Labor and Tories Are Increasing Pressure on the City's Growth Watchdog - Latest Global News

Labor and Tories Are Increasing Pressure on the City’s Growth Watchdog

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The Labor Party has struck an unlikely double whammy with Conservative Chancellor Jeremy Hunt by putting pressure on Britain’s City regulator to stop hampering Britain’s financial services sector with allegedly excessive regulation.

The rare policy alignment reflects growing concerns about the Financial Conduct Authority’s leadership, its willingness to boost competitiveness and fears it has spooked companies with a controversial plan to “name and shame” the companies it investigates.

City shadow minister Tulip Siddiq said Labor plans to push the FCA to “break down the barriers to competitiveness and growth” if elected this year.

She told the Financial Times that Labour’s proposed Regulatory Innovation Office would “improve accountability and encourage innovation in regulation across all sectors”.

The planned new body is intended to make the regulatory authorities more accountable overall and increase transparency.

The Tory government is also putting increased pressure on the FCA and Hunt will tell the regulator in the coming weeks that it is failing to meet new requirements to boost growth.

The Chancellor is expected to address an audience at Mansion House in the City of London in July to express his concern that a new statutory “secondary objective” for regulators on growth and competitiveness is not leading to a change in behavior.

“If it’s just a tick-box exercise, it won’t work,” said a Hunt ally. The Chancellor is also considering whether new legal changes are needed to ensure regulators take their new growth obligations seriously.

Treasury insiders say concerns about the FCA’s actions reached a peak this year when plans to name-check companies were investigated, which has sparked a fierce backlash in the City and leaves Hunt fearing London as financial center will become less attractive.

The Chancellor took the unusual decision to censure the FCA last month, telling the FT that the policy “does not feel in line with the new secondary growth duty that they have”.

Senior ministers also expressed concern about the performance of Ashley Alder, a former Hong Kong regulator who became FCA chair in February 2023. “We appointed a new chairman to change things but that didn’t happen,” a minister said. The FCA declined to comment on Alder’s criticism.

A Treasury insider described the problems surrounding the FCA as a “perfect storm”.

While Hunt is expected to increase pressure on the FCA to change its approach in July, a new Labor government is also expected to place a new focus on the regulator as Sir Keir Starmer seeks to address barriers to growth.

Siddiq said: “Working with the City and regulators, a Labor government will streamline the regulatory burden on financial services and remove the barriers to competitiveness and growth.”

Labor said the FCA plays “a critical role in ensuring the protection of British consumers and the integrity of the financial sector” but there must be “an appropriate balance” with the requirements to maintain Britain’s competitiveness.

Siddiq’s proposed new Regulatory Innovation Office would provide transparency into whether regulators are meeting their secondary competition objective, in addition to the FCA’s internal assessment.

Labour’s new office would also provide “guidance” to regulators to speed up decision-making in priority growth areas, the party said.

The FCA said: “It is for the Government and Parliament to determine the approach to accountability and oversight. We are committed to being held accountable for our decisions and working closely with other regulators to support innovation.”

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