When it finally comes in the autumn, economic issues will be to the fore in the cut and thrust of political debate at the General Election. The cost of living, taxation, growth, infrastructure investment, pensions and the welfare state are all likely to be in the headlines. Financial services regulation is unlikely to feature – but what can we expect?
A superficial examination of party policies might suggest that there are few areas of disagreement between Conservative and Labour policies, writes Contributing Editor David Worsfold. Both parties make a lot of noise about need to streamline regulatory rulebooks.
Labour’s recent launch of its policy Financing Growth: Labour’s Plan for Financial Services gives some idea of what to expect if the opinion polls are right and Kier Starmer gets the keys to 10 Downing Street.
It offers some indications of where it thinks a drive to simplify regulation could focus.
It says the Consumer Duty means that many older regulations could now be redundant and pledges to direct the Financial Conduct Authority to invite the sector to identify rules that could go if rulebooks are better aligned with the Consumer Duty.
Labour also plans to “simplify the ISA landscape to make it as easy as possible for people to feel the benefits of saving and investing their money”, promises a review of the pensions landscape and has given its backing to the FCA’s review of the advice-guidance boundary.
Braced for criticism from consumer groups that this could see consumer protections weakened Shadow chancellor Rachel Reeves says it is not about watering down protection for consumers, but “to have a proper review to make sure that the rules and regulations we’ve got are fit for purpose”.
The tone of Ms Reeves comments and her pledge to “unashamedly champion” the UK’s financial services sector should also encourage the insurance market to believe that its proposals to create a specialist captive insurance sector within the London Market will get a fair hearing from an incoming Labour government.
Perhaps flowing in the opposite direction is Labour’s proposal for a Regulatory Innovation Office which it says would improve the efficiency of regulatory and supervisory activities by promoting a joined-up approach focused on to improve accountability and promote innovation in regulation across sectors.
It also pledges to maintain the pressure on the sector to embrace robust sustainable finance initiatives and to improve the diversity of the sector.
It is this latter area where one of the clearest dividing lines between Labour and Conservatives has already emerged.
Business Secretary Kemi Badenoch told the recent TheCityUK international conference that she is worried about there being too many rules in financial services, warning that cultural issues should not get in the way of growth.
Ms Badenoch said: “I worry about the tendency to push for well-meaning but counterproductive measures that stifle growth, productivity and innovation.”
She added: “Regulation has moved from protection against fraud and systemic failure to everything from diversity to green finance, and this ever-rising tide of micro management will not necessarily make us or the financial markets stronger.”
She singled out the FCA’s current consultation on proposals to boost diversity and inclusion in UK financial services, saying she has written to financial regulators to warn against proposed mandatory ethnicity quotas, which she said the law “does not require and could be counterproductive”.
“These so-called cultural issues have an impact more significant than we realise on the bigger picture,” said Ms Badenoch.
As the election draws nearer we will get more detail and greater clarity, although probably still a little fuzzy around the edges. No doubt many in the sector will pore over the small print of the party manifestoes so they are prepared for whatever the next government has in mind for them.