LONDON (AP) — U.K. Treasury chief Rachel Reeves said Tuesday that she’ll cut red tape for banks and finance firms so that “informed risk-taking” can help kickstart Britain’s sluggish economy.
The government is trying to regain the economic initiative after rocky weeks of costly U-turns and figures showing the British economy contracted for two months running.
Reeves announced plans to pare back some of the regulations introduced after the 2008 global financial crisis, which was triggered by risky lending. That includes reforms to “ring-fencing” rules enacted to separate banks’ retail and investment banking activities, and a review of the amount of capital banks must hold.
She said it was the widest set of reforms of financial services in more than a decade.
“We are fundamentally reforming the regulatory system, freeing up firms to take risks and to drive growth,” Reeves said on a visit to Leeds in northern England.
Reeves will outline the changes later at the annual Mansion House speech to finance bigwigs in London, the Treasury said. She plans to say that financial services are “at the heart of the government’s growth mission … with a ripple effect that will drive investment in all sectors of our economy and put pounds in the pockets of working people.”
The Treasury said Reeves also will hail the “instant impact” for prospective homebuyers of new Bank of England guidance allowing mortgage-lenders to loan more than 4.5 times a buyer’s income.
The center-left Labour Party won a landslide election victory in July 2024, but has struggled to deliver on its pledge to boost economic growth.
Efforts to soothe markets and demonstrate fiscal prudence have proved unpopular with voters. A decision to end winter home heating subsidies for millions of retirees, announced soon after the election, was reversed last month. Earlier this month the government ditched planned cuts to welfare spending after an outcry from Labour lawmakers.
The U-turns have reduced the Treasury’s future income by several billion pounds, increasing the likelihood of tax increases in the fall. But the government has boxed itself in by ruling out hikes to sales tax or to income tax for employees.
Questions swirled about Reeves’ future earlier this month when she appeared in tears in the House of Commons during the weekly prime minister’s questions session. The Treasury said Reeves was dealing with a “personal matter.”
The cost of government borrowing spiked at the sight of Reeves’ tears, but settled down after Prime Minister Keir Starmer gave her his full backing.
