Labour's proposed overhaul of the UK's pension system consists of a plan to redirect a significant portion of public sector pension funds into into high-growth UK companies and infrastructure projects.
Supporters see this plan as a long-needed antidote to the lack of any long term investment planning. Britain's pension funds — among the world's largest — invest surprisingly little in British businesses. Rather than funding UK innovation and growth, a lot of this capital goes overseas or into low-risk, low-growth assets. With what result? A steady conveyor belt of ambitious UK start-ups, sold to foreign buyers before they can scale on British shores.
An example is the fast-growing life sciences firm CMR Surgical, based in Cambridge. Despite all its promise, it recently indicated an exit abroad — the same destiny that has awaited more than 2,600 other UK firms over the past decade. Hutton's argument is that Britain will only take seriously the creation of the next AstraZeneca if it invests more capital in younger companies. Labour's pension reforms are designed to do exactly that, by consolidating smaller schemes into "mega-funds" with the power and the size to make big, long-term investments in British business.
For supporters redirecting UK pension funds into such companies is smart capitalism, why not use those currently underutilised mega billions to boost British business...
But the risks?
From a more Liberal perspective, the risk of the above is that it risks turning the pension system into a political slush fund, whereby future governments can direct savings towards favoured projects and ideological causes. And far from reducing the burden on the taxpayer, the reforms could increase public liabilities over the longer term.
There is also the fact that the government has a £5 trillion future-liability in terms of public sector pension commitments over next 60 years — which are mostly unfunded and far more generous than anything that most private-sector workers can expect.
The temptation might be to deliberately underfund these future pensions in the hope that increased growth will make everything OK 30 years down the line.
Final thoughts...
It's important I think to consider the government's desire to unleash Britain's current public sector pension wealth into national infrastructure projects in the context of future liabilities they have no idea how to fund.
Doing this I think helps us understand their true motive - batting back problems into the long grass where we can't see them and so don't have to think about them.
Or maybe given that the pension shit is going to hit the fan at some point now if we do nothing it's better to throw the dice in the hope that'll it'll all maybe be OK anyways?
That at least is in fitting with global politics ATM!