Stewart Lansley, Duncan McCann and Steve Schifferes, Remodelling Capitalism: How social wealth funds could transform Britain, Friends Provident, 2018, 56 pp, free to download from here
The first lines of this report’s introduction say it all:
- There is growing disconnect between the citizen and [the] state, which is seen as increasingly unable to provide for public needs.
- Wealth is highly unequally distributed, and the share of total wealth that is publicly owned has fallen sharply.
- Public assets have been badly managed in the past.
- We are proposing a new type of collectively owned investment vehicle aimed at social goals and held in trust for all.
- By spreading the ownership of part of the economy to all and ensuring that some of the gains from economic activity are equally shared across society, the funds would be a powerful pro-equality instrument (p. 4)
Sovereign wealth funds are usually set up by governments to invest the proceeds from the extraction of natural resources and to employ dividends from the fund for a variety of purposes. The authors propose that if such a fund were to be established in the UK then there might be three options to consider: a Citizen’s Dividend Fund, the dividends from which would be used to make cash payments to all citizens; a Social Investment Fund, the dividends from which would fund adult social care or some other useful public service; and Urban Land Trusts, that would develop public land for social housing. If any of these funds were established it would begin to right the balance between private and public wealth and at the same time promote intergenerational fairness. The authors propose that the fund should be funded from wealth levies, the UK’s top 350 companies, and a small increase in National Insurance Contributions, and they envisage the proceeds being used to fund new activity, and not to support current government expenditure.
This is a most thorough report. Chapter 1 studies some existing sovereign wealth funds and proposes mechanisms for ensuring that such a fund for the UK remains transparent and serves the public good, and in particular it proposes that if a ‘Citizen’s Dividend Fund’ were to be established then should be independent of government. Chapter 2 describes the aims of the funds in detail (tackling inequality, promoting intergenerational fairness and long-termism, and the ‘remodelling of capitalism’ – although ‘adapting capitalism’ might have been a more accurate description of what they propose). Chapter 3 explores a number of ‘principles’ of sovereign wealth funds (governance, investment decisions, distribution, funding, and hypothecated taxes). Chapter 4 provides details of how a fund large enough to make substantial payouts by year 10 could be funded, including ‘all adults’ making contributions ( – this is not exactly what they mean. The proposal is for a small increase in National Insurance Contributions).
Chapter 5 takes the Alaska Permanent Fund as the model for the proposed Citizen’s Dividend Fund that would provide the revenue stream for the small citizen’s dividends and the one-off grants for 25 year olds that the authors envisage, with a view to providing a larger citizen’s dividend in the future. Chapter 6 provides detail on the Social Care Trust Fund, and chapter 7 discusses Urban Land Trusts. Chapter 8 recognises that ‘the models being advanced in our report are at the radical end of the possible range of proposals’, but suggests that ‘nevertheless … it is possible to build strong public support for [the] approach across the political spectrum’. Here the authors need an additional stage in their argument to show that the political contexts that have given rise to sovereign wealth funds in other countries bear relevant similarities to the political context in the UK.
The final chapter contains a list of recommendations relating to the three alternative funds; and the appendix, as well as much of the rest of the report, contains relevant financial detail.
Anyone who has read Stewart Lansley’s A Sharing Economy: How social wealth funds can reduce inequality and help balance the books (Policy Press, 2016) and Howard Reed’s and Stewart Lansley’s report, Universal Basic Income: An idea whose time has come? (Compass, 2016) will find much that is familiar in this new report: but they will also find three detailed proposals and some careful research on how sovereign wealth funds could work. This report therefore takes the sovereign wealth fund debate into the same territory in which we now find the Citizen’s Basic Income debate: that is, into the field of public debates about ideas that are both radical and at the same time relatively minor alterations in the way in which we organise our economy. It is that combination of aspects that has helped to propel the Citizen’s Basic Income debate to where it is today, and the same combination should help to do the same for the sovereign wealth fund debate.