THE Tories are risking a repeat of “the catastrophe of the financial crash in 