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The writer chairs the Treasury select committee of the House of Commons
A year ago, I asked chancellor Rachel Reeves how many times she had met with consumer advocacy groups since she had been in government. I was concerned about the apparent imbalance between business and consumer voices influencing UK Treasury policy.
In her response, I received a list of meetings involving junior ministers. The only mention of a meeting attended by the chancellor herself was with the consumer champion Martin Lewis.
The Treasury appeared to be readily accepting requests from the City for a red-tape bonfire but not spending as much time listening to the other side of the story. In her Mansion House speech, Reeves described regulation as “a boot on the neck of businesses, choking off the enterprise and innovation that is the lifeblood of growth”.
I acknowledge that burdens can be reduced without harm, but a balance must be struck. The following week, I asked the governor of the Bank of England if he shared those views. Andrew Bailey replied, “I don’t use those terms”.
Politics is the art of persuasion and so it’s perhaps not surprising that the chancellor uses more colourful language than officials. But I can’t help feeling that there is a disconnect between the government and some of our major public financial institutions on deregulation.
An organisation I feel particular sympathy for is the Financial Conduct Authority (I’m sure this is a position that puts me firmly in the minority). The regulator is under constant pressure to show it is supporting the government’s mission to grow the economy, but without any clear definition of exactly how much risk ministers are willing to accept.
A few things are becoming clear. Rules are being relaxed and a further loosening appears to be coming down the track. This will enable more financial risks to be taken, including allowing people to take on more debt. It is hoped this will open up avenues for people to engage with financial services in a way that helps to grow the economy.
But what will also happen is that we will see an increase in the number of people or businesses falling into financial distress. Resilience in the event of an economic downturn will drop.
The Treasury’s job is to analyse and reanalyse, before drawing the line of acceptable harm. So far, it has failed to do so. If you give regulators a destination, they can plot their route accordingly. If you don’t, they end up lost and, when there is an incident, all fingers point towards the regulator. I hope that isn’t by design.
We must also acknowledge the fraught global context. While red tape burns, so does the global economic order. In its latest Financial Stability Report, the BoE describes an increase in risks to the UK’s financial stability because of heightened international tensions. It’s impossible to ignore the stark dissonance between a financial deregulation agenda and warnings that the economy is becoming more vulnerable, not less.
If I am to accept that more risks will be taken, then, as chair of the Treasury committee, it feels fair that we should have them clearly explained by all the relevant interests, including the Treasury.
I want the government to realise its ambition to grow the economy. I believe that growth offers us a viable path to improve living standards for MPs’ constituents. But that does not mean that I will blindly accept this should be done by just deleting rules from the City’s rule book.
The FCA is forced to uphold high standards of transparency and I expect the same of the Treasury. We need to see a clear strategy that sets out the risks that the government will allow its own regulators to take in the name of growth. The current ambiguity must end.
