Labour’s commitment to becoming a staunch advocate for the UK’s financial services sector is underlined in a recent pledge, aiming to trim down an extensive 10,000 pages of regulations while explicitly ruling out a windfall tax on bank profits.
The shadow chancellor, Rachel Reeves, emphasized that while Labour is determined to champion the financial sector, it won’t yield to intense lobbying from the private equity industry. A particular focus remains on closing a £500 million tax loophole benefiting private equity executives.
In a comprehensive 24-page document obtained by Leaked News, Labour articulated its intent to leverage the strengths of the financial sector, often overlooked by the Conservative party. The report emphasizes, “Britain’s financial services lead the world…
But too often that success has been in spite, not because, of the actions of the government, which has lacked commitment to its success and stoked instability.”
Reeves stressed, “We will unashamedly champion our financial services sector as one of the UK’s greatest assets.” The formal unveiling of these plans to City leaders is scheduled for Labour’s business conference in London on Thursday.
As part of their strategy, Labour aims to reduce the industry’s “regulatory burden” by streamlining excessively procedural rules within the Financial Conduct Authority’s (FCA) extensive 10,000-page regulatory handbook. Additionally, the plan includes eliminating overlapping rules from the FCA, the Bank of England, and the Competition and Markets Authority. To facilitate collaboration among regulators and enhance efficiency, a “Regulatory Innovation Office” is proposed to be established, fostering data sharing and monitoring the watchdog’s activities.
Reeves defended the move, clarifying that the goal is not to compromise consumer protection or the stability of the UK’s financial sector. She stated, “It is important to have a proper review to make sure that the rules and regulations that we’ve got are fit for purpose and don’t cut across each other. So it’s about having smart and sensible regulation that works for consumers and also works for the sector.”
As the City grapples with increased competition from global financial hubs such as New York, Paris, Frankfurt, and Amsterdam, particularly post-Brexit, Labour’s initiative seeks to bolster the UK’s financial standing. London’s stock market has witnessed an exodus of companies, and the UK’s £275 billion financial and professional services sector, contributing about 12% to the economy, remains a crucial tax generator.
While the “Financing Growth” report is silent on Labour’s tax plans for the sector, Reeves confirmed that banking executives need not worry about a windfall tax. This assurance comes amid concerns within the banking industry that Labour might follow Italy’s lead and impose a tax on profits, especially as interest rates rise. The report, however, does maintain Labour’s commitment to scrapping a discounted tax rate for “carried interest” in the private equity industry, a move that has been met with some resistance.
The report also critiques the Tories’ post-Brexit support for the financial sector and outlines Labour’s intention to collaborate with the EU in removing “unnecessary barriers” for firms. To reinvigorate the UK’s stock market, Labour plans to launch a campaign encouraging consumers to invest in British companies’ shares. Furthermore, it seeks to encourage pension schemes to allocate more funds to small private companies, venture capital, and infrastructure investments.
For consumers, Labour aims to forge a national financial inclusion strategy, focusing on swiftly regulating controversial “buy now, pay later” products.
The party also advocates for regulators to have the power to guarantee face-to-face banking for branchless communities across the UK.
In a push towards sustainability, Labour envisions a partnership with City firms to establish the UK as a “global hub for green finance.”
Plans include ramping up the decarbonization of the country’s housing stock by expanding green mortgages and collaborating with City firms to create loan products supporting retrofitting initiatives.
To hold companies accountable, Labour proposes compelling City firms and the UK’s largest listed companies on the FTSE 100 to publicly disclose their carbon footprint and adopt “credible” climate transition plans.
As part of a broader effort to distribute wealth more evenly, Labour aims to expand financial services into regional hubs beyond London and Edinburgh. Additionally, it plans to establish a “Skills England” body dedicated to identifying and nurturing talent in these areas.
In summary, Labour’s comprehensive strategy aims to revitalize the financial sector, aligning it more closely with national interests, fostering sustainability, and ensuring equitable distribution of wealth across the country.
The party underscores the importance of the financial sector as a vital player in the nation’s economic resurgence.
