Reeves' ‘communist' pension plans are a bad idea
Do such schemes really make us wealthier, though? If UK pension funds feel they get the best risk-return ratio by investing in France or the UK or Korea, why would it make the UK any richer to force them to turn down those higher-yielding, less risky investments in exchange for less attractive UK alternatives? Doing so reduces the return on UK funds, making the UK citizens whose pensions those funds do or will pay worse off. Those worse off UK citizens will themselves consume and invest less.
Furthermore, by forcing those monies into UK assets, the pound is artificially strengthened, making UK exporters worse off, costing jobs and investment in those industries.
If UK investment projects are attractive, investors from all over the world are available to provide capital. We don't need to distort markets, harming UK pensioners and UK exporters, by forcing UK pension funds to invest in projects international capital markets have turned down. It isn't that the country is brimming with high-return, low-risk attractive investment projects but there simply isn't any money available to inject into them. Rather, the problem with the UK is that it isn't an attractive place to invest at present. Taxes are prohibitively high and going higher. Infrastructure is old and deteriorating. Planning processes are lengthy and expensive. Workers are abundant and still by European peer standards have limited unionisation and worker regulation but the politics is moving in a negative direction.
The Chief Executive of Lloyds Bank, Charlie Nunn, has compared the proposals to make pension funds invest directly in the UK to 'communist' Chinese rules. That's probably going to bit too far to get the message home, but we understand the point. Once you start down the road of capital controls it's a long way back, and with the rest of our politics turning into a 1970s chaotic stereotype, investors might well start to feat 1970s-style capital controls would be just around the corner and steer clear of the UK altogether.
Modern global capital markets are a source of huge wealth and opportunity. Let's not try to segment ourselves off from them.
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