Labour vows to cut financial ‘red tape’ and ‘unashamedly champion’ UK sector | Financial sector
Labour has pledged to “unashamedly champion” the UK’s financial services sector, as it promised to cut down 10,000 pages of regulations and ruled out a windfall tax on bank profits.
However, the shadow chancellor, Rachel Reeves, signalled that Labour would not bow to intensive lobbying from the private equity industry, telling the Guardian she still planned to close a £500m tax loophole benefiting Britain’s private equity executives.
In a 24-page document seen by the Guardian, Labour said it would aim to harness the strengths of the financial sector, which it claimed the Conservative party had taken for granted.
“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,” the report said.
“We will unashamedly champion our financial services sector as one of the UK’s greatest assets,” Reeves added.
Labour, which will formally unveil the plans to City bosses at its business conference in London on Thursday, said the move would involve cutting the industry’s “regulatory burden” including by streamlining some “excessively procedural rules” in the Financial Conduct Authority’s (FCA’s) 10,000-page regulatory handbook.
It will also find and scrap overlapping rules set by the FCA, the Bank of England and the Competition and Markets Authority, and create a “Regulatory Innovation Office” that could help regulators share data, and will monitor the watchdog’s work.
Reeves defended the move to cut down on City rules, saying it was not about watering down protection for consumers or the UK’s financial stability. “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.”
Labour’s charm offensive comes as the City faces growing threats from rival financial hubs including New York, Paris, Frankfurt and Amsterdam, particularly post-Brexit. London’s stock market has seen an exodus of companies, with Flutter Entertainment, the owner of FanDuel, saying this week it was considering moving its primary listing to New York “as soon as practicable”. The UK’s £275bn financial and professional services sector accounts for about 12% of the economy and is a huge tax generator.
While the report, titled Financing Growth, is silent on Labour’s tax plans for the sector, Reeves said confirmed that banking executives could rest easy. “We have no plans for a windfall tax,” Reeves said.
Some bankers have been concerned that Labour could end up following in Italy’s footsteps and launching a tax raid on profits, which have been bolstered by rising interest rates. Banks were criticised last year for raising rates on mortgages and loans more quickly than those offered to savers.
Reeves also said she was not backing down on her plan to scrap a discounted tax rates for “carried interest” in the private equity industry, referring to the share of profits that fund managers make on successful deals. Dealmakers pay 28% capital gains tax on those profits, much lower than the 45% income tax levied on higher earners.
“That is one of the three tax-raising policies that we have announced along with closing the non-dom tax loophole and applying VAT and business rates on private schools,” the shadow chancellor said.
The report takes a swipe at the Tories’ record on supporting the financial sector post-Brexit and says a Labour government would work with the EU to remove “unnecessary barriers” for firms.
In an attempt to revive the UK’s flagging stock market, Labour said it would launch a campaign to encourage consumers to buy up the shares of British companies and encourage pension schemes to push more cash into small private companies, venture capital and infrastructure investments.
For consumers, the party said it would focus on forging on national financial inclusion strategy, to support vulnerable households. That would involve quickly rolling out regulation of controversial buy now, pay later products, and giving regulators power to guarantee face-to-face banking for branchless communities across the UK.
Labour also said it would partner with City firms to make the UK a “global hub for green finance”, and ramp up the decarbonisation of the country’s housing stock, by expanding green mortgages and partnering with City firms to create loan products that can better fund retrofitting.
It would also force City firms and the UK’s largest listed companies on the FTSE 100 to publicly declare their carbon footprint and adopt “credible” climate transition plans.
The shadow Treasury team said it aimed to spread the wealth, with plans to expand the financial services into regional hubs, beyond London and Edinburgh, and it would establish a “Skills England” body to seek out and foster talent in those areas.
“None of the ambitions of the next Labour government can be achieved without a strong financial sector playing its part in reviving investment,” Labour said. “It’s time we took pride in what Britain does best.”