The government has launched a call for evidence on creating a long-term focus for investment and finance.

Speaking at the Confederation of British Industry (CBI) annual conference, business secretary Vince Cable said a guiding principal for financial services should be investing for the long-term, with the model of finance that contributed to the financial crisis ‘disastrously short’.

“I am today launching a call for evidence on the subject of pay, corporate governance and takeovers. It is called ‘A long term focus for corporate Britain’.

“It should produce a rounded account of the issues that may be causing a dislocation between what is best for the ultimate owners, the incentives of their agents, and what is best for managers,” Cable said.

He told the conference that securitization (packaging several assets such as mortgage loans into a bundle that can be sold) was a valuable asset but the markets had got to the point where investments were being made with little concern for long-term factors, ‘because everyone assumed they could sell them on in liquid markets.’

He said loans were increasingly divorced from the relationships that can make the loans work and ‘what the Bank of England governor calls the casino part of investment banking came to dominate and in some cases destabilise leading banks’.

“I believe that empowered, informed shareholders, investing for the long term, are good news for the companies they own,” Cable added.

Responding to the speech, Richard Lambert, CBI director general, said: “This was a thoughtful speech, with a welcome focus on the long term.

“From informed share ownership to competitive markets, his [Vince Cable’s] ambitions for the future are ones that the CBI shares. We look forward to contributing to the review on corporate governance, and firmly believe that a range of tax and regulatory instruments are needed to incentivise long-term investment in British business.”

Maggie Craig the acting director general of the Association of British Insurers said the insurance industry invested for the long-term and welcomed efforts to promote a ‘longer term attitude to investments.’

She said: “We believe that in order to truly promote a long-term approach, there needs to be a consideration of the wider current regulatory framework for long-term investors and the incentives in place.

“For over twenty years, there has been a trend to promote short-term gains through various tax and regulatory initiatives. Long-term equity investment requires a level playing field.”

© Fair Investment Company Ltd