Author Archives: GK Strategy

Pensions reform: Will the Chancellor’s vision become reality?

The Chancellor’s first Mansion House Speech, has made it clear that pensions reform is the first item on the Treasury’s agenda for financial services policy and regulation. Following an autumn budget that caused some business leaders to question the government’s pro-growth agenda, Rachel Reeves’ speech emphasised the important role that pensions reform will play in delivering long-term economic growth. 

As expected, Reeves reiterated her intent to pool Local Government Pension Scheme (LGPS) assets into a handful of megafunds. This proposal has been set out in the Pension Investment Review: interim report. The report, published by the Treasury and the Department for Work and Pensions, sets out the initial findings for ‘phase one’ of the government’s review. A consultation on this measure has also been launched alongside the report, offering stakeholders the opportunity to share views on new requirements for pooling and the governance of funds.   

The government has also launched a separate consultation on a proposal to set a minimum size limit on Defined Contribution (DC) scheme default funds in the private sector. The government believes that this measure will encourage consolidation and allow savers to be moved more easily from underperforming pension schemes to schemes that deliver higher returns.   

The government’s vision for the pooling of schemes has been welcomed by industry trade bodies, given the returns it could generate for savers and the scope it could create for pension funds to invest in longer-term assets. It is no secret that the Chancellor is keen for the UK to mirror the Australian system, where there is greater investment in infrastructure assets. 

However, the government will still need to assuage stakeholder concerns about these proposals, given the disruption it could bring to the pensions market. The government will need to balance its own policy goals with market realities. If the government requires a significant portion of pension funds to be invested in the UK, how will industry stakeholders be impacted, given some will view the maximising of returns as their primary objective, rather than investment in British assets?   

The government will also need to address concerns around the timeline for implementation. Given the pensions review is still in progress, there remains an opportunity for stakeholders to engage with the government to ensure that proposed policy changes support economic growth, and that the implementation process provides the industry with sufficient time to adjust to the new regime.  

The government has announced that the final report of its pensions review will be published in Spring 2025 and that the Pensions Schemes Bill will also be introduced to Parliament shortly afterwards. By this stage, the government will need to have set out a roadmap for its reforms. It will also need to address how, if at all, to mandate the consolidation of the LGPS, and funds in the DC market, and whether new rules will be introduced to regulate pension scheme selection advice and investment consultancy.  

These questions highlight the complexity of the task that the Chancellor faces. Despite these challenges, pensions reform remains at the heart of the government’s most important mission – delivering economic growth. The Chancellor’s speech and the newly launched consultations set out further details on the government’s vision for reform. The industry will now have the chance to scrutinise those plans and share its view on how to minimise implementation risks and maximise opportunities for growth.

GK Strategy is a political and regulatory consultancy firm supporting management teams and investors to understand and navigate complex policy changes.

We’d be delighted to share our perspectives on what the government’s pensions reforms could mean for you and how you can engage with policy debates. Please contact joshua@gkstrategy.com if you would like to discuss the reforms with the GK team.

Across the pond – Insights from our US partners

Mark Linton is a public affairs expert working with clients on US regulatory forecasting and scenario planning. He is a former senior appointee in the Obama Administration and a CoFounder of Hummingbird Advantage, a national public affairs consulting firm working with startups, investors, and established brands to help them win on their top causes.

Q: If you were a betting person, who would win the US election tomorrow? 

A: I would rather be Kamala Harris than Donald Trump. The Vice President has a higher overall ceiling of support among the electorate and a better field operation (to contact voters and get them to the polls). Having said that, the race is exceedingly close and it’s very possible Donald Trump could still win.  

Q: Which campaign do you think has received the largest donations from investors? 

A: America’s lax campaign finance laws make it incredibly hard to know this, given the proliferation of spending by outside political action committees (PACs) and interest groups, many of which have few disclosure requirements. Donald Trump has received a significant amount of dark money support including from major VC players who back crypto.   

Q: What does each candidate mean for international investment into the US? 

