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Chancellor Rachel Reeves will on Tuesday set out a vision for Britain’s financial services industry based on sound public finances and a regulatory system geared towards growth rather than eliminating risk.
Reeves will tell City of London grandees in her Mansion House speech that she will not put at risk Britain’s economic “stability”, in spite of pressure from some Labour MPs for higher public spending and looser fiscal rules.
An ally of the chancellor said she would announce plans to tear up “reams of financial red tape” and that she would be “ruthless in slashing rules that make the UK uncompetitive”.
People briefed on the speech said she would accelerate reforms to the “senior managers’ regime”, accountability rules introduced after the 2008 financial crash that the City has complained are too onerous.
After a damaging few weeks for Reeves in which she was forced to abandon £6.25bn of welfare savings by rebellious Labour MPs, the chancellor will insist she has a grip on the economy and will not let borrowing run out of control.
“She will highlight how the government has restored stability as a vital precondition to shaping the economy of tomorrow, supporting four interest rate cuts to drive down mortgage and business lending costs,” the ally of Reeves said.
However, many in the City of London fear that Reeves will attempt to fill a growing hole in her fiscal plans by increasing taxes on the financial services sector — such as an increase in the bank levy — or on the wealthy.
Polling by Survation last month found that 64 per cent of Labour MPs said Reeves’ fiscal rules inhibited ministers’ abilities to meet their objectives, including raising living standards and improving public services.
Reeves has insisted the rules, most critically a pledge to fund day-to-day spending only with tax receipts by 2029-30, are vital for maintaining market confidence and keeping debt interest under control.
Bond yields spiked at the sight of Reeves crying in the House of Commons earlier this month, amid concerns she might be about to leave the Treasury. Markets feared that a new Labour chancellor would take a looser fiscal approach.
Reeves’ speech will be a significant moment as she seeks to reassert her authority, while at the same time reassuring her audience that she will honour her promise to change Britain’s regulatory culture so it “regulates for growth”, not just for risk.
The senior managers’ regime has since 2016 forced senior executives at banks, building societies and credit unions to take personal responsibility for infractions if they have not taken “reasonable steps” to prevent them.
Penalties range from fines to bans. UK Finance, which represents 300 companies in the sector, has warned that the regime captured “large swaths of people and compliance has become quite burdensome”.
Reeves will set out plans to cut the burden of the senior managers’ and certification regime, which covers almost 140,000 finance professionals, by half, empowering regulators to put in place a more “proportionate” regime.
She will also propose making senior management appointments easier, reducing timelines for review by regulators from three to two months and removing pre-approvals for about 4 per cent on average in banks and insurers, Treasury officials said.
Financial services is one of eight “growth” sectors identified in the government’s new industrial strategy and Reeves will set out proposals to help it take on growing international competition.
Reeves’ failure to push through reforms to winter fuel payments and sickness and disability benefits has shaken confidence in the Treasury.
The chancellor has been forced to drop from her Mansion House speech plans to limit cash ISAs, an idea intended to shift savings into stocks, after a backlash from building societies and consumer champions.