Guy Hands’ View

17 July 2015

Individual need must be the focus of elderly care

The increase in life expectancy highlights the need for better elderly care. Even as the debate between domiciliary and residential care continues, it is evident that the existing divide between health and social care needs to be replaced, argues Guy Hands.

The NHS, as always, was a major battleground during the election. But while there were plenty of angry clashes and big promises over funding, almost no attention was given to the crisis in social care.

Yet how our growing elderly population is supported is not just one of the most serious challenges facing the country but at the heart of the NHS’s problems. Read more.

22 June 2015

Defence Spending Will Have to Be Increased to Contain a Resurgent Russia

The announcement that another £500 million is to be saved this year from the UK’s defence budget has raised fresh question marks over whether Britain will meet its pledge to spend two per cent of GDP on defence. It’s an embarrassment for David Cameron because only last year he called on fellow NATO leaders to join Britain in meeting the goal – something only three other countries out of the 29 members were achieving. Read more.

12 June 2015

Don’t teach entrepreneurship in schools – let us take our own risks

As George Osborne prepares for next month’s Budget, he will already have told his speechwriters to provide a strong section on supporting entrepreneurship. The Conservatives made strong play throughout the election campaign of the importance of startups for the country’s future.  David Cameron went so far as to say it was the willingness of entrepreneurs to take risks which “pumped” him up in his fight to remain in Downing Street. Read more.

13 March 2015

Saudi Arabia won’t cut production – because it knows the oil age is ending

There have been many explanations, including on these pages, for why Saudi Arabia has not cut production to shore up the price of oil. These range from the use of the oil price as a foreign policy weapon – whether to wage economic war against rivals Iran, or to help their US allies bring Russia into line – to the belief that the Saudis are protecting their long-term market position by making the exploitation of shale gas and tar sands unviable. Read more.

2 February 2015

Europe Should Call Greece’s Bluff

In November 2011, I hosted a dinner for senior German bankers that was dominated by heated debate over the continuing Greek financial crisis. They were adamant that Greece should not again be rescued by Germany and its European partners or the International Monetary Fund. I argued that a further bailout was the only option. Read more.

14 January 2015

How to invest in an increasingly uncertain world

2014 will be remembered as a year of unpredictable crises on the world stage fuelling an atmosphere of profound uncertainty in the financial markets.

The global political situation was volatile and contentious. The outbreak of Ebola and the mobilisation of ISIS shocked many, but more surprising was the slow response of Western governments to contain them. Governments in particular failed to understand how ISIS could use social media to attract recruits, raise finance, organise itself and fight a very different war to anything we have seen before. ISIS’ recent capture of a Jordanian pilot  is a tragic event and a government’s worst nightmare. In contrast, for fundamentalists capture or death represents martyrdom and glory rather than defeat. The psychological advantage that groups like Isis have is profound and to defeat them moderate Muslim governments and the West will need to be far more ready to accept the human costs of war. Indeed, the threat from Islamic State militants is considered by many to pose the biggest threat to the West since the Soviet Union. Read more.

5 January 2015

2015 resolutions: Ten pledges to put Britain back on a sustainable footing

It’s that time of the year when, having over-indulged over the holiday period, we promise to do better over the next 12 months. Our political leaders have over-indulged for a good deal longer than just a few days, and we can see the cost in the state of the public finances and falling standards of living for most people. So here are a few New Year’s Resolutions which, if they made it into the party manifestos for the coming election, would leave us all feeling healthier. Read more.

29 December 2014

A letter from Guy Hands

The following letter is from Guy Hands about our article “Last hurrah”, which appeared in the December 6th issue:

SIR – You questioned whether the interests of a private-equity (PE) house and its investors in a fund it manages can be meaningfully aligned when the PE house will receive no carry at the end of a fund’s life (“Last hurrah”, December 6th). In this scenario, you argued the PE house will focus on management fees rather than on maximising returns for investors. Read more.

9 December 2014

UK energy policy is driven by populism and prejudice: Consumers pay the price

I can imagine ministers’ horror when they read front-page stories earlier this autumn that the UK could suffer blackouts this winter. The speed with which National Grid promised that generating capacity would meet demand, no matter how low temperatures fall, shows how deep are memories of the political damage caused by the three-day week in the 1970s.

Read more.

28 October 2014

Why German Fears of a Housing Bubble Are Overdone

No matter what our views on the European Union, we like to pretend in Britain that we are different from our continental neighbours. This certainly includes a belief that our housing market is somehow unique whether it is our attachment of owning our own homes or our concerns about rising prices and the dangers of a housing bubble.

No matter what our views on the European Union, we like to pretend in Britain that we are different from our continental neighbours. This certainly includes a belief that our housing market is somehow unique whether it is our attachment of owning our own homes or our concerns about rising prices and the dangers of a housing bubble.

It is, of course, simply not true. In terms of home ownership, the UK is not at the top but towards the bottom of the league table of the 28 EU member states.

The culture of home ownership is far stronger, for example, in Romania (96.6 %), Lithuania (92.3%), Spain (82.7%) and Greece (75.9%) than in the UK where it languishes at just under 68%. In fact, only Netherlands, Denmark, France, Austria and Germany – which all have strong tradition of renting – have lower levels.

Nor does this mean that even these countries escape fears about rising prices. The Netherlands took emergency measures three years ago to cap the amount of money that could be lent to take the heat out of its housing market. The ECB earlier this year singled out France, along with Belgium and Finland, as countries where prices were in danger of getting out of control.

In Germany, too, the Bundesbank has been outspoken in warning of the dangers of an over-heating housing market. Property price rises of 10 per cent in some German cities in the last year have alarmed a country where inflation and debt are viewed as twin evils to be avoided.

The response has partly been caused by the fact that such rapid price rises in housing are unusual in Germany. While easy credit stoked extraordinary increases in property prices across much of Europe in the years running up to the 2007 financial crisis, Germany’s housing market actually fell.

To the alarm of the Bundesbank, this has reversed in recent years. It has pointed the finger at the record low interest rates across Europe and the cross-border flow of money looking for a safe haven as the main cause of this over-heating. When voting against the latest ECB cut in interest rates this summer, Bundesbank President Jens Weidman justified his decision by again warning of the dangers of a housing bubble. Prices in some cities, we are told, are 25 per cent over-valued.

But not for the first time, those in charge of Germany’s economy are being too cautious. The rise in house prices reach a peak 12 months ago and have been steadily slowing throughout 2014.

Viewed, too, against prices in London, German property per square metre remains very cheap. German cities also do not have the influx of the super-rich driving prices for top-end properties in London and the Home Counties which in turns pulls up the entire market.

These pressures do not exist in Germany where, despite the Bundesbank’s well-known caution, conditions continue to be benign in the property market. Looked at the long-run against incomes, housing in Germany remains affordable, not something that is the case in the UK. Nor has there been any significant change in volume of mortgage loans on which Germany retains a very conservative approach.

This is good news for all with a direct interest in the German housing market whether home-owners, renters or investors. Prices and yields should continue to rise without the risks of a corrective crash or threats to the well-being of the German economy. Looking at house prices in the UK, this may be one way the two markets are genuinely different.

This article first appeared in the Huffington Post on the 28th Oct 2014