The basic answer is no as we expected. Manifestos are usually high level and give a sense of direction and this manifesto largely reflects the previous proposals in the paper from the Labour Party "Financial Growth: Labour's plan for financial services" which was published in January.
However, you can tell quite a lot about the direction of travel when you look at the tone of the proposals. I would draw attention to a few key points in this context.
First, the big picture. There is a real focus on competitiveness and growth as the core of the overall agenda and these are set in the context of warm words towards the role of the financial services industry.
The references to open banking and finance reflect this approach and perhaps of greatest note is the calling out of "ensuring a pro innovation agenda". This needs to be set within the focus in the document on stability in the economic and tax environment as drivers of growth. The message that regulation needs to be part of this stability and growth agenda is loud and clear. Within this framework, there is the reference to the Regulatory Innovation Office which will cover all industries (see below) and to a National Wealth Fund to encourage investment in key areas and initiatives, including green growth (an emphasis which is not surprising). Perhaps of more note is that fact that whilst the need for consumer protection is noted, the discussion on financial services does not emphasise this and, for example, no reference is made to crypto or buy now pay later regulation.
One should not read too much into this as the manifesto is by definition very high level in relation to our sector but the desire to reassure the industry that a Labour Government would pursue a pro-growth type of regulation is clear.
Of course, there are a lot of questions which remain to be answered and I would pick out three points to watch for.
- The first is perhaps the most challenging structurally. A Labour Government would face a PRA and FCA whose powers gave been much enhanced in the post Brexit settlement and whose independence has been underpinned within the statutory framework. The big question here is how the language and reality of mission-driven government might fit in with the independence of the regulators to develop policy. Examples such as Basel 3 in the prudential context and a more muscular approach to enforcement of the consumer duty in the conduct one come to mind. It is not clear how the Regulatory Innovation Office would fit into this equation. There are of course tools which HM Treasury may have at its disposal to control the agenda, one example of which may be revamping the FCA Board to make the executive directors of the FCA directly appointed by the Chancellor as full board members and changing the executive/non-executive balance of the Board. The bigger elephant in the room is whether we would ever move back to the much criticised override power in HMT's hands which the current Government considered and then dropped. So some thinking to be done in this whole area. The other unknown is what powers the Regulatory Innovation Office could be given in the financial services sector and how effective it would be unless it is given the resource to influence this highly complex area of regulation. History has taught us that knowledge is truly power in relation to the financial services regulatory arena.
- A second area which is not discussed in substance in the manifesto is the whole question of EU alignment. This is of course not a surprise given how sensitive this issue is politically. However, the language of the document is unsurprisingly EU friendly. The question is going to be what this could mean for financial services policy and this remains to be seen. There is no suggestion that anyone thinks equivalence in its full form is back on the table but nuances of policy in this area are significant and will be worth watching. The move towards a more "equivalent" approach has its supporters in the industry even if it does not directly lead to the EU granting equivalence.
- The third area I would draw attention to is the whole pensions and savings debate. There is reference to the need to increase investment from pension schemes into UK assets and this reflects the thinking in the January paper. When ones combines this with the general approach to activist state investment encouragement through initiatives such as the National Wealth Fund there is the interesting prospect of a significant coming together of tax, regulatory and general policy agendas within a more activist policy framework designed to stimulate growth and savings. To some degree, the current Chancellor started down this line of policy with the recent ISA changes and the question is how much further things would go, should Labour come into power.
Stepping back slightly, it is important to note that there would be significant continuities of policy if Labour wins the election. In particular, most of the core aspects of the Edinburgh framework look likely to continue to be implemented but that is not to say that we would not see differences in emphasis and approach. More generally, as noted above, there are a number of areas where Labour could develop policy, in particular in relation to competitiveness, savings and the relationship with the EU.
There is also a more macro point which I would call the "logic of action". A new Government (and particularly one with a significant majority) creates its own momentum in relation to all policy areas as ideas are looked at afresh and new decision makers are in place. The lesson of 1997 remains. The Financial Services and Markets Act 2000 was originally intended as merely a consolidating piece of legislation but, as we know, that is not how things played out. Once one starts to ask the question: are we doing the right thing or is there something better we could be doing when one is on a path towards more change as policy is developed? What starts as technical tweaks to the existing regime can easily turn into wholesale change as happened when the FSA was created. When a new government comes to power, even with the presence of independent regulators, there is a natural temptation to search for new policy levers to enhance growth for the domestic economy and capital markets, and to avoid the scandals to which our industry has been prone. One can take alternative views on whether this is a good or a bad things but this temptation to create change can sometimes be overwhelming.
Whatever one's political perspective, it is good to end on a high note. In this policy area at least, there is significant continuity of policy between the two main political parties bolstered by the stability ensured by the independence of the regulators and the stability of their work programmes. Within this setting, the centrality of the growth and stability message and the continuity of the core elements of financial services regulatory policy between the two main UK political parties is welcome and not always paralleled in other jurisdictions.
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