I do hope he’s being misquoted here:
This week I spoke to Richard Murphy, the economist and tax expert, whose new book has the self-explanatory title The Courageous State and brims with imaginative thinking. Using pension funds for national investment, he told me, could be done much more efficiently than the Osborne plan. In exchange for the vast sums granted in pension tax relief – £38bn at the last count – we could be compelling funds to put money into the very infrastructure projects the government is so keen on – and with no need for a mouthwatering rate of return to draw them in.
Your pension would be compelled to invest in infrastructure projects. At less than exotically wonderful returns. Doesn’t that just fill you with joy?
The same logic, he says, applies to credit easing, the roundabout method Osborne is using to persuade banks to supply businesses with money. Again, were we to insist on a quid pro quo for pension tax relief we could channel funds into a national investment bank and send credit directly to those businesses.
Again, your pension would be compelled to invest in loans to those businesses which a politically directed national investment bank would find worthwhile.
Note that both of these are designed as loans: a perfect way to lose money. Inflation, you will note, is at 5% or so and long term interest rates at 3% or so. Your pension will be compelled to invest in something that loses you money.
If he’s not beingmisquoted then Ritchie’s making the same mistake he does so often. The aim isn’t to find the money to do things. We know there’s vast sums of money sitting in pension funds and on corporate balance sheets. The aim is to create a structure in which it is worthwhile to use this money to do these things. We’ve got to create a revenue stream from these “investments”, a revenue stream which makes people want to make the investments with the money that is already there.
Once that revenue stream has been created (say, tolls on roads) then people will happily invest the money to get the revenue. Forcing people into losing money isn’t the way: tempting them by offering a potential profit is.