Rachel Reeves, Britain’s new chancellor, says that she has inherited the worst fiscal circumstances since the second world war. An exaggeration, perhaps, but only a small one. To address the squeeze, Ms Reeves will seek the help of Britain’s retirement savings. On July 8th she said that she wants the country’s pension funds “to drive investment in homegrown businesses and deliver greater returns to pension savers”.
Details of Ms Reeves’s plans are still to emerge. Her predecessor, Jeremy Hunt, set the ball rolling by mandating that defined-contribution pension funds will have to disclose the scale of domestic investments by 2027. Other countries are joining in. Stephen Poloz, a former governor of the Bank of Canada, is looking at how to increase pension-fund investment in domestic assets on behalf of the Canadian government. Enrico Letta, a former Italian prime minister, recently argued in favour of an EU-wide auto-enrolment pension scheme that could be funnelled into green transport and energy infrastructure.
What explains the rise of pension-fund nationalism? Many Western countries, other than America, face similar problems. Politicians fret about low levels of business investment. The most promising high-tech firms flee for Silicon Valley when seeking venture-capital funding or Wall Street when requiring a stockmarket on which to list. High interest rates and mighty government debts mean that cash is scarce. Time, then, to shake down pension funds.
