I wrote yesterday about my idea for issuing bonds to fund the new investment that will be required in the UK economy after coronavirus. My suggestion was that these bonds should be hypothecated in the sense that the proceeds of any issue should be used for the purpose that was designated at the time of their sale to a retail investor. Those retail investors would usually invest through an ISA or their pension fund.
I am now aware from the comments of a couple of financial services professionals on that post that there is some confusion as to the type of bond to which I was referring when making my suggestion. One speculated on this issue, and the other was quite sure that I was referring to what were, in effect, gilts i.e. the type of bonds already in existence and issued by the government.
This, however, is not what either I or Colin Hines, who has been my long-term collaborator on this project, have ever had in mind when discussing the issue of this type of bond through these types of personal investment wrapper. It has always been our belief that the bonds in question would, at least in the case of ISAs, and maybe in the case of personally invested pensions as well, be what we might call ‘retail bonds'.
In practice, these retail bonds might be little different from what many might think to be long term deposit accounts held with a bank, which is why we suggest that they are either issued by a National Investment Bank, or maybe by National Savings and investments. Such an account would lock money up for, for example, five years at maybe 1% at present, or 10 years at maybe 1.5%.
Particularly in the ISA market we think that that this is what most investors want: a simple, straightforward and easy to understand product with a guaranteed rate of interest, albeit at a low rate with little upside potential, but where they know the funds in question might be put to good use. In the personal pension market this could also be of appeal: in the more sophisticated pension sector something more akin top a green gilt would also appeal, and I think should be made available.
It can be, and will be, argued that these bonds are not suitable for this purpose. Rational investment managers say that no one should hold cash at present because it is clearly deteriorating in value given inflation and the very low rates of interest paid. But, despite that, hundreds of billions of pounds are held in cash in ISAs and, even, pension funds, whilst the gilt holdings of pension funds remain relatively high, again running into hundreds of billions of pounds, despite the fact that many of them pay negative real interest rates. And, of course, there are hundreds of billions of pounds more in cash held on simple bank deposit accounts. Rationality, in the sense that investment managers use the term, clearly does not come into many retail investors' decision-making.
There are three, very good, reasons for that. The first is that very few retail investors understand what investment managers mean by rationality, and so question it. Secondly, those retail investors do not believe the assurances provided by investment advantages that current markets are rational. They look at the very obvious disconnect between, for example, market prices for shares and the very apparent risks within the economy, and suggest that it is the investment managers who have departed from reality. Third, retail investors want what I am suggesting, which is an investment that does result in real economic activity in the communities in which they live for the benefit not only of themselves, but for others in those places, including their own children. Based on the comments made, some investment managers do not get this, but that is their problem, not mine.
My logical conclusion, based upon this analysis, is that there is a massive market for what look like cash based savings products but which are related to real economic activity, which is precisely what I am trying to promote for the combined reason of tackling the cash glut that exists, and to provide the capital that society needs for the economic and social transformation that it must undertake. If an investment manager cannot understand this reconciliation of goals, again, that is a problem in bedded in their view of rationality, which is far removed from what the real world sees as being so.
But, I do accept that the retail bond does give rise to issues. The obvious one is that this creates a mismatch between the potential risk between the underlying investments, the returns that they can make, and the desire implicit in the Green New Deal to, for instance, create long term, well paid jobs. I have to be honest and say that there is no guarantee that the investments that the bonds I propose will fund will earn a sufficient return to cover the interest that I suggest should be paid. They might, of course make that return, but given the criteria for investment may well not be solely economic it is just as likely that they will not.
This, however, does not undermine the credibility of the offering, which has been constructed for the precise reason of moving unused cash into productive activity. Instead, it justifies the description of these bonds as being part of green quantitative easing. Green QE would play three rolls in this offering.
First, if there was an investment shortfall then green QE would be used to make good that difference. In other words, the government would create the money necessary to guarantee the return to the investors, even if the underlying investment could not. That is because that investment would, of course, be undertaken for social purpose. The whole purpose of the bonds would be to provide most of the capital, in effect leveraging the activity. But, entirely appropriately, the government would remain at risk, and would therefore in affect create the equity capital through green QE.
Second, the government would similarly use green QE to make sure that there was a liquid market with regard to redemption of these bonds, if that is what a holder required. Once more, the amount of QE that would be required in this case would be vastly less than the total capital used, which means that the goal of reallocating cash into useful activity would still be achieved with limited distortion from a new QE resulting.
Third, Green QE would provide the backstop so that if, at the end of a bond term, there were no new subscriptions then full redemption could take place, and the project could continue unimpeded. I think that the prospect of this is incredibly unlikely, but again this is the government acting as guarantor (a role with which it is entirely familiar inside financial markets) rather than as the primary provider of capital.
Put these three aspects together, and the investor has a guaranteed return, the government has access to the capital it needs without recourse to QE or taxation, social purpose is achieved, and excess liquidity within the financial markets which is at present being used for speculative purposes to absolutely no gain to society is reduced. Those are massive multiple wins.
So, some final thoughts. First, is this product suitable for recommendation? Yes, of course it is, to those people who want an alternative to the current extremely secure cash or gilt based savings. That does not mean it is suitable for everyone.
Second, would anyone be compelled to take these investments? No, of course they would not. But if they wanted the benefit of tax reliefs then this would be the option available to them, and that is an entirely appropriate use of government subsidy. My suggestion to anyone who disagrees is that they try to provide justification for the current systems of subsidy for savings, which reallocated more than £60 billion of subsidy each year to those who are already wealthy because they have the ability to save, including for their own old age.
Third, to those who say that this product is not suitable for pension fund investment, I would suggest that they try to explain the existing real profile of risk with in the pension portfolios that most people have, given the massive uncertainties within both the bond and stock markets, and then see peoples own choices: I very strongly suspect that they would go for the safety that this route offers, despite the lower returns.
Finally, to those within financial services who wish to challenge this suggestion, might I ask that they come up with a better macro economic explanation of how the savings and investment market might be reprofiled to meet the social capital investment programme that I am proposing? Or is it that they simply think we do not need to act to improve our physical and social infrastructure, and to tackle climate change?
I will also offer one afterthought. I sat next to a very senior actuary from a very large pension fund a year or two ago. He assured me that his fund was guaranteed to be successful, because given the current profile of investments within it, his investment portfolio was guaranteed to burn the planet to extinction before most of the people for whom he was investing could die. As a consequence, if there were any survivors of coming global meltdown, their pension would be phenomenal. He fully understood the risk in the current pension investment, but was constrained by conventional market logic. I am not, and what I am doing is proposing a solution that defeats the nihilism within that logic.
