I wrote for LSE Blogs arguing that govt should be much bolder in getting British pension assets invested in Britain 👇

In 2012, over half of DC pension assets were invested domestically. By 2023, that had fallen to 22%.

If we need more private investment (we absolutely do), this is where to look

Economies grow fastest when many institutions move in the same direction

Japan, Taiwan, and South Korea achieved unprecedented growth by establishing “social coalitions” between govt and industry

Britain needs its own social coalition - and our pension assets have to be a partner in that

Strikingly, the public vastly overestimates the percentage of their pension invested in Britain. The average guess is 41 per cent – 10 times the actual rate.

The opportunity to shine a spotlight on this and get the public onside is immense

3) The public wants and deserves change

Financial returns matter. But savers care about more than returns. Polling shows they favour domestic investment

And research shows pension investment boosts productivity and growth, benefitting savers’ finances in the long-term

Other countries do demand domestic investment.

Poland’s open pension funds must invest 70 per cent domestically, while Chile’s floor is 20 per cent. This makes the Mansion House Accords’ 5 per cent ambition look feeble.

2) The Government should ask for something back

Auto-enrolment has shoved over 40% of private-sector employees into pension saving. The Treasury subsidises those savings heavily (at least £24 billion anually)

But our state demands nothing in return.

Pension funds – with an inherently long-term view – were once the single biggest owner of UK shares.

In 2022, they owned just 1.6 per cent.

That has to change.

It is critical that pension funds break the catch-22 for 3 reasons

1) They are big, long-term investors

The UK has high foreign ownership and few controlling shareholders (lowest in OECD). 80% of publicly-owned firms see pressure for short-term shareholder returns as deterring investment

Govt is right to begin clarifying fiduciary duties, so pension trustees consider savers’ interests in the economy, public health, environment - not just financial returns

But they can go further. Mandating domestic equity investment for 20-25% of auto-enrolled assets could raise £76bn by 2030

But the success of the Accord would only mean an extra £26 billion more domestic investment each year – worth about 0.9% of GDP.

That would still leave the UK bottom of the G7 for investment, and far below the global average for domestic equity investment (13%)

More ambition is needed.

Progress is being made in the Mansion House Accords (where major pension schemes committed to put 10% of portfolios into private markets, property and infrastructure, including 5% in the UK (up from 3.5%)

I saw this at last year’s CBI conference. The audience of business leaders were asked which bet the government should make to attract global investment.

The top answer was delivering major infrastructure projects.... Which itself requires huge investment!

That catch-22 locks in stagnation.

Pension funds argue that Britain is not investable enough. And it's true - pension funds invested more in Britain have seen lower returns.

But that is the case because we haven’t invested enough in Britain’s foundations

National renewal demands radical changes, including breaking that catch-22.

The UK’s pension assets are vast – 10% bigger than our GDP and 6x our annual capital formation.

But pension funds have moved away from investing in UK equities, instead favouring investments like global tracker funds (largely dominated by US firms (often tech megafirms).

I wrote for LSE Blogs arguing that govt should be much bolder in getting British pension assets invested in Britain 👇

In 2012, over half of DC pension assets were invested domestically. By 2023, that had fallen to 22%.

If we need more private investment (we absolutely do), this is where to look

UK Mansion Tax—The Beginning Of A British Wealth Tax Regime? Rachel Reeves’ new mansion tax signals the UK’s shift toward wealth taxation—modest now, but with big implications for property, policy, and fairness.

The mansion tax "is as much symbolic as it is fiscal.. it establishes a political and administrative precedent."

This shift in the overton window is a key reason we proposed the mansion tax. It lays the groundwork for a wholesale proportional property tax or a more ambitous wealth tax in future

There are a lot of tax reform Reeves could make which address wealth and would be entirely justified and could also have growth benefits, e.g on CGT, investment income, property, pensions

These should come alongside taxes on middle earners

Wealth inequalities also map onto inequalities in income and so compound the overall feeling of inequality.

Also the CGT data here is only taxable gains. Doesn't account for gains on pensions or primary homes.

Capital gains, inheritance and investment income have all become more important, are spread v unequally, are not captured by the article's data, and are taxed less

Eg see below by Advani and Summers.

And the top 0.1% is often seen as the most egregious inequality

warwick.ac.uk/fac/soc/econ...

Britain’s tax system combines the worst of the US and Scandinavia The UK’s experiment in eating the rich while shrinking the state has left everyone worse off

We do need higher tax on middle earners, but this analysis misses:

1) Wealth's importance vs income has ballooned & it's distributed twice as unequally

2) Wealth can boost income in ways this data doesn't capture

3) Income from wealth is taxed much less than income

www.ft.com/content/75ce...

Times letters: Chancellor’s tax raid on the middle classes Write to letters@thetimes.co.ukSir, At the Royal College of General Practitioners’ recent annual conference, I recounted something a GP approaching retirement told me: as in practices across the

These letters to The Times saying how bad it is that govt may be taxing NHS GPs (b/c Reeves may equalise NICs between employees & limited liability partnerships (LLPs))

Ridiculous and untrue. The reported reform would NOT apply to NHS GPs as they cannot be LLPs!

www.thetimes.com/comment/lett...

Rachel Reeves’s second budget needs a narrative of fairness to justify tax rises | Heather Stewart The chancellor should reach for the language of solidarity and social justice that this government tends to recoil from

Spot on from @guardianheather.bsky.social in @theguardian.com, quoting @centaxuk.bsky.social, @demos-uk.bsky.social, @resfoundation.bsky.social and @theifs.bsky.social. The right tax reforms, well designed and communicated, can raise revenue, reduce wealth inequality, boost fairness AND drive growth

Great to see our tax research featured in the Guardian yesterday!

Check out the report for more details👇
demos.co.uk/research/sol...

Only if they trade up in the same region right? So people still gain if they (1) keep their home till death and give it as inheritance (if its sold by the inheritor, which inherited homes tend to) or (2) move to a region with lower house price rises. That's likely to be a v significant % of people

Don't think this is right? A London buyer in 2010 may have paid a premium due to lower council tax, but their house price has since continued to grow faster than elsewhere while their council tax hasn't (= a gain).

As long as house prices continue to diverge more than CT bills, homeowners gain

We also have papers coming out on:

(1) The Story to Tell about Tax Rises - how to frame tax rises to gain public trust, based on tests of mock-up BBC articles announcing tax rises
(2) The Attitudes of Small Businesses to tax rises, based on a representative survey of SMEs.

Keep your eyes peeled

These reforms would help sort the fiscal mess. BUT if we do want 'national renewal' (essential if govt is to rebuild public trust) much more is needed

Are broad-based tax rises needed? Would the damage to public trust be worth it in the long run? We discuss these questions in an upcoming paper

Solving the Tax Puzzle: Eight popular, pragmatic, pro-growth tax reforms to plug the fiscal hole Demos is Britain’s leading cross-party think-tank. We produce original research, publish innovative thinkers and host thought-provoking events.

So, a set of popular, pragmatic and pro-growth tax reforms could not just to plug the fiscal hole, improve the tax system and avoid raising the headline rates of broad-based taxes...

They could boost public confidence in government at the same time

Read the detail here:
demos.co.uk/research/sol...

Support is also seen among key electoral target groups

... or with arguments for and against the reform