A: The care economy, healthcare: If Kamala Harris is elected and Democrats control both chambers of Congress, we would expect to see a concerted push to enact paid family and medical leave, an area where the U.S. lags compared to most European countries. Vice President Harris has also proposed expanding subsidies to help cover health care costs and in general strengthening the Affordable Care Act. 

Renewable Energy: Even if Donald Trump is elected, it will be hard – and politically unpopular – to claw back the billions of dollars that have flowed to states for renewables and climate adaptation through the recently passed infrastructure law (the Inflation Reduction Act). We’d expect to continue to see interest in clean energy, upgrades to the nation’s grid, and a focus on new technologies ranging from microgrids to carbon capture and removal.   

Q: What is the most favourable election outcome for US investment into the UK? 

A: Kamala Harris will bring a high degree of stability and competence to the White House. For that reason, many business leaders have privately signalled their preference for her as America’s next president. By contrast, most analysts predict a period of heightened political instability at home and abroad if Donald Trump is elected. He has pledged to start a trade war and weaken American alliances e.g., NATO, that undergird much of the western international economic order. A second Trump presidency would also lead to sustained domestic unrest, including potentially general strikes depending on the severity and reach of any unconstitutional orders he gives to the military and federal law enforcement agencies.    

Q: Top three sectors which will benefit from Trump and why? 

 A: This depends on his early executive actions, of course, but it’s reasonable to expect that crypto, oil & gas, and defence sectors will do well.  

Q: Top three sectors which will benefit from Harris and why? 

 A: Health care, renewables and housing are three sectors that will potentially benefit from existing and new subsidies and tax credits that a Harris administration would likely pursue.  

Q: Most likely candidate to want to negotiate a full fat trade deal with the UK? 

A: Both parties are focused on striking trade deals that favour American workers and, in the case of Kamala Harris, include robust environmental and labour protections. Add in Donald Trump’s threat to start a trade war and apply across-the-board tariffs, and a full fat trade deal with the UK seems unlikely in the near term.  

Q: If Trump is elected, how might US protectionism evolve in the next four years?  

A: It will get worse – if we take Donald Trump at his word to pursue a maximally protectionist set of trade deals and apply across the board tariffs.  

Q: If Harris is elected, how might economic policy diverge from that of Biden and the Inflation Reduction Act? 

A: Depending on the makeup of the next Congress, we’d expect to see new gains for the housing and healthcare sectors, a boost in consumer spending, and, potentially, new regulations in the tech space.  

Q: What happens to the Republican Party if they lose in November? Should fears of civil unrest be taken seriously? 

A: Since the Big Lie in 2020, most elected Republicans have unfortunately embraced baseless lies about the integrity of the US election system, despite it being the most secure and transparent in the world. We know that Donald Trump will not go quietly into the night if he loses. The real question will be how far along elected Republican officials follow him, especially if protests become violent. The best scenario is that an electoral blow against political extremism resets some of the political incentives – in the immediate and longer term – and we begin to see Republican officials join many other voices in calling for calm and support for the rule of law. It will not be surprising if at least some investors and business leaders also add their voices to urging calm.  

Q: Who are the future Democrat heavy weights should Harris lose?   

A: The Democratic Party has no shortage of talent; from current Biden administration cabinet officials to members of Congress and successful Governors. Kamala Harris will have a deep bench to draw from for her cabinet if she is elected president. If she falls short, the Vice President is in good company with an array of incredibly gifted Democratic leaders, many of whom will presumably decide to run for president in four years.   

Q: How will the makeup of the Congress impact policymaking under the next President? What will be the key political priorities and barriers? 

A: If both chambers switch – Democrats take the House while Republicans take the Senate, which is a distinct possibility, the question becomes: which major policy areas can garner enough bipartisan support to compel members to pass legislation? Some areas where the political incentives potentially align for bipartisan legislation include the regulation of social media platforms (and possibly AI); some form of paid family leave; defence and some foreign aid.  In addition, if Congress doesn’t renew the Farm Bill soon after the election (in a “lame duck” session of Congress), then the next Congress will have to, regardless of which party controls each chamber.  

