Harwood: UK Government is trampling on equity investors
The Unicorn director says the shareholder spring was a long overdue reaction from a group that has been treated “scandalously” for too long.
The Government’s mistreatment of equity investors is depressing economic growth, according to Paul Harwood, director of Unicorn Asset Management.
Chancellor George Osborne launched a multi-billion-pound scheme last week to underwrite loans by banks to small businesses and homeowners, but Harwood says the Government's efforts to boost liquidity would be better directed at improving the lot of investors.
"One thing the Government could do for the economy would be to improve the relative attractiveness of equities for equity investors," he claimed.
"We currently have capital gains tax with no indexation, a double tax on dividends as well as stamp duty when you buy shares. If you want to encourage people to set up businesses and grow them you need to make it fairer."
Harwood believes that the tendency of institutional investors to support excessive executive pay is also having an adverse effect on smaller shareholders.
"It’s scandalous what’s been done to shareholders," he vented. "Institutional investors have lost the plot in terms of controlling the companies.”
"They are extracting all of the value and leaving nothing to shareholders. But institutions do not want to rock the boat, plain and simple."
Last week shareholders voted down a 30 per cent pay increase for WPP chief executive Sir Martin Sorrell in the latest revolt against excessive remuneration for management.
A previous revolt at Aviva was also successful, but in recent months other UK companies, including bookmaker William Hill and media company Trinity Mirror, saw large institutional investors vote in favour of pay increases for management.
Harwood was also less than enthusiastic about the Government’s attempts to boost the economy.
"If you want to create demand in the economy we have to do it through the consumer," he said. "You could cut taxes but the Government is reluctant to do that because it would increase the deficit."
"What you could do is print money and send £5,000 to every person over 18 in the country. If you put the number of recipients at 50 million people, the money would be similar to that spent on the bailouts."
"A lot would leak into imports but that’s OK because it would bring the exchange rate down and boost exports."
"It also might encourage other governments to do the same," he explained.
Harwood has over 35 years' experience in the financial services industry, and joined Unicorn Asset Management as director in 2000.
Overall, he is positive for the future of equity markets, saying that short-term volatility was partly the fault of the media and of speculators trying to make a fast buck.
In a recent FE Trustnet article
, he explained more fully his views on investing in stocks of smaller companies.