If the ideas Tony Blair outlined in Singapore about the "stakeholder economy" are insufficiently radical for you, consider this proposition: what would be the implications were the Singapore model of a state-run funded pension system to become the norm for the industrial world? Or, to put the point from the perspective of participants in financial markets: could the rise of state-sponsored investment funds become as important an influence on world finance in the next quarter century as the rise of institutional investors have been in the past one?
A mad idea? Far from it. Indeed, growth in state-sponsored investment funds seems inevitable as countries find this is the only way they can fund the demands of an ageing population. The present pay-as-you-go pension systems, which just about work if there are four or five people of working age to every pensioner, cannot work if there are only two-and-a-half workers for each pensioner. Encouraging people to save more for their old age via established occupational pension schemes is one way of squaring this circle, but there will always be people left out of such schemes.
In much of continental Europe funded pension schemes hardly exist, while even in the UK only about half the population is a member of one. Some kind of funded scheme offered by the state and backed by compulsory saving seems the obvious way of making adequate provision for people.
Thoughtful politicians are well aware of this. Tony Blair praised the Singapore Central Provident Fund, though he was careful to explain that such an idea was not necessarily directly transferable to another country. But Labour MP Frank Field has developed his own model, a state-run funded pension, and Tony Blair is known to be interested in this idea.
In one sense this is not a British problem: we are almost unique in that our social security fund is close to actuarial balance. Thus there is not the grinding financial imperative that faces many other countries. But one key reason we do not have large unfunded pension liabilities is that our basic state pension is very low. So there is a powerful social case in that a compulsory savings scheme linked to a supplementary pension would mean that more people had a decent standard of living in their retirement.
So Britain is an ideal country in which to launch such a scheme. Elsewhere, forcing people to save money for pensions, in addition to paying into a social security fund, smacks of deceit. In Britain it could come in as a top-up scheme.
To say all this is not to suggest that in 25 years all developed countries will have something on the lines of the Singapore system. Singapore has pounds 28bn in its Central Provident Fund; gross that up by population and a British scheme would have more than pounds 500bn. That is an almost unthinkably big number: the total market capitalisation of the all the companies on the London Stock Exchange is pounds 900bn, so the state would be owning, on our behalf, more than half of …