From pensions and property rights to North Sea oil and the demonising of wealth – welcome to life in Starmer’s big state Britain, writes ALEX BRUMMER
The charm offensive has been unrelent-ing and, up to a point, impressive.
Labour leader Keir Starmer and Shadow Chancellor Rachel Reeves are on a mission to convince business, the City of London and the British public that the party has shed its statist past and can be trusted with the economy and keeping the nation’s finances stable.
As a former Bank of England economist — a pedigree Reeves never tires of reminding us about — she has come up with the cringey term ‘Securonomics’ for her party’s approach.
In recent days, Labour has sought to put some flesh on its plans.
In doing so, it has made it clear that, far from making us more secure, the party is intent on a back-to-the-future approach, with the state taking an ever tighter grip on our lives and the ‘free’ market.
Insidious
Shadow chancellor Rachel Reeves (pictured) is on a mission to convince business, the City of London and the British public that the party has shed its statist past and can be trusted with the economy
Socialism may have acquired a more benign face under Starmer, but make no mistake, it is back with a vengeance.
First in the firing line are the pensions of hard-working citizens and the rights of land and property owners. But Labour’s climate-change zealotry also threatens to put the nation’s energy security at risk at a time when — thanks to the invasion of Ukraine — we are boycotting gas supplies from Russia, up to then Europe’s biggest energy supplier.
Meanwhile, the promise to abolish non-domicile status for overseas residents in the UK is an indication of how a Labour government would crush wealth creation.
Yes, the Corbyn magic money tree policies may have been erased from the Labour handbook, but legislation that equates to insidious nanny-state control has not.
There is no more alarming development than the revelation that, if elected, Starmer will plan a £50 billion raid on the defined contribution private sector pensions funds.
These are pension pots that, rather than offering a fixed return, make payments based on the value of investments, which are carefully managed by experts schooled in the art of ‘high risk’ investing.
The Shadow Chancellor is backing proposals to create a ‘future growth fund’, with every defined contribution fund forced to divert 5 per cent of its assets into it.
The plan has been savaged by blue chip fund manager Schroders, which says the problem lies not with risk-averse pension funds but ‘decades of structural inefficiency and policy muddle’.
Former chancellor Gordon Brown (pictured) axed a perk that let pension funds receive tax free dividends on investments
And it provides a sharp reminder of former Chancellor Gordon Brown’s assault on ‘gold standard’ company pensions in 1997, in which he axed a perk that allowed pension funds to receive dividends on investments free of tax.
It’s a policy that proved disastrous for pension fund investment in good, solid British companies let alone new innovative firms.
As a result, pension fund holdings in the UK stock market have plummeted from nearly 50 per cent to just 2 per cent as retirement funds chose to adopt what they considered the low-risk alternative: putting their money into government stock.
There is a strong case to be made for directing more pension fund cash into infrastructure projects and pioneering technologies coming to the UK stock market.
One potential source of such funds is the local authority pensions. The notion, however, that government should simply grab £50billion from people putting their savings into pensions through the system of opt-in workplace pensions should not be entertained.
A better approach would be for ordinary citizens, as in the U.S. and Australia, to become more connected to their superannuation schemes. In both countries there is encouragement to invest in their future through the stock market.
Nothing is more alienating for citizens than ill-equipped civil servants making investment decisions with our money. It was just such an approach which led to the failure and near ruination of Britain’s car manufacturing industry under Labour misrule in 1975.
The proposed assault on pensions is just one of a number of actions demonstrating that, in power, Labour would extend the reach of government. For in addition to its pensions grab, it is planning to trample over the rights of landowners and almost certainly drive new investment from these shores.
Sir Keir Starmer has set out plans to let developers build houses on ‘green belt’ areas
Starmer has already declared he is willing to sacrifice the ‘green belt’ around our towns and cities to developers — but yesterday it emerged he is contemplating an even more radical idea.
Party sources said he is planning to change how land is valued when acquired through compulsory purchase orders (CPOs).
At present, landowners issued with a CPO are entitled to a ‘hope’ value, a price that reflects its potential for development.
Every UK government since the 1950s has declared it wants to build more houses, and the fulfilment of this ambition has never been more urgent than now, with net migration to Britain on the rise and a generation of aspirational 20 to 30-year-olds itching to get on the property ladder.
Obsession
But Labour’s change would undermine Britain’s ancient system of property rights.
It could also have the effect of prompting owners to hold back land suitable for development and lead them to challenge any efforts to sequester property through the planning system and courts.
Moreover, as anyone involved in house-building knows, it is not the landowners who are the problem but the people that Labour wants to empower.
The low quality of chief executives at council level and the self-interest of ‘Nimby’ elected councillors means that most municipalities are incapable of proper land management and making sound housing decisions.
Only the big cities, with elected mayors, seem to be equipped to deliver accessible housing. Passing greater responsibility to central government — with limited local knowledge — can only lead to planning delays and appeals and more bureaucracy.
Meanwhile, in an age of energy uncertainty, government has no greater responsibility than to ensure that, during the transition to a carbon-free economy, the soaring cost of heating our homes is managed and the danger of power cuts averted.
Yet Labour clings on to an obsession with net zero which would see exploration and production in the North Sea banned and thousands of supporting jobs sacrificed.
In another statist policy promise, not content with the 75 per cent taxation of windfall gains on existing North Sea projects, Reeves is vowing to end what she calls the ‘carbon fuel loophole.’
Ruinous
Some of the biggest investors in the North Sea – including Sir Jim Ratcliffe’s (pictured) Ineos – are also huge backers of green projects
That is the tax break enjoyed by investors in North Sea projects. To remove it would simply drive firms overseas.
What Labour fails to recognise is that some of the biggest investors in the North Sea —including Sir Jim Ratcliffe’s Ineos, BP and Shell — are also huge backers of green projects, from hydrogen fuels to electric vehicle charging networks.
Turning off the investment allowances would be sure to drive away firms that contribute so much to our economy.
Which brings us to the abolition of non-dom status, which Labour says may create a new pot of £3billion to spend on projects such as free school meals.
But this naive proposal will undoubtedly drive non-doms off to Portugal, Italy and Greece, which are offering tax-free living for the wealthy, meaning that over time, the £6billion they pay in taxes on their UK interests will be lost.
This ruinous tapestry of proposals from Labour displays a fundamental misunderstanding of how capitalism works.
For all their high-minded rhetoric about state intervention and large-scale investment, the truth is that this is an agenda which demonises wealth, neglects property rights and views government as more capable of making investment decisions than entrepreneurs and asset managers.
Britain’s economy needs reform. But Labour’s contempt for economic freedom can only make things worse.
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