The Labour Party has published its plan for UK financial services if it enters government after the next general election.

The 'Financing Growth' plan states that a Labour government's policies would promote the financial services sector as a competitive advantage of the UK, balance consumer protection, competitiveness and financial stability, support the independence of the UK’s financial institutions and maintain fiscal responsibility.  

The plan focuses on six priority areas:

• delivering growth across established hubs and regional centres (with a greater role for mutuals);
• enhancing international competitiveness;
• reinforcing consumer protection and financial inclusion;
• making the UK a world leader in sustainable finance;
• supporting innovation and fintech;
• growing capital markets.

The plan states that Labour supported the Financial Services and Markets Act 2023, supports the on-going work on the UK's future regulatory framework and will not reconsider reforms that are currently in-flight or recently put in place. It also expresses support for some reforms already underway, such as, the new powers for mutuals, the ring-fencing review, the review of the advice/guidance boundary, the reform of consumer credit legislation, the proposals to allow the delay of potentially fraudulent payments, the work on the next phase of open banking and on a UK central bank digital currency, the capital markets reforms implementing recent reviews and Solvency UK. Press reports also indicate that Labour does not plan to reverse the removal of the cap on bankers' bonuses.

On inclusive growth, the plan supports proposals for local government pension schemes to establish in-house management capabilities, additional measures to promote the British Business Bank's support for regional SME financing, new place-based impact investing models and a new body, Skills England, to support regional talent pools. The plan also includes proposals to double the size of the mutuals sector.

To enhance competitiveness, the plan proposes work to identify overlaps and gaps in regulatory mandates across the PRA, FCA, Competition and Markets Authority, The Pensions Regulator, and Payment Systems Regulator and to improve regulatory coordination, including creating a new Regulatory Innovation Office. Labour also plans to direct the FCA to issue a call to identify rules which have been made redundant by the consumer duty, with a view to eliminating these as part of the FCA's planned review of its rulebook. The plan envisages expanding agreements and relationships with other financial centres and bolstering the UK's engagement in international regulatory fora. The plan also states that, while using the UK's regulatory freedoms to support UK markets, Labour aims to work more closely with the EU with a view to achieving compatible regulatory approaches, mutual recognition of professional qualifications and reducing barriers to trade in areas where regulations deliver similar outcomes, including a sustainable solution for cross-border clearing.

On consumer protection and financial inclusion, Labour plans work to prevent fraud, including by tech and telecoms companies sharing data with financial firms, accelerating regulation of buy now pay later firms, expansion of retail banking hubs to replace closed branches and a national financial inclusion strategy. It also wants to explore the expansion of longer-term fixed rate mortgages and innovative savings programmes to improve individual's financial resilience.

In relation to sustainable finance, the plan states that a Labour government would take a leading role in international fora, require financial institutions and FTSE-100 companies to publish their carbon footprint and credible 1.5-C aligned transition plans and advance the UK green taxonomy and sustainable disclosure requirements based on the International Sustainability Standards Board standards and the Transition Plan Taskforce disclosure framework. It would also seek to track green finance flows, explore nature-based finance, extend the use of covered bonds on green assets and work with the banking sector on financing for decarbonisation of the UK housing stock.

The plan states that consumer protection must come first when regulating new technology and that Labour is working on its artificial intelligence strategy. The plan also envisages work on more data sharing via an expanded open finance initiative and on establishing a regulatory sandbox to test financial products to reach underserved communities. The plan also proposes work to clarify the law and create an appropriate regulatory regime to support asset tokenisation, that is, the digital representation of financial assets using distributed ledger technology.

The plan states that Labour is still assessing additional policies to increase investment by institutional and individual investors in UK capital markets. However, it proposes a review of review of 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, increasing investment in infrastructure and green industries through Solvency UK reforms and supporting greater retail participation through a marketing campaign and simplifying the regime for individual savings accounts.

The plan also includes a section on women in financial services. It supports the FCA and PRA guidance on diversity and inclusion (and would expand the focus to include socio-economic diversity), the Women in Finance Charter promoting reporting on firm-level gender representation in senior management, the development of additional KPIs with the British Business Bank to set an investment allocation target for women and ethnic minority founders and addressing the drivers of the gender pay gap through Labour’s on-going review.

The report does not cover skills, mobility, tax, data, planning and infrastructure. For example, it does not discuss the future of the bank levy or bank profits tax surcharge, the tax treatment of non-domiciled individuals or the tax treatment of carried interests.

Authors: Monica Sah and Christopher Bates