Rachel Reeves has been coned

How a ‘Socialist’ became a patsy for City Slickers and didn’t even see it coming

Ms Reid rushes off to see her new besties in the City of London

Rachel Reeves, Britain’s Chancellor of the Exchequer, really needs to stop hanging out with these big City fund managers, bankers and assorted other princes of the financial world who can spot a sucker at 150 yards.

Ms. Reeves maintains that she’s ever so responsible and yearns, yes, yearns for these super rich guys (a term that embraces a few women but only a few) to say something nice about her and, possibly, if she is sufficiently accommodating, they might be kind enough to offer a bit of endorsement for Labour’s policies.

So on any given week you will find her out there shmoozing with this crowd. They’ve been shmoozed before and know how to play this game much better than her. She wants to grow the economy, spread the wealth and balance the books; by any standards a big call. They have a much simpler agenda which is to make loadsamoney.

In most cases they are already making loadsamoney but, as is well known, it’s never enough. They whine like mad about having to hand any of it over to the tax man and squeal in agony at the thought that even when they are large sums will be conveyed to His Majesty’s Inland Revenue in inheritance tax.

Fortunately they have squads of accountants and tax lawyers who know every loophole in the book and so almost always end up paying a lower proportion of their income in tax than the average working stiff.

Life, as we know, ain’t fair but even the average UK citizen, bereft of a wily accountant, has access to one relatively modest but nonetheless valuable way of acquiring tax-free wealth. This is through the Individual Savings Account or ISA, a scheme allowing tax payers to invest up to £20,000 per year without paying tax on either the dividend or capital gains derived from selling a ISA investment.

A ‘mere’ £20,000 is no more than a good night out in Monaco for City Slickers but millions of people rely on this scheme to build up their reserves and overtime it is a very useful way of acquiring a bit of wealth.

So far, so good but not good enough in the eyes of the people who manage these ISA funds because as matters stand most of the ISA money goes into cash savings schemes offering very limited potential for the City Slickers to take a cut via management or trading fees and goodness only knows what opportunities could arise from creating a large pool of novice investors.

Obviously when they meet sober suited Ms. Reeves they do not express their views in these terms. Instead they talk about they desire to help her in the mission to grow the economy and guide those adorable little people towards becoming more financially savvy by getting them involved in higher earning stocks and shares.

Actually they have point because by almost all measures investments in equities produce better returns than money earned via the modest interest paid on cash investments.

However most people are somewhat afraid of equity investment and do not think of themselves as being well equipped to dabble in the stock markets. So they cling to the security and predictably of cash ISAs and shamefully are not lining the pockets of those wonderful people who would like to manage their money.

All the signs are that Rachel Reeves has swallowed this argument hook, line and sinker. ‘I want’, she said, ‘to create more of a culture in the UK of retail investing to earn better returns to savers and to support the ambition to grow the economy’.

What a patsy, she can faultlessly trot out the lines fed to her by the super-rich money managers and she is planning to follow their advice.

That will almost inevitably end up making access to cash ISAs more limited and fling open the doors to ever eager investment managers. Some of the reformed ISA scheme arrangements might even trickle down to the benefit of the little guys. So, job done.

But there are a couple of problems here. First and foremost what we are talking about is other folk’s money. In my book everyone has the right to put their hard earned cash into whatever savings vehicle makes them feel most comfortable. It is not the job of government to effectively force them to do otherwise.

Secondly, Ms. Reeves seems not to appreciate that money traveling from cash accounts into equities is not stimulating economic growth because the shares the ISA investors will be coerced into buying are already in the market, they are not raising one penny in new investment. That would only happen if she was seriously inclined to force ISA savers into the infinitely more risky business of investing in new capital raising exercises.

Oh, and by the way, if the Chancellor thinks that expanding participation in the British stock market axiomatically grows the British economy someone should remind her that the real action within the benchmark FTSE 100 comes from the foreign companies which dominate the index.

But let’s not bogged down with facts because if City Slickers get their way it will make them very happy and they may even be inclined to give the Chancellor a pat on the back.