Rachel Reeves vows to tear up red tape for the City as she claims regulation after the 2008 financial crash has ‘gone too far’

Rachel Reeves will vow to tear up red tape for the City of London after claiming regulation after the 2008 financial crash has ‘gone too far’.

The Chancellor, in her first Mansion House speech tonight, will say rule changes in the wake of the global banking meltdown were ‘right’.

But she will add this has now ‘resulted in a system which sought to eliminate risk taking’ and led to ‘unintended consequences’.

Labour pledged before the general election to secure the ‘highest sustained growth in the G7’.

And Ms Reeves will this evening bemoan how the UK ‘has been regulating for risk, but not regulating for growth’ in recent years.

In setting out a package of reforms, the Chancellor will say: ‘Before we came into Government, I was clear that the financial services sector must play a central part in our economic vision and our plan for economic growth.

‘Because I know that this sector is the crown jewel in our economy.’

She will tell a central London audience how financial services employs 1.2million people across the UK and accounts for 9 per cent of economic output.

 Rachel Reeves will vow to tear up red tape for the City of London after claiming regulation after the 2008 financial crash has ‘gone too far’

‘It is a global success story: we are the second largest exporter of financial services in the G7,’ Ms Reeves will add. 

‘But we cannot take the UK’s status as a global financial centre for granted. In a highly competitive world we need to earn that status and we need to work to keep it.’

Her reforms aimed at driving competition across financial services will include sending ‘growth-focused remit letters’ to regulators and overhauling the system for consumer redress to give customers and firms ‘clearer expectations’ about the compensation landscape, the Treasury said.

Ms Reeves has written to the Financial Conduct Authority, Prudential Regulation Committee, Financial Policy Committee and Payment Systems Regulator to push for a greater focus on growth.

She is expected to announce plans for pension ‘megafunds’ which could result in around £80billion to invest in businesses and infrastructure.

In her speech, Chancellor will say: ‘While it was right that successive governments made regulatory changes after the global financial crisis, to ensure that regulation kept pace with the global economy of the time, it is important that we learn the lessons of the past.

‘These changes have resulted in a system which sought to eliminate risk taking. That has gone too far and, in places, it has had unintended consequences which we must now address.’

Ms Reeves will hail her reforms as ‘the most pro-growth financial services package since the financial crisis’.

The Treasury said ‘high regulatory standards will be maintained’ but parts of the system will be ‘rebalanced to drive economic growth and competitiveness’.

Ms Reeves will announce plans to ‘modernise’ the Financial Ombudsman Service, which deals with complaints between consumers and firms, as part of the shakeup.

Meanwhile, a pilot scheme will be launched to deliver ‘digital gilts’ – tokenised Government bonds that are issued on a blockchain – in a move to better embrace technology.

The Government will also consult on replacing the certification regime, which seeks to strengthen market integrity and applies to staff below senior management level, with a more ‘proportionate’ approach that cuts costs so firms can ‘focus on growth, the Treasury said.

The Chancellor, Home Secretary and Technology Secretary have also written to tech and telecommunication sectors calling for tougher action in reducing the scale of fraud taking place on their platforms and networks.

A progress update has also been requested by March 2025 ahead of an expanded fraud strategy.

Ms Reeves will also commit the Government to publishing the first ever Financial Services Growth and Competitiveness Strategy in the spring, which is aimed at providing long-term certainty for the sector.

She will propose focusing on five priority areas in financial services to take advantage of the UK’s existing strengths and boost the potential for growth.

These will be financial technology, sustainable finance, asset management and wholesale services, insurance and reinsurance and capital markets.