You heard it first from Ros Altmann and Sharon Bowles in the House of Lords. Now it’s been passed to Andy Haldane who’s close to Andy Burnham as an “adviser”. What’s he planning for Britain via the HMRC and whoever is Chancellor? Read on…

The tax system should be used to incentivise investment in British companies and stop the “overseas stripping” of innovative businesses, an economic adviser to Andy Burnham has said.

Andy Haldane, president of the British Chambers of Commerce, told its annual conference in London that the billions of pounds of pension tax relief was a “ready made” and “largely fiscal-free way” of giving growth “a genuine giddy-up”.

Haldane, a former chief economist of the Bank of England who Burnham has been consulting as he prepares a policy programme for No 10, said it was a “third way” between “unfettered free markets” and the “mandation” of pension fund allocation into UK assets.

“This government, startlingly, extends over £50 billion in pension tax relief and more than £10 billion in tax relief for Isas,” Haldane said. “That means, as a country, we spend more in tax relief on savings than we do on defence. Yet these benefits are conferred without any accompanying commitment to support British businesses, or therefore UK growth. Most are implicitly supporting US corporations and indeed foreign governments.

“Shifting those incentives towards UK companies would deliver a far larger return while keeping decisions on those investments in the hands of managers.”

Westminster and the City have struggled in recent years to increase the capital available for scale-up companies and stem the flow of promising ventures being acquired and moving overseas. Haldane said existing initiatives from successive governments, particularly the British Business Bank and National Wealth Fund, were welcome but remained on a “modest scale”.

The “quantitative impact” of Mansion House reforms to boost pension fund investment in UK companies would also “still be modest in the near term”, he said.

“We simply cannot afford to allow the continuation of overseas stripping of our greatest growth asset — innovative businesses — on this scale, doing so is tantamount to willingly sacrificing growth and jobs.”

He said the government needed a “level of boldness” to “act at speed and scale” in order to take

“full advantage of the UK’s brilliant businesses before they perish on the vine or are plucked off by overseas foreign raiders. Fortunately, in the UK we have, hiding in plain sight, not one but two gift horses — British business and British capital. Let’s not, as leaders, continue to look [these] in the mouth.”

The Treasury has stopped short of forcing pension funds to invest more in UK companies after criticism that doing so would run counter to prioritising the best possible returns for savers.

Haldane said the debate should not be about “constraining choices” but rather mirroring a “home bias” seen in Europe, Canada, Australia and Japan.

“Their pension funds invest between 20 per cent and 40 per cent in their own companies — multiples of their global market share, the UK’s pension fund system, big and mature, is the only pension system in the world … that does not have such a home bias.”

Haldane said savers supported this shift, citing surveys that showed more than 70 per cent of British investors would prefer to invest their pensions in UK companies.

“It is a strong case, I would say, given those preferences of households, for the default option under pensions auto-enrolment being into UK companies.”

This is a strong argument from a man who has been chief economist of the Bank of England . It was ten years ago he made this famous statement

I would be surprised if he knew much more about the details of pensions today. He came to an talks at an event in the RSA (which he was running at the time) and told me that he still was “baffled”.

If he is involved in Burnham’s Government, I would expect him to be listened in because he understands money both from the Treasury’s point of view and that of ordinary people.

He likened the situation with our pensions as like having a farm situated beside a full reservoir but so arid the crops died because the farmer couldn’t have the water beside him. The analogy is to British businesses undercapitalised though sitting beside reservoirs of capital that we call pension funds.

Andy Burnham may take Andy Haldane’s advice. It is time we had a Chancellor who implemented a radical vision and Andy Haldane’s plan to implement growth through redirecting pension funds seems feasible to me. The next Chancellor will not be Andy Haldane but I’d be surprised if he/she will not be advised by him.