Pension tax relief worth more than £50bn should be reserved for savers who invest in Britain, the former Bank of England chief economist Andy Haldane has said, warning of “foreign raiders” snapping up the country’s most promising start-ups.
Speaking at the annual British Chambers of Commerce (BCC) conference in London, Haldane called for a “home bias” that would direct retirement savings into UK businesses, closing a funding gap that stifles small and medium-sized enterprises. The pension system, he argued, is the only one in the world without such a bias.
“Andy Haldane proposes pension tax relief only for savers investing in UK businesses.”
Haldane, now president of the BCC and an adviser to the Labour mayor Andy Burnham, said radical reforms were needed because “unfettered free markets have not worked. That is a lesson of the last 30 years.” Ministers have recognised the need to intervene, he added, but measures such as the National Wealth Fund are having only a modest impact.
Instead, the government should overhaul the tax system, as there are “trillions of pounds available for investment”. Haldane’s plan would force retirement schemes to channel funds into UK companies as the price of pension tax relief, avoiding the need to deploy taxpayer money. He also floated the idea of heavier taxes on domestic pension funds that invest overseas, describing foreign buyers as “raiders” on Britain’s most promising start-ups.
“Is there a third way, something that shifts the balance of incentives towards British businesses, while leaving those choices [of exactly what to invest in] in the hands of asset managers and their owners?” Haldane asked. The proposal is expected to be the centrepiece of a new economic plan, with Haldane likely to push for it as part of his advisory role.