPUs) from Nvidia, whose chips power AI models such as ChatGPT.


£100m has been allocated to the project. However, it is believed that the outlay is seen as insufficient to match the Government’s artificial intelligence ambitions, with civil servants pushing Jeremy Hunt to allocate far more funds in the coming months.

GPUs are the critical components in building artificial intelligence systems such as ChatGPT, whose latest version was trained on as many as 25,000 Nvidia chips.

Nvidia’s chips power AI models such as ChatGPT - I-Hwa Cheng/Bloomberg

Mr Sunak has outlined plans for Britain to be an AI superpower but the UK severely lags the US and Europe in the computing resources needed to train, test and operate sophisticated models.

A Government review published this year criticised the lack of a “dedicated AI compute resource” with fewer than 1,000 high-end Nvidia chips available to researchers.

It recommended that at least 3,000 “top-spec” GPUs be made available as soon as possible.

Mr Hunt set aside £900m for computing resources in March, although the majority of that is expected to be spent on a traditional “exascale” supercomputer.

It is believed that slightly more than £50m was assigned to AI resources, but that the bill is expected to rise to between £70m and £100m amid a global race for the chips powering AI.

Officials are likely to press for more funding to be released in the Autumn Statement, which could take place around an AI safety summit in November.

Last week The Financial Times reported that Saudi Arabia had bought at least 3,000 Nvidia H100 processors, the company’s $40,000 high-end component for training AI.

Tech giants such as Microsoft, Amazon and Google are also racing to secure tens of thousands of the in-demand chips, while Joe Biden has blocked Nvidia from selling them in China under national security powers.

It was not clear what types of chips Britain is in talks to buy.

GPUs will be used to construct an AI Research Resource that the Government hopes will be operational by next summer.

Funds for the project are separate from a £100m taskforce that will conduct safety research into AI systems such as ChatGPT and Google Bard.

Officials have also been weighing up the merits of a “sovereign chatbot” – a publicly-funded language model similar to ChatGPT – and finding ways of boosting AI’s deployment in public services such as the NHS.

The Government has been in discussions with multiple microchip companies although Nvidia, whose chips are widely used to train AI, is seen as the clear frontrunner.

Mr Sunak is pushing for the UK to become a hub for setting global standards for the safe development of AI. He has spearheaded plans for the AI safety summit, expected to take place at the World War II codebreaking hub of Bletchley Park.

It is hoped the event will lead to international agreements between governments and top AI companies on developing the technology.

A Government spokesman said: “We are committed to supporting a thriving environment for compute in the UK which maintains our position as a global leader across science, innovation and technology.”

Nvidia did not comment.
UK
WORKERS CAPITAL
Women born in 1950s die while waiting for pension payouts

Lauren Almeida
Fri, 18 August 2023 

Women affected by the increase in state pension age have been protesting for years - Jenny Matthews/Getty Images Contributor

More than 250,000 women born in the 1950s have died while waiting for state pension payouts in a draw-out campaign, it is claimed.

Until 2010, women were entitled to receive the state pension from the age of 60. The Government announced in 1995 that this would gradually increase to the age of 65 to bring it into line with men. Both ages now rise in tandem.

However, campaigners have argued women born in the 1950s, who were most affected by the change to when they could retire, were not given enough notice or detail.

Campaigners say around four million women were pushed into financial hardship as their retirement plans were knocked off course.

More than two-fifths of women in this generation have struggled to pay essential bills in the last year, the Women Against State Pension Inequality, or “Waspi”, group said.

The Parliamentary Ombudsman, the Government watchdog, ruled in 2021 that the Department for Work and Pensions had failed to provide clear communication around state pension age changes. However, it is yet to publish any recommendations for redress.

Angela Madden, who leads the “Waspi” campaign, said: “For the 250,000 women who have died while waiting for this issue to be resolved, justice delayed is truly justice denied.”

This equates to around 100 deaths per day, the campaign group said.

Ms Madden added: “The Ombudsman’s investigation has been going on for five long years, and it is two years since he confirmed the DWP was guilty of maladministration.

“To keep women waiting a single further day for a proper offer of compensation just shows an appalling disregard for all of us.”

Susan Taylor, a 65-year-old woman affected by the state pension age rise, said: “Both my sister and I were born in the 1950s and had our retirement plans completely devastated by the state pension age fiasco.