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I will look at this in a bit of detail and comment…… but I can’t resist an immediate word about the last paragraph. It amuses and scares me at the same time in the same way that the movie Dr. Strangelove does. Anyone saying “this can’t be done” should reflect carefully on this paragraph.
There is a huge amount wrong with what you have written here.
“One speculated on this issue, and the other was quite sure that I was referring to what were, in effect, gilts”
No, what I said was why bother issuing retail bonds which are going to be illiquid or at a higher yield, when you can issue Gilts instead.
“Particularly in the ISA market we think that that this is what most investors want: a simple, straightforward and easy to understand product with a guaranteed rate of interest, albeit at a low rate with little upside potential”
Yet few people seem to want such a product at the moment. Certainly not in the volumes you are talking about to fund your Green QE plans. The WHOLE of the government retail bond issuance stands at £165bn at the moment. It is not realistic to expect it to increase by the £60bn-£100bn per year you are claiming.
You say it yourself why people are buying. Low rates and little upside.
“But, despite that, hundreds of billions of pounds are held in cash in ISAs and, even, pension funds, whilst the gilt holdings of pension funds remain relatively high, again running into hundreds of billions of pounds”
You can withdraw money from Cash ISA’s, because it is liquid. You wouldn’t be able to do this with a retail bond where you are locked in for the duration.
Pension funds do indeed have a lot of Gilts, but they are forced to for regulatory reasons. They also use them for interest rate hedging purposes and collateral for other investments, so the net holding of Gilts is lower than optically suggested, and is reducing both in nominal terms and as a percentage of total assets.
“Third, retail investors want what I am suggesting”
How do you know this? Retail investors can buy normal Gilts as well as other retail bonds, but the uptake has been tiny. You are just making a totally unverified claim. Not least because retail investors want to see a return first, primarily.
“My logical conclusion, based upon this analysis”
What analysis! You haven’t done any.
“have to be honest and say that there is no guarantee that the investments that the bonds I propose will fund will earn a sufficient return to cover the interest that I suggest should be paid.”
So they are high risk, and nobody will buy them at the low rates you are suggesting.
“This, however, does not undermine the credibility of the offering”
Yes it does. Really rather a lot.
“In other words, the government would create the money necessary to guarantee the return to the investors”
If they are government guaranteed, they are just Gilts. Not retail bonds.
“Second, the government would similarly use green QE to make sure that there was a liquid market with regard to redemption of these bonds”
Again, just Gilts. Not retail bonds.
“I think that the prospect of this is incredibly unlikely, but again this is the government acting as guarantor (a role with which it is entirely familiar inside financial markets) rather than as the primary provider of capital.”
What the……? Last I checked, a borrower is not the one providing capital. This is the same for government issued retail bonds or Gilts.
“Put these three aspects together, and the investor has a guaranteed return”
No, the investor doesn’t. The investor can (and probably will) lose money thanks to inflation and should interest rates move higher, they will also lose money. The only guarantee is that they will receive the nominal sum invested back on redemption of the bond. Which again, is exactly the same as Gilts.
“First, is this product suitable for recommendation?”
I assume you are accredited to offer investment advice?
“Second, would anyone be compelled to take these investments? No, of course they would not. But if they wanted the benefit of tax reliefs then this would be the option available to them”
You wouldn’t be compelled to buy these bonds, unless you want to lose the tax advantages of saving. Nice. So you have a choice of losing money with a bond with a negative return, or having the government tax you more. Nothing “compelling” at all about that.
“Third, to those who say that this product is not suitable for pension fund investment, I would suggest that they try to explain the existing real profile of risk with in the pension portfolios that most people have, given the massive uncertainties within both the bond and stock markets, and then see peoples own choices: I very strongly suspect that they would go for the safety that this route offers, despite the lower returns.”
These bonds would have a higher risk profile than regular Gilts if not guaranteed, and exactly the same if they are. So they are not safer than what is currently on offer.
“might I ask that they come up with a better macro economic explanation of how the savings and investment market might be reprofiled to meet the social capital investment programme that I am proposing?”
The private sector is already investing huge amounts into green energy particularly. You seem to ignore this, and think only the government does. Moreover, you haven’t actually detailed what this social capital investment program would look like, other than lots of money spent on vague goals. Nor have you done any cost benefit analysis of these plans you haven’t made yet, or even checked if they even meet these goals and targets. You are just making things up as you go along, with a general “government should spend more” tag line.
“I sat next to a very senior actuary from a very large pension fund a year or two ago. He assured me that his fund was guaranteed to be successful, because given the current profile of investments within it”
I think this is nothing more than a lie. You’ve made this up. Not least because an actuary is unlikely to know the asset make up of a pension fund, given that they work on the liability side of schemes, not the asset side. Plus very very few actuaries work directly for a given pension fund. Plus any decent actuary would likely know the mortality expectations of his scheme, which tend to be around 25 years – and nobody is assuming the world is going to meltdown in that time period. But I suppose you could just give us the name of the pension fund and we can check if this is true or not. But I suspect not.
“and what I am doing is proposing a solution that defeats the nihilism within that logic.”
What you are doing is proposing that people should be forced into investing more with government, on pain of losing tax breaks for saving. You are then saying they should be forced into investing in highly illiquid instruments which either look exactly like Gilts (so why not just Gilts) or are more risky, so would need higher yields. So again, why bother. You are arguing this case with a series of assertions about the benefits of your plan, but haven’t actually done any analysis of such things at all. None.
You are literally just making things up as you go along.
With respect Michael you have accused me of lying when I told the absolute truth
Of course I am not going to say who it was – but the conversation was at the Institute of Actuaries and knowing the person I have no doubt
I do not take kindly to being told I have lied
You will now be banned from this blog.
I think you have already got a fixed conclusion and seem to be deliberately misconstruing Richard’s points to fit your view.
On a couple of points (I won’t address them all).
Yes, Green energy has attracted private investment but what about flood defence?
Yes, it is possible for retail investors to buy bonds at the moment but GBP denominated corporate bonds typically have a £50,000 or £75,000 minimum size pieces so realistically you need about GBP 500,000 for a diversified portfolio. Gilts have no minimum size but with yields where they are and trading costs included gilt offer a negative return to maturity…. or worse than the zero offered by cash.
