UK Treasury chief will slash financial red tape to boost investment
The government is trying to regain the economic initiative after rocky weeks of costly U-turns and figures showing the UK economy contracted for two months running.
Arguing that regulation often 'acts as a boot on the neck of businesses', Reeves announced plans to pare back some of the rules introduced after the 2008 global financial crisis, which was triggered by risky lending. That includes reforms to 'ring-fencing' rules enacted to separate banks' retail and investment banking activities, and a review of the amount of capital banks must hold.
She said that it was the widest set of reforms of financial services in more than a decade.
'We are fundamentally reforming the regulatory system, freeing up firms to take risks and to drive growth,' Reeves said on a visit to Leeds in northern England.
Reeves set out the changes in her annual Mansion House speech to finance bigwigs in London, saying she was 'rolling back regulation that has gone too far in seeking to eliminate risk'.
'I have placed financial services at the heart of the government's growth mission ... with a ripple effect that will drive investment in all sectors of our economy and put pounds in the pockets of working people,' she said.
Reeves also praised new Bank of England guidance allowing mortgage lenders to loan more than 4.5 times a buyer's income, saying that would allow tens of thousands of people to buy their first home.
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She added that 'regulators in other sectors must take up the call I make this evening not to bend to the temptation of excessive caution, but to boldly regulate for growth'.
The centre-left Labour Party won a landslide election victory in July 2024, but has struggled to deliver on its pledge to boost economic growth.
Efforts to soothe markets and demonstrate fiscal prudence have proved unpopular with voters. A decision to end winter home heating subsidies for millions of retirees, announced soon after the election, was reversed last month. Earlier this month, the government ditched planned cuts to welfare spending after an outcry from Labour lawmakers.
The U-turns have reduced the Treasury's future income by several billion pounds, increasing the likelihood of tax increases in autumn. But the government has boxed itself in by ruling out hikes to sales tax or to income tax for employees.
Questions swirled about Reeves' future earlier this month when she appeared in tears in the House of Commons during the weekly prime minister's questions session. The Treasury said that Reeves was dealing with a 'personal matter'.
The cost of government borrowing spiked at the sight of Reeves' tears, but settled down after Prime Minister Keir Starmer gave her his full backing.
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