The Dash Review: the future of the CQC

Steve Brine @BrineHealth is a Strategic Adviser at GK Strategy. He was a Health Minister (2017-2019), Government Whip, and is a former chair of the Health & Social Care Select Committee. Here, he reflects on the future regulatory landscape for adult social care.  

Context is everything when it comes to social care. Well, almost everything because you can’t forget the politics. On one hand, despite a grand pledge in the Labour Party manifesto to “undertake a programme of reform to create a National Care Service”, we have nothing happening at all. 

On the other we have the Dash Review (and now Dash 2.0), the Ten Year Plan, the next phase of the spending review and of course, the Budget which brought a further £600m to prop up the service. 

Taken on face value, a national care service is of course a very (very) big deal. This could literally mean the nationalisation of the entire social care sector – akin to how local voluntary hospitals were brought under national public ownership in the 1940s – or it could mean, well, whatever you want it to. Perhaps that’s the point. The truth is, right now, we’re none the wiser and nor I suspect are Ministers. 

More immediate, not least for investors and those looking for a little certainty in the sector, is the major NHS Ten Year Plan consultation launched last week. As I understand it, everything is in scope for this programme of work led by Paul Corrigan and Sally Warren with the exception of, wait for it, adult social care. Meanwhile, the Dilnot reforms have been kicked down the road (again) which means the spending cap will now not be introduced next year as planned. Andrew Dilnot is reportedly furious and the great immovable object of NHS reform seems further away than ever before.  

What we do know is Penny Dash is in the ascendancy with this government. Shortly after Lord Darzi produced his 163-page diagnosis of the NHS, Dash published her full report into the operational effectiveness of CQC. The Dash review found significant failings in the organisation which it said ’has lost credibility in the health and social care sectors’ and led Wes Streeting to say it was no longer fit for purpose. It found that the CQC’s ability to identify poor performance and support quality improvement has deteriorated and says this has undermined the health and social care sector’s capacity and capability to improve care. 

Alongside Dash, a parallel review was led by Prof Sir Mike Richards (former chief inspector of hospitals) looking at CQC’s controversial single assessment framework. Sir Mike (one of the best officials I worked with while a Minister) recommends a fundamental reset of the organisation and a return to the previous organisational structure, with at least three chief inspectors leading sector-based inspection teams at all levels. 

And as if that weren’t enough, Dash gets a 2.0 moment as this month we learn the way patient safety is regulated and monitored is to be completely overhauled in England. With the swoosh of a Minister’s pen; the CQC, the National Guardian’s Office, Healthwatch England and local Healthwatch services, the Health Services Safety Investigations Body, the Patient Safety Commissioner and NHS Resolution are all set to be reviewed. 

Whatever the future of Henrietta Hughes (the Patient Safety Commissioner) or Helen Vernon (who leads NHS Resolution) one name here is to stay is Julian Hartley. Currently Chief Executive of NHS Providers he will take over as the head of the CQC in December. Julian is a smart appointment. A nice guy (but don’t be fooled) who exudes calm and is fiercely organised. He will find an organisation on its knees and I am sure a massive rebuild on his hands. 

It is clear that Penny Dash has listened to the voices of care providers, resulting in a clear set of recommendations so Julian Hartley will benefit from that oven-ready piece of work. Equally, I suspect the Richards review findings will not meet too much resistance. Expect a re-set to a standardised approach to inspections and for line management of such to come back under the auspices of the Chief Inspector of Hospitals. I wouldn’t be surprised to see a completely re-born and re-branded CQC that focuses on safety as well as efficiency, outcomes and use of resources – you can be sure Rachel Reeves will make that a red line. 

Ministers will, in my experience, find that the desire to do the Ten Year Plan minus adult social care doesn’t survive contact with political reality. And so between now and the Spring, and indeed the final throes of the comprehensive spending review to come, furious negotiations between DHSC, Angela Rayner (who is responsible for council funding) and HMT are the order of the day. 

