A CHANGE IN DIRECTION?
WHAT A NEW LABOUR GOVERNMENT COULD MEAN FOR THE INDUSTRY

CCTA

GENERAL ELECTION RESULT

Labour won the recent General Election with a landslide victory. The party now has a majority in the House of Commons of 170, close to what Tony Blair achieved in 1997.

However, they achieved a relatively modest share of the vote for a governing party. This coupled with low voter turnout, may undermine that majority in the coming months and years as they look to introduce their legislative programme.

Small parties also did well with the Liberal Democrats achieving their best election result, and both the Greens and Reform picked up a handful of seats for their respective parties.

The Conservatives suffered their worst result in history. Rishi Sunak has announced that he will stand down as leader once arrangements for choosing a successor are in place. So, we can expect a full leadership election soon.

THE NEW LABOUR GOVERNMENT

From a financial services perspective, we have seen little surprise in who has been appointed so far. Rachel Reeves has become the first female Chancellor and Tulip Siddiq MP has been appointed Economic Secretary, with responsibility for financial services regulation. Siddiq has shadowed this brief for the last few years and has commented recently that she intends to “tear down barriers to growth” and has also called on the Conservatives to stop delaying the regulation of the Buy Now Pay Later (BNPL) sector.

WHAT DO WE KNOW ABOUT LABOUR PLANS?

During the election campaign, Labour managed to say as little as possible, sticking to key pledges made by Keir Starmer. The manifesto also made little mention of the financial services sector, beyond recognising the contribution it makes to the UK economy. It did refer to the cost-of-living crisis and the need to improve financial resilience.

The party also released a publication in January called “Financing Growth” which was largely an appeal to businesses which focused on the need to promote growth and competition. Part of this was about distancing the party from a previous anti-business stance.

Another possibility for the future is a ‘Fair Banking Act’ that has been introduced in other countries.

This included details on creating a national financial inclusion strategy, and there are rumours that the Labour Government may appoint someone (likely to be connected to the Financial Inclusion Commission) to look at this issue in further detail. This document also mentioned plans to regulate the BNPL sector so this might be something we see them move quickly on.

Elsewhere we know that the Labour Party has always been supportive of the Credit Union movement so expect this to continue.

Another possibility for the future is a ‘Fair Banking Act’ that has been introduced in other countries. A bill of this kind would likely call on high street banks to lend to underserved communities or provide funding to do this. Banks may not be forthcoming, but there is also a role for us here to explain how the alternative lending sector can be part of the solution and help with access to credit.

One thing that we do not yet know the future of is the current review of the Consumer Credit Act, which was underway before the election was called. We will pick this up at our next meeting with HM Treasury officials who remain in post, regardless of the change in the governing party.

AN ELECTION BRINGS A NEW PARLIAMENT

An election also means a change in Parliament. In mid-July the State Opening of Parliament and King’s Speech (which outlines the types of legislation the new Government wants to introduce) took place. Having analysed the contents of the Speech, there doesn’t appear to be much that will affect financial services, but it does mean the rest of the work that comes with setting up a new Parliament, can begin.

The next steps will be the creation of new select committees that scrutinise Government policies. The number of Chairs that each party gets will depend on the share of MPs that they have. Following that, there we be elections for these positions and the MPs which will serve on these committees. The CCTA will be watching the formation of relevant committees like the Treasury Select Committee which has oversight for the FCA and the FOS, among other responsibilities.

And aside from this, we will be monitoring what happens with other committees in the House of Lords. Prior to the election announcement, the House of Lords Financial Services Regulation Committee had open inquiries into the FCA’s enforcement guidance consultation and the regulator’s growth and competitiveness objective. We have engaged with the Committee previously and will continue to do so if it re-forms.

So, an election brings lots of change. The coming weeks and months will bring more insight into the plans of the Labour Government, which we will keep members informed on. It will take some time for all the areas of the new Parliament to get up and running but, as ever, the association will be looking for opportunities to engage with what is a significant number of new MPs.