Speech: Chancellor Jeremy Hunt's Mansion House speech

Hm Treasury

July 10
20:18 2023

My Lord Mayor, Governor, Ladies and Gentlemen it is an honour to be with you at the Mansion House tonight.

While some may be distracted by events in Windsor, we all know that Walbrook is the place to be this evening.

Thank you to the City of London Corporation for hosting us so generously. It is a privilege to follow the Lord Mayors excellent address and to give my first Mansion House speech as Chancellor.

Tonight, I want to talk about long term reforms to our competitiveness, but let me start with the immediate challenge of tackling inflation.

Following the pandemic and energy shock, like other countries, the UK faces difficult challenges.

It has shown itself more resilient than many predicted, but that resilience is itself one of the reasons for higher inflation.

In a cost-of-living crisis, that leads to great concern for many families who see the cost of their weekly food shop or the price of petrol go up.

But with the levers of fiscal and monetary policy, wholesale food and energy prices falling and a government that has made the battle against inflation its number one priority, there is nothing insurmountable in the current situation.

Let me be clear again tonight. Working with the Bank, we will do what is necessary for as long as necessary to tackle inflation persistence and bring it back to the 2% target.

Delivering sound money is our number one focus. That means taking responsible decisions on public finances, including public sector pay, because more borrowing is itself inflationary.

It means recognising that bringing down inflation puts more money into peoples pockets than any tax cut.

And it means recognising that there can be no sustainable growth without eliminating the inflation that deters investment and erodes consumer confidence.

Tackling inflation therefore unlocks the Prime Ministers two other economic priorities growing our economy and reducing debt but because it is a prerequisite for both, it must come first.

As we tackle inflation, we must always remember our responsibilities to those struggling the most, so I am therefore grateful to our banks and mortgage lenders for their help in developing last months Mortgage Charter.

I agree with the Governor that margin recovery benefits no one if it feeds inflation.

And I will continue to work with regulators to make sure the needs of families are prioritised in a tough period.

This evening, though, I want to look further ahead.

I want to lay out our plans to enable our financial services sector to increase returns for pensioners, improve outcomes for investors and unlock capital for our growth businesses.

We start from a position of strength.

The financial and related professional services industry employs over 2.5 million people. Although two thirds of them are outside the South-East, it has made London the worlds second largest financial centre and one of the most dynamic cities on the planet.

It generates more than 100 billion in tax revenue, paying for half the cost of running the NHS.

A strong City needs a successful economy, and a strong economy needs a successful City.

Recent challenges have led to some lose hope and even peddling a declinist narrative.

They are profoundly wrong.

I am proud that since 2010, we have one million more businesses and one million fewer unemployed.

And weve grown faster than France, Italy, Japan or Germany.

In the last decade we have become Europes largest life science sector, Europes largest technology sector, its biggest film and TV sector and its second largest clean energy sector.

But as we emerge from our current challenges, the Prime Minister and I have big ambitions for the British economy.

We want to be the worlds next Silicon Valley and a science superpower, embracing new technologies like AI in a way that brings together the skills of our financiers, entrepreneurs and scientists to make our country a force for good in the world.

That means making sure our financial services sector, traditionally so nimble and agile, has the right architecture to provide the best possible security for investors as well as capital for businesses, and the best talent right here in the UK to make that happen.

The structures put in place after the financial crisis have served us well and financial stability will always be our top priority.

But we can further improve the functioning of capital markets, so this evening I set out the governments Mansion House reforms.

They build on the Edinburgh Reforms I announced in December and the vision for financial services which the now Prime Minister spoke about here in 2021 of an open, sustainable, innovative and globally competitive sector.

Firstly, I am announcing a series of measures to boost returns and improve outcomes for pension fund holders whilst increasing funding liquidity for high-growth companies.

Second, I will set out ways to incentivise companies to start and grow in the UK by strengthening our position as a listings destination.

And finally, we will reform and simplify our financial services rulebook to ensure we have the most growth-friendly regulation possible without compromising our commitment to stability.


I begin with pensions.

The UK has the largest pension market in Europe, worth over 2.5 trillion. It plays a critical role in providing safe retirement income as part of the social contract between generations.

Government policy, such as autoenrollment, has strengthened it but so too has confidence in the expertise of our financial institutions to manage investments wisely.

However, currently we have a perverse situation in which UK institutional investors are not investing as much in UK high-growth companies as their international counterparts.

At the same time on their current trajectory, some defined contribution schemes may not provide the returns their pension fund holders expect or need.

Whilst many defined benefit funds are in surplus, their returns are lower than some international peers and some are still underfunded.

So alongside our outstanding Economic Secretary Andrew Griffith and brilliant Pensions Minister Laura Trott I have engaged with some of our largest pension schemes, insurers, asset managers and experts to put together tonights Mansion House reforms. I am also immensely grateful to Sir Jon Symonds and Sir Steve Webb for their advice on how to construct this package. And Im also very grateful to Gwyneth Nurse and her brilliant team in the Treasury. Gwyneth is of course the real Chancellor as we Official Chancellors come and go.

Tonight I lay out the direction of travel. Sometimes consultations will be necessary, but all final decisions will be made ahead of the Autumn Statement later this year.

And as we make those decisions, I will be guided by three golden rules.

Firstly everything we do we will seek to secure the best possible outcomes for pension savers, with any changes to investment structures putting their needs first and foremost.

Secondly we will always prioritise a strong and diversified gilt market. It will be an evolutionary not revolutionary change to our pensions market. Those who invest in our gilts are helping to fund vital public services and any changes must recognise the important role they play.

The third golden rule is that the decisions we take must always strengthen the UKs competitive position as a leading financial centre able to fund, through the wealth it creates, our precious public services.

I start with Defined Contribution pension schemes, which in the UK now invest under 1% in unlisted equity, compared to between 5 and 6% in Australia.

Today I am pleased to announce that the Lord Mayor and I joined the CEOs of many of our largest DC pension schemes namely Aviva, Scottish Widows, L&G, Aegon, Phoenix, Nest, Smart Pension, M&G & Mercer for the formal signing of the Mansion House Compact.

The Compact which is a great personal triumph for the Lord Mayor - commits these DC funds, which represent around two-thirds of the UKs entire DC workplace market, to the objective of allocating at least 5% of their default funds to unlisted equities by 2030.

If the rest of the UKs DC market follows suit, this could unlock up to 50 billion of investment into high growth companies by that time.

Secondly, we know funds can only optimise returns from a balanced portfolio if they have the scale to do so. We will therefore facilitate a programme of DC consolidation, to ensure that funds are able to maintain a diverse portfolio of bonds, equity and unlisted assets and deliver the best possible returns for savers.

Tomorrow, the Department for Work and Pensions will publish its joint consultation response with the Pensions Regulator and the FCA on the Value For Money framework, clarifying that investment decisions should be made on the basis of long-term returns and not simply cost.

Pension schemes which are not achieving the best possible outcome for their members will face being wound up by the Pensions Regulator. We will also set out a roadmap to encourage Collective DC funds, a new type of pension fund which we believe holds great promise for the future.

Third, we need to ensure that all schemes have access to a wide range of investment vehicles that enable them to invest quickly and effectively in unlisted high growth companies.

We have launched the LIFTS competition, and will consider closely the bids that have already started to come in for up to 250 million of governme

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