The presumption that these are a bad investment is predicated on the idea that they will be offered at today’s “almost zero” gilt yields. More likely, once the scheme becomes public yields would rise and offer a fairer bargain between savers and borrowers. Through a balance of Green Gilt issuance and QE (requiring co-ordination between the BoE and DMO) yields could be held at a level that reflects inflation expectations and other factors.
Green Gilts open up bonds to retail investors in a way they currently are not. The existence of the huge Muni market in the US suggests strongly that there is large demand for a retail, tax advantaged, fixed rate savings. If we build it, investors will come. NS&I shows there is demand for risk free savings – they would attract more if they offered fixed rate product that could be held in SIPP accounts or other pension products.
Thank you
I think it might be best ignoring Michael now: his last comment was not posted as it became decidedly rude (to be polite)
And he also knows the tricks of trolls, which does not surprise me
My guess that he was in financial services may not be justified
I’ve been watching this debate with interest.
Clive:
Corporate retail bonds are available on the LSE ORB with a minimum investment of £2000. The total issuance is only about £2.5bn though, so demand for retail bonds doesn’t seem very large.
I’m not sure why you thing that Green bonds would have a different yield to any other Gilt, if backed by government. This being the case, what you are suggesting is that the yield on all gilts should rise. I think this is what Michael was saying. Gilts themselves offer negative real returns and holders are exposed to large capital risk should interest rates rise. If those Green gilts were issued cheap (i.e.with higher yields) then the market would simply price them back to other comparable Gilt yields.
I have to agree though – holding government bonds as investment instruments rather than for hedging or collateral is a pretty sure fire way to lose money. The path to a decent real return is tiny, and the downside risks are huge, so the risk/reward is terrible at the moment.
The US muni market is quite large, but broadly speaking US muni bonds carry much higher risk than US treasuries, and so tend to offer much higher yields. Default rates are also very high considering the ratings (about half as high a junk bonds). Many are also totally tax free, outside any other tax efficient wrapper, offering another incentive. They are not the same thing as Richard Murphy is suggesting.
I don’t think what he is saying would work. If nothing else, the demand is simply not there, if you take other government retail investment schemes as a guide. Put it bluntly, I don’t think the £60-£100bn of retail investment per year will magically appear for investment which still offer low or negative real returns.
Richard:
You mentioned pension schemes in your argument with Michael. I have a question on this topic.
Given scheme liabilities are discounted on a Gilts curve, how would offering a Green Gilt at the same yield as other Gilts improve a schemes return or funding levels?
Or if you are saying that these Green Gilts are offering higher yields, what extra risks are attached? If there are none, the market will simply arbitrage them against regular Gilts till the two prices are exactly in line again.
I may be missing something, but what you are suggesting doesn’t seem to offer anything new, given regular Gilts could and are also issued for investment purposes, including Green investment.
You said you are following this with interest and yet you are discussing issues wholly unrelated to what I have proposed.
Might you address my suggestion because I am not wasting my time addressing issues that are unrelated to matters I have raised?
I think my questions are very relevant considering what you have proposed. Specifically the nature of these bonds.
As far as I can tell, you are just saying there should be a new class of Gilts offering higher, but still negative real yields.
If this is the case, retail investor are unlikely to buy them in any significant quantity. Certainly not the amounts you are claiming, which would be about 50 times the average annual investment into government retail products. The marginally increased returns over cash wouldn’t likely offset the lack of liquidity – why lock yourself in for 10 years for a tiny bit of extra cash, or retail investors would simply invest in other assets which provide much better potential returns. Which isn’t hard to do considering your bonds lock in negative real rates for the long term.
Institutional investor would buy them if the yields were higher, but wouldn’t do this outright as they would still offer negative real yields. They would sell Gilts they currently hold or simply outright short Gilts, to arbitrage the difference in price between otherwise identical financial assets.
This would drive the yields on green Gilts down and normal Gilts up till they are exactly the same. The net result would be that investors would make a tidy profit at the cost of government, the government would raise little or no extra money and gilt yields would likely go higher.
Neither outcome seems to achieve what you claim. The former would raise a fraction of the amount you mentioned, the latter would be equivalent to Gilt issuance, and would probably end up costing government money rather than raising any net funds.
I asked about pension funds as you say that these green bonds offer something to pension savers in excess of what they could achieve elsewhere. I can’t see how, as they would trade in line with any other Gilt, so wanted to you to answer my example to shed some light on what you actually meant.
Martha
No one is suggesting anything that looks like a gilt here
Why not read what has been proposed and stop wasting our time?
Richard
I have carefully read what you have proposed. I don’t think you are bothering to read what I am saying.
If these things are retail bonds, the take up will be minimal. The retail market simply isn’t as large as you think. So to try and raise the sums you are talking about is simply not realistic, let alone to do it on an annual basis.
To put it into perspective, to raise the £100bn number you mentioned at one point, you would need roughly 5% of GDP to be invested in these retail bonds every year. This is higher than the total net household savings ratio, so this is literally impossible. At the moment £1-2bn is invested in government backed retail products per annum, to put things into perspective.
So if this is your plan, it just doesn’t work.
If your plan is to sell green Gilts to institutional investors, as I explained in my last post, they would look exactly like regular Gilts, and be priced and traded in exactly the same manner.
Now would you kindly actually answer my questions instead of trying to fob me and the other readers off?
I have carefully read what you have proposed. I don’t think you are bothering to read what I am saying.
If these things are retail bonds, the take up will be minimal. The retail market simply isn’t as large as you think. So to try and raise the sums you are talking about is simply not realistic, let alone to do it on an annual basis.
To put it into perspective, to raise the £100bn number you mentioned at one point, you would need roughly 5% of GDP to be invested in these retail bonds every year. This is higher than the total net household savings ratio, so this is literally impossible. At the moment £1-2bn is invested in government backed retail products per annum, to put things into perspective.
So if this is your plan, it just doesn’t work.
If your plan is to sell green Gilts to institutional investors, as I explained in my last post, they would look exactly like regular Gilts, and be priced and traded in exactly the same manner.
Now would you kindly actually answer my questions rather than trying to fob me off and avoid the issues I have raised?
Have you noted what I said about ISAs and pensions and the change of reliefs?
Have you noticed the new flow of saving funds – that the IMD says has to continue today?