And when all is said and done, we will find out whether the work of change has great substance or everything looks and feels very familiar. 

Labour’s new era for agriculture: Can political stability drive agri-tech innovation?

GK Senior Adviser James Allan analyses the government’s agriculture policy plans and the opportunities that could arise for investors.

With the Labour government now in power, some may wonder if the food, farming and agriculture sectors are about to see a major shift – a shift from being an important constituent of the then Conservative administration of 14 years to lower down the political list of priorities within Labour’s “mission led” government.

The Autumn Budget on 30 October will partly address this concern and end the speculation about potential changes to agriculture property relief and Defra’s agricultural budget. But with a Party of a different political hue now occupying the corridors of power, it’s worth considering whether Labour’s pro-growth messaging of “political stability” to attract private sector investment extends to the food, farming and agriculture (FFA) sectors, and if so, to what extent.

Why Labour must harvest more than just political stability

To attract private investment, ‘political stability’ alone is not sufficient – it needs to be backed up by policy substance and public investment, and with long-term strategic thinking. From aquaculture to viticulture, solar farms to biodiversity, food pricing and standards to foods high in fat, salt and sugar, there are many agendas and issues at play. These will all be playing out against a political backdrop with a renewed sense of momentum, a government with a greater willingness to intervene in the name of public health, an entire mission focused on decarbonisation, and a tight fiscal environment impacting the potential for significant public investment.

The first 100 days for the new government have proved that governing isn’t easy. Political pinch points and missteps aside, a common thread in the criticisms levelled against Labour ministers has been the absence of a defining vision for the sector to provide the framework for policy thinking and development; not least for food security which is set to become one of the defining political issues of the parliament. Without this overarching vision for the sector, the ability for businesses to plan their own investment and growth strategies becomes much more difficult and limits the ability of government to ‘crowd in’ private capital to drive growth.

The sowing of early seeds positive for UK investors

There are a few positive and recent developments of note. First, the Farming Minister, Daniel Zeichner, has confirmed the government’s intention to introduce secondary legislation which will bring to reality the regulatory regime of the Genetic Technology (Precision Breeding) Act 2023.[1] This will help to simplify the authorisation process for bringing new products to market from 1o years to an estimated 12 months.[2] Investors should note the government’s familiar caveat of “as soon as parliamentary time allows” which means the introduction of secondary legislation is unlikely to be imminent and will compete with an already packed legislative calendar. Speeding up routes to market will be welcomed by investors backing early-stage or growth-stage companies involved in gene editing, crop efficiency technologies, or those innovating in climate-resistant crop varieties. The streamlined regulatory environment lowers barriers, creating the potential for significant returns more quickly. Zeichner has also confirmed 43,000 Seasonal Worker visas for the horticulture sector and 2,000 for the poultry sector for 2025. Accompanied by a few additional measures to simplify free-range labelling requirements, this signals that the Defra ministerial team is actively listening to the sector and willing to flex policy to meet operational challenges and remove barriers to growth.[3]

Secondly, the government has secured access to the US market for British beetroot farmers, boosting export opportunities and attributed to the efforts of DEFRA’s agri-food attaché in the US.[4] This establishes an interesting precedent for securing market access outside of more formal and comprehensive free trade agreements, and creates attractive investment opportunities in companies that produce export-ready, high-quality British agricultural goods. Crucially, produce by produce access deals averts the political tightrope of negotiating comprehensive trade deals, not least one with the US which has long been the envy of previous Conservative Prime Ministers. For investors and argi-businesses on the lookout for export opportunities, engaging with DEFRA’s eleven attaches located in British embassies and consulates in Canada, Mexico, Brazil, Kenya, The Gulf, India, Japan, China, Thailand and Vietnam will be important to replicate this success.

