If Edmund Truell had been the next Labour Chancellor (unlikely), I would have expected him to have produced a pension policy paper called “Financing Growth”. Four years ago, as the Labour party recovered from one of its worst election defeats, I would not have expected the then Labour party to seek financial salvation by allying to the principles of Edi’s Disruptive Capital. You may say that Labour has been captured by the private markets and you would be right. The Blairite Private Finance Initiative is taken a step to the right with the publication of Financing Growth and it could have been written ty Edi.

Do not be fooled by the bright red cover, the opening salvo from Rachel Reeve makes clear the direction of travel and it is straight to the City of London.

Take out “Labour ” and this could as easily have been written by Liz Truss

Labour’s defining economic mission is to restore
growth to Britain. This calls not just for a change in
government, but a change in mindset: an active
government prepared to work in partnership with
business to remove the barriers to economic
success.

In the banks we trust…

Our history as an innovating, industrious, trading nation was
built on the foundations of a strong financial sector.
The same can be true of our future.

Labour’s “Securenomics” we learn brings together innovation with financial inclusivity, it’s capitalism for all. It’s a vision of growth in every direction

Our financial sector can be a vehicle for growth not just from the top down, but from the bottom up and the middle out. ..We know that realising our ambitions will require private investment.

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Securenomics (a phrase unlikely to catch on)

I am not a fan of the word , but can run with its application. After 19 pages of well-intentioned banality, we get to the nub of the paper

New Financial’s analysis of international pension
fund performance found UK pension funds delivered
an average annual return of 6.2% compared to
7.6% in Netherlands and 7.5% in Australia.60 The
Capital Markets Industry Taskforce estimates that
increasing UK pension fund investments in UK assets
from 5-6% to the 2007 level of 25% could deliver over
£900 billion additional capital for the UK economy.61

In addition, participation by retail investors in
UK public equity markets remains well below
comparable markets. The UK lacks a pro-equity
culture with only 11% retail direct ownership of stocks
and shares, compared to Sweden with 22% and the
US at 16%.62 New Financial research estimates that
an additional £740 billion could flow into the UK
economy if households invested a quarter of their
savings in shares and funds.

So a £1.6 trillion transfer of non-productive capital to the financing of UK growth comes from the pockets of private individuals and the pension funds in which they are invested.

What does this mean in practice?

A Labour Government would undertake an “in-government” pensions and
retirement savings review. That’s not a pensions commission or an outsource to the IFS. This sounds like Government taking responsibility for making it happen , using the work done so far through the Mansion House agenda and cracking on.

The review won’t have to be extensive , most of the policies are in place already

Enable greater consolidation across all pension
and retirement saving schemes- more of the same

Empower the British Business Bank with a more
ambitious remit – an extension of its current role

Encourage investment of unlocked capital from
Solvency UK into British infrastructure and green
industries – investment into clean infrastructure

Support increased retail participation in capital
markets – an update on “tell Sid”

The only “market intervention” is through establishing a Tibi scheme, a French word which means

Labour will set up an opt-in scheme for DC funds to invest a
proportion of their assets into UK growth assets –
split between venture capital, small cap growth
equity, and infrastructure investment

The wording of this section is rather sinister , with “participation” sounding pretty well compulsory for some

The participating institutional investors will be asked
to allocate a small proportion of their funds to the
scheme and will have full discretion over which
funds from the accredited list that they invest in.

There will be a scramble to get “funds” onto the accredited list. Let’s hope that Labour will look beyond “funds”, the vast majority of private equity available to instructional investors is accessed through FTSE 250 investment companies. Let’s hope the work of the House of Lords in removing barriers to entry to these companies, comes apace.

Long Term Assets not Life Time Al

The Labour Government are not promising tax changes to improve savings rates, there is nothing here about auto-enrolment rates or about the Lifetime allowance.  The document is not about saving more but about saving better. It will disappoint those who want savings rates to increase through changes to the AE threshold and do nothing to assuage the wealthy that their pension savings are invulnerable to wealth taxes.

The paper recognises that we have seen a wasted quarter of a century which has seen us withdraw support for UK growth in favour of overseas investment and fixed interest debt.

There is nothing in the paper critical of current pension policy. That’s because the Mansion House “reforms” are clearly being embraced, re-adopted and will form the basis of Labour’s future policy. If only a proportion of the £1.6 trillion that Labour see as the available market for UK growth, is tapped, then we could see a major inflow into the UK markets.

I hope that we will see the next Government nudging that target, whatever colour it might be. Right now the colour looks more likely to be red than blue (Betfair have Labour as 1/4 for an overall majority.

But frankly, those in charge of getting on with it , can feel comfortable that in 2025 – it will be business as usual.