No…..you are instead looking at what Clive has noted to be a very hard to access market and trued to draw comparison
You have, then, not read what I have said
I am discussing my plan, which would work given the criteria I have suggested and not yours which is irrelevant
Those are the terms of reference. If you do not like them, go away.
I noted what you said about removing tax relief from pensions and ISAs.
This would reduce the amount available to be invested. If you remove the tax incentive to invest, people will simply do less of it. If you force them to invest in assets which provide no real return, they will be forced to look elsewhere to find real returns. This doesn’t solve your problem. If anything, it makes it worse.
This suggestion also breaks the compact between government and pension investor. It is a thoroughly terrible idea which would serve only to destroy any sort of savings culture, leading to even greater liabilities for government to care for the elderly and lower investment across the economy.
I looked at what Clive said – and you seemed to be in agreement with him, but also directly at what your article said. I quote “It has always been our belief that the bonds in question would, at least in the case of ISAs, and maybe in the case of personally invested pensions as well, be what we might call ‘retail bonds’.”
So I assumed these were retail bonds, but was interested to know how you would achieve the volumes you talk about when those amounts are greater than total net annual household savings in the UK every year. Even assuming every penny of savings were invested in these retail bonds, you still wouldn’t meet your targets.
At which point I assumed, partly because you mentioned it in some comments, that these bonds would be issued as an alternative to Gilts. Institutional markets are the only ones large enough to deal with the scale of issuance you are talking about. However, if these new green Gilts have the same issuer and covenants as regular Gilts, my point stands. Any price difference will be smoothed out through arbitrage, most likely at an added cost to government, benefit to speculators and likely driving up bond yields.
I am also discussing your plan, but the criteria you have laid out are not realistic. There is no point discussing fantastic ideas which have no basis in reality and ignoring the real effects of the actions you are proposing. Do you not think that removing tax reliefs won’t affect behavior? Or do you really think you can raise £100bn a year from retail bonds when the current market size is £1-2bn, and £100bn is more than the total net annual household savings in the UK, as a whole?
If your terms of reference are totally made up, what is the point of this in the first place?
£70bn goes into ISAs a year
More than £100bn goes into pensions
And I am saying the government can direct how it’s subsidy – nearly £60bn a year – can be used
Do I think removing the subsidy will change behaviour? No, because I am not removing a subsidy. I am attaching conditions to it, which people will understand, appreciate and desire
How do I know? Almost no one in the UK understands their pension – and if they knew the massive risks ing=herent in them now they would be in cash
And that\’s what a lot of ISAs are in
I offer a better use for something akin to cash
Will it work? Never, metaphorically, would so many people have queued around the block to invest is my suggestion
You don’t like that because you want to capture it for your own gain
I conclude you are clueless, or simply peddling self interested myths. I suspect both
either way, your time here is up. You made not a single value contribution to debate because you never engaged with it. And that is precisely why these bonds will work because that is the contempt with which the financial services sector treats the public
The £70bn ISA and £100bn pension amounts you have described are gross amounts, not net. Even then, to get to your numbers you would require a simply enormous share of the whole investment landscape to be invested in your green retail bonds for your numbers to make any sense.
Not taxing something is not a subsidy. This is like saying only taxing people at 40% when they could be taxed at 100% is a subsidy. Of 60%.
Regardless, removing tax breaks will not increase net investment. At best it will simply shift it, but the likely outcome is that net investment will reduce, at a cost in GDP and jobs terms to the economy.
Removing tax breaks will change behavior. This is well understood.
Your conditions are based on your understanding, appreciation and desire. Not everybody, and I daresay a majority of people will not share your priorities, or the order they are in. Most will be interested in securing their long term and retirement futures primarily. If you gave people the choice of losing money in a well meaning government bond or investing profitably elsewhere to secure their long term, I would guess that most would choose the latter.
I think your view on how well educated the UK population is regarding their personal investments is wrong. In my experience, people are quite well aware of their financial situations and there are a plethora of free online tools to help them. You also seem to be unaware of the inherent and significant risks of investing in bonds.
A lot of money is in cash ISAs, as they are liquid. There is very little downside as they can be accessed easily. Totally illiquid long term retail bonds cannot be. The two are not similar at all, primarily because of this concern.
I doubt people will be queuing up to buy these retail bonds. You have just made a statement, but have no fact or evidence to back it up. They offer no real return and disadvantages over simple cash ISAs. Other alternatives offer much better returns. If nothing else, there is no demand for even regular Gilts at the moment, and retail demand for bonds has always been small, even at much higher nominal and real yields. The BoE has to buy every single Gilt the DMO currently issues because the market has no interest in them at these yields.
I am not sure what I am supposed to be capturing for my own gain, in pointing out the flaws in your proposal.
I leave it up to your readers to determine who is clueless. You seem to be the one who is plucking things out of thin air though.
I am pretty sure I engaged with debate, and in return got no real answers from you. What I did get was you avoiding the questions I posed, making things up and abuse thrown in my direction.
Are you always this rude to people who disagree with you or point out flaws in your work?
Of course I use gross numbers. The pension relief is on new contributions. My ISA proposal is about recycling existing as well as new funds into replacement accounts. So, as I said again, you either have not understood, or don’t want to, or can’t.
And am I always rude to people who do not agree with me? No. If I think they have genuine reason for disagreeing of course not. But those who come here to troll, or pursue their own agendas that I think abusive of society, of course I am. Why not? People who claim tax reliefs are not subsidies to the wealthy are oppressing those in society who deserve that subsidy better, and are denying people the future they need. Sure as heck such people annoy me. As do those who claim my work is flawed when they have shown that they have nit even read it.
You will not be posted again.
I thought I had commented enough on this, and I am sure a number of readers are murmuring “hear, hear”! Nevertheless I am driven to comment simply to request some of Richard’s ‘rational investment managers’ to comment here specifically to explain how they accommodate ‘safe asset theory’ into their rational scheme, and in particular how they reconcile their ‘rational’ hypothesis with the fact that there is a serious global shortage of safe assets, in spite of the fact that they attract negative interest rates?
