Clive Lewis For Norwich South
Last month, Rachel Reeves proposed loosening financial regulations to “unshackle” the City of London and boost growth. But could this come at the cost of economic stability?
Post-2008 regulations were designed to prevent another financial meltdown.
The 2008 crisis showed what happens when banks & financial firms take unchecked risks. Reeves argues these regulations “stifle growth,” but they’ve been essential in protecting the economy from reckless behaviour.
Plans could cut compliance costs and ease reporting rules.
This includes:
•Reducing trade-reporting requirements for capital markets.
•Replacing the certification regime for junior employees with something “less burdensome.”
Sounds harmless? Maybe. But there’s more.
A new share-trading platform called PISCES will allow startups to stay private longer.
While it could make life easier for startups, it risks further weakening London’s already struggling public Stock Exchange.
Staying private longer could reduce transparency & oversight.
The elephant in the room: deregulation brings risks of financial instability.
We’ve seen this before. Pre-2008 “light-touch regulation” paved the way for massive bailouts & a global recession. History warns us about prioritising short-term growth over long-term stability.
And does deregulation spur growth?
The evidence is weak. The Financial Conduct Authority (FCA) recently noted that academic literature on the link between a freer financial sector and sustained economic growth is “patchy” at best.
Even the Bank of England’s Andrew Bailey is skeptical.
In his Mansion House speech, Bailey highlighted that growth comes more from real-economy investments than loosening rules for asset managers and banks. So, where’s the real economic benefit?
Deregulation may cheer financial elites but risks leaving the wider economy behind.
Former Chancellor Gordon Brown learned this the hard way in 2008. Deregulation helped banks, but taxpayers footed the bill when it all came crashing down.
Deregulation without clear safeguards = high stakes.
Banks may pay more tax in the short term, but they account for less than 5% of total government receipts. Is it worth the risk of another crisis?
Bottom line: Financial regulation exists for a reason.
Loosening the reins without evidence of long-term benefits could repeat past mistakes. Let’s not gamble with the UK’s economic future for quick wins.