“I lost her at 59 to cancer and was diagnosed myself with lung cancer at 62. I have no quality of life and the financial pressures I face are immense. Some days it’s extremely hard to see anything but a miserable end to a lifetime of hard work as the fight for justice for so many women continues.

The Parliamentary Ombudsman was expected to publish the second stage of its investigation by the end of March this year, but was delayed indefinitely after a legal challenge to its original draft.

The final stage three of its report is expected to recommend possible solutions, however the High Court ruled in 2019 that the Government was right to correct “historic direct discrimination against men” and underlined that the ombudsman cannot reimburse “lost” pensions.

A spokesman for the Government said: “We support millions of people every year and our priority is ensuring they get the help and support to which they are entitled.

“The Government decided over 25 years ago it was going to make the state pension age the same for men and women. Both the High Court and Court of Appeal have supported the actions of the DWP under successive governments dating back to 1995 and the Supreme Court refused the claimants permission to appeal.”

A spokesman for the Parliamentary Ombudsman said: “We are confident that we have completed a fair and impartial investigation. As an independent ombudsman, our duty is to provide the right outcome for all involved and make sure justice is achieved.

“We hope this cooperative approach will provide the quickest route to remedy for those affected and reduce the delay to the publication of our final report.”

The state pension may no longer exist for these retirees


Lauren Almeida
Fri, 18 August 2023

gen z money

If you are under 40, the state pension will probably look very different by the time you retire. In fact, there is no guarantee that it will even exist.

Civil servants, industry experts and even some pensioners have been shouting for years: the state pension system is just too expensive for the Treasury to keep up. With ever larger payments to an ever growing number of pensioners, costs are spiralling out of control – and fast.

No political party wants to upset its oldest voters, but experts have warned the Government will have to change the way the system is set up or face a fiscal crisis.


In just 50 years, one in every four Britons will be pensioner age. That’s more than three times the current population of Scotland. And with birth rates in decline, less than two-thirds will be of a working age.

This is a problem because the state pension is a “pay as you go” scheme, which is fueled by general taxation. If there are more retirees and fewer workers, the system becomes more and more fragile.

This is complicated further by the Conservative’s triple lock policy. It promises that state pension payments increase each year in line with the highest of the previous September’s inflation, wage growth or 2.5pc.

It meant this year the new state pension jumped by a record 10.1pc, surpassing £10,000 for the first time. Record wage growth is paving the way for yet another bumper pay rise next year, and will probably push it beyond £11,000 a year per person.

At some point, this will become unsustainable, but warning signs are ignored time and again. Even the Government’s own accountant warned that the “fund” that measures Britain’s state pension payments will hit zero in just two decades unless the Government acts.

The “National Insurance Fund” records workers’ and employers’ National Insurance contributions, as well as how much the Government spends on various benefits, including the state pension.

This “fund” is theoretical, as the Government can effectively deploy its financial resources as it sees fit. But it serves as a further alarm bell that while improving longevity is welcome, it is straining public finances.

Sir Steve Webb, a former pensions minister and now a partner at the consultancy LCP, said increasing the state pension age was a key “lever” the Government could pull to control spending.

“If you pay the state pension age later, then it pushes down costs,” he said. “This is a lever that the Government has pulled before and almost certainly will again.”

However, history suggests that increases to the state pension age would likely deepen social inequality. This is because there are stark regional variations in life expectancy, and poorer people typically have fewer private pension savings to fall back on and no choice but to stay in work for longer.

When the state pension age increased from 65 to 66, one in seven 65-year-olds were pushed into income poverty as a result, the Institute for Fiscal Studies found.

And while the Government typically waits for an increase in life expectancy to ramp up the state pension age, this does not necessarily correspond with an increase in healthy life expectancy.

Government expenditure on healthcare has been steadily climbing for almost a decade and the bulk of it goes towards curative and rehabilitative care, according to the Office for National Statistics. In just five decades, state pensions, pensioner benefits and health and adult social care spending will be worth 27pc of GDP, IFS analysis of official data found.

Maxwell Marlow, of the Adam Smith Institute, a think tank, said: “Young people are often criticised as wasting our money on avocados or Netflix. But the reality is that most of our taxes go towards spending on the elderly.

