The next big moment for Rachel Reeves and growth comes at the Mansion House on July 15.
Historically, the annual dinner for bankers was an opportunity for the Chancellor to pronounce on monetary policy. In recent years, the focus has shifted to pensions, savings and equity markets.
If Reeves had fiscal space, she could improve the competitive position of the City and strengthen equity culture at a stroke by abolishing stamp duty on share trading.
Instead, she is in danger of alienating critical players in the pensions arena by adopting a clunky, government-knows-best approach.
Lloyds Bank boss Charlie Nunn fears that if the Chancellor takes new powers to require pension funds to devote 5 per cent of funds into UK infrastructure and private firms, it will amount to ‘capital controls’.
No one disputes that Britain has been let down by fund managers who have neglected good British shares and preferred the safety of government bonds and the adventure of American tech.
Power struggle: Chancellor Rachel Reeves (pictured) is in danger of alienating critical players in the pensions arena by adopting a clunky, government-knows-best approach
Compulsion is unwanted and the governor of the Bank of England Andrew Bailey (speaking to bankers in Washington) is among those who think mandating change is inadvisable.
The Government approach is hopelessly misplaced. The National Wealth Fund tapped up the banks first for co-investment even though they have no interest in committing money for decades. Insurers are a much better match.
Big fund managers signed up to the principle of devoting 5 per cent to infrastructure, UK equities and start-ups. But many feel unhappy about central control.
Similarly, changing Isa rules, which will limit cash that can be saved tax-free in the hope it will be transferred into shares, is bonkers.
The UK already has a lamentable record on savings, and it will make it worse.
Far better to change the rules governing equity Isas so that only British-focused equity funds, rather than those exposed to the US, qualify for tax relief.
Oil patch
Shell’s disappointing update shows why chief executive Wael Sawan is intensely focused on improving cash flows and share buybacks. It is less than enthusiastic about a deal with BP.
The oil major warns investors that earnings in the second quarter will be hurt by weaker trading in its gas division and losses in its chemical plants.
Sawan would like to exit chemical operations and is looking for a partnership route in the US. If buyers cannot be found, it might close European production.
The focus on oil and gas drilling is paying off with output projections for both higher than previously projected.
Despite recent disruption in the Middle East, because of the 12-day Israel-Iran conflagration, oil prices remain subdued.
At the time of the conflict there was much speculation of an energy price spike if the Strait of Hormuz were to be closed. The reality is that disruption to Gulf energy supplies is far less sensitive than in the past.
More sophisticated options markets mean that oil producers – Shell and BP are among the biggest operators in the region – can better hedge against potential price spikes.
Shipping can be more closely monitored and directed away from trouble by satellite surveillance (thanks to Elon Musk!). These days, in contrast to the past, much of the production heads east to Japan and to a lesser extent, China.
When Sawan took control of Shell, there was much speculation that renewables would be his focus, as that was his immediate previous job.
Instead, he is determined to prioritise oil and gas production and cash flows, taking advantage of skills in deep water exploration in the Gulf of America and LNG output in North Africa and across the globe.
Parting words
Paul Johnson’s stringent views as director of the Institute for Fiscal Studies will be missed now that he is moving on to fresh pastures.
His final bit of advice to politicians is that if they really want to tackle the ballooning cost of working age welfare, then the only way to do it is to curtail the cost of disability and incapacity benefits.
After last week’s debacle in the Commons, it is a radioactive message.
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