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Chancellor Rachel Reeves will tell a City of London audience on Tuesday that Britain’s safety-first regulatory culture is acting as “a boot on the neck of business”, as she promises to sweep away red tape across the economy.
Reeves will use her annual Mansion House speech to announce what she claims is the biggest cut to financial services regulation in a decade, arguing that Britain has engaged in a corrosive attempt to eliminate risk from the economy.
She will say that the drive against red tape must extend beyond the City to all sectors of the economy, insisting that Britain must adopt a new culture in which rules are deployed to boost growth, not cut all risk.
“It is clear we must do more,” Reeves will say. “In too many areas, regulation still acts as a boot on the neck of businesses, choking off the enterprise and innovation that is the lifeblood of growth.”
“Regulators in other sectors must take up the call I make this evening and not bend to the temptation of excessive caution,” she will say. “They should boldly regulate for growth in the service of prosperity across our country.”
Reeves’ overarching message to City grandees is that Britain needs to take more risks and that the regulatory culture that took root after the 2008 financial crisis has gone too far.
In the City, that means reforming the ringfencing rules that force UK banks to separate their retail and investment banking activities — a change introduced after 2008 — along with cutting capital and reporting requirements.
Earlier on Tuesday Reeves also announced a scaling back of what she claimed was an excessively onerous senior-managers regime in the City, and an overhaul of the much-criticised Financial Ombudsman Service.
The chancellor will also launch a new Listings Taskforce to support businesses to list and grow in the UK as part of efforts to revive the stock exchange.
Meanwhile, the public will be encouraged by banks and through a national advertising campaign to take more risks with their savings, investing in stocks and shares to boost returns.
Reeves is under pressure to take more political risks too, as she seeks to boost growth in the face of a deteriorating fiscal situation and the prospect that she will have to raise taxes significantly in her autumn Budget.
Her comments have drawn a sceptical reception from observers who say Labour has failed to deliver reforms on the scale needed to transform the economy during its first year in office.
Despite policies to boost public investment that would pay off in time, “it doesn’t feel like a radical change,” Helen Miller, director of the Institute for Fiscal Studies, said at an event earlier on Tuesday.
“Growth should be the number one mission,” she said. “We should be throwing the kitchen sink at it [but] it doesn’t feel like that.” She added that the new focus on raising defence spending had overtaken other priorities, limiting the scope to invest in other areas such as local transport or non-military research and development.
Miller said the “obsession” with how much headroom the chancellor had against her fiscal rules was the “political choice” of a government that had retained its predecessor’s policies, on state-funded childcare and the pension triple lock, rather than starting a debate on the size and role of the state.
Meanwhile, Richard Hughes, the head of the Office for Budget Responsibility, struck a gloomy note about the health of the public finances when he addressed MPs on Tuesday.
The head of the fiscal watchdog warned that there are “reasons to worry” about the level of public debt in the UK given the country’s exposure to economic shocks and the hefty impact of events such as the financial crisis and the pandemic.
“We have also already raised taxes quite a bit in this country — the tax burden is getting close to an all-time high, so we have used some of that policy flexibility,” he told MPs.
The size of the state was also getting close to its highest postwar levels, he added, while demand from pension funds for UK government debt is declining.
Additional reporting by Sam Fleming