See Ricardo J. Caballero, Emmanuel Farhi, and Pierre-Olivier Gourinchas, ‘The Safe Assets Shortage Conundrum’; in, ‘Journal of Economic Perspectives’, Volume 31, Number 3, (Summer 2017), pp. 29—46. Matters have scarcley improved since Covid-19. Here is an excerpt from the Caballero et al. conclusions:
“If the saving side of society has a disproportionate desire for safe assets, then it effectively wants to fund only a small share of the overall risky investments required for economic growth. A central role played by the financial sector is to intermediate risk between the savers who want safe assets and the borrowers who are taking on a greater degree of risk. One result of such intermediation is that the interest rates associated with the relatively small tranches of safe assets are compressed against the zero lower bound, while other risk spreads remain elevated. If the financial sector cannot fully manage this transmutation, then it will be hard to sustain the levels of physical investment needed to generate growth in core economies–and it will be hard for these core countries to carry out an ongoing expansion of the quantity
of safe assets. From this perspective, publicly funded infrastructure investment
becomes particularly attractive, as it both boosts potential growth in the asset
producer countries and does so with maximum issuance of safe assets per unit of
installed capital.”
Thank you
“Particularly in the ISA market we think that that this is what most investors want: a simple, straightforward and easy to understand product with a guaranteed rate of interest”…
Don’t forget the small print..” this is guaranteed to lose you money in real terms”
And you think this is a good idea for mass retail??.. would be the next misselling scandal
That scandal is happening: it is pension enrolment to produce no return, the illusion of security and a stock market bubble
Meanwhile, which I suggest is government-guaranteed security for funds – something no -pension fund provides and yet will appeal to very large numbers of people
You do not know better
Your bonds could be index linked for the longer term bonds. NS&I, which I think would be an appropriate issuer, has in the past offered index-linked bonds for longer-term savings. (My wife has a modest one rolled over for umpteen years.) And people are happy to buy Premium Bonds, £100bns worth at a notional 1% average interest (tax free!!), and despite the overwhelming majority winning nothing, according to MoneySavingExpert.
Seems to me a great idea.
Thanks
And yes, a capped (in terms of holding) index-linked offer may be a good addition
“Meanwhile, which I suggest is government-guaranteed security for funds — something no -pension fund provides “
Again I would add – at a return which is guaranteed to lose me money in real terms!!… nobody in their right mind is going to view that as a good investment.. so unless you have that health warning in bold letters shouting at in every bit of marketing, then you are causing a misselling crisis down the line.
With the greatest of respect Gene there are several hundreds of billions held in. cash in ISAs
I think we have to assume that you are pretty ignorant of the real world
Please don’t call again
I would, however, draw your attention to warnings from the IMF today
Yes, it is suitable as a mass retail product.
Investments should not be measured against inflation but against alternative investments. The alternative to Green bonds is “zero” (in cash) or “risky and uncertain” (in equities).
Yes, it is possible for retail investors to buy bonds at the moment but GBP denominated corporate bonds typically have a £50,000 or £75,000 minimum size pieces so realistically you need about GBP 500,000 for a diversified portfolio. Gilts have no minimum size but with yields where they are and trading costs included gilts offer a negative return to maturity…. or worse than the zero offered by cash.
Green Bonds open up bonds to retail investors in a way they currently are not.
Individuals will have to decide whether they want “zero” cash or lock-in (say) 1% for 5 years. Who knows what is correct but it is certainly not mis-selling to offer investors the choice.
Finally, the presumption that these are a bad investment is predicated on the idea that they will be offered at today’s “almost zero” gilt yields. More likely, once the scheme becomes public yields would rise and offer a fairer bargain between savers and borrowers.
Thank you
You use cash as the only alternative!!! Do you have that choice cash or gilts? Or do you own a diversified pool of equities/ corporate bond/ private equity funds? C,mon tell them truth
This might come as a surprise to you, but most people (that’s the vast majority of people) do not own a diversified pool of equities/ corporate bond/ private equity funds
If they do via a pension fund they do not know it
But they do want safe savings
If you are engaging here deal with the real world, not your own fantasy version of it
I would add if you make them inflation linked – well that’s a different story!!
The idea is good. I would like to offer some thoughts at two levels — macro and micro. Both come from the perspective of 35 years trading Government Bonds and, at the macro level (why Green bonds?), is just a slightly different way of looking at what you suggest and I have no disagreements with you. At the micro level (what should Green Bonds look like) I think there are still discussions to be had and I try to layout the pros/cons of the different strategies. Please forgive the length but I do think that this is such an important idea that it needs proper examination.
Why Green Bonds?
There are two pressing and linked issues and Green Bonds addresses them both.
First, huge investment is needed in many areas but “Green” projects are a very substantial part of what is required. These present a particular problem because private enterprise can’t deliver what we need. How would one finance (say) flood defences on a private, profitable basis? It is clear that this investment must be delivered by Government.
Second, extremely low interest rates plus QE has created (a) a huge pool of savings looking for a home and (b) a strong incentive to speculate in assets on borrowed money.
MMT says Government could just spend the money to build flood defences without any recourse to borrowing. And, given that there is huge slack in the economy this would not be inflationary. This is true…… but there are two problems. First, all this cash that is injected would find its way eventually into the hands of savers who would drive up asset prices further. Should we care? Yes — if we want our young adults to buy their own home etc.. Second, mention MMT and half the world who don’t understand it switches off!
Green bonds can be seen in too ways. From an MMT perspective, they are draining cash from the system to control asset price inflation. From an “orthodox” perspective it is simply borrowing to invest in our future. Importantly, the merits of Green Bonds do not depend on understanding or otherwise of MMT and that is key to their adoption by any political party with an eye to the future.
Issuing Green Bonds would also have the benefit of delivering a product (bonds) to a market place that is craving bonds. How do we know? Just look at yields on 50 year gilts — 0.68% at present. The main reason that rates are this low is QE and a lack of alternatives that offer the correct risk and regulatory characteristics for long-term investors. In the Great Financial Crisis and the pandemic massive QE was absolutely the right response — you don’t quibble with the firefighters about the amount of water they are using and the collateral damage it might cause – but, as we look beyond the crisis and how we build a sustainable future we need to think about QE differently. Ultra low rates are fuelling asset prices (to the detriment of ordinary folk) and causing problems for Pension Funds and other savers. Furthermore, I don’t believe that MODESTLY higher rates would damage businesses in the real economy — they have other problems! Looking ahead, the issuance of Green Bonds in combination with QE would regulate long term rates allowing a balance to prevent asset bubbles, allow business to finance at reasonable rates and savers to save at a reasonable rate.
The last paragraph might be a bit technical but in short it is a new “financial contract” that (a) mobilises the peoples savings productively (b) delivers fairness between savers and borrowers and (c) fairness between this generation and the next.
