The general election and a possible change in government
Commentary | 30/05/24
On the 22nd of May, Rishi Sunak surprised most of the UK by calling a General Election to take place on the 4th of July. Much of the political world thought it would take place in the autumn, but there was a growing sense that this was as good as it would get for the Conservatives.
Though polls can be misleading and often narrow as election day approaches, Labour has consistently been around 20 points ahead of the Conservatives. It seems unlikely that the Tories will feature in the next government. Labour looks likely to be at the head of the next government in some form, possibly with a majority, a minority, or a coalition arrangement.
What would a Labour government mean for the alternative lending sector?
Labour has said very little that would worry or calm the sector. We believe they may attempt to get through this campaign by saying as little as possible. The more it reveals its policies, the more the Conservatives can attack.
In the few relevant statements, they have picked up on concerns about Buy-Now-Pay-Later. After pointing out this government’s regulatory delays, we can assume that they will want to move quickly. They have also addressed concerns about access to credit as part of a wider discussion on financial inclusion.
They may also consider introducing a Fair Banking Act that would require the High Street banks to either lend directly to unserved communities or provide funding to other lenders that serve those groups. This has had some impact in the US so they may look to replicate something similar.
Elsewhere, Labour has been careful to welcome the changes brought by the Consumer Duty but joined others in criticising the FCA, where the regulator has been more aggressive. They have floated the idea of more scrutiny.
Earlier this year, Labour published “Financing Growth”, outlining some of its plans for financial services. This was seen as an outstretched hand to the City. The party is keen to appear pro-business and shed the views of the Corbyn era in this election.
At a high level, the paper called for growth and the need to increase international competitiveness, recognising the importance of the FCA’s secondary objective. The report also discussed the need to embrace innovation and fintech, such as AI and Open Banking, with appropriate protections for the consumer.
What does the election mean for the review of the Consumer Credit Act?
The future of the current review of the Consumer Credit Act is uncertain. Work on the reform has been placed on hold as we enter the election period, and it’s unclear whether or when this might restart.
Labour has previously said that the Act requires updating for the digital age, so they may well continue with the review, but the election will introduce more delay into the process.
What is happening elsewhere?
Beyond the Labour Party, there has also been some relevant activity in Parliament.
Before the election announcement, the House of Lords Financial Services Regulation Committee launched a call for evidence on the FCA.
In early May, the Committee announced it was conducting an inquiry into the FCA’s secondary objective of facilitating the UK economy’s medium—to long-term growth and international competitiveness.
As members of the House of Lords remain in post despite the election, this cross-party committee is likely to continue its work. The Committee Chair was also critical of the FCA’s recent plans to ‘name and shame’ firms subject to enforcement activity.
Producing recommendations for an incoming government is not bad, so some pressure may remain on the regulator.
As the campaign continues, we will get more insight into the thinking of the main parties. The CCTA is planning how to engage with a new government and what is expected to be a large new Parliamentary intake.