Rachel Reeves is proposing to shake up Britain’s pension system as part of a three-pronged plan aimed at boosting the economy’s sluggish growth rate if Labour wins the next election.
The shadow chancellor wants more of the money saved for retirement schemes to find its way into support for expanding UK businesses, and says her reforms could increase the size of the average pension pot by up to £37,000.
Jeremy Hunt, the chancellor, will announce plans to lift the economy’s growth rate in next week’s autumn statement but Reeves said the 25 tax increases announced by the government in recent years were evidence of its failure since 2010.
“It is because the Tories have failed to grow the economy that they are picking the pockets of ordinary working people,” she said.
Labour has no plans to increase taxes beyond measures it has already announced: a toughening-up of the rules governing non-dom status, an end to tax breaks for private schools, and higher taxes for private equity bosses. Economists have estimated the three changes would raise up to £7bn a year.
The shadow chancellor said her ambition was to cut taxes for workers but she would not do so unless she could identify where the money was going to come from: “I would like to lower taxes on working people but I am not going to go all Liz Truss and have unfunded tax cuts.”
Opinion polls currently suggest Labour is on course to win the election. “I have no illusion about the scale of the challenge that will face us,” Reeves said. “Growth is slow, public services are on their knees, people are feeling worse off.
“If we can get the economy growing we can start to turn things around. There is some low-hanging fruit that we can pick to deliver results.”
Labour’s growth plan involves speeding up the planning system; an industrial strategy with statutory underpinning; and reform of the pension system.
On pensions, Reeves is keen on a French-style scheme under which institutional investors and defined contribution funds would come together to channel money into UK firms with growth potential. The shadow chancellor would also give the Pensions Regulator more power to reduce the number of UK defined contribution funds through a process of consolidation.
A future Labour government would review the entire pensions system to ensure “it delivers the full potential for British savers and UK plc”, she said.
There has been speculation that Hunt might use the autumn statement to announce an extension of 100% tax breaks for business investment beyond 2025-26. “If the chancellor extends full expensing by a year we will support that,” Reeves said. “If the money is available to us we would look to extend it beyond that.”
She said NHS waiting lists were one reason why workforce participation rates had failed to return to their pre-pandemic levels, adding that some of the money from Labour’s three tax increases would be spent on delivering 2m extra hospital appointments.
“We would have a fairer tax system and use that money to invest in the NHS and schools,” Reeves said.