THE Chancellor last night attempted to win back the City with plans to create pension megafunds to boost investment in Britain and rip up financial red tape.
Just a fortnight after her Budget received a frosty reception, Rachel Reeves told businesses she was still “going for growth”.
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Ms Reeves wants to create her “megafunds” by pooling £1.3trillion of pension savings held by 86 separate local government schemes.
She reckons this will create £80billion to invest in British businesses and infrastructure.
The Chancellor borrowed the idea from Canadian and Australian pension schemes, which bundle local government pension schemes together and invest their trillions of dollars in big assets with high growth and profit potential.
She hopes this will not only cut costs for pension schemes by reducing fees to advisers, but will also funnel greater investment into the country’s infrastructure — which is currently being snapped up by overseas pension funds.
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Canadian pension funds own swathes of British properties and utilities, and just this week bought the UK’s airport operator in a £1.5billion deal.
Reeves’ idea is not a new one, but pension reform on this scale has not been tackled before.
Andrew Bailey, Governor of the Bank of England, last night agreed that the UK pension system had been “too fragmented” to encourage “investment in the real economy”.
In his speech last night he said the UK’s economic potential growth rate had fallen from 2.6 per cent between 1990 to 2008 to just 0.7 per cent, partly because of low productivity.
Tom Selby, public policy director at AJ Bell, said the megafunds must not forget their purpose to deliver good returns for pensioners.
He said: “In the government’s increasingly desperate search for investment and growth, it is crucial savers and retirees are not forced to pay the price through sub-standard investment return.”
The Chancellor, who has said she wants to bring more stability and security to the financial system than the Conservatives, last night conceded it was time to take off the kid gloves.
She said that some of the rules and regulations brought in after the 2008 financial crisis to avoid another banking meltdown had “gone too far”.
Ms Reeves reckons some rules stifled investment.
She added: “The UK has been regulating for risk, not regulating for growth.”
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Firms feel left out after raid
LAST night was a Square Mile schmoozefest that few Brits or businesses could relate to.
As Reeves spoke of growth under chandeliers in the Lord Mayor’s house, shops, pubs and restaurants counted the cost of her £25billion tax raid.
Retailers feel particularly sore for supporting Labour before the election to then be hit by National Insurance contributions. They also didn’t get business rates reforms.
Altus Group analysis shows raising taxes on top properties to level the playing field with online retailers actually hits nearly three times more retail, leisure and hospitality firms than online businesses.
Reeves has to renew her charm offensive with firms outside of the City.
Trench warfare for Burb
BURBERRY shares rose yesterday after its new boss outlined an urgent turnaround — and blamed his predecessor for several fashion faux pas.
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Half-year results for the brand fell by a fifth to £1.1billion in the last six months while it has swung to a £53million loss.
Joshua Schulman, who took over as CEO in July, said it was due to “poor decision execution and a lack of focus on core business”.
He also pointed the finger at former CEO Jonathan Akeroyd’s decision to hike handbag prices, when Burberry did not have the same clout as leather goods giants LVMH and Hermes.
He said it will focus on its heritage of trench coats, which Thomas Burberry started in 1856 with waterproofs.
The US boss, who previously led Michael Kors and Coach, dismissed predictions that he would turn Burberry into similarly more affordable and mass-market brands.
New coal mine ban
THE government has banned any future new coal mining schemes as part of its Clean Power push.
It comes after the UK’s last coal-fired power station Ratcliffe-on-Soar shut last month.
Coal mining powered Britain for 140 years but Labour wants to become reliant on green renewable energy by 2030.
Energy Minister Michael Shanks said: “The UK’s in prime position to lead the phasing out of coal power, the largest contributor to global emissions.”
Ices Gaza ‘gag’
ICE cream brand BEN & JERRY’S is suing its parent company Unilever, claiming it was silenced from speaking out in support of Palestinians.
It follows the former Unilever boss telling Ben & Jerry’s to stay out of geopolitics after it said it would stop supplying ice cream to the West Bank two years ago.
The Phish Food maker now says attempts to speak out in support of a ceasefire were blocked, breaching the terms of its settlement in 2022. Unilever said it “rejects the claims and will defend its case.”
INVESTMENT firm London Capital & Finance was a Ponzi scheme, the High Court ruled. It raised about £237million from 11,600 ordinary investors before going bust in 2019.
It depended entirely on new investors paying existing ones, a judge said.
WHS shops fly
WH SMITH yesterday revealed it now makes five times as much profit from its travel network shops than its high street stores after a rapid expansion in US airports.
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The stationery retailer opened 100 new stores last year and is appealing to holidaymakers by selling more cosmetics, gadgets and food products.
It made £202million profit from its travel division compared to £39million from its high street stores in the past year. There are 90 more travel shops still to be opened.
