4 days ago
Rachel Reeves pensions power grab is worthy of a banana republic
Britain's economy badly needs a jump start. But after eight long punishing months, there is no sign of one. The Chancellor's latest idea is a decree on people's private pensions that is more in keeping with economic policy in Venezuela. It is looming disaster.
As with other hardcore socialist regimes, this Labour Government believes you should not keep control of the money you earn. The message that has been coming out of No 10 Downing Street ever since Sir Keir Starmer moved in is that if you are a risk taker or wealth creator, Labour will come for your savings, your pensions, your job and your house.
You name it, Keir Starmer will tax it.
Many of the businesses who were duped into supporting Labour during Rachel Reeves's prawn cocktail offensive before the election must now be looking on in horror.
As the 'City' minister in government, I was always clear that dictating how funds should be investing in people's private retirement savings was a red line. But it appears one this Government is all too happy to cross.
And like other harebrained ideas, such as stripping millions of pensioners of the winter fuel payment, imposing death taxes on family farms or many other punitive measures, it has come out of the blue.
It is not that pension reform is not needed. There are always improvements to be made, working with the City – not against it. But that is not what Rachel Reeves has done. Taking powers for the state to direct how your pension is invested is the most significant direct intervention by the Government in the UK pension and wider investment market for decades.
And who is to say what a future iteration of Starmer's Government would do? Will pension funds be told they must put a certain proportion into 'Red Ed's' mad windmill schemes?
We already see disinvestment campaigns picket town halls across a whole panoply of Left-wing causes. Handing the Chancellor the power to direct the whole country's pension funds at the stroke of a pen will make her an irresistible target for woke warriors of every kind.
As someone who has worked in finance myself, I know, like many others with business experience, that most poor outcomes for pensions come from an excess of financial regulation, not from its absence.
Pension funds will perform far worse when guided by Labour's political agenda, rather than solely the interests of savers. The invisible hand of the market will not be helped one jot by Keir Starmer's sticky fingers.
The big issue on private pensions has traditionally been a defensive, risk averse culture, which has elevated low costs over performance and theoretical liquidity over real investment growth for the long-term.
Our landmark Financial Services and Markets Act started to change this. Imposing growth duties on regulators, introducing new options such as long-term asset funds and freeing up over £100bn from UK insurers through a Brexit dividend supporting productive investments, such as infrastructure, were all steps in the right direction, which to be fair this Government has continued with.
But Rachel Reeves now threatens to undermine that progress in one fell swoop.
She is an embattled Chancellor, visibly out of her depth. As all of her chickens come home to roost, she is hemmed in by the growing distrust of the bond markets on one side and Cabinet and trade union advocates for more public sector largesse on the other.
It is no surprise the trillions of private pension capital are increasingly attractive.
In the process she is risking the futures of millions trying to save for their retirement and undermining Britain's global jewel of a fund management centre.
Since taking office, Labour has gone out of its way to attack wealth creators and hard-working businesses. Their Employment Bill, which will do the opposite of what it says on the tin, puts a £5bn burden on businesses and drowns them in reams of red tape.
New business rates will punish high streets and see more shops boarded up. And the Jobs Tax will drive down the wages of workers whilst penalising growth and aspiration.
But that is people's private money, put in there over years of scrimping and saving. Not her money to control after maxing out the Government's credit card. The rapid exodus of millionaires under Labour is a sign that things are getting worse – these pension changes will only accelerate that flight.
We need a government which sets out a positive vision for the country. One founded on greater risk appetite. One where entrepreneurs aren't afraid to fail and where investors are willing to responsibly back them to grow further when they succeed.
The Conservatives are the natural home of business which can deliver that vision. After 14 years in government, perhaps this was too easily forgotten and there were certainly mistakes – though not of the pension stealing kind. But we are under new management.
With other parties competing over ever higher spending, and Labour's unrelenting war on private enterprise, there is a gap in the market for sensible, centre-Right, economically credible policies.
