Where has all the capital gone?
Currently, there is a real shortage of public capital, but at the same time there is a lot of private capital currently sitting on the sidelines waiting for the right moment to recreate the 2002-08 economic situation before the crisis.
What the country really needs is to unlock this capital against long-term strategic investments. In order to make this happen, there is a need for an independent report on what the infrastructure concerns within the UK are, which would have to be a broad, systematic review of where we have deficiencies in our society. This would have to call upon the Office of National Statistics (ONS) to bring to the surface the levels of poverty, vulnerability and deprivation that we have in our society – particularly for the elderly and children.
The efforts of chancellor Osborne to persuade the private sector to invest is ‘too little, over too short a term’. But this reflects the fundamental problem that there is no political mandate to back an ‘infrastructure’, or social model of capital (as currently exemplified by Germany and China, who are far more innovative than the UK) rather than the alternative model which we currently use of shareholder capital.
We need a major capital investment that would not just put money into schools or try to create employment, but rather a systematic approach to family welfare, educational improvement and employment improvement to tackle pockets of deprivation.
I do not think we will see this happening – rather, we will have little incremental changes (attracting perhaps £60-80 billion) which, whilst positive, are not enough to get the UK back on track, seeing as there is nearly £700 billion worth of private capital that is essentially sitting there not being used.
The UK is actually very cash rich; it’s just that the richness is unequally divided. We face a political issue where the UK is missing a coherent financial philosophy, and this is the fundamental shift that is gong to have to take place if things are going to change.
