Contribution
I hope the right hon. Gentleman would accept that diversification is critical here. Of course, illiquid private assets are not something that one holds for a couple of years and then sells, but the funds are designed to be large enough to bear the risk from diversification. That is the critical point.
Pension funds are a statutory arrangement, with significant taxation and other legal benefits. That creates a business opportunity for pension providers—and quite right, too. Against that background, it is right that the Government review whether, under the existing arrangements, savers are getting a fair return from that special statutory and legal arrangement. Given the tax breaks, it is not unreasonable to address the question of whether there is sufficient investment in the United Kingdom.
Let me turn to our attitude to risk in the UK, on which the success of pension arrangements turns, as does our desire for more economic growth. We will not get more economic growth unless we take more reasonable risks, as the Chancellor of the Exchequer and others have made clear. It is essential for banks and fund managers to consider whether they take enough risk.
The chief executive of the National Wealth Fund, John Flint, made the point last Tuesday at the Treasury Committee, when he said,
“I would encourage the stewards of private capital to go back and challenge themselves on their risk appetite…the country’s growth outcomes are, for me, largely consistent with the country’s risk appetite generally.”
I venture to say that our great fund managers and banks need to turn their minds to whether they are taking enough risk, because that drives economic growth and drives successful outcomes for savers.
Another aspect of pensions reform and risk taking is the individual savers, as was brought home to me in a quite different context, when I was on a football history tour organised by Football’s Square Mile, which promotes the history of football in Glasgow East. As we stood mainly in Glasgow East—I must admit that some of it was in Glasgow South—the guides explained to us that when Queen’s Park decided to organise the first international football match between Scotland and England in 1872, the club had just over £7. It had a choice: the low risk was to hold the match at a rugby club, free of charge; the higher risk was to hold the match at the West of Scotland cricket club at Partick, an old, closed ground where tickets could be sold and there was potential revenue. The problem was that the West of Scotland cricket club wanted more by way of rent than the Queen’s Park had—much more than £7. The guides put the choice to us all as we stood just in Glasgow South constituency, and just outside my constituency. The vast majority of people on the tour picked the low-risk option: an indication, at the end of the week, of how risk-averse we have become in Britain.
Encouraging sensible risk taking is critical to pension saving and if we want more economic growth. In fact, Queen’s Park took the higher-risk option: it rented the cricket ground and made a huge profit. The game transformed the profile of football and was the foundation for Queen’s Park’s building the first international football stadium in the world, which opened a year later in 1873 in my constituency. Queen’s Park took a risk that was pivotal to the development of modern football, and modern football contributes billions to the Exchequer. My point is that risk is essential to economic activity, as Mr Flint explained and as was illustrated later in the week.
The Bill is critical for economic growth. It takes active steps to ensure that money flows to the entrepreneurs and risk takers who will create wealth across Britain. It ensures that working people have access to better pensions. On that basis, I support the Bill.