I, with Caroline Lucas MP and Andrew Simms had this letter in the FT this morning. For some reason Colin Hines did not have his name published, which was a mistake:
Put the UK's savings to good use for the future
From Caroline Lucas and others
Paul Mason is right to point out that the Labour party will need to think radically about funding if it is to secure the £100bn required to enact a comprehensive Green New Deal (“Labour is planning its own Green New Deal”, November 2). The Green New Deal group, of which we are members and which developed the first comprehensive plan for a Green New Deal here in the UK in 2008, is used to proposing radical alternatives. We have long said that borrowing (issuing bonds) by the government, a national investment bank and local authorities has to be the primary source of funds for this essential programme.
Crucially, we have to identify who might buy the government bonds. At present more than 80 per cent of UK personal financial wealth is invested in tax incentivised assets. Since incentives are already provided by the government, simple rule changes could encourage savers towards Green New Deal bonds. For example, if an interest rate of 1.5 per cent or more was paid on such bonds with a government guarantee being provided, then the £70bn that goes into Isas each year could be directed towards the Green New Deal. Changes to pensions rules could also be a significant source of funding.
Such simple changes, which would impose no additional cost in terms of tax relief, could guarantee the funds a Green New Deal requires and put the UK's savings to use for the benefit of the future.
Caroline Lucas Green party candidate for Brighton Pavilion
Richard Murphy Professor of political economy, City University
Andrew Simms Co-director, New Weather Institute
Let's hope some people notice.
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I do not mean to appear flippant but I presume you are referring to the amount invested in ISAs rather than the ‘tax relief’ provided by the government which appears to go to the savings institutions rather than the saver as there is little difference in the interest paid on ISA and non-ISA products. The ISA was originally introduced as an incentive for the smallish saver with an entry point into stocks and shares with a relatively small annual amount that could be saved within the tax free wrapper. Sadly the original ideal has been lost with no differential in interest rates paid on savings ISA or not. The increase in the maximum subscription to £20,000 per year mainly benefits those seeking to minimise their CGT liability even though they have a threshold before any tax is paid.
A GND bond could reintroduce the original motivations of the ISA by having a more moderate maximum annual subscription and also have a more attractive interest rate, say, by linking it to the RPI. Transfers could be allowed in from currently held ISAs up to a maximum allowance per year and the current tax advantages of ISAs would be withdrawn at the end of a reasonable period of notice.
Your recall of history is not far out
Most ISAs are cash now
A staggering £70 billion a year goes in- some being recycled of course, but that’s still fair for the purposes of this policy
I would end all new allowances for all stand ISAs and stop all account top ups if this new Green New Deal ISA came about
You mention Cash ISAs but they are completely different in risk profile to the bonds you are proposing which will be long dated to match the nature of the underlying infrastructure investment. The secondary market price of the bonds will be volatile and move with inflationary and interest rate expectations. Savers could only get there initial investment back at the end of the life . In the meantime there is a good chance if they wanted to sell before the maturity date they would suffer a capital loss. .. so Green bonds and cash ISAs are completely different… unless you are proposing the principal is capital guaranteed throughout its life?
What a strange claim to make
The government could issue bonds with a range of maturities akin to bank deposit arrange tax now
And it could guarantee redemption prices too, as it does in national savings
Why make up claims?
Do you understand gilt prices are volatile and the Government only guarantees par repayment at maturity. So you are proposing green premium bonds where investors can sell at anytime? That’s fine… but issuing 10, 20yr bonds at a 1.5% coupon to people who would otherwise own cash ISAs is a miss selling scandal in the making as throughout the life they are likely to trade way below the issue price.
So bonds would be issued to suit the market
20 years may well suit pensions
But not ISAs
You know the Debt Management Office does this all the time? What issue are you making up? And why not run it in a way more al8n to national savings. Your issue would be? Early redemption would be allowed with an interest penalty. It’s hardly rocket science, is it?
Except your text is all about getting Cash ISAs into green bonds. So in a nutshell you want to force all cash ISAs to own green premium bonds. I am clear now thank you.
This is a very brief letter to the FT – of course not all the detail, can be covered – but it’s really not hard to flesh out
And no, these are not premium bonds – which is a ridiculous claim. Clearly you do not know what they are.
I can only presume you are either really very, very obtuse or really very, very stupid
Might you advise which?
I would love to be able to invest in an index-linked GND ISA. I would actually redeem index-linked National Savings Certificates and move the money over for that, because it would let me point the money at green policy instead of just funding whatever the government feels like.
It would have to be index-linked, though. I’m deafblind and crashed out of work years ago, so I’ve got to know that the money I saved whilst working will retain its spending power until I need to use it.
I suspect the cost would be too high
Sounds like a good idea, doesn’t it?
But who was the last Chancellor who was interested in a good idea?
🙂
In this funding model would the investors get a say?
If you buy shares in a listed company or join a membership organisation you can get some sort of annual say to re-appoint the auditors, approve the directors’ remuneration, that sort of thing.
If the people directing the funds for Green New Deal investment are unaccountable to the people paying their wages then I can only see a recipe here for a warmed up disconnected stew, without dumplings or dessert. Which is pretty much where we are in politics generally with leaders only remotely connected to the people who they serve, and in many cases overtly opposed to doing what the people want, even when they voted to ask them what they want.
How many times have the shareholders ever overturned directors in recent years?
The vote here is in a general election, in any case
That is a great deal more accountable than corporate UK
How many times have the shareholders ever overturned directors in recent years?
I don’t know. Do you? But that’s not the point. The point is that they can. So that makes the directors accountable.
