By Huw Jones
LONDON (Reuters) – Britain’s opposition Labour Party, tipped in the polls to win an election expected this year, set out its blueprint on Tuesday to “unashamedly champion” a financial sector worried about its global competitiveness following Brexit as top rival New York lures UK companies to list on its markets.
WHAT IS LABOUR PROPOSING?
Labour, traditionally seen as leery of the financial sector, which provides 100 billion pounds in tax revenue and accounts for 12% of the UK economy, says the City is one of Britain’s “greatest assets” and key to kickstarting growth.
Just as for the current government, Britain’s strapped finances mean Labour would have to rely heavily funds raised by the private sector to pay for new infrastructure and other investments to boost growth.
Labour said it would enhance the global competitiveness of the financial sector, bolster consumer protection, lead the world in sustainable finance and embrace fintech.
It would also reinvigorate capital markets by reviewing pensions and savings to make it easier to invest in infrastructure, growth companies and clean technology. It also backs easing insurer capital rules to free up cash for investment.
MORE TO COME
The Party also wants more women working in finance, though by supporting existing initiatives, and to deepen cooperation with the EU on financial services.
Bespoke buffers of capital on the retail arms of UK banks, known as ring-fencing, would remain.
Labour would regulate the buy-now-pay-later sector, but it mirrors BoE caution on a digital pound, and won’t reverse the government’s decision to scrap an EU-originated cap on banker bonuses.
Labour says it will “further articulate” its capital markets policy during 2024.
WHAT’S NEW HERE?
Not much of substance so far. The plans mirror those of the government, which have been praised by the sector, though deemed a damp squib by lawmakers for having little impact to date.
After Brexit in 2020, the finance ministry undertook over 30 public consultations and root-and-branch reviews of UK financial services rules.
This spawned the “Edinburgh Reforms”, a raft of measures to fundamentally change listing rules, ease capital requirements for insurers, and other reforms.
Parliament last year approved a broad financial services and markets act, giving the Bank of England and Financial Conduct Authority a range of new powers – and a new remit to bear in mind the City’s global competitiveness and economic growth when it comes to writing new rules.
The finance ministry has also spearheaded the “Mansion House Compact” to persuade pension schemes to invest a portion of their cash into growth companies.
The FCA has introduced a “Consumer Duty” on financial firms, the most radical change in consumer protection in decades. It has also proposed tougher scrutiny of diversity in financial firms.
The government has set out reforms to make ring-fencing more flexible, but has ignored industry calls so far to scrap it, and has also proposed that the FCA regulates buy-now-pay-later credit.
MORE OF THE SAME
After the upheavals of Brexit and torrent of activity that has taken place under the Conservative government, a finance sector official welcomed Labour’s explicit reassurance there would be no major divergence from reforms already under way if it came to power.
The City wants a ‘partnership council’ of ministry and industry representatives to quickly implement these reforms, a step Labour has flagged, to avoid lagging the EU, which is approving similar changes to listing, insurance capital and other rules.
APING THE GOVERNMENT?
Positive Money, which campaigns for a financial sector that supports a sustainable economy, said Labour’s plans simply ape what the government is already doing by being too cosy with the City.
The sector has said that regulation is just one factor in competitiveness: being able to hire easily from across the world, and having a tax regime is not out of whack with rival centres are also key, but tackling them is harder.
Labour’s warm overtures to the EU on financial services will be welcomed, but few expect the City, largely cut off by Brexit from the bloc, to see materially better access anytime soon as Brussels legislates to grab euro derivatives clearing from London.
(Reporting by Huw Jones; editing by David Evans)
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