Stop tinkering with tax and create an industrial strategy, says boss of L&G

Nigel Wilson – or to give him the correct title, Sir Nigel – is a one-man powerhouse from the North and a one-man social mobility ad. The boy from a council estate in the north east of England grew into Britain’s largest investor.

And as CEO of insurance giant Legal & General, where he is the steward of £1.2 trillion of our retirement savings, he is determined to put the power he gives to good use. Wilson, who recently announced he is stepping down after more than a decade at the helm, has spent his time at L&G trying to use the money his company manages towards pension savers to revive the UK economy through of ‘inclusive capitalism’.

£5 trillion has been invested in UK pension funds. We should spend more of it on growth power and infrastructure,” he says.

In his view, a long-term strategy for the industry is more important than specific tax changes in the budget. Hunt’s debut, he says, was “competent” on “pressing issues like childcare and strengthening our cities.” “But we need real investments that raise living standards and solve climate change.

The tax burden in Britain is unprecedented, but tax breaks are not necessarily the answer. The key question is how to shape industrial policy.

For too long, the Conservative Party has believed that the market will perform. But we need to have an industrial strategy backed up by a tax strategy.’

Putting people’s pension savings in neglected parts of the UK and into supporting research at our best universities, he believes, will create a virtuous circle that benefits everyone. He says the disruption caused by the pandemic has opened up an opportunity for the UK to bounce back. ‘Science and technology can give us a second chance. We have to grab it.

‘We need to think much more actively about which new industries we are going to support. Otherwise, our successful start-ups will be bought up by American firms and we will suddenly have eroded the economy.’

He adds: “We will be a low-value, low-productivity, low-wage service economy where all our production goes elsewhere and it will be very difficult to bring it back.”

We are, he argues, good at innovating, but not at persistence.

He notes that more of our pension fund assets are invested outside the UK than within our shores. Around £150bn, he says, is being invested in new-style pension schemes, but almost none of that has been spent on start-up, potentially high-growth companies.

“They are the future FTSE. We can decide whether those companies list here or on the Nasdaq market in the US or in Amsterdam.’

Wilson, with 11 years as CEO, has served about twice as long as a typical FTSE 100 boss. Since he took over in June 2012, the shares have returned more than 340 percent, well above the FTSE 100.

The company was hit by the mini-Budget pensions collapse, but its final full-year results showed operating profit up 12 per cent to £2.5 billion, with dividends up 5 per cent.

He has earned £41 million during his tenure at the helm of L&G, but lives in a one-bed rental flat and uses public transport instead of driving. He regularly goes back to the Northeast and still enjoys a game of dominoes in the pub.

If there was any danger of him getting too big for his boots, he would rectify that through his mother, who, he says jokingly, wouldn’t let him go to the local shops unframed.

He also likes to tell the story of how when he called her to tell her about his knighthood, she snubbed him for calling too late at night.

After putting him in his place, she was of course “very proud” to accompany him to Windsor Castle, where he was knighted by the now king.

Does he think the economy would function better if more ordinary people like him were at the helm? “The world is so complicated, you need people who look at life in different ways,” he says.

Is his approach to economics and running L&G based on his northeastern roots? ‘Yes Yes. We need to build a fairer society, it’s about inclusive capitalism, not exclusive capitalism. We have regressed in terms of social mobility.

“Someone who lives in the kind of house I grew up in, a town hall, would find it extremely difficult to get a PhD from MIT now [the elite Massachusetts Institute of Technology where Wilson studied].’

“Many people don’t have a mentor in their lives. People in the Northeast might say to me, ‘I could have been you, I should have been you’, but they didn’t, because they didn’t have the benefit of great mentors and coaches that I had. People can reach the top with resilience and capabilities. Resilience is underestimated.’

Unusually for the Northeast at the time, Wilson’s father was a conservative. Nigel himself started looking for Labor at the age of 11. ‘I was politically engaged quite young. Now the country comes first. I think people, place, then politics is the right order.’

His slogan ‘inclusive capitalism’ sounds good – if a little Tony Blair – but what does it actually mean?

It is, he says, about investing in projects that generate good returns for its investors and policyholders, and a dividend for society.

Think of housing, care, green energy and innovative companies that originate from universities. ‘We want growth in real wages and that people have the chance for a better life.’

During his time at the top, he has tried to put those principles into practice. L&G has backed the Helix in Newcastle upon Tyne, a £350 million innovation center on a site that was formerly a coal mine and the Brown Ale brewery.

He’s also sent money to the dreaming spires, with a £200 million investment in the Life and Mind Building at the University of Oxford, for the departments of zoology, plant science and experimental psychology.

Why does he think other insurance bosses haven’t gone down the same path? ‘You have to have the confidence that you will be in the job for a long time and that you will be successful.

“I never doubt that I will succeed in the sense that I have always tried my best.”

Outside of work he is an avid runner and holds several British Masters titles over 100m, 200m, 400m and 800m and supports his local football team, Newcastle United. Does he regret his time at L&G? ‘I don’t think about ‘should haves’ and ‘could haves’, my brain doesn’t function that way. I’ve left them behind and I’m looking ahead, like when I left the Northeast.’

Wilson’s route from the north was education. He attended Essex University, followed by a PhD in economics from the Massachusetts Institute of Technology.

Once L&G finds a successor to step into his shoes, he hopes to return to academia with a role as a university lecturer. “I have unfinished business,” he says. “Economics has been wrong and that needs some reflection.”

“We have outdated models. The magnitude of the disruption we are seeing now far exceeds the capabilities of what was pioneered so many years ago by Adam Smith and John Maynard Keynes.

“I want to put my shoulders under it and help.”