In an article that first appeared in the Yorkshire Post, Head of Policy and Advocacy, Marloes Nicholls looks at the possible impact of the appointment of the new Prime Minister on the Financial Services and Markets Bill.
It’s been a remarkable turnaround for Rishi Sunak in recent weeks, going from a gruelling leadership contest over the summer that ended in disappointing defeat, to an unchallenged coronation following Liz Truss’ dramatic implosion.
There will be plenty of people who will be badly hoping for a similar change in their own fortunes, as they face up to the extent of the economic crisis we are now suffering. Just last week, the Financial Conduct Authority warned that record numbers – 60 per cent of all UK adults – are now struggling to pay their bills.
The new Prime Minister should be focussed on what he can do to help people further with their personal finances, while trying to restore some order to the national picture. But there is an equally pressing question that Rishi Sunak will need to answer when it comes to the way our economy should work, and what it should prioritise.
Behind the political hubbub of the last few months, a landmark piece of legislation that will rewrite the rules underpinning how the UK’s critical finance industry works has been proceeding quietly through Parliament – the Financial Services and Markets Bill.
One of the key authors of this Bill was in fact Rishi Sunak while Chancellor.
But if its contents are any indication of the direction his policies will now take in the top job, those looking for him to put the interests of the public first may find themselves disappointed.
Instead, a key pillar of the Bill is to fundamentally undermine effective regulation of the finance industry. The independent regulators who are supposed to protect us from City wrongdoing will now be given an objective to promote the ‘international competitiveness’ of the industry they oversee.
Turning regulators from watchdogs to cheerleaders is a bad enough suggestion on the face of it, but it also ignores that it was precisely this approach to regulation that was changed in 2012 after it contributed to the devastating financial crash of 2008. That catastrophe saw millions lose their savings, homes, businesses and jobs, cut every workers pay by £800 in the years that followed, and cost the UK an estimated £1.8 trillion in lost GDP.
Alongside this, other measures that were brought in following the crash to safeguard us from reckless risk, such as caps on bankers’ bonuses and the ‘ring-fence’ that protects our savings from reckless investment bank gambling are now also being put under question.
After the experience of the last few weeks, the downsides of pursuing growth through deregulation and favouring the wealthiest should be clear, even on its own terms. The current poll rating of the Conservative Party shows what the British public think of this – and they also reject the specific proposals in this Bill.
Fortunately, there are representatives in Parliament who understand the dangers of removing these protections from financial risk taking and another crash. Yorkshire MPs Emma Hardy and Kevin Hollinrake should be commended for working across party political lines.
They have proposed amending the Bill to instead give our financial regulators a responsibility (shockingly, for the first time) to ensure that everyone has access to the essential financial services they need such as cash, home insurance, and affordable credit.
This would be a strong positive step to harness the power of our finance sector to address the challenges people are facing here in the UK. But it is only one step – the Bill needs substantial changes if it is not to cause more economic damage at the worst possible time.
Let’s hope that his period out of office has given Rishi Sunak the chance to realise this.