Rachel Reeves has vowed to slash the red tape that is ‘choking off’ Britain’s ‘enterprise and innovation’.
But it came amid warnings that her plan risks causing economic chaos – with a similar push for deregulation blamed for the financial crisis and global recession of 2008.
Delivering her annual Mansion House speech tonight in the City of London, Ms Reeves also confirmed plans to make it easier for banks and building societies to offer more mortgages at 4.5 times a buyer’s income – a restriction brought in after the financial crash – which is expected to benefit more first-time buyers.
On Tuesday night Ms Reeves said: ‘In too many areas, regulation still acts as a boot on the neck of businesses, choking off the enterprise and innovation that is the lifeblood of growth.
‘Regulators must take up the call I make this evening, not to bend to the temptation of excessive caution but to boldly regulate for growth in the service of prosperity across our country.’
The Treasury is carrying out a line-by-line review of regulation affecting financial services, with a view to stripping it back to make the UK ‘supercompetitive’.
Ms Reeves believes that ensuring Britain is in sync with its competitors – which includes reforming strict rules on investment banking brought in after the great financial crisis that saw Northern Rock collapse – will make the country a more attractive place to do business, driving growth and investment.
But she also hopes that reducing regulation for financial services will encourage businesses and individuals to take informed risks when it comes to investing in stocks and shares.
Rachel Reeves vowed to slash the red tape ‘choking off’ Britain’s ‘enterprise and innovation’
Ms Reeves also confirmed plans to make it easier for banks and building societies to offer more mortgages at 4.5 times a buyer’s income
The Chancellor of the Exchequer believes that ensuring Britain is in sync with its competitors will make the country a more attractive place to do business, driving growth and investment
To this end, Ms Reeves will launch an advertising campaign on the benefits of investing – which has drawn parallels with the 1986 ‘Tell Sid’ adverts encouraging ordinary people to buy shares in British Gas when it was being privatised.
And banks will be able to alert customers about specific investment opportunities, in the hope it will encourage those with cash sitting in low-return current accounts to move it into stocks and shares.
But deregulation also comes with risks, and economists have pointed to the recession that followed the financial crash.
Chaitanya Kumar, head of economy and environment at the New Economics Foundation thinktank, told the Guardian: ‘It feels like groundhog day. We’ve been here before, expecting the financial sector to do most of the heavy lifting in terms of growth.
‘The 2008 crash and what followed should have been a very strong lesson to everybody in not completely letting the financial services sector off its leash, but that’s what we seem to be doing.’
And Jesse Griffiths, chief executive of The Finance Innovation Lab charity, said: ‘Buying the City’s push for deregulation risks increasing the risks of costly financial crises.’
In 2011, then shadow chancellor Ed Balls apologised for Labour’s failures when in government which contributed to the 2008 crisis.
He said: ‘All around the world the banks behaved irresponsibly, but regulation wasn’t tough enough. We were part of that. I’m sorry for that mistake – I deeply, deeply regret it.’
Treasury officials insisted last night that financial stability remained key for the Chancellor, and that her reforms were aimed at a regulatory culture which ‘excessively’ focuses on risk.
The Chancellor also said new powers to force pension funds to invest in UK assets – such as infrastructure projects – were ‘sending a clear signal’ the Government wants to deliver higher returns for savers and more investment for the economy.
‘But I am confident I will not need to use that power because firms see the urgency and importance of this as clearly as I do,’ she added.
On Tuesday night, Shadow Chancellor Mel Stride said: ‘Rachel Reeves should have used her speech to rule out massive tax rises.
‘The fact she didn’t should send a shiver down the spine of taxpayers across the country.’
Hoping for the green light…the Chancellor steps out in mint suit
All eyes were on Rachel Reeves last night as she delivered her high-stakes speech designed to woo the City.
The Chancellor, 46, beamed as she arrived at Mansion House in a mint green suit – which starkly contrasted her red ministerial folder.
Her colourful appearance was a world away from the annual dinner’s traditional dress code of black tie, showcased in recent years by the likes of former chancellors George Osborne and Alistair Darling.
But the rules have now been relaxed, allowing the ministers to ditch the bow ties in favour of regular business attire.
Since at least 1985, chancellors have been invited to give a speech on the state of the economy at Mansion House.
It is the venue for the annual dinner and the official residence of the Lord Mayor of the City of London.
In his address in 1985, then chancellor Nigel Lawson said: ‘You may remember that a few years ago a common cry was “Where is the growth coming from?” We can now see the answer.
‘It came in a balanced way from several sources, with investment and exports growing twice as fast as consumer spending.’
Chancellor Rachel Reeves, 46, beamed as she arrived at Mansion House in a mint green suit – which starkly contrasted her red ministerial folder
George Osborne and Alistair Darling adhered to the more traditional dress code of black tie in previous years