The vote here is in a general election, in any case
That is a great deal more accountable than corporate UK
That’s not an argument that would appeal to investors then. If we are debating how to ensure the Directors of Green Funding programmes are going to be accountable, then that is an argument for raising the funds from general taxation with a little government borrowing/printing on top, just enough to keep inflation at sensible levels.
No it does not make directors accountable
Because they know it never happens
And they know the structure of shareholding now means it never will
So let’s get real here
And yes, I do know this issue, very well indeed
And we are talking about government funding in the main here
How many times have the shareholders ever overturned directors in recent years?
Why did you ask this question? When later on you state
Because they know it never happens
It’s an odd form of debate to ask a question you already know the answer to.
The point that needs acknowledging is that it CAN happen. And that means there is SOME accountability which I should have been clear about. There is more accountability for membership organisations certainly, and when investors are also workers in the company they’ve invested in.
But let’s look at this comment too:
we are talking about government funding in the main here
Well following the logic I agree with that. And if you do too, then signing a letter to a newspaper proposing that £70bn of private investment per year is incentivised to funding programmes which you have previously suggested with the same colleagues would need around £50bn a year looks like foolish attention seeking. How else can we interpret someone disagreeing with themselves?
The best estimate is now £100bn a year
And claiming companies are accountable when they’re known not to be so is so crass further debate with you is pointless
You will be deleted next time
Mathis Travis says:
“How many times have the shareholders ever overturned directors in recent years?
Why did you ask this question? When later on you state
Because they know it never happens”
That is what is known as a rhetorical question. It’s been an absolutely standard part of debating style for as long as I’ve been aware and probably a great deal longer.
But Mathis doesn’t know what debate is….
The government can’t spend without people giving it their savings? What happened to MMT?
MMT describes a part of the way the world works. That’s it
Another way the world works is people want to save
MMT explains the economic uselessness of that activity in most cases
Tell me why I can’t combine insights to achieve a social objective? Or would you rather be dogmatic? If so, to what end?
Surely people cannot save without the government taxing back less then the government spends and therefore running a deficit Sectoral balances [business, overseas and personal] for non- governmental sectors can only be positive and, therefore, people as one of those sectoral balances, can only have the capacity to save if the government has the inclination to run a deficit.
Paul Mayor says:
Surely people cannot save without the government taxing back less then the government spends […]people as one of those sectoral balances, can only have the capacity to save if the government has the inclination to run a deficit.
That’s in line with my understanding. Therefore it follows that if the government (seriously) wants to ‘balance it’s books’ it has to claw back all that private saving as tax. It would have to be absolutely draconian and it would completely kill the economy of the country. And that’s why (even if they don’t rationalise it that way) the government is simply lying when it pretends to be concerned about the national debt.
Perhaps you could clarify the following:
HMRC record that around £70bn was contributed to ISAs in 2017/18 as the letter states, but that approx £30bn of that was stocks and shares ISAs. Does the proposal apply to both types?
HMRC state that the ‘stock of ISA funds is c£600bn of which around 55% is stocks and shares – the same question applies to ‘renewal ISAa’?
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/797786/Full_ISA_Statistics_Release_April_2019.pdf
I am specifically suggesting that if stocks and shares could be Green New Deal certified – and the rules would be right – then I would be happy for them to be included
But quite specifically the rule change would be that existing schemes close to new funds
Only Green New Deal ISAs would then qualify
And I am confident that they will pick up the funds as well over 80% of all UK personal financial wealth is held in either ISAs of pension funds – and I am specifically covering both angles
Thanks – can you confirm that:
– ISA cash accounts would no longer qualify as ISAs and that GND bonds would replace them and all existing ISA cash accounts would no longer be able to receive top ups?
– Stocks & shares ISAs would all be closed to new money & any new stocks & shares ISAs would require to be ‘GND approved’ to what criteria and by who?
Also
– Is there not a danger that investors would ignore the GND ISAa and invest elsewhere, suffering whatever tax implications there could be.
– would it not be better to make the GND investment offering more attractive rather than compulsory?
You get it
No one is obliged to opt for tax relief
No government is obliged to offer tax relief
If it does it must be aligned with social goals
The GND is the biggest social goal we have
And 1.85% interest – my preferred rate and the current average cost of government borrowing – would have people queueing round the block
I am quite confident the plan can withstand competition – and not one thing about it is compulsory. Anyone could save somewhere else.
‘And 1.85% interest — my preferred rate and the current average cost of government borrowing — would have people queueing round the block
I am quite confident the plan can withstand competition — and not one thing about it is compulsory. Anyone could save somewhere else.’
Not sure where the 1.85% is in the letter – only 1.5% is quoted.
Have you calculated how much of the £70bn would not move to the GND bonds?
What’s the criteria for approving stocks & shares ISAs by the GND and by who?
A reasonable assumption of S&S ISA over 7 years is around 6% CAGR i.e. 50% capital growth – will GND match this sort of performance?
I have no problem with the intention here – however the devil is in the detail, which I would suggest your group needs to work on.
I added the 1.85% here
It’s consistent with ‘at least 1.5%’ in the letter
And is my opinion: the letter is joint
As for your usher questiins
A) Other inv3tsment criteria would be established by a Green New Deal Commission – see the Lucas / Lewis Bill on this
B) I think this bind would collect more than £70 billion – try getting 1.85% elsewhere easily
C) no it will not make that return – the return is false anyway based on an economic model that is crashing
D) why should we want to offer a return rate that is obviously unsustainable on a finite planet?
The problem with this plan is it might well attract too much money
[…] to the letter Caroline Lucas, Andrew Simms, Colin Hines (whose name was omitted in error) and I had in the FT yesterday was intriguing, and largely predictable. This being election season those seeking to dismiss a […]