Public Policy

Long active in public policy, co-founding the Institute for Fiscal Studies, he worked closely with Conservative Treasury Ministers and Shadow Ministers, and key economic Think Tanks. He served on the Taxation and Economic Committee of the Institute of Directors, the Taxation and Technical Committee of the Association of Corporate Treasurers and the London Committee of the International Fiscal Association.

Major issues have included the financial crisis, the future of the Eurozone, tax policy, and the unacceptable growth of regulation which is damaging productivity and the huge loss to the government on the sale of Royal Mail.

Financial markets, Eurozone and Brexit

Following the financial crisis, political pressures have been damaging financial markets without really attacking the abusers. These days, though, the main concern is Brexit. What will it do to the British and European economies? This is a complex and rapidly changing subject.

As an economist very aware of market bubbles and their effect, he has watched, predicted and commented on the unfolding financial crisis. This did not cause, but did precipitate, the “disaster waiting to happen” in the Eurozone. His Adam Smith Prize dissertation was essentially on fixed versus floating exchange rates, long before the subject was fashionable.

We economists knew that monetary union would not work without a fiscal and transfer union. We were over-ridden by the politicians, and although many of these did not understand the point, some did – but see below.

John contributed the historical chapter to an IEA pamphlet, and reviewed the book by Harold James showing, from then available archives, how the issues ignored by the founders of the Eurozone were actively discussed in the earlier attempts: the “snake” and the ERM. In a reviewed book (see publications) Lamfalussy admits that he and hoped that it would lead to his desired end without democratic accountability.

Royal Mail Sale

As a strong supporter of Margaret Thatcher’s privatisations, John was horrified to discover how sponsoring banks were proposing to handle these issues. They invented the “priority applicant wheeze” (please regard the last word as an euphemism). Instead of making a tender offer, by far the best arrangement for the (taxpayer) client, they deliberately fixed the price too low and arranged that about half the issue was privately placed with this their selected clients. This inevitably resulted in a loss to the Exchequer of some £2.5 billion over several issues. When I pointed out that this procedure was in breach of Stock Exchange rules, they reacted by changing the rule.

Fearing a repeat when the Government started selling off assets acquired in the crisis, I wrote “No to Underwriting: How the Coalition can avoid being ripped off”, but this was ignored, and the same discredited procedure was used for Royal Mail!

The bank advisers were paid fees of £12.7 million. One of the tasks was to decide the method used and advise on the fixed price – choosing 330p. The shares opened at 450 p (36% above the recommended price and rose to a peak around 60p. Good judgment? Only 162 million shares were allocated to the general public who made about £40 profit each. Other established investors were squeezed out completely. Another 473 million were privately placed by the sponsoring banks with institutions variously described as “priority applicants”, “High-Quality Investment List”, “firm long-term holders” or “Pilot Fish Institutions”. The bankers were paid a fee to take great care choosing these. As the NAO Report shows, seven of the 20 largest of these sold all their shares shortly after the issue, and another four sold most. The Myners Report lists 21 “Pilot Fish Institutions” showing that 11 of these, allocated a total of 131 million shares, sold their holdings down to 2 million by the beginning of November. Well selected, High Quality, investors?

The Irish Government did a little better on their sale of AIB `only’ losing £300-£400 million.


International Public Policy

This interest has now revived and the Department is taking a serious interest in technical assistance including capital markets in Africa. John is also working with those involved with a team of lawyers who have been active in helping set up International Financial Centres.

Having been involved with tax reforms in Canada, South Africa, New Zealand, Australia, the European Union and elsewhere, I went on to lead major formal projects after the collapse of Communism in Russia and other CIS/CEE countries, plus Cyprus Thailand and Mongolia. All involved the development of capital markets, initially with special reference to the tax aspects but later work with Jackie Newbury who worked in financial markets in London, Frankfurt and Tokyo). He made a number of short visits often on City missions led by the Lord Mayor of London, to a range of countries, including all but one of the post-Communist EU members, and China.

Active, free capital markets are essential for prosperity and growth, but conflicts of interest although not new, there have a serious problem about which he has written extensively. Our aim is to show how to tax financial markets while encouraging their expansion. The same care is needed with regulation, which needs to balance between keeping life simple for the honest, while preserving high standards.

He was asked to review `Edge of Chaos’ by Dambisa Moyo. This is an absolutely splendid account of precisely the problems in which he is interested.


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