What should Green Bonds look like?
This will follow later — I do have a life!
Thanks
I agree with this:
Importantly, the merits of Green Bonds do not depend on understanding or otherwise of MMT and that is key to their adoption by any political party with an eye to the future.
For goodness sake, would the two of you just come together and present a worked-out proposal?
I still think that they should be offered with a Government ‘safe asset’ guarantee on the tin; because if this is ‘retail’ a substantial part of your market do not understand gilts. Safe asset theory relies on the complete confidence of the population – confidence of last resort; it is a very bad idea to leave them in any doubt about what risks they are running, becuase that could have major consequences.
We’ll get there
Big ideas take time to finesse
And I think you believe that this is useful
Assuming your last comment is directed at me? Then – Yes!
Flood defences is one, but I offer another; tidal energy. There is already investment and results in the Pentland Firth, but the British Government has failed to supply the scale of research/development resources. The critical feature here is that tidal energy is the ‘mother load’ of renewables, and offers far more than wind. Why? Because it operates according to the laws of astronomical physics. The contingencies are vastly reduced. Tidal could supply ‘base load’ electricity. The very first computer ideas in 19th century derived from the study of tidal forecasts in physics. It follows from this that the returns are astronomical. Scotland has the best tidal potential in Europe. Once tidal is turned into investment opportunity, a grid connection to Europe transforms the economics.
I agree, entirely
I think the Green Bonds or Gilts (the terms, I think are causing some confusion and need clarified) should be considered not as representing examples of conventional public sector products, but as new products; real innovations. I think this would need to break genuine new ground; a genuine public-private partnership in which there is something in it for everyone (and not the ghastly asymmetries of the 90s).
If they are to be genuine ‘safe assets’ (the only way they will work I supect) they need a government guarantee against investment risk (perhaps the same as the ceiling on protection currently given on personal private sector bank accounts). This means up to the ceiling the investment is safe; beyond it there are risks to be borne by the investors. The other side of the risk coin, however is the reward. Therefore, this instrument should provide a commensurate return where there are major successes; if for example the solution to large scale tidal energy is established. This means the instrument must share in the upside, rather than a public sector investment leading to the private sector operator simply taking all the rewards.
Why not?
They are completely new products
And they are not gilts
I do not think an upside is required bar indexing, but I hear you
I was thinking more ‘aspirationally’ for the small investor, who will put safe asset security first, than merely to provide what is ‘required’. I was thinking of bringing more people into the world of working money that does not depend wholly on an exclusive priesthood, defending self-perpetuating, self-serving rituals. This is as much a matter of public education as of investment options.
The striking features of both the Crash and MMT is to discover just how little most people understand about either money or economics, even in the 21st century when so much of life throughout the world (unlike the 17th century) is driven principally – above virtually everything else – by money and economics; rather than religion, land, social hierarchy and sovereign dynasty. There is much less excuse for ignorance about money and economics now; but it is rife.
Much to agree with
I’ve always liked Professor John Smithin’s argument that it’s important for human beings to try to preserve the value of money. In very basic terms it’s the fight against entropy! Accordingly I don’t see why the interest on any proposed Green Bonds shouldn’t be index linked up to a certain quantity of bonds. After all government has a hard job trying to tame the forces of inflation often beyond its control. The OPEC oil price hikes of the Seventies are the classic example. I think the section of Smithin’s paper entitled “Preserving the Value of Accumulated Capital” (page 16) is especially worth reading. Here’s the link:-
https://www.researchgate.net/publication/5172361_The_Role_of_Money_in_Capitalism/link/548898b00cf2ef344790a152/download
I am being persuaded…
I confess I have as yet only scanned this paper hastily. I wish to emphasise I do not propose to criticise it; it is a valuable paper, but I was particularly interested in the opening: “Money plays the primordial role in the genesis and subsistence of
capitalism.”
I could see where this may begin its exploration; only it didn’t (at least that I have so far noticed), and I think there is something missing in economic analysis both of the period, and of the nature of money’s key place in economic activity, and especially in the confidence people have in money (a matter of social psychology, which does not lend itself to econometrics or conventional economic narrative explanations). I think the ‘primordial’ role of money is important to the 17th century history, and remains significant beyond that history.
See page 19 Smithin hedges his bets whereas Desan argues a stable currency created by government is the necessary pre-cursor of effective market capitalism.
“The chartalist argument, that state money is base money because of acceptability in the payment of taxes, is obviously a powerful one. This does not mean that a “private” monetary authority is logically impossible. There have been historical examples (Goodhart 1998; Ingham 2004) and, in modern conditions, if the state did abdicate its monetary role (as contemporary “free bankers” advocate), pre-sumably some powerful private financial institution would have to fill the void (Dow and Smithin 1999; Goodhart 1998). What the discussion does achieve is to drive home the argument that the monetary order is socially constructed, rather than deriving automatically from the market.”
The Libertarian Friedrich Hayek tried to make the case for non-government based national currencies and to some degree influenced the set-up for the Euro but even this has had to act “governmentally” both in the GFC and Covid crisises.
I think you are constructing the framework for a de-centralised monetary and banking system fully supported by the money creation powers of the central bank and government. Bring it on! This is great stuff Richard. My own work, with the assistance of some other collaborators, is trying to design a new banking and monetary system for Scotland and is heading in precisely this direction.
It is only to be expected that the folk working in the finance sector who have a vested interest in stopping this sort of reform will be attacking you and trolling you. This is exactly what happened in early 20th century America when the popular movement for banking reform was active – see Christopher Shaw’s book “Money, Power and the People”…much to learn from that history.
To continue…….
What should Green Bonds look like?
Should they offer preferentially high rates to retail savers?
I think not. Most folk have their pension savings held institutionally. Only the wealthy invest directly using SIPPs and I don’t think they should be advantaged over others obliged to invest with Pension Institutions. Even with ISAs I am not sure we should be helping over and above the tax break already offered. Rates offered should closely match those in the wholesale gilts market.
Where should they be offered?
If possible we should operate with the infrastructure we have. NS&I offer ISAs and could easily be pressed into service offering whatever product makes sense…. either as an ISA or outside that wrapper.
Pensions is slightly trickier. Could SIPP providers access these products in NS&I somehow? Could NEST the auto-enrol pension scheme help? Not quite sure.
What instruments should be offered?