“The unfunded state pension system is shocking. It is a ponzi scheme grand enough to make Bernie Madoff blush.”

Around one in four pensioners are millionaires, so the idea of a means-tested state pension has gained popularity quickly. This could make for more targeted support for the vulnerable. Inequality in this group is stark, with around half of retirees also relying on the state pension as their main source of income.

Anyone who has more than £1m in assets should not receive a state pension, the Adam Smith Institute has suggested. “The triple lock is unfit for purpose,” its researchers wrote in a report last year.

“This ratchet spending is becoming unsustainable and unjustifiable, and exposes the Government to large state pension payouts which outstrip the growth of the economy that underwrites them.

“An increasingly large divide has opened up in British society between generations in which the young lose out, while the elderly benefit.”

According to the think tank’s calculations, the Government could save the taxpayer £25bn a year if it stopped offering the state pension to those with assets worth over £1m.

It said an alternative was to means-test pensions for higher-rate taxpayers – those with a salary of more than £50,270 – to avoid the “difficult politics” of testing those on lower incomes.

Sate pension increase

While scrapping the state pension completely may sound like the simplest solution, this too would require decades of advance planning, as well as warning for those who it would affect first.

But Sir Steve acknowledged that removing the state pension could become a more feasible option in the very long-term, after there had been a generation that had enjoyed the full benefit of “auto-enrolment”.

The policy, which obliges employers to automatically enrol their staff into a pension savings scheme, was only enacted around a decade ago.

“You would still need a safety net however for those who auto-enrolment had missed,” he said. “Across the world, you would be surprised about how many countries offer something that can be recognised as a type of state pension – even the land of the free has got it.”

But until we reach crisis point, it is unlikely that the Government will be spurred into action, Mr Marlow added.

“We are in a gerontocracy,” he said. “The civil service, the Treasury, the DWP – they all need to talk about these costs. The Government will not act until they are pinned to the wall.”

A government spokesman said there was currently a surplus of funds in the National Insurance Fund, and it would be able to top up its balance if needed in the future. They added it was committed to the triple lock and as is the usual process, would conduct an annual review of benefits and state pensions in the autumn.

Britain’s largest pension scheme to invest billions in private companies in boost for savers

Nest to invest up to a fifth of pension pots into high-growth businesses over next decade

Jeremy Hunt put pension reform at the heart of his Mansion House speech in July
 CREDIT: Aaron Chown/PA

Britain’s largest pension scheme will start investing billions of pounds in private companies in a boost to Jeremy Hunt’s plans to deliver higher returns for savers.

The National Employment Savings Trust (Nest), which looks after the retirement funds of a third of the British workforce, said it will invest up to a fifth of pension pots into high growth companies over the next decade.

Writing in The Telegraph, Mark Fawcett, Nest’s chief investment officer, said the move will offer most of its 12 million members the chance to enjoy “significantly higher” returns, with the risk spread over several decades.

He said: “We plan to step up our investment into private markets over the coming years, including more money into unlisted equities.

“Our view is simple – we don’t want Nest members missing out on an asset class which is so highly sought after.”

Mr Fawcett said Nest, the UK’s largest workplace pension scheme by members, would invest up to a fifth of younger members’ pension pots in private companies, which typically carry greater investment risk but can generate higher returns than publicly listed equities.

The policy is a significant vote of confidence in the Chancellor’s ambition to ramp up risk taking by pension funds to boost future retirement incomes.

Mr Hunt put pension reform at the heart of his Mansion House speech in July. The Chancellor wants the UK to rival countries including Australia and Canada that are home to huge pension schemes that invest in illiquid assets around the world, including in British infrastructure.

The risk-taking has led to higher rewards. Average annual pension fund returns in the UK were 9.5pc in 2021, according to Moneyfacts. This compares with a 20.4pc gain by the Canada Pension Plan Investment Board and 22.3pc increase delivered by AustralianSuper for the same year.

Defined contribution (DC) schemes like Nest promise a pension income based on the performance of stocks, bonds and other investments rather than a promise from an employer to sustain a certain level of income in retirement.

In July the Chancellor told an audience of bankers and finance bosses at the annual Mansion House dinner that nine of Britain’s biggest DC providers had signed a compact committing to invest at least 5pc of assets in unlisted equities by 2030.

