Bank of England governor opens door to ‘simplifying’ financial rulebook
Andrew Bailey opened the door to simplifying the UK’s financial rulebook as he joined Rachel Reeves for the Chancellor’s third and final Mansion House speech on Tuesday evening.
The Bank of England governor distanced himself from capping taxes on banks and financial institutions, but said existing rules should help “flush out supranormal profits” by “reducing barriers to entry.”
“There should not, to be clear, be a cap on returns set by regulators. That is a matter of commercial strategy for firms,” Bailey told senior City leaders.
“We are very much open to simplifying and adjusting regulations where needed,” he said.
“But doing so must contribute to sustaining a healthy banking system which can support and foster stronger growth in the economy.”
Bailey cautioned that simple calls to deregulate financial services were “unhelpfully reductive” but said central banks were willing to question how well current red tape was working.
Reeves doubles down on credibility
Meanwhile Rachel Reeves avoided talking about unemployment, taxes or Keir Starmer as she fixated on fiscal credibility in her valedictory Square Mile speech.
The Chancellor mentioned ‘credibility’ no fewer than 11 times in her set-piece City send-off, according to a copy of the speech shared with City PM, laying down the gauntlet for her successor to stick to her fiscal rules or risk being “unable to satisfy the public’s justified impatience for change.”
“Radical governments without credibility have ultimately failed to win the trust necessary to deliver their agenda,” she warned.
But Reeves was careful to avoid talking about taxes, a subject which has irked many senior figures in the City.
The outgoing Chancellor has presided over more than £65bn in tax hikes over the past two years in office, making the UK tax take the largest as a share of GDP since the Second World War and hampering firms with extra costs. Her only reference to taxes was in recommitting her support for giving regional leaders control over business rates, in a nod to Andy Burnham’s devolution agenda.
In a marked departure from her inaugural address, she also steered clear of mentioning Keir Starmer, instead using the personal pronoun ‘I’ as many as 60 times, a 36 per cent increase on 2024, as she distanced herself from her Downing Street neighbour and take personal credit for her own successes.
Reeves also tiptoed around mentioning employment and unemployment in her address. The UK’s unemployment rate has risen from 4.4 per cent before the general election to 4.9 per cent according to the latest data, while youth unemployment has surged to 16.2 per cent.
“Through the choices I have made I have fixed the foundations,” she said.