The Labour Party, victorious in the UK general election on 04 July 2024, laid out a transformative agenda for the financial services sector, highlighted in its manifesto and the King’s Speech 2024. Here, Charlotte Gregory and Fern Dempsey summarise the swathe of initiatives introduced that will impact consumer and business markets.
Labour’s Manifesto
Labour aims to leverage the financial sector as a catalyst for inclusive growth and the UK’s transition to net zero, under a strategy termed ‘securonomics’. This approach focuses on providing a stable regulatory environment that fosters innovation, entrepreneurship, and long-term investment while enhancing financial security for UK citizens. Labour’s proposals for financial services centre on six ‘policy priorities’:
- Inclusive growth
- International competitiveness
- Consumer protection and inclusion
- Sustainable finance developments
- Fintech innovation
- Capital markets
Labour plans to establish an efficient, proportionate and predictable forward-looking regulatory regime, aligning with the Financial Conduct Authority’s (FCA) and Prudential Regulation Authority’s (PRA) secondary objectives of competitiveness and growth. Key initiatives include expanding regional financial centres alongside London and Edinburgh, doubling the mutuals sector, and advancing green finance through a comprehensive regulatory framework, such as requiring FTSE 100 companies to publish carbon footprints and credible transition plans.
To bolster consumer protection, Labour proposes new financial resilience models like longer-term fixed-rate mortgages, cross-sector fraud prevention, and a national financial inclusion strategy designed by a committee of government, industry, and regulators. Additional measures include regulating ‘buy now, pay later’ schemes, accelerating the rollout of 350 banking hubs, and ensuring access to in-person banking services.
Labour also seeks to position the UK as a global leader in green finance by developing a leading green finance regulatory framework, supporting home decarbonisation, and exploring innovative products like green mortgages. The party supports the Bank of England’s (BoE) work on a central bank digital currency and aims to make the UK a hub for securities tokenisation, proposing a regulatory sandbox to foster innovation in underserved communities.
In capital markets, Labour plans to review pensions and retirement savings, simplify the ISA landscape, and boost investment in growth assets through the British Business Bank. The party will also work with the PRA to unlock capital for investment in infrastructure and green industries. Additionally, Labour intends to modernise outdated legislation, such as the Consumer Credit Act and Building Societies Act, likely by utilising powers introduced in the Financial Services and Markets Act 2023 to drive these changes.
The King’s Speech
The King’s Speech outlined the Labour government’s proposed legislation.
The Bank Resolution (Recapitalisation) Bill
This Bill aims to enhance the UK’s bank resolution regime by giving the BoE broader flexibility in managing small bank failures. It introduces a mechanism allowing the BoE to use sector-provided funds to cover the costs of resolving a failing bank, including its sale.
Key provisions include expanding the Financial Services Compensation Scheme (FSCS) to fund bank resolutions, allowing the FSCS to recover costs through levies on banks (excluding credit unions), and empowering the BoE to require a bank in resolution to issue new shares for recapitalisation. These measures are designed to promote financial stability and protect public funds without imposing additional costs on taxpayers or the banking sector upfront.
The National Wealth Fund (NWF) Bill
The Government emphasises that the NWF Bill is key to its growth and green economy goals. The NWF Bill will centralise investment in priority sectors across the UK and align existing institutions (the UK Infrastructure Bank and the British Business Bank) under the NWF. This alignment aims to create a unified investment platform, using public funds to unlock opportunities and attract private investment.
The Pension Schemes Bill
This Bill aims to create a private pensions market focused on consolidation and value for members, ensuring retirement security and promoting broader investment opportunities. Key measures include consolidating small pension pots, enforcing a Value for Money frameworks across all pension schemes, requiring schemes to offer retirement products, and consolidating the Defined Benefit market through Superfunds.
The Bill reaffirms the Pensions Ombudsman’s authority and updates rules for end-of-life financial protections.
The Draft Audit Reform and Corporate Governance Bill
The draft Bill proposes replacing the Financial Reporting Council with a new regulator, the Audit, Reporting and Governance Authority, to enhance standards and accountability in company audits and director conduct. The new regulator would have a broader remit, including extending Public Interest Entity (PIE) status to large private companies, simplifying rules for smaller PIEs, and gaining powers to investigate and sanction directors for serious financial reporting failures. Additionally, it would oversee the audit market to ensure quality and mitigate conflicts of interest.
Comment
Labour’s agenda is to seek to push economic growth through regulatory change. The pace of change seen over the past few years, including through the passing of the Financial Services and Markets Act 2023 by the previous Conservative Government (which provided a framework for swifter implementation of regulation via HM Treasury and regulator rules rather than primary legislation in some cases), is unlikely to slow. Firms from all sectors, large and small, will have a keen eye on the opportunities and potential risks that new regulation will bring.
How can we help?
We can help you to navigate new regulations and ensure compliance with changes made by the Labour government. If your business requires assistance or further information how the new Labour government will affect you, please contact our Financial Services team.