Thirdly, there is recognition in government of the long and fraught dissatisfaction among farmers concerning the future viability of the agricultural sector.[5]  The Labour ministerial team perceives a lack of confidence among farmers as the rationale for needing to optimise Environmental Land Management schemes as part of a wider new deal for farmers. The precise details of this new deal have yet to be clarified but the government has signalled a focus on:

  • Trade deals undercutting low welfare and low standards
  • Maximising public sector purchasing power to back British produce
  • A land-use framework to balance nature recovery and long-term food security

A latter focus on food security will be important for investors seeking opportunities which align with Labour’s aim to make the UK more self-reliant in the food and energy sectors, but especially where technological innovation contributes to more efficient and resilient farming processes and produce. Defending their record in government and playing in safe political territory, this was a focus of a recent opposition day debate in Parliament where several Conservative MPs made the case for greater public investment in new farming technologies to safeguard the nation’s food supply.[6] However, as noted by DEFRA Secretary, Steve Reed, the government’s ability to do so is up for consideration in the upcoming Budget and next year’s Spending Review and therefore competes with other public spending priorities.

A wet start for the farming sector

This year’s harvest of the five key crops – wheat, winter and spring barley, oats and oilseed rape – saw a decrease of 15% compared to the 2023 harvest with an estimated loss of £600m in revenue for English farmers due to considerable wet weather.[7] The impact has extended beyond these core crops with a south Devonshire winemaker reporting a 70% decrease in expected volumes compared to 2023 and another winemaker noting heightened disease pressures due to constant rain. For the British viticulture industry, the wet weather year of 2024 follows a boom in capital investment and overseas wine producers buying into the UK as a hedge against climate change. Rural and farming communities might not be this government’s traditional supporter base but neglecting the sector – with its sub-sector growth gems like viticulture – risks undermining long-term food security and economic growth not just farmers but the broader economy and consumers alike.

[1] DEFRA, New legislation to support precision breeding and boost Britain’s food security (Sept-23 link)

[2] DEFRA, Impact Assessment – Impact Assessment – Genetic Technology (Precision Breeding) Bill (Mar-22 link)

[3] DEFRA, Government provides certainty to horticulture and poultry businesses  (Oct-24 link)

[4] DEFRA, British beetroot growers to put down roots in US market (Sept-24 link)

[5] DEFRA, Government to restore stability for farmers as confidence amongst sector low (Aug-24 link)

[6] House of Commons, Opposition day debate on farming and food security (Oct-24 link)

[7] Energy & Climate Intelligence Unit, England has second worst harvest on record with fears mounting for 2025 (Oct-24 link)

A stack of coins

GK Strategy Briefing – October 2024 Budget

GK Strategy Pre-Budget Briefing: GK Associate Hugo Tuckett takes a look at what we’re expecting to see in the government’s first Budget on Wednesday 30 October

Political Context 

The government will hold its first budget on Wednesday 30 October. Ministers will want to use it as an  opportunity to reset the political agenda given the turbulence of recent weeks which has seen the Prime  Minister lose his Chief of Staff Sue Gray and pay back more than £6,000 in gifts after a row over donations.

Labour’s election manifesto was light on tax and spend measures. The Party identified four revenue raising  levers to utilise to fund its reforms to public services. These are: further reforming non-dom tax loopholes,  applying VAT and business rates to independent schools, ending the carried interest tax loophole and  increasing stamp duty on purchases of residential property by non-UK residents. The Party estimated this  would raise just over £7 billion in additional revenue for the exchequer.1 The manifesto also included a commitment not to increase national insurance, the basic, higher or additional rates of income tax, or VAT.  Given these represent approximately two-thirds of tax revenue, this forces the Chancellor to focus on  maximising returns from a series of smaller pots to fund Labour’s spending priorities.

In July 2024, the Treasury completed an audit of public spending which identified a £22 billion black hole in the public finances. The government said this represents an in-year overspend and does not constitute an estimate of how much additional funding might be allocated to departments moving forward or how  much additional borrowing may be required.2 The Chancellor will therefore have to pursue a series of tax  rises to close this gap in the public finances and support additional investment in departments moving  forward.

