Chancellor Rachel Reeves is set to announce a raft of deregulation changes for the City of London, arguing that cutting red tape will have trickle-down benefits for households across Britain. The Treasury has described the planned reforms as the 'biggest financial regulation reforms in a decade', with details expected to be unveiled on Tuesday ahead of Reeves' Mansion House address.
The 'Leeds reforms', named after the city where the chancellor will hold a summit with top City executives, aim to pare back transparency rules and other burdensome regulations. Reeves will claim that a thriving financial services sector is essential for the UK's growth mission, stating: 'I have placed financial services at the heart of the government’s growth mission – recognising that Britain cannot succeed and meet its growth ambitions without a financial services sector that is fighting fit and thriving.'
However, economists and campaigners have warned that deregulation carries significant risks, pointing to the 2008 financial crisis which led to a deep recession and government bailouts. Chaitanya Kumar of the New Economics Foundation said: 'It feels like groundhog day... The 2008 crash and what followed should have been a very strong lesson... but that’s what we seem to be doing.' Jesse Griffiths of the Finance Innovation Lab added that prioritising international financial firms over domestic needs had 'simply not worked for the UK economy'.
As an example of tangible benefits, Reeves is expected to highlight last week's loosening of mortgage rules by the Bank of England, which could allow 36,000 more first-time buyers onto the housing ladder each year. Nationwide Building Society has already lowered income requirements for its 95% mortgage. The chancellor will also confirm a permanent government-backed guarantee scheme for 95% mortgages, covering banks' losses if borrowers default.
Critics remain unconvinced. Sara Hall of Positive Money argued: 'Put plainly, loosening mortgage rules really translates to saddling households with larger, less sustainable debts, instead of tackling the underlying causes of unaffordability.' She noted that the Bank of England itself suggested the move could push up house prices by increasing demand.
