Our hack is not amused by the Chancellor's latest calamitous policy
For the Tories, Rachel Reeves is the gift that keeps on giving. Like a reverse Midas, everything she touches turns to lead. Does any one remember anything about her first major Common’s statement, bar harming pensioners and sending farmers to the wall? Her imaginative CV -Swift thinks she claimed to be an economist but turned out to be someone who did something in - HR, was it? Her hi-vis tours of power stations and energy companies with Miliband the Mad?
Things haven’t got better since. Forget about the imaginary £22bn black hole left by the previous lot (incidentally can we PLEASE find another way of expressing a shortfall than this tawdry cliché?): every Treasury update reveals the fact that mismanagement and overspending is going to result not in a hole (sorry) by an enormous chasm in the public finances. Up will go taxes sure as sure - because that’s Labour’s way. And more irritatingly, some of this will go to stuff the mouths of greedy public sector workers while they twirl their pens and wait for their ludicrously generous pensions.
Talking of pensions, the latest Reeves wheeze won’t make as many headlines, but is on that very topic. It’s a scheme to force pension funds to invest more in a category known as private assets.
Swift’s ignorance of the financial markets is legendary. He makes the late Alec Douglas-Hume, who claimed he did economic calculations using matchsticks, look like Warren Buffett. However, he knows a scam when he sees one. The respectable-sounding Mansion House Accord (translation, Treasury revolver pressed firmly into pension sector forehead) will see 17 workplace pension providers invest 10 per cent of their defined contribution pension schemes in assets like property, infrastructure and private equity. This is apparently voluntary, but there is the real possibility of the Treasury stick being applied to the derrières of the non-compliant.
What fresh madness is this? Pension funds have a fiduciary duty to maximise their returns to their members, not to take on some social duty to fund bridges and hospitals. This is exactly the same stratagem as semi-compelling the money in cash ISAs to be diverted to buying shares in the stock exchange, by limiting the investable amount. (Swift has one of these and he likes it a lot better than the thought of playing the market).
Having spent years encouraging people to save safely, the Treasury will now push them in a direction they clearly do not want, and frankly won’t take.
There is a principle here. Pension funds should make their investment choices solely in the interests of their members. We can’t expect much of the bumbling Chancellor herself, but Treasury officials should be ashamed of themselves for abandoning orthodoxy, and bowing to the City lobbyists and the touts of the big but opaque private markets. Of course, the need to ‘invest’ in exciting green projects is right at the front of this. No thanks.
As usual the Tories got this wrong while in government: Jeremy Hunt introduced a five per cent voluntary investment target for the pension funds while Chancellor. So Labour can play finger-pointing again (although the new shadow Chancellor is refreshingly negative about this idea).
Swift’s trusty crystal ball can immediately be deployed. In a few years there will be some sort of scandal in which pensioners are put at risk by some collapse in the value of a private asset class. But by then Rachel Reeves will be long gone.