59 leading economists have written an open letter to the Chancellor, Rishi Sunak MP, and the Economic Secretary to the Treasury, John Glen MP, outlining their concerns regarding proposals to make ‘competitiveness’ a greater focus in financial regulation.
A landmark post-Brexit Financial Services and Markets Bill was announced at the Queen’s Speech last week, and the government intends to use that to introduce objectives for financial regulators to promote the “international competitiveness” of the finance sector. International competitiveness refers to the ability of UK firms to compete for business overseas, and for the UK to remain an attractive location for global businesses.
The letter signatories, who include pre-eminent British economist Sir John Kay, former UK Minister Sir Vince Cable, former UK regulator Mick McAteer, and Nobel Prize laureate Joseph Stiglitz, argue that competitiveness is an inappropriate objective to charge financial regulators with because:
- It risks another financial crash.
- It will harm the real economy.
- It will reduce economic growth.
- It is a poorly defined objective, which will lead to poor policy making.
- It will generate a regulatory ‘race to the bottom’.
- It will undermine the work regulators do to promote healthy competition.
- It will force the regulators to act as cheerleaders for big city institutions.
The letter can be read in full here.
It is truly shocking that the government is proposing we reintroduce the mistaken regulatory rules that helped cause the global financial crash, and economic turmoil and misery for millions. In the midst of a cost of living crisis, their focus should be on making financial regulation work for the public, not narrow City interests, for instance through climate and inclusion objectives for regulators.Marloes Nicholls, Head of Policy and Advocacy at the Lab
Research by the Lab published last week found that the British public agree – most deem the government’s financial services reforms as out of touch and elitist, putting the City of London first and repeating the mistakes of the past.
- ‘New law to protect access to cash announced in Queen’s speech’, HM Treasury, 10th May 2022: https://www.gov.uk/government/news/new-law-to-protect-access-to-cash-announced-in-queens-speech
- ‘Poll shows widespread concern over Chancellor’s financial reforms’, Finance Innovation Lab press release, 9th May 2022: https://financeinnovationlab.org/queens-speech-2022-poll-shows-widespread-concern-over-chancellors-financial-reforms/
- 37 public interest groups opposed the proposal to introduce ‘competitiveness’ objectives for financial regulators via a joint statement in February 2022: https://financeinnovationlab.org/insights/financial-services-future-regulatory-framework-joint-statement/
- The Finance Innovation Lab is a UK-based charity working to build a financial system that serves people and planet – one that’s democratic, sustainable, just and resilient. We support the growth of purpose-driven financial institutions, including through Lab Fellowship, the world’s first incubator to support financial innovators putting social or environmental purpose at the heart of their work. We work with major UK banks, through strategic partnerships with them and their staff to support greater action on climate change. We also coordinate the Transforming Finance Network of civil society organisations focussed on financial sector policy.
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