Labour acting like communist China: Lloyds boss blasts Reeves over shake-up of pensions

Lloyds Bank’s boss has likened Labour’s plans for pensions to ‘capital control’ policies in communist China.

Charlie Nunn compared the idea of forcing pension funds to invest in UK assets with the approach of repressive regimes such as Beijing.

The caustic comments from the chief executive of Britain’s biggest mortgage lender pile further pressure on Chancellor Rachel Reeves ahead of her Mansion House speech to the City next week.

Ministers are seeking voluntary agreements with retirement funds to invest in UK assets such as infrastructure and housing, but will create ‘backstop’ powers to mandate them to do so.

But Nunn told the Financial Times that mandation would put funds in conflict with their fiduciary duty to seek the best returns for pensioners.

He said: ‘Mandating allocations of pension funds is a form of capital control.

‘I have spent ten years of my working life in China and many jurisdictions where there are capital controls. That is a different model and that is a difficult slope for an economy that believes it is an open economy.’

The Government’s plans to give itself powers to force funds to invest in the UK have already been described as a ‘step too far’ with a number of experts lining up to criticise them. But Nunn is the most senior to do so.

Lloyds has already shown a reluctance to sign up to Labour’s plans on pensions. Its Scottish Widows arm declined to join an agreement by 17 other retirement providers to invest at least 5 per cent of their default funds in private market assets.

And it emerged last month that Scottish Widows was preparing to cut its exposure to UK equities. 

Nunn yesterday also offered scepticism on another key policy expected to be laid out at the Mansion House speech – that the cash allowance for tax-free Isa savings will be reduced from £20,000. The idea would encourage savers to put more money into Stocks and Shares Isas instead.

Nunn told the FT: ‘Everyone gets tied up in the cash Isa debate, which is relevant for a few rich people if we are honest about it.

‘But that’s not where the problem is, that’s not the way to turn around the economy.’

The comments add to the growing sense that after a year of a Labour government, business leaders are losing patience with the party that before the election had wooed the corporate world with a smoked salmon and scrambled egg charm offensive.

Many are now feeling the impact of a damaging £25billion raid on employer national insurance – announced in last autumn’s Budget – which came into force in April.

The effects of the policy, which is effectively a tax on jobs, are coming through in the shape of fewer jobs, lower pay and reduced investment.

But as the Government’s precarious finances deteriorate further – thanks to U-turns over plans to cut welfare spending and new commitments to splash out on defence – fears are growing that Labour will return with a fresh tax grab this autumn.

Among those to raise the alarm are Currys chief executive Alex Baldock, who last week warned the Government to ‘think very carefully before they make the situation any worse’. 

And Santander UK boss Mike Regnier said that a tax raid on banks threatens to hobble growth.

A Treasury spokesman said pension reforms ‘will unlock billions for the UK economy, supporting businesses to grow and creating well-paid jobs across the country’.