Potential Measures 

The following list sets out a series of measures that GK has assessed are likely to be included in the  upcoming budget:

Employer pension contributions: The pushback the Chancellor received following her decision to end winter fuel payments for pensioners not in receipt of pension credit (which cut the relatively small amount  of c.£1.5 billion from the government’s annual welfare bill) reduces the likelihood of her pursuing a large  number of small tax rises to balance the books. Instead, the government is likely to target 3-5 measures  which collectively bridge the gap in the public finances. GK’s assessment is that the Chancellor is likely to reform the NICs treatment of employer pension contributions by levying employer NICs on employer pension contributions. If levied at the full rate (13.8%), this would raise around £17 billion per year. This covers approximately three-quarters of the £22 billion figure identified in the Treasury’s audit of public spending  and would end what the Institute for Fiscal Studies (IFS) describes as “the generous NICs treatment of  employer pension contributions… [which are] opaque and poorly targeted.”3

Inheritance tax: The government is likely to close several loopholes in the inheritance tax system. Politically, Labour is not as sensitive about reforming inheritance tax as previous Conservative  administrations. This provides the Chancellor with a freer hand to make changes without encountering  pressure from her Party’s backbenchers. Reforms to the inheritance tax system are likely to include ending  reliefs for business assets (including those held in the AIM market), agricultural property, and gifts to  charities. This is estimated to raise c.£2.4 billion in revenue.4

Capital gains tax: We expect the Chancellor Rachel Reeves to increase rates of capital gains tax. This is,  however, likely to constitute a shift of only a few percentage points given concerns about maintaining the  UK’s international competitiveness. Unlike the Conservatives, Labour did not commit to freezing capital  gains during the election campaign. As the Party has ruled out increases to income tax, national insurance  and VAT, it has few levers to pull to raise revenue to fund its spending commitments. Capital gains tax is  an attractive revenue raiser for the government given it is paid by a small number of individuals each year (who broadly sit outside Labour’s electoral base) and it fits with its wider commitment not to raise taxes on  “working people”.5

Carried interest: Reforms to the tax treatment of carried interest which would see rates align with the  higher rate of income tax (45%) are unlikely to be contained in the upcoming budget. Instead, we expect a  compromise agreement to be reached whereby rates are lifted, albeit not significantly, to fulfil the Party’s  manifesto commitment to “close this loophole”.6 Although it was one of Labour’s few tax raising measures  it committed to pre-election, internal Treasury analysis has now revealed that the policy could have a “net cost to the exchequer”. This is because wealthy individuals could choose to leave the UK rather than pay  the money and deter investment. Treasury civil servants estimate the rise could cost as much as £350 million per annum after five years.7

Debt measure: The Chancellor is likely to reform the UK’s debt measure to support public investment in infrastructure projects. Speaking at Labour Party Conference in October 2024, Rachel Reeves said that “it’s time the Treasury moved on from just counting the costs of investment in our economy to recognising the  benefits too.” This suggests that the Treasury’s fiscal rules will be altered to allow the government to offset “assets”, against the wider national debt, thereby freeing up more money for investment. This is likely to  amount to c.£50 billion worth of additional headroom.8 Importantly, the move will not allow Reeves to  increase day to day spending, as Labour has said this must be met entirely from annual tax receipts.

1 Labour Party, Change, 13.06.24 
2 HM Treasury, Fixing the foundations: public spending audit 2024-24, 02.08.24
3 IFS, Raising revenue from reforms to pensions taxation, 11.09.24
4 IFS, Raising revenue from closing inheritance tax loopholes, 18.04.24
5 Financial Times, IFS urges Labour Party to make ‘serious reforms’ to capital gains tax, 06.10.24 
6 Labour Party, Change, 13.06.24
7 The Times, Labour poised for U-turn over tax plans for investment gains, 04.10.24 
8 The Times, Rachel Reeves hopes for £50bn windfall with fiscal rules rejig, 26.09.24