Nothing off limits: Now they want your pension

LABOUR’S INNOCUOUS-SOUNDING PENSION SCHEMES BILL is very far from benign. It potentially heralds one of the greatest attacks on private wealth ever considered by any government, and yet, given the degree of chaos flooding the newswires, it has received relatively little attention. Make no mistake, this bill, theoretically at least, gives the government power over where your pension money is invested – and for what purpose.

The House of Lords is the last line of defence here, and unless it forces meaningful, cast-iron protections, watch out. Miliband and others will soon be dictating which Green Bank –or whichever flavour-of-the-month government scheme – your money is invested in. Ministers insist they won’t use these powers; frankly, no one believes them.

Governments, in their ever-growing desire to control and centralise, have wrecked the public finances. That is no exaggeration. We now have the highest tax burden since 1948, alongside on-balance-sheet debt of £3 trillion, a millstone around the neck of the next generation. And even that is not enough. The cupboard is bare, so they are eyeing the next target: the estimated £3.2 trillion of UK pension assets.

Reeves & Co have a growth problem – entirely of their own making through their egregious tax, spend and regulate philosophy (admittedly inherited from Johnson and Sunak’s disastrous government). No doubt they think how smart it would be if just a bit of that capital could be directed into UK investments. But “just a bit” rarely stays that way – it quickly becomes a full-scale raid. Mark my words.

the UK’s share of global market capitalisation has shrunk to around three per cent

Now a bit of history. I started my career in the mid-1990s. As a young fund manager, around sixty per cent of pension assets were invested in the UK. The market was vibrant, balanced across sectors and quite dynamic. UK-listed companies accounted for roughly ten per cent of global market capitalisation – it was a major force

Fast forward to today. UK equities are, at best, a niche interest. Pension funds typically park around six per cent of their assets in UK shares, and the UK’s share of global market capitalisation has shrunk to around three per cent. That is a precipitous decline in a single generation.

Worse, the UK market is – let’s be polite – firmly “old economy”, disproportionately stuffed with financial companies, commodities and consumer staples. Good companies, for sure, but hardly the cutting edge of global innovation.

The number of new issues is derisory. Far more companies are de-listing or being acquired than joining. I challenge any reader to name a manufacturing company of any size that has joined the list in the past 25 years. Only one British technology company – Arm Holdings – makes the global top one hundred.

What Reeves no doubt has in mind, but is too cautious to state outright, is simple: direct pension funds to invest a bit in the UK. I’ll bet that “bit” will be directed into government-backed infrastructure, green energy and politically convenient projects. Doubtless it will follow the disastrous PFI model – where pension funds receive a “guaranteed” return, paid for through inefficient and overpriced capital structures. What’s the problem, then, if the pension funds receive this return?

The problem is this: it is not Reeves’ money to touch in the first place. And ultimately, it is you and the rest of society who pay the price – through higher energy bills, questionable infrastructure that private capital would never fund, and pet political projects of dubious value. I could even see it morphing into a rearmament slush fund – funnelling yet more overpriced, over-engineered kit into an admittedly hollowed-out military.

The real question Reeves should be asking is this: why are so few companies choosing to list on the London Stock Exchange? And why have pension funds voted with their feet – moving assets away from the UK to such an extent that within a generation their UK exposure has reduced from dominant to negligible?

This is illiberal, economically illiterate and deeply dangerous policy

The answer is obvious. Smart investors see the opportunity is not here. It used to be but successive governments have eroded Britain’s competitive advantage to such an extent that investors look elsewhere. Reeves would do well to ponder this. Could it be government policy itself has driven capital away?

Instead, she risks trying to puff up growth with useless infrastructure projects that in the short term may add 0.1 or 0.2 per cent to output but in the long term further damage competitiveness. This is illiberal, economically illiterate and deeply dangerous policy – and it must be resisted. Future governments should make clear that any attempt to commandeer private assets in this way will be repealed.

By sleight of hand, with a sub-clause buried deep in a complex bill, it may be written in the law, “but don’t worry we won’t use this power”. Yes – we’ve heard that before. It will end in tears. Political direction will destroy returns, distort remaining capital into unproductive uses and further weaken what remains of the UK’s investment base

Regardless of the economic folly, the principle is clear: it is a violation of basic liberty. Government has no right to dictate where your pension is invested. Their appetite for control knows no bounds.