Nest’s ambition to commit up to a fifth of assets for younger savers goes well beyond this. Mr Fawcett said there was “an especially large capacity to invest in these asset classes for our younger members,” who are decades away from retirement.

He said: “Those members have much greater ability to hold long-term illiquid assets compared to members approaching retirement, particularly when there are some assets which can be held in portfolios for decades.”

He added that “in the not-so-distant future” this could mean “a Nest member 40 years from retirement could have up to 20pc of their pension pot invested in unlisted equities”.

It is understood that Nest’s overall investment in unlisted equities, including private equity and infrastructure, will climb to at least 10pc of its portfolio by the end of the decade, potentially funnelling an extra £10bn into high growth assets.

Nest, which is publicly owned but operationally independent currently manages just over £30bn in retirement pots. This is forecast to balloon to £100bn by 2030. Mr Fawcett said this would give Nest the “size and scale to negotiate great deals” across a range of asset classes.

Mr Hunt has claimed that his compact with pension funds could help to boost retirement incomes by over £1,000 a year for a typical earner over the course of their career.

The Chancellor said: “British pensioners should benefit from British business success.

“This also means more investment in our most promising companies, driving growth in the UK.”

However, the Government’s own internal modelling suggests the very high fees charged by private equity firms could erase returns for pension savers.

High performance fees could even leave savers who invest in private companies £1,300 worse off, Department for Work and Pensions analysis showed.

Mr Fawcett insisted Nest did not pay performance fees “as a point of principle”.

He added: “All investment fits within our existing fee structure. This competitive fee structure also increases the probability that any net investment returns will meet our objectives.”


Why we’re investing Britain’s pension pots in solar farms and fish and chip shops

By Mark Fawcett, chief investment officer of National Employment Savings Trust (Nest)

The Chancellor’s Mansion House speech back in July generated a lot of interest within the pensions industry. Particularly the signing of the Compact by major UK defined contribution (DC) investors to commit 5pc of their portfolios to investing in unlisted equities.

There are questions from some quarters about whether UK DC schemes could, or even should, be investing in unlisted equities.

As a signatory to the Compact, our view is simple – we don’t want Nest members missing out on an asset class which is so highly sought after.

There’s a good reason private equity features in large pension schemes around the world. Average historic returns in private equity, broadly speaking, have been significantly higher than for listed equity over most time horizons.

At Nest, we’ve considered a wide range of factors and data to support our decision to invest in private equity because clearly, if we can achieve at least the average return, this will enhance the scheme’s total returns.

We’ve focused on growth-stage firms, as well as small and mid-cap buyouts, as these are the areas which we believe will deliver the highest risk-adjusted returns.

Since 2022, when we started investing in private equity, we’ve put money into a range of companies across industries.

One example is Captain D’s, a chain of seafood restaurants bringing a soul food take on the British classic of fish and chips for its American culinary audience. It’s been operating for 50 years but last year looked for further investment to help continue expanding its business.

Another deal Nest entered is in Sekhmet, the Indian pharmaceutical company, which is one of the world’s largest suppliers of generic drugs. Both very different companies, but both exciting investment opportunities.

Private equity assets bring an attractive combination of less volatile valuations and higher expected returns than their liquid counterparts. This combination is naturally desirable for any long-term, institutional investor.

We’ve also used our size and scale to negotiate great deals. As a point of principle, we don’t pay performance fees and all investment fits within our existing fee structure. This competitive fee structure also increases the probability that any net investment returns will meet our objectives.

The only difference our members should notice, now we’re investing their money into unlisted equities, are better risk-adjusted returns over the long term.

That’s why the debate of whether DC schemes should be investing in unlisted equities is somewhat over, or should be, provided those schemes have the scale and expertise to access good deals. The path ahead for growing UK DC pension schemes includes illiquids.

The conversation should be moving on to how best to include unlisted equities within a portfolio.

Having access to private assets is one thing, but can investment strategies be designed to maximise the benefit passed onto our members? Asset classes like private equity are still more expensive than their public market equivalents and it’s essential to select the right asset managers to ensure we generate value for money.

We think there’s an especially large capacity to invest in these asset classes for our younger members. Those members have much greater ability to hold long-term illiquid assets compared to members approaching retirement, particularly when there are some assets which can be held in portfolios for decades.

