With a UK General Election expected sometime later in 2024 and Labour flying high in the polls, the fact that Labour has today released details of its plans for financial services, including six policy priorities, is likely to attract much attention.
Below we’ve reproduced the main points from Labour’s document as follows:
“The financial services sector is one of Britain’s success stories. It contributed 12% of the UK’s economic output in 2023.1 It drives economic growth and creates jobs and prosperity. Labour’s first mission in government is to secure the highest sustained growth in the G7, with good jobs and productivity growth in all parts of the country. This will only be achieved if we champion the UK’s role as a global leader in financial services.“
Labour says that its vision for the sector is based on six policy priorities as follows:
1. “Deliver inclusive growth of the UK’s financial services sector by scaling regional financial centres alongside established hubs in London and Edinburgh and unlocking the full potential of the mutuals sector.
2. Enhance the international competitiveness of the UK’s financial services sector by pursuing a more joined up and innovation-centred approach to regulation and supervision, streamlining the regulatory rulebook in line with the Consumer Duty, strengthening our international engagement in financial services, and building a more collaborative relationship with the EU.
3. Reinforce consumer protection and financial inclusion by exploring alternative models for increasing financial resilience including longer-term fixed rate mortgages, adopting a coordinated cross-sectoral approach to fraud prevention, creating a national financial inclusion strategy, and regulating the Buy Now Pay Later sector.
4. Lead the world in sustainable finance by making the UK a global hub for green finance activity, delivering a world-leading green finance regulatory framework, and partnering with the financial services sector to support the decarbonisation of our homes.
5. Embrace innovation and fintech as the future of financial services by becoming a global standard-setter for the use of AI in FS, delivering the next phase of Open Banking, defining a roadmap for Open Finance, embracing securities tokenisation and a central bank digital currency, and establishing a regulatory sandbox for financial products to reach underserved communities.
6. Reinvigorate our capital markets by reviewing the pensions and retirement savings landscape, enabling greater consolidation of all types of schemes, empowering the British Business Bank to invest more in growth capital, establishing a British ‘Tibi’ scheme to increase institutional investment in venture capital and small cap growth equity, and increasing investment in infrastructure and green industries through Solvency UK reforms.“
This is Labour’s first statement of intent for financial services. The party also said that it is “committed to working in partnership with the sector to define a detailed policy agenda to support growth across the country, embrace innovation, and enhance people’s financial wellbeing”. No doubt its’ thinking will be under the scrutiny of many across the financial services profession as we look to what the future may – or may not! – hold.
Read Labour’s plan for financial services in full
Commenting on Labour’s plan for financial services, Karen Northey, Director of Corporate Affairs at the Investment Association, said:
“Solid, proportionate and modern regulation is the backbone of an innovative, sustainable and competitive financial services landscape. Our industry plays a crucial role in powering businesses and helping people across the UK to meet their long-term savings goals, and we support Labour’s innovative approach to savings to increase financial resilience. We are also pleased to see Labour highlight the crucial role innovation and AI play in advancing the industry, and in particular the inclusion of fund tokenisation as an area of focus. We look forward to continuing to work with the Labour party to drive forward growth and unlock capital in the UK.”
Commenting on the publication of the plan, David Brooks, Head of Policy at leading independent consultancy Broadstone, said: “It is interesting that the Labour Party is keen to continue the journey of encouraging more investment in long-term illiquid assets such as productive finance.
“The continuity in pensions policy, despite any potential change in government, will please the industry and is to be welcomed. However, scepticism remains around the speed of change required to reach the government’s goals give the pace of consolidation needed as a pre-requisite for releasing the required levels of investment.
“Labour is proposing stronger regulatory powers to force the wind up of under-performing defined contribution pension schemes. This is an interesting development which could increase the pressure on The Pensions Regulator to become more ‘hands on’ with underperforming schemes.”
Becky O’Connor, Director of Public Affairs at PensionBee, commented: “Labour appears to be pinning its sail to the mast of the Conservative’s Mansion House reforms for pensions. This gives some clarity to the industry, suggesting that should a Labour government come to power, many of the initiatives already in motion, to unlock capital and to bring about consolidation, would continue. A pensions review has the potential to give impetus to new initiatives too, such as the Lifetime provider model. It’s also encouraging to note Labour’s support of streamlining regulation in line with the FCA’s Consumer Duty and its focus on outcomes.”
Responding to Labour’s plan for financial services Lizzy Holliday, Director of Public Affairs and Policy at NOW: Pensions, comments: “We’re pleased to see Labour providing clarity on its future outlook for the financial services industry, particularly its position on important themes notably sustainable finance, innovation within the sector and financial inclusion.
“Empowering people to feel confident about their finances begins with developing a realistic financial inclusion strategy with a focus on promoting financial literacy in schools and colleges. As part of NOW: Pensions partnership with Debate Mate we help to educate students about personal finance in order to help them build healthy relationships with money, savings and pensions. Developing their understanding on key financial topics and building in early understanding of financial resilience can help to avoid feeling unprepared to make financial decisions in adulthood.
“Addressing gender inequalities in the financial services industry – as in all industries – is crucial for businesses, individuals and society. As part of our Fair Pensions For All mission we are very aware that the gender pay gap and the gender pension gap, are sadly, still very real challenges facing women across the UK. Our research in 2022, in partnership with the PPI, found that women would have to start saving into a pension from the age of four in order to retire with the same saving pot as men; this simply shouldn’t be the reality in the 21st century. We continue to focus on this issue and are publishing our new Gender Pensions Gap report next week.
“We welcome the concept of a pension and retirement savings review; pensions are a significant and essential part of all of our lives, and the wider economy. But often this isn’t realised until it’s too late. However, to have the greatest impact on millions of savers we believe joint work on developing a roadmap for Auto-Enrolment, including tackling the challenging topic of pensions adequacy, will be key.”
On Labour’s plans for the green investment opportunity, Heather McKay, E3G Senior Policy Advisor, UK Sustainable Finance said:
“For Britain, the only growth is green growth, and unlocking green investment is critical to achieve that goal. UK market players have been crying out for stability, security and long-term policy direction to unlock the growing green finance opportunity. Rachel Reeves’ and Tulip Siddiq’s welcome Financial Growth Plan purports to do just that.
“Clear, coherent and interoperable financial regulation is essential if the UK is to minimise regulatory burden and capture the UK’s net zero competitive advantage. By committing to roll out the long-delayed package of sustainable disclosure requirements, relaunch the UK as a green standard setter internationally, and prioritise working relationships with other key economic centres, today’s announcement makes clear that Labour is listening to business.”
Also commenting on Labour’s new Financing Growth Report, Arjan Verbeek, Founder and CEO of Perenna said:
“We fully support Labour’s measures to promote ‘securonomics’— a concept that places consumer’s financial security at the forefront of economic policy. Recognising that long-term fixed rate mortgages will play a critical role in providing homeowners with the peace of mind they deserve is a huge step forward.
“These mortgage products not only offer stability to families but also unlock other initiatives that can lead to a more sustainable future. For too long, the industry has leaned on short-term fixed-rate mortgages which have left consumers exposed to financial market volatility. As we’ve seen over the past year or so, this dependence causes huge uncertainty and emotional stress whilst detrimental to household finances.
“Realising the potential of alternative models such as long-term fixed rate mortgages for mainstream use will require industry-wide collaboration. We must drive a cultural shift away from short-termism and put consumer protection and financial inclusion at the heart of a market revolution that better serves the needs of homeowners and first-time buyers across the UK.”