Welcome to this month’s SEC Newgate pensions newsletter. It continues to be a very busy time for pensions policy with a number of legislative and regulatory developments impacting both DC and DB schemes.
The new Financial Services and Markets Bill, introduced last month, will implement measures announced by the Chancellor last year in her ‘Leeds Reforms’, which set out an ambition to improve competitiveness in UK financial markets by rolling back regulation. In the world of DB pensions, the government and the TPR have recently put out initial statements and consultation documents on the extraction of DB surplus, which should be significant in terms of how billions of pounds are extracted and shared with scheme sponsors and members.
But perhaps the main issue for long-term policy is, of course, the current uncertainty in UK politics. Ever since the local elections in May, Keir Starmer’s authority as Prime Minister has been significantly weakened, with a substantial loss of confidence in him among his own MPs. It now seems very unlikely he will lead the party into the next general election and more-than-likely that he will be removed as leader before the end of the year.
One challenger from the Greater Manchester region, in particular, appears to have the support of party to take over. Former Manchester Mayor Andy Burnham has won the Makerfield by-election, allowing him to challenge Starmer to become Labour leader and Prime Minister. The two routes to a leadership change are a direct challenge to Starmer or forcing him aside by political pressure. In any formal challenge – triggered by 81 MPs backing an alternative candidate – Starmer would be entitled to stand, and more than one challenger could put themselves forward. If Starmer goes without a fight, the next question will be whether Labour MPs choose to clear the way for a Burnham coronation or to insist on a contest.
Bearing all this in mind, it would now be a good time to consider what an Andy Burnham government could mean for the pensions sector. In answering this question, we would start by looking at his likely macro-economic positions. Any future Labour leader would be under pressure from their own party to increase spending, with limited scope to cut spending and Burnham himself has previously called for additional borrowing, although subsequently stated he would adhere to Rachel Reeves’ fiscal rules. There will also be pressure for further tax rises – Labour figures have, in recent weeks, suggested increased CGT and other perceived ‘wealth taxes’.
Beyond fiscal policy, Burnham’s stated platform has been built around his mantra of “Manchesterism”. As part of this, Burnham has expressed enthusiasm for greater public ownership and an increased role of the state in the economy, with headline examples include a significant council housebuilding programme and nationalisation of utilities.
It should be noted that maintaining and adapting that approach to Westminster will be a different scale of challenge for Burnham, particularly given spending constraints, sluggish economic growth and a fractious Parliamentary Labour Party – but businesses and investors should be aware of his guiding philosophy that he will bring with him should he take the top job.
For a more detailed look at Andy Burnham’s policy positions and their likely implications, see SEC Newgate’s briefing note, with exclusive insights from those who have worked with him in his role as Mayor of Greater Manchester.
by Gareth Jones, Director