Currently, the obvious way to do this would be to finance the long term projects required is with long term liabilities — 30 to 50 year gilts. Is this what retails savers want to buy? No, what they want is a higher, fixed rate with the flexibility to get their money back without penalty.
In life, we rarely get what we want. It is not reasonable to expect (or encourage) retail savers to buy 50 year fixed rate bonds. Equally, savers can’t expect the “free lunch” of higher rates without commitment. We need to strike a balance and (on balance!) that balance should slightly favour the retail saver as the borrower (the Government) can manage and bear the risk much more easily. (But only slightly, so as to not disadvantage wholesale investors too severely).
So, my thinking has changed from yesterday when I was rather excited at the prospect of everyone experiencing the joys of trading long dated Government bonds. On reflection we should start with a product that is well understood and accepted by retail savers. This does not preclude product development in the future.
That product is a fixed rate bond. Various maturities should be offered 3, 5, 10 and (maybe) 20 years. Rates would be in line with Gilt yields with penalties for early redemption of (say) 1% of principal for each remaining year to maturity. Rates would be altered periodically to reflect gilt rates but, most importantly, there should be co-operation between NS&I (fixing the rates), the DMO deciding which gilts and what size to issue) and BoE conducting open market operations (QE to guide gilt yields to meet policy objectives).
This last point is perhaps the key. It is saying that there does have to be changes to institutional arrangements between these organisations….. and I would put the BoE in charge with a mandate of “managing market interest rates across the yield curve to achieve full employment and price stability via (i) issuance of Gilts through the DMO, (ii) Green Gilts through NS&I and (iii) QE through the APF. All this to be done in consultation with UK Treasury to co-ordinate interest rate and bond issuance policy with spending and taxation plans”.
Thanks
I will muse on that as this idea develops
Much appreciated
Is a solution to the problem identified by Clive – preferential rates favouring the wealthy – to drop the proposal to treat them as tax free ISAs but to tax the unearned income as part of income for income tax purposes. Saves in higher rate groups then pay more tax on the interest income than savers from low tax groups. Pension funds need not pay tax on them at all as they don’t pay income tax. It might take a slightly higher rate of interest to keep them attractive if tax is to be applied to returns but a balance could be struck possibly to address this.
I am suggesting a holding cap – which I think is a fair and say way to manage this
There was no “Reply” option…… and feel free to not publish this but in direct response to Martha’s point about retail buying corporate bonds.
The “Retail bonds” offered on LSE are incredibly illiquid and the costs to trade make them unattractive. The real market in non-government GBP bonds is the Eurosterling market where minimum sizes were £50k, now raised to £75k with the specific purpose of keeping retail investors out.
Offer a sensible market place, a fair rate and retail WILL come.
Precisely
Thank you
Well, I’m sold on the idea – it’s at least worth a try and boy do we need new ideas at the moment.
I am not sure why this has attracted some adverse invective, it seems a positive opening up of an important debate.
Richard previously appeared to suggest that ISAs and SIPPs should be replaced by some sort of tax-favoured green investments. I recall commenting that while he might have other priorities personally, those current savings vehicles seemed legitimate use by governments of the ability they have as highlighted by MMT to employ the tax system for what they saw as social good: in this case encouraging the public to have a rainy-day fund and provide for their own old age.
But this proposal seems simply to suggest – if I understand right – the government creating the facility for companies or organisations investing in desirable low carbon technologies etc to raise money through a special version of the fixed-term higher-interest investments available from most building societies. (They are sometimes colloquially described as bonds, but it is clear from comments here that this nomenclature is highly confusing to anyone who knows about government bonds). If you agree with the aims of incentivising investments in “green” infrastructure the question becomes how to organise it and how to make it attractive to the average small saver.
The second bit is easiest. Those savings opportunities need to be readily available – most easily through existing building societies or similar – with interest rates that are attractive and possibly an additional tax incentive such as ISA benefits. More difficult but perfectly soluble is the organisation: it needs an interface with the benefitting companies more like an investment bank, a channel between that and the retail savings businesses that the public interact with, and the government’s incentives via underwriting savings, using their abilities to choose what to tax, and possibly contributing modest funds to bridge any gap between cheap borrowing for the projects and attractive interest rates for the savers.
Thanks Jonathan
All noted
The 1694 Bank of England set-up was based on a form of social contract not too unlike the Green Bond concept. A government income stream was attached to the joint-stock company so that investors got 8% annual interest return from Tonnage Tax Revenue. Of course today we know that that Tonnage Tax is cancelled on a balance sheet and on another balance sheet the government creates money from nowhere to service the interest and provide a guarantee (up to a limit) the investment capital is safe. In reality the money the government can create from nowhere means the interest rate on the Green Bond can be variable. In the same the BoE joint-stock company interest rate return could be upwards variable if the Tonnage Tax revenue increased. I think the BoE proposers thought they were pressing their luck with Parliament to suggest this and may have ended up with a variable interest rate that could go down.
Lots of input here from various people with different views. That is good although with 50+ comments some of the threads are crossed and mixed up now. So, forgive me another bit at the cherry….
To those that reject the idea out of hand I would merely ask “What do YOU propose to do to mitigate the climate change that is already ‘baked in’ and minimise further climate change beyond that?” (Or, for example, how do we build flood defences and how do we de-carbonise the economy). If you have other ideas then I would love to hear them. Really.
Here are my answers to the common objections
“Retail can already buy bonds but they don’t”.
Have you ever tried to invest in bonds as a small saver? It is not easy.
First, so called “retail bonds” on the stock exchange are few and far between not due to lack of retail demand but unwillingness of borrowers to bear the additional cost of listing etc.
Second, Eurosterling bonds have minimum sizes of at least £50k to deliberately deter retail investors
Third, trading commissions are large and eat up a substantial portion of any potential return
So, the truth is, the current lack of retail participation does not tell us much.
“No one would buy because rates offered are below inflation”.
This might have some validity if there WAS an investment that guaranteed to pay inflation…. but there are none. Index linked gilts are the obvious instrument but these yield Inflation MINUS 1 or 2% at present.
What matters is the relative attractiveness of the accesible investments and given the huge cash holdings that retail savers have which pay virtually no interest, 1% suddenly looks attractive.
Besides, we don’t know what market rates will be when these bonds are offered. The very fact of them being offered will drive market rates higher so that they are more attractive.
Also, do not underestimate the hypothecation story. Savers are not charities but when offered two economically similar paths (in effect floating versus fixed rate interest) they will tend towards the Green route.