That opportunity is not just limited to unlisted equity. We think there are opportunities in other unlisted assets like infrastructure, not just in being hugely exciting investment assets but in how we can use them to connect with our membership.

Imagine telling a 22-year-old, who may be contributing into a pension for the first time, that when they start saving their money could be invested in infrastructure projects, like renewable energy – tangible assets they can see in the countryside around their home or just off the coast – for decades to come.

What a great message we can share with younger savers. That renewable energy will be powering their pension throughout their savings journey. A limitless source of energy making them money, while also increasing in value as we transition to low carbon economies.

Nest has recently updated its investment objectives and approach to strategic asset allocation. Within this is a new approach to better incorporate illiquids into our portfolio. We’ve evolved our investment glide pathway so younger savers have the highest percentage exposure, which then rebalances as they continue to save with Nest.

What does this look like in practice? That in the not-so-distant future, a Nest member 40 years from retirement could have up to 20pc of their pension pot invested in unlisted equities.

We plan to step up our investment into private markets over the coming years, including more money into unlisted equities. With our new investment objectives in place, we feel confident we can create the best outcomes for our 12 million (and growing) members.


ESG
A new approach to environmental, social and governance policies is needed before it's too late


Daniel Tsai, Lecturer in Business and Law, University of Toronto
Peer Zumbansen, Professor of Business Law, McGill University
Sun, August 20, 2023 
THE CONVERSATION

We are facing a crisis on a planetary scale and it requires immediate political, social and economic action. (Shutterstock)

This summer has proven how destructive climate change can be. We have been plagued by harrowing images of Maui, Hawaii in ashes, news about wildfires spreading smoke across Canada and the United States and record-breaking heat waves worldwide.

It’s clear we are facing a crisis on a planetary scale, requiring immediate political, social and economic action.

Corporations and governments have rushed to declare their commitment to environmental, social and governance (ESG) principles in response to the climate crisis. One of the issues with ESG is how difficult it is for investors, consumers and the public to assess how effectively companies have implemented it.

In addition, the lack of government leadership and the fragmentation of the ESG landscape has created uncertainty about its future. Many firms don’t know if they should lead by example or wait to follow the pack.

Read more: ESG investing has made little impact on the green energy transition so far. Why is that?

Several large investors and corporations in the U.S. — most notably BlackRock — have recently become targets of the “anti-woke” movement, adding further uncertainty and hesitancy to committing to ESG.

The public debate around ESG, stakeholder governance, sustainability and responsible investment continues to gain momentum in the midst of all this.

In response, McGill University’s CIBC Office of Sustainable Finance hosted academics and experts from 11 countries to confront the issues of ESG, climate change governance and democratic politics. The resulting impact paper proposes several policy recommendations for governments and corporations to work together to transform ESG standards into practice.
Increased transparency and accountability

Despite recurring financial crises and staggering socio-economic inequality, corporations find themselves conflicted by the need to maximize profits with ESG. But profit can still coexist alongside a significant business and investment shift towards sustainability.

A fully transparent and publicly available ESG and sustainability index for financial institutions and corporations would improve transparency, accountability and address the demand for ESG.

If large public corporations were required to report universal ESG metrics, it would lead to healthy competition among corporations to go above and beyond the minimum index requirements. This would allow investors and consumers to see how companies are actually implementing ESG policies, leading to increased transparency.

Meaningful disclosure will ultimately lead to a transformation of a company’s buying, production, selling and investing practices.

The BlackRock investment company in the Hudson Yards neighbourhood of New York City on March 14, 2023. (AP Photo/Ted Shaffrey)

Corporations and influential asset managers — such as BlackRock, State Street or Vanguard — must address stakeholder interests in ESG by changing their governance and investment practices in relation to their position of global power and influence.

A public index would provide a reference point for public and private behaviour to effectively address the causes of disastrous climate change. It would go beyond empty social media posts and corporate website statements by exposing companies’ shortcomings in across-the-board implementation of ESG policies.

Increased transparency would also help prevent companies from greenwashing by boosting their ESG ratings before quarterly or semiannual public disclosures.

In addition, a shared public commitment would not kill profits, as some have argued. Instead, it can mobilize people to think differently about gains, growth and what it means to run a successful business.

