Gordon Brown set out the scope of an inquiry into institutional investment in a speech to the London School of Economics last night.
The review will be led by Gartmore executive chairman Paul Myners. It was originally announced by the Chancellor in his budget speech in March, and will likely take a year to complete.
Myners will publish a list of the questions next week he expects to answer in his inquiry. This strategy was adopted by Don Cruickshank prior to his investigation into the banks and has been seen as being widely successful.
He will ask why British institutions invest less than one per cent into venture capital compared with five per cent in the US.
Myners will make it clear that while it is not for the state to determine where the City should put its money, it is necessary to overcome barriers to investment that currently exist.
Institutional investors say that the Treasury does not understand how the market works. They say the Government had displayed “a lot of ignorance of how the financial markets operate.”