A parliamentary committee has today (8 December) described the government’s plan to boost financial services as a “damp squib”, saying proposed reforms have so far had a limited impact on the economy.
The House of Commons Treasury Select Committee issued the report on the impact of the so-called “Edinburgh reforms”, launched a year ago today by chancellor, Jeremy Hunt.
The plans included a removal of ringfencing for pensions investments, the scrapping of the cap on bankers’ bonuses and changes to the regulatory structure. They were aimed at improving the UK’s financial sector post-Brexit, making it more attractive than European rivals, such as Paris or Frankfurt.
‘Damp squib’
But today’s report found there had been little progress towards meeting the government’s goals.
Chair of the committee, Conservative MP Harriett Baldwin, said the Treasury was right to update the rules for the financial sector after the UK left the EU, but that more work was needed:
“We welcome many of the changes as logical and sensible measures. We do, though, question the validity of claims that welcoming consultations, establishing reviews or publishing documents should be considered reforms.
“The Edinburgh Reforms were given considerable fanfare last December but, 12 months on, the lack of progress or economic impact has left them feeling like a damp squib.”
Many of the chancellor’s efforts were “preparatory” steps for reforms and not reforms, according to the report’s conclusions.
Government response
Economic Secretary to the Treasury, Bim Afolami, visited the City of London to mark the year anniversary of the announcements.
He is expected to highlight the progress made by the government towards the reforms, saying that the government has already delivered on 22 of the 31 reforms.
Afolami will say:
“Already companies worldwide are taking note of the UK’s approach, and we will continue to deliver on our reforms as we make the UK the best place in the world to create and grow a business.”
Powerhouse
The UK remains a service-based economy. According to a recent House of Commons report, the service industries accounted for 79% of total UK economic output and 83% of employment in in April–June 2023.
As highlighted by a recent report launched by the Institute of Export & International Trade (IOE&IT), services account for half of the UK’s global exports, making the UK second in the rankings of global services exporters and first in Europe.
The report, entitled ‘Global horizons: realising the services exports potential of UK nations and regions’ found that closing the export gap in the UK’s nations and regions was key to maintaining the UK’s status as a ‘services superpower’.
IOE&IT director general, Marco Forgione, said:
“It’s vital we do not become complacent, and that we maintain our global advantage as an exporter of services.
“With multiple forecasts predicting that services will be the driver of economic growth across the world, policymakers must ensure that they are creating an environment that allows the UK to remain a services powerhouse and to continue to sell our financial products to the world.”
No more sneering
The opposition Labour Party has used the day to say it is no longer “sneering at business”.
Tulip Siddiq, shadow City minister, told the FT that her party wanted to work with the financial services sector and promised to prioritise stability.
Siddiq said: “We are not coming in and ripping up all the legislation.”
She also announced that the party would be appointing 10 City advisers to work on financial policy, including Sir Ron Kalifa, independent director at the Bank of England; Susan Allen, CEO of Yorkshire Building Society; and David Schwimmer, CEO of London Stock Exchange Group.
Later today, Keir Starmer and shadow chancellor, Rachael Reeves, are expected to announce their own review of financial services. A final report is due in 2024.