This forward momentum can lead to the integration of sustainability officers, who play a key role in ensuring effective ESG implementation, into businesses and organizations.
Incentivizing green investment

Another recommendation is for governments worldwide to offer incentives for green and purpose-driven investments, as Canada has done with green tax credits that were unveiled in the 2023 budget.

But these tax credits need to go further. For example, the government could provide tax credits to the oil, gas and mining sectors for investing in renewable energies. The government could also allow investors to deduct related corporate losses against their personal income.

That will help spur economic growth, investment and development in beneficial industries and technologies, as we have seen with the rise of the electric vehicle industry.


The West Pubnico Point Wind Farm is seen in Lower West Pubnico, N.S. in August 2021.
THE CANADIAN PRESS/Andrew Vaughan

The goal should be to encourage corporations to better integrate sustainable practices within their business models and create targeted investment that favours socially responsible investment. That way, governments can use their tax systems to support technologies and business models that address climate change.
The bigger picture

Governments need to take a longer view on the development of sustainability policies and push back against short-term criticism. One way world governments can do this is by publicly endorsing ESG initiatives. Government officials should also do more to promote ESG.

Governments can also help make the financial sector sustainable by providing favourable loans and financing for greener investment portfolios.

Governments, central banks and banking regulators can create regulations that require financial institutions to implement sustainability into their underwriting policies. This would involve placing higher interest costs on loans with poor ESG outcomes to encourage industries to invest in better ESG.

By setting transparent standards for ESG accountability, requiring corporations to participate in sustainability indexes and standards and offering economic incentives through tax reform, governments can have a transformative effect on businesses through ESG. But it requires effective leadership.

This article is republished from The Conversation, an independent nonprofit news site dedicated to sharing ideas from academic experts. 

UK
National Trust resists pressure to ditch Barclays over environmental concerns

Anna Isaac
THE GUARDIAN
Sun, 20 August 2023 

Photograph: The National Trust Photolibrary/Alamy

One of Britain’s most powerful charities, the National Trust, has hit back at pressure to cut ties with Barclays bank over environmental concerns.

The trust, which acts to conserve more than 780 miles of coastline and 500 historic properties, claims that it can wield influence within the banking sector as a whole and does not need to ditch the global bank as a supplier.

An attempt to stop the charity from banking with Barclays failed after losing a vote at its annual general meeting, but a grandson of one of the trust’s largest donors has doubled down on the campaign.

Dominic Acland said his environmentalist grandfather, who donated the family’s 7,000-hectare (17,000-acre) estates in Devon and Somerset to the charity in 1944, would be “horrified that the National Trust is banking with Barclays”, according to correspondence between Acland and the charity seen by the Financial Times.

Related: Celebrities call on Wimbledon to drop Barclays sponsorship

He further claimed in the correspondence that the charity’s approach of seeking to leverage its position as a client of Barclays to halt investment in fossil fuel exploration and other climate commitments was “not working”.

“It seems completely out of kilter to be banking with Barclays … when they [the National Trust] are an organisation that cares so deeply about nature and the environment,” Acland told the FT.

The National Trust is the ninth-biggest charity in the UK by expenditure, pumping half-a-billion pounds into its activities each year, according to data gathered by the Charity Commission, which governs the sector.

The charity has already ceased new investments into fossil fuels, but still banks with Barclays, which does directly invest in new fossil fuel projects. While Lloyds, HSBC and NatWest have said they will stop directly funding fresh fossil fuel extraction, Barclays has not made a similar pledge.

Barclays’ stance on the fossil fuel industry has come under growing scrutiny in recent years. Since November last year, a group called Christian Climate Action has put pressure on a range of charities, including the National Trust, to quit Barclays.

In May, the bank’s annual general meeting was disrupted by protesters who had reworked lyrics of a hit Spice Girls song to underline the bank’s role as one of Europe’s largest funders of fossil fuels.

In July, fellow charity Christian Aid switched its banking activities from Barclays to Lloyds. Martin Birch, chief operating officer for Christian Aid, said in a statement last month that the bank’s “record on fossil-fuel finance, and their weak commitment to future improvements in this area meant that we had to seek a more suitable provider”.

