The Great Debate UK

What to do about the City’s “Lazy Funds”

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BRITAIN/By Andrew Kakabadse

–Andrew Kakabadse (www.kakabadse.com) is Professor of  International Management Development at Cranfield School of Management. The opinions expressed are his own.–

Over the last 18 months I have interviewed a number of high-level city executives, including chairmen and CEOs, for a research paper to be published in the Journal of Strategic Review early next year. What was surprising was the general consensus that there is £450 billion in ‘Lazy Funds’ waiting to be invested in the City. That is more than twice the upper estimates of national debt. This enormous figure is not being invested because managers cannot see clear opportunities for realising gains.

Many of the respondents also expected another economic crisis of even greater severity than the present in 9-10 years’ time. The prediction is a stark reminder that the root cause of the economic crisis has yet to be resolved. Many respondents made clear that they see this as a political issue, and not one for the financial services industry to remedy. While no other instruments exist for the bankers to do their job, they will continue to use the system that we now know is flawed. The creation of new instruments, which would prevent another economic crisis, is a matter for the government.

The measures that have been introduced by the coalition government to tackle the current economic crisis are not sufficient. The government’s plans privatise gain, rather than socialise capital. Financial institutions continue to have their losses covered by the public, however those same institutions are not sharing the substantial profits that they are now reaping. The levy on banks that was introduced in the comprehensive spending review was an attempt to rectify this. Yet the sums that it will raise represent a miniscule amount when compared with the profits that banks are now making.

What can the U.S. learn from the Spending Review?

Watching George Osborne present the results of the Government’s Comprehensive Spending Review last week, two thoughts went through my mind.

On a personal level, how could I have been so wrong about Cameron and Osborne? A pre-election blog of mine was titled “A Pair of Lightweights”. Both have already done enough to assure even the most cynical observer (which probably doesn’t mean me) that they are every bit as serious as the job they face.

The real story of the Spending Review was the absence of any shocks

BRITAIN-SPENDING/In the end, the ‘leaks’ worked. The various snatched photographs of briefing documents leaked in the past couple of days meant that the real story of the Spending Review was the absence of any shocks. The government managed our expectations, so political new junkies and the money markets were not really surprised as Chancellor George Osborne outlined the cuts today.

Some benefits, such as the winter fuel payment and free entry to galleries and museums, had been considered low hanging fruit, almost certain to go, but the Chancellor surprised the gallery by throwing out a few spending commitment trinkets as he wielded the axe elsewhere.

from UK News:

Treasury tables challenge notion of a ‘progressive’ spending review

BRITAIN-SPENDINGDuring his speech to the House of Commons announcing how he would cut government spending, Chancellor George Osborne insisted that the richest 10 percent of Britons would bear the brunt of austerity measures.

But a glance at the tables in the Treasury's own Spending Review report suggest a different picture.

As the axe falls, spare a thought for the private sector too

BRITAIN-SPENDING/Most of the media and commentator attention today will rightly be on the public sector. When the Chancellor announces the cuts we all expect, the axe is going to fall on public services and the only real question is where and how hard it falls.

But spare a thought for the private sector too. These cuts will have an enormous effect on private companies that work for the government, and those companies employ many thousands of people too.

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