In a month where the David Brent movie has been released, you might have thought we’d have become used to those in the public eye seemingly saying the wrong thing and delivering views which might not chime well with a given audience. Indeed, one suspects that with the advent of social media, we’d all be well-versed in terms of choosing our words wisely, and not putting ourselves in a position where we could be hoisted by our own petards.
Admittedly, it can be rather boring and sanitised to hear the same views expressed over and over again but for those in certain ‘public eye’ positions – particularly those whose comments can affect the entire economy, our sector, the market in general – you would think they might want to stick to the script.
This was certainly my initial thoughts when I read the words of Bank of England chief economist, Andy Haldane, who in a recent interview with The Sunday Times uttered the following answer when asked which was better, pensions or property:
“It ought to be pension but it’s almost certainly property… As long as we continue not to build anything like as many houses in this country as we need to…we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.”
Now, on the face of it, I would probably be the first to agree with Haldane; he’s not wrong when it comes to the lack of housing supply and he’s not wrong with the fact that prices are moving upwards because we’re not building enough houses. Demand exceeds supply.
However, my agreement doesn’t really matter; what matters is how Haldane’s words come across and what matters is how his belief in property over pension might be construed, especially when it comes to the policies adopted by the Bank, the government and all other regulatory branches.
After all, I’m not the chief economist of the Bank of England; I’m not involved in hugely significant changes and decisions which affect all our lives, neither am I part of an organisation which for a number of years has been trying to put the dampeners on the buy-to-let market for fear that too many people are looking to purchase property now rather than put their money into a pension. I’m also not at the higher echelons of an institution which has been trying to (there’s that word again) ‘dampen’ higher house prices in order to get more people onto the housing ladder.
I’m also not part of a government ‘machine’ which for the best part of a couple of years has been running a campaign to get people to invest in a pension, rather than perhaps think of the property they live in as providing for the retirement that they want. I’m not part of an establishment that wants employers to set up pension schemes for all employees, which must have a certain amount contributed to by both employer and employee – not that I disagree with this. So why does this matter?
Well, the simple fact is not everyone is in a position such as Mr. Haldane, who is currently eligible for a pension worth £80k a year when he retires and probably has the best of both words – pension, owns his own home, invests in property, has other assets, and the like.
A lot of people instead have to weigh up their retirement wants and needs in far different terms; a lot of people have to make a decision between a pension perhaps, or investing in property, and the ‘mood music’ over the last few years at least has been that the government, etc, want people to opt for the pension over the property; they indeed are actively disincentivising people from going down the property route even when the chief economist of the Bank of England clearly disagrees with that strategy.
We all know there’s probably no such thing as a level playing field here but the mixed messages this sends out about what people should be doing for their retirement, not only makes the field less level but it starts to move it more like a roundabout. Mr. Haldane is probably, a) wondering what all the fuss is about, and b) wishing he never took the interview, but the simple fact is that the British public looks to the Bank and its employees for clarity and insight, it looks for a clear message on what might be the best option to take. It’s not providing advice as such but it’s delivering a noticeable steer, it’s supposed to deliver greater confidence in the decisions we might take. If you were in any doubts on this, consider the positive response to the Bank in its post-EU referendum thoughts and action.
Given the policies that have been adopted recently, given the tax changes to come, given the focus on housing and steering it in the direction of first-timers rather than investors, it’s an odd choice of words by Haldane; given the focus on saving in pensions, given the introduction of workplace pensions, and given the huge amounts of public money that have gone into pushing the view that pensions are the right option, it’s also an incredibly strange message to give. Perhaps it’s right for him, but it doesn’t chime with what’s been coming out of the Bank itself, or the government, and for that I think we might all require some clarity.
Richard Adams is managing director of Stonebridge Group