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Labour has formed an unlikely double act with Tory chancellor Jeremy Hunt in putting pressure on the UK’s City watchdog to stop holding back Britain’s financial services sector with allegedly excessive regulation.
The rare political alignment reflects rising concerns over the Financial Conduct Authority’s leadership, its willingness to unlock competitiveness, and worries that it has spooked businesses with a contentious plan to “name and shame” companies it is investigating.
Tulip Siddiq, shadow City minister, said Labour planned to push the FCA to “tear down the barriers to competitiveness and growth” if elected this year.
She told the Financial Times that Labour’s proposed Regulatory Innovation Office would “improve accountability and promote innovation in regulation across sectors”.
The planned new body is designed to hold regulators across the board more accountable and increase transparency.
The Tory government is also putting increased pressure on the FCA, with Hunt set to tell the regulator in the coming weeks that it is failing to meet new requirements to spur growth.
The chancellor is expected to tell a City audience at Mansion House in July that he is concerned that a new legal “secondary objective” for regulators on growth and competitiveness is failing to change behaviour.
“If it’s just a tick-box exercise, it’s not working,” said one ally of Hunt. The chancellor is also considering whether any new legal changes are needed to make sure regulators were taking their new growth duty seriously.
Treasury insiders say that concerns about the FCA’s approach came to a head this year with plans to name companies being probed, which has provoked a fierce City backlash, and which Hunt fears will make London less attractive as a financial centre.
The chancellor took the unusual decision to rebuke the FCA last month, telling the FT that the policy “doesn’t feel consistent with the new secondary growth duty they have”.
Senior ministers have also expressed concern about the performance of Ashley Alder, a former Hong Kong regulator who became FCA chair in February 2023. “We brought in a new chairman to change things, but it hasn’t happened,” said one minister. The FCA declined to comment on the criticism of Alder.
One Treasury insider described the issues swirling around the FCA as a “perfect storm”.
While Hunt is expected to increase pressure on the FCA for a change of approach in July, an incoming Labour government is also expected to put a new focus on the regulator as Sir Keir Starmer tries to remove obstacles to growth.
Siddiq said: “Working in partnership with the City and regulators, a Labour government will streamline the regulatory burden on financial services and tear down the barriers to competitiveness and growth.”
Labour said the FCA played “a critical role in securing protection for UK consumers and the integrity of the financial sector” but there had to be “an appropriate balance” with the needs to maintain UK competitiveness.
Siddiq’s proposed new Regulatory Innovation Office would ensure transparency on whether regulators were meeting their secondary competitiveness objective, on top of the FCA’s own internal assessment.
Labour’s new office would also give “steers” to regulators to speed up decision-making in priority areas for growth, the party said.
The FCA said: “It’s for the government and parliament to determine the approach to accountability and oversight. We are committed to being held accountable for our decisions and to working closely with other regulators to support innovation.”
