THE MOVING PARTS:
A POLITICAL REVIEW

CENTAURUS COMMUNICATIONS

The summer parliamentary recess is a good moment to appraise where we are in national politics and consider what might be in store for CCTA members in the second half of the year.

It has been a tumultuous six months for the Prime Minister. Following the calamitous Liz Truss interlude, Rishi Sunak delivered impressive early ‘wins’ that suggested his brand of brisk managerialism could chart a narrow path to victory for the Tories in 2024.

He sought to capitalise by announcing Five Pledges – halving inflation, lowering waiting lists, cutting debt, growing the economy and, most controversially, stopping the small boats. The pledges were regarded as easy – designed to be hit so that, in time, he could come up with five harder ones. It now looks like he’ll score zero out of five. There might still be a path to victory, but it is vanishing.

Sir Kier Starmer is enjoying more luck. It isn’t easy to get a hearing in opposition, but nor do you suffer the collateral damage caused by missed pledges. As one Labour insider put it, Starmer’s task is like carrying a Ming vase across a highly polished floor. In other words, he will win so long as he doesn’t screw up.

As befits an opposition leader with a big poll lead, Starmer is light on policy. He too has made five pledges, or ‘national missions’, covering broadly the same ground minus the small boats. The priority for Starmer is projecting competence and professionalism. Expunging the negative brand associations of the Corbyn era is key, hence some heavy-handed side-lining of left-wing elements in his party.

Labour strategists are laser-focussed on avoiding a rerun of 1992 when Labour led the polls but stumbled at the finishing line. Starmer is no Blair, but does that make him a Kinnock? Time will tell.

In the realm of credit and debt there have been notable developments. The Financial Services and Markets Act has received Royal Assent. This is largely a post-Brexit, pro-City measure to repatriate regulatory powers and boost competition. It also boosts financial inclusion by safeguarding access-to-cash and enabling credit unions to offer more products.

Opposition parties sought amendments to increase the FCA’s accountability to Parliament and oblige the regulator to ‘have regard to’ both financial inclusion and ‘net zero’ targets as part of its operational objectives. Ultimately, these amendments were defeated, but the debates gave an indication of FCA and Treasury priorities for the period to come.

If further confirmation were needed, they showed that Consumer Duty will be the weapon of choice for the FCA. The call for a statutory financial inclusion objective was rejected because ‘the Consumer Duty will adequately cover the same ground’. Further safeguards on bank branch access were deemed unnecessary because ‘banks are bound by Consumer Duty’. You get the picture.

The FCA is wielding the Duty in other areas too. The regulator is monitoring the speed of banks’ pass-through of interest rate rises to its savings customers. Its stick of choice? You guessed it. It will ‘follow up’ with firms whose pricing is ‘at risk of not providing fair value’. Sounds ominous.

The other big story of course is illegal lending. After repeated warnings over many years, the unintended consequences of over-tight regulation in the credit market are finally being made apparent to the FCA. The CCTA and other campaigning voices deserve much credit for their persistence in bringing a grim regulatory failing to the attention of the policy community. Happily, once the issue was taken up – first by the Centre for Social Justice and then by Fair4All Finance – the scale of the problem was quickly enumerated.

Fair4All estimate that more than three million people have borrowed from an illegal lender in the last three years. Fair4All and CSJ remain wedded to the idea that credit unions will step in, but it is hugely significant that the spike in illegal lending on account of over-regulation is now established fact.

The other policy prescription pitched by Fair4All was a Fair Banking Act. This would be a UK version of the US Community Reinvestment Act which compels banks to better serve poorer communities on pain of having their licences removed. US, French and Dutch versions of the Act already exist.

For campaigners, a Fair Banking Act is the second prong of a two-pronged strategy to get more lending into communities at risk of illegal lending (the first being credit unions and CDFIs). The message that ministers are hearing from the CCTA is a ‘blended market’ is required, with commercial and social lenders working in tandem to the same high standards. Now the penny has dropped on over-regulation and illegal lending, this is the next message the FCA will need to take on board.