Last month celebrities including the film director Richard Curtis, the actor Emma Thompson and the entrepreneur Deborah Meaden also called on Wimbledon to end its new partnership with Barclays over the bank’s support for fossil fuel projects. They claimed that the sponsorship deal, reportedly worth £20m a year, was harmful to the tennis club’s reputation.

A Barclays spokespersonsaid the bank believes it can “make the greatest difference as a bank by working with customers and clients as they transition to a low-carbon business model”. These customers include “many oil and gas companies that are critical to the transition, and have committed significant resources and expertise to renewable energy”.

The spokesperson added: “Where companies are unwilling to reduce their emissions consistent with internationally accepted pathways, they may find it difficult to access financing, including from Barclays,” , noting that the bank has committed to become net zero by 2050.

The National Trust told the Guardian that it works with “partners and suppliers who are committed to reducing their climate impact” as part of its sustainability goals, which includes a commitment for the charity to become carbon net zero by 2030.

“We are clear that banks, including Barclays, need to do much more to address the financing of the fossil fuel industry,” it said, adding: “As a big charity, we know we can help influence change within the banking sector.”
UK
Over 700,000 households missed out on ‘flawed’ energy support scheme – charity

Aine Fox, PA Social Affairs Correspondent
Fri, 18 August 2023 



Hundreds of thousands of older people missed out on financial support for soaring fuel bills after a Government scheme “flopped”, a charity has claimed.

Age UK said some 735,240 households missed out on support under the Energy Bills Support Scheme (EBSS) Alternative Fund amounting to almost £3 million.

That fund – for households without a direct relationship to a domestic energy supplier, such as those in park homes or living on boats – has already faced criticism from the Public Accounts Committee (PAC).


The MPs said, in a June report, that many such households only became eligible for funding at the end of February, almost five months after consumers began receiving discounts on the main scheme.

Now Age UK has said Freedom of Information data requested on its behalf showed that, of the Government’s estimated 883,000 eligible UK households with atypical supply arrangements, only around 17% – equivalent to about 150,000 – were actually awarded the £400 of energy support available this year.

The charity said many of those who missed out were older people living in park homes and care homes.

It said its analysis of figures from the Department of Energy, Security and Net Zero also showed that households in areas of the country with higher levels of fuel poverty appeared less likely to have accessed the funding.

It said that while more than a fifth (22%) of eligible households in the South East, where fuel poverty is lowest, got funding, this compared to 13% of eligible households in the North East and London.

In terms of who was able to successfully access the funding, Age UK said eligible care home residents were least likely to have done so, with only around one in 14 of them (7%) receiving the £400 energy help.

This compared to around a third of park home and houseboat residents (35%) and over half of eligible heat network users (58%).

The Government said it had spent billions to protect families from price rises last winter and had used various ways to “communicate the scheme with as many eligible households as possible”.

But the charity said the findings showed the scheme for these users had “completely flopped” – blaming a “time-consuming, complicated” application process that it said had not been well enough publicised.

The organisation said it was calling for the unused money to be “recommitted to the scheme and for the process of applying for it to be made more straightforward, thereby increasing take-up”.

Caroline Abrahams, Age UK’s charity director, said: “The process designed by the Government to distribute the funding was flawed so we’re not surprised the scheme has flopped, but rather than siphoning off the unspent £300 million for other purposes, we call on the Government to do the right thing and improve the scheme so these older people get the money they are due.

“After all, with energy bills expected to stay high this winter, they are going to need all the financial help they can get.

“More than half-a-million households have missed out on this financial support as a result of the fund’s failure, many of them older and living in park homes and care homes.

“We know the fees have gone up substantially in care homes because of rising costs for everything from energy to food, so the extra £400 could have really helped some residents to continue to make ends meet.

“The responsibility on ministers to resurrect and improve this funding scheme is surely all the greater when you consider that some of the areas with the biggest concentrations of older people who have missed out on the funding also have above average levels of fuel poverty.”

A Government spokesperson said: “We spent billions to protect families when prices rose over winter, covering nearly half a typical household’s energy bill – this includes more than £60 million supporting over 140,000 households without a domestic electricity supplier.

“We used a range of methods to communicate the scheme with as many eligible households as possible, so they could apply to access this vital energy bills support – including a contact centre and requesting councils to write to eligible care homes and park home sites.

“We recommend that any household that did not apply should visit our webpage to view what other support they may be eligible to receive.”