Former City minister Lord Myners has criticised the financial services industry for its successful lobbying of the Government, claiming fund managers and intermediaries have been made rich at the expense of the companies they set out to help build.
According to a report by The Times, Lord Myners made the claims while giving evidence from the Kay review of UK equity markets to the Business, Innovations and Skills Committee.
Lord Myners, who was previously chief executive of Gartmore, argued he had witnessed first hand Gordon Brown’s Government being heavily lobbied by the financial industry so it could get preferential treatment – at the expense of private investors.
He points out that during this time, despite 90 per cent of unit trusts underperforming the FTSE 100 index over five years, the Government had been “persuaded that maximum charges on unit trusts should be lifted”.
Lord Myners was heavily critical of the behaviour of both institutions and institutional investors, declaring that business is being “destroyed by short-term gain”, as big institutions sell out of failing businesses rather than trying to turn them around.
He also accused the public company ownership model of “failing its primary economic purpose”, with thousands of “ownerless corporations” created as a result of institutional investors being too big and too passive when steering the companies in which they invest.
Lord Myners suggested that the “agglomeration of ownership among a few very large investment institutions” is of greater concern than the internationalisation of ownership and also argued that “too many companies are being publicly quoted and would be better off privately owned”.
Lord Myners concluded that the recommendations from the Kay review would not adequately solve any of these issues.