A Labour-controlled council has been advised to invest some of its £250m in pension assets overseas because of the “political risk” of a Labour election victory and “renationalisation” by a Corbyn-led government.
A Camden council document posted online last week summarises the advice given by London CIV, a £5.6bn fund management group set up by local authorities to manage the pension funds of London councils.
London CIV is chaired by Bob Kerslake, a former head of the civil service, and includes board members that control schools and hospitals in London.
According to the document, Camden has been warned against investing too much in UK infrastructure, such as bridges, ports and social housing, because of the “political risk” of both Brexit and “a potential future change of government” that could lead to a “sharp repricing of assets due to concerns over renationalisation”.
The document, revealed by Room151, a specialist news service covering local authority finance, said it would be “imprudent” to expose London pension funds to infrastructure investments that are entirely UK-focused.
A spokesman for London CIV said: “London CIV is responsible for investing significant sums on behalf of the boroughs and therefore has a duty to consider all potential risks. In carrying out this duty, we are in discussions with all boroughs as to consider all risks which might potentially impact on infrastructure. These discussions are ongoing and the London CIV is continuing to debate with its members the shape of its infrastructure strategy. No decisions on this strategy have been made.”
Earlier this week, investment bank Morgan Stanley warned that the prospect of Jeremy Corbyn becoming prime minister is a more serious threat to British business than Brexit. It provoked a stinging response from the Labour leader, who accused Morgan Stanley of being part of the same “speculators and gamblers who crashed our economy in 2008”.
Camden Council sought to distance itself from any suggestion that its pension fund endorses or opposes any political party. In a statement, it said: “Our Pension Committee view and discuss reports from a variety of industry bodies and independent advisers ... Viewing other organisations’ reports in no way reflects either our endorsement of or our opposition to any political party’s policies and no decisions were made at the meeting, or subsequently, regarding changes to our future infrastructure investment.”
Labour’s renationalisation plans largely revolve around bringing key utilities, such as energy supply networks, the water companies, railways and the Royal Mail, back into public ownership.
Infrastructure investment has been a huge growth area for pension funds seeking a regular and stable income from things such as road tolls, railway tracks, power distribution networks and water pipes. But they have been accused of extracting super-normal profits from companies that behave as quasi-monopolies, raising charges to consumers significantly above inflation.
Recent polling has found renationalisation is a popular policy, with the public keenest on taking the water companies back into public hands.
Water topped the poll by Populus with 83% thinking it should be renationalised, followed by electricity (77%), gas (77%) and the railways (76%).
But Richard Elmslie, who runs funds for Australian based RARE Infrastructure Investment Management, said: “You would be the first country to have a major renationalisation. It would be terrible for inward investment into the UK.”