“it’s wrong to compel people to buy Green Bonds”
Nobody is compelled. But it is perfectly reasonable to use the tax system to encourage behaviour that has wider benefits. Indeed, this was true with ISAs, too!. Originally, ISA investment had to be in UK equities (not cash) with the aim of securing cheaper capital for UK companies…. but this aim has been lost in the mists of time.
“Nothing new here. Just issue gilts (with or without QE) and get on with it”
Yes, if we could…. but the political class seem to have ruled that out. Green Bonds are an attempt to re-frame the debate in a way that will allow politicians to change tack (as well as offer savers an interesting new product etc.).
“The potential market is small”
I disagree, the POTENTIAL is clearly large…. but the truth is, nobody knows what the outcome would actually be. However, flows into NS&I when their rates are attractive and cash levels held in ISAs are clues that there is real potential. Besides, if it does not match greatest our hopes what is lost? Even a few billion would help. At least we will have got somewhere.
That’s al for now, I think.
If all, still much appreciated
A really trenchant summary Mr Parry; thank you. This is exactly how to present this to the public – contrast what is new being offered, with the way the ordinary public is excluded from the monetary state by the difficulties, hurdles and costs thrown up by the vested interests of a priesthood. I do not use the term ‘priesthood’ gratuitously, I use it because it reminds us of the primordial nature of money in complex human, social interactions; it is the real rather than only the supposed only nominal power of money in a global economy (as mainstream economics falsely preached), has finally brought to the surface the fact that money is the only modern, truly international religion.
I would merely like to sneak in here my reference to the aspirational and educational elements that could be captured by Green Bonds (I like this terminology). Green Bonds should use Retail to bring in the citizen from the cold to a more direct relationship with the Monetary State; to stretch an historic analogy, it is a presbyterian solution that reduces the reliance on a middleman closeted behind arcane and impenetrable explanations of their unique, irreplaceable value. I would wish to see an upper limit cap to investment in the Green Bond that is guaranteed ‘safe asset’ protection; but also an upside potential for reward beyond a specified return, for revolutionary Green products produced by the investment that are capable of providing big returns on investment (I appreciate that is very difficult to achieve – but worth some effort?).
All noted
I like the religious/Church analogy…. in this modern world that worships money it is extremely apt.
I am also interested in your (and others’) product ideas. Why? First, my profession blinkers me; second, whatever we offer to start with is not the end of the story. It will develop as we really find out what people want.
Isn’t your “priesthood” Michael Hudson’s “financial rentier class”?
An interesting clarficiation. No, I was thinking of the priesthood as the professional governors of the system, the functionaries who run the system and both promote and authoritatively interpret the sacred text that governs or operates the monetary system; the bankers for example, the financial services traders, the hedge funds (who expand the envelope of interpretation). The broader “rentier class” I was thinking of rather as the lay members of the church; particularly the influential lay embers – the elders, for example.
Firstly may I add a ‘Like’ to the idea of a ‘National Savings Certificate’ type product.
I may only be a Bear with a small brain, standing back and looking at the bigger picture.
Interest rates and investment returns are very low
But The Government has created a lot of money through Quantitative Easing, this money is looking for better returns resulting in massive increases in the price of, amongst other things Land and Property, Shares, Vintage Cars etc.
MMT tells us that we can create the money we need for the Green New Deal, and we could deal with the asset price inflation issue by taxing some of this money out of existence, however this may be politically difficult.
So, what we need to do is to lock up some of this ‘surplus money’ in Green New Deal ‘products’
My opener might be to make some of these speculative investments less attractive, either through taxation or in the case of Land and Property controls on who is allowed to own it.
What we then need to do is to create a range of products to attract some of this ‘surplus money’ these need to range from long term bonds aimed at ‘commercial’ investors such as Pension Funds and Insurance Companies down to perhaps a 6th former in a Saturday Job who wants to put away some money to go to University or buy a car.
The important thing is deciding what we are trying to do, that in turn will drive the products and other measures needed to make it happen.
Good stuff John
You get it
…………………and it would be nice to see this money going into something genuinely productive for society for once – something that according to today’s Guardian, people support – like doing something about climate change.
The idea has a ‘stakeholder’ like element to it which to me had always been a sort of inclusive concept about how to measure the best and broader outcomes other than just one’s financial wealth which is much too narrow and for too few.
My view is that the fear of vested interests is that they see money being diverted from their more speculative (and self-enriching) bullshit projects.
Vested interests want a monopoly. Of course. As Mark Carney said, markets only value lost habitat when it is gone and turned into developable land; we only value what is lost when it is gone. This is a major problem with markets.
Well, tough on them.
I’m all for the idea. If many people knew that they were investing in something positive like this, they would feel better about themselves, and also, many people investing moderate amounts of cash into the bonds makes investment affordable to the man in the street so to speak. And democratises investment and therefore the decisions as to where to invest and what drives our economy. Even children should be able to purchase a little of the investment in their planet etc., using this model.
It’s a very exciting and positive idea.
Yes – why not?
Interestingly Christine Desan argues in her book “Making Money: Coin, Currency and the Coming of Capitalism” there was a switch in the mentality of the English people in the 17th century from the dominant Catholic Church “mantra” that human beings should pursue their activities from consideration of what constituted the collective to good to one in which self-interest could contribute to the collective good (See Adam Smith “The Wealth of Nations”). This self-interest argument is, of course, the bed-rock of market capitalism which has sadly morphed into an extremist “market fundamentalism” where it’s viewed, particularly by Libertarians, that “collective interest government” hinders the market. Christine Desan in her book makes the point by way of counter-challenge that you need to have the stability of a government (collective interest) created currency to enable market capitalism to take off!
Thinking about it some more, the real problem we have is that while a small percentage of the population have more money than they can sensibly use, there is a much larger group who don’t have enough income to save, and that means things like replacing their clothes, cookers, washing machines, cars etc.
So we need to start by making sure that people have enough to live on, that means a higher minimum wage, possibly with increases for night and weekend work, higher rates in certain sectors such as hospitality and retail – possibly even some way of identifying ‘High End’ establishments. More generous benefits, including ‘Insurance’ based benefits such as Sick Pay, Job Seekers Allowance & Contributory Employment and Support Allowance, both to address ‘poverty’ and to get a ‘buy in’ from those in work.
In addition of course we have the ‘workplace pensions’ which are ‘invested’ in the stock market, surely these need to be abolished and replaced by a more generous state pension.