The Wilberforce Society | Economic Policy
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Economic Policy

This report offers some suggestions directed at how quality of service can be improved in the mutual fund industry, how competition can be made more effective and thereby the results for customers as well as successful fund managers improved. It does this by firstly conducting a broad narrative analysis of the many issues which have affected the industry in the past and which still affect it. It then makes a series of policy recommendations setting out what each party involved can do to contribute to better overall outcomes.

How does this market work, and as importantly, in what ways is it not working as well as it could? What are the reasons for this? What is its history, and structure? To what extent is the power of consumer choice the driver of services delivered? Where this is lacking, what are the fundamental reasons for this? What is the effect, both good and bad, of current regulation? What is the range of business structures used and what is their history? Why is it important for fund managers to be able to trust their clients? What should investors look for in a fund manager’s description of themselves? How, and by whom, can consumer understanding of “what active management actually is” be best maintained?

These are some of the questions dealt with in this wide-ranging, narrative, non-technical and discursive report which also makes a series of policy recommendations in the following areas:

  • That open debate on the merits of different business structures is needed.
  • Why and how funds should improve the way they communicate with their investors, and the gains for all parties that can be made from doing so.
  • Why it is crucial for the consumer to understand the basic choice they must make between passive and active management, why current regulation actively confuses this choice, and how the regulatory approach should be modified.
  • What the consumer should look for when they choose an active fund.
  • What the regulator, state or otherwise, should and should not be doing to help.

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The increasingly errant forecasting of the Bank of England (the Bank) and the challenges presented by unconventional monetary policy (in particular, quantitative easing [QE]) which it has used to counter the UK’s fall into economic stagnation have placed its credibility under scrutiny.

This paper identifies the key threats to the credibility of the Bank of England, both now and in the near future, which it must address if it is to maintain efficacy in a world after QE.

  • First, the Bank’s CPI inflation target is inadequate in an environment of increasingly volatile food, and upwards trending commodity prices.
  • Second, following a comprehensive review, we find that the Bank’s stated exit strategy from QE — resting on a mirror-image asset sale and the issuance of Bank of England Bills — is unsatisfactory, particularly given the predominantly long-dated nature of the Bank’s bond-holdings.
  • Third, the communication challenge presented by QE, and indeed any attempt to exit it, is straining the Bank’s communications framework. To be credible in this new world of multiple monetary policy instruments, the Bank needs to recognise that there is no one-size-fits-all strategy for central bank communication.

We present three recommendations to address these threats and restore the Bank’s credibility:

  • A core inflation target would align the Bank’s tacit objective with its stated one,
  • Committing to not selling the assets purchased under QE would clarify the Bank’s exit strategy, and
  • Adopting a tailored approach to communicating different policy instruments would create a more coherent communications framework.

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TWS’s first Annual Conference, held in January 2012 on the theme of ‘Public Policy for Cyberspace’, was accompanied by our introduction to the policy debates surrounding this area.

The paper was written by our specially-formed subcommittee on cyberspace, chaired by Albert Beardow.

Please email policy@wilberforcesociety.co.uk for more information.

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This paper discusses several key issues, including how the Eurozone member states’ relinquishment of their monetary levers has caused economic booms and busts, why equilibrium hasn’t been settled by free movement of persons, how certain European institutions need strengthening to support stability, recommendations for the creation of further federal institutions, proposals to strengthen the criteria for Eurozone entry & Greece’s future in the Eurozone.

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A paper assessing the potential costs and benefits of lowering corporation tax in Northern Ireland. We conclude that while potential benefits of a reduction in corporation tax may be high in the very long term, the costs are very likely to be high in the short term and may well remain so in the future. Potential benefits are far too uncertain for Northern Ireland to risk a significant corporation tax rate reduction; and a small reduction may be ineffectual in attracting significant amounts of new business.

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An assessment of mechanisms to repay graduate debt, with four proposals to improve the system: median earnings to be the income threshold at which repayments are made, CPI + 3% to be the interest rate paid on graduate debt (with rate relief for low earners), early repayment to be permitted with no penalty, and the progressive aspects of the system to be publicised clearly and aggressively.

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