Category Archives: Labour

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.

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)

Sweets

Wales says BOGOF to unhealthy food & drink

GK Associate Director Thea Southwell Reeves analyses the Welsh government’s progress on regulating unhealthy food. 

This week, the Welsh government took an important step towards tightening the regulatory environment around high fat, sugar and salt (HFSS) food. The measures include prohibiting retailers from offering promotions such as buy-one-get-one-free and three-for-two offers on unhealthy foods; a ban on free drink refills in restaurants; and preventing retailers from placing HFSS food in certain locations in stores. Worth noting, these regulations are also set to apply online so website entry pages, shopping basket and payment pages will all need to comply.   

The consultation is open until midnight on 23 September and is seeking views from industry on the draft regulations and their proposed enforcement approach. If the proposals are approved by the Senedd, the legislation is likely to come into force in 2025.  

These proposed changes form part of a broad range of approaches, both voluntary and regulatory, that the Welsh government is said to be considering to encourage the food and retail sector to produce, promote, and ultimately sell, healthier food and drink.   

The increased regulation of HFSS foods has been on the table for years and is also being explored by Holyrood and Westminster. A consultation on Scotland’s ambitious HFSS regulations closed in May and the King’s Speech included measures to restrict the advertising of junk food to children, along with the sale of high-caffeine energy drinks to children. The cost-of-living crisis has derailed anything more ambitious in Westminster… for now.   

Industry has, for the most part, been critical of moves to tighten legislation, arguing that they disproportionately impact the small food and drink producers and make selling food complex and costly. However, for businesses that are nimble, the rules represent an opportunity to gain advantage over non-compliant brands or big brands that are slow to adapt. In a similar vein, producers who can emphasise a healthier product range in marketing and brand positioning are set to attract consumers who are looking to reduce their HFSS intake.  

GK Strategy is a political advisory firm. We help investors, business leaders and organisations to engage with policymakers and advise on the political, policy and regulatory aspects of M&A processes.  

To discuss what the Welsh government’s consultation may mean for you and how you can engage with policy debates in the year ahead, please reach out to Thea@gkstrategy.com. 

Image of the city

The GK Post-Election Breakfast Event

GK Strategy Adviser Rebecca McMahon reviews the GK Post-Election Breakfast Event. 

The coming weeks and months will see the new Labour government pressing ahead with its agenda for government, and getting to grips with a number of difficult challenges facing the UK, from sluggish growth, to growing NHS waiting lists, to precarious local authority finances.

GK Strategy was delighted to host a panel discussion this week looking at how the government will tackle some of these issues, and how it will prioritise its time and resources to deliver on its ambitious policy pledges. GK was joined by  former Minister and Health Select Committee Chair, Steve Brine, and Head of Research at Labour Together, Christabel Cooper, who shared their insights into the government’s approach, and some of the inevitable obstacles it will face in the coming months.

Both panelists agreed that while the list of public policy challenges inherited by Starmer and his team is by no means a short one, Labour ministers will now be deciding on areas where urgent action is most needed.

Reforming the UK’s planning system was identified as one of the priority areas for Starmer’s new administration. Our two panelists noted that the new Government’s ambition in this area has already been illustrated by repealing the de facto ban on onshore wind, re-introducing mandatory housing targets, and pledging to update the National Planning Policy Framework via consultation by the end of the Party’s first month in power.

As a policy area with implications for multiple sectors – including housebuilding, the green economy and major infrastructure– planning reform to unlock private investment will be at the core of the new Labour Government’s agenda. As Chancellor of the Exchequer Rachel Reeves set out in her first speech following her appointment, its ultimate success will rely on “unlocking private investment that we so desperately need”.

Healthcare and the future of the NHS was another policy area which featured prominently. Steve Brine pointed out that under current spending plans, funding for the health service is projected to rise at a lower rate than during the austerity years. Meanwhile, the NHS Workforce Plan continues to be underfunded and the outcome of the Health Secretary’s talks with the junior doctors uncertain. He noted that while the Government will soon have to make difficult spending decisions, there would be an emphasis on creating an investor-friendly NHS to support Labour’s ambitions to “crowd in” private investment to improve efficiency and health outcomes.

There was a consensus that Labour’s perspective on the use of the private sector in supporting the delivery of public services is a pragmatic one. Labour’s ‘wide but shallow’ majority – achieving 64% of parliamentary seats on roughly 34% of the vote – means that the Party will need to reassure voters that it is making headway on its policy programme. Our panelists agreed that working with the private sector will be key to successfully demonstrating this.

Please do get in touch via rebecca.mcmahon@gkstrategy.com if you are interested in attending future events or would like to set up a call to discuss the year ahead in politics.

The view from Westminster in London

GK Strategy – General Election Update

General Election Results Briefing

The GK team reacts to the 2024 General Election results, with GK’s Strategic Advisers sharing their insights on Labour’s historic victory, and the implications for Sir Keir Starmer’s new government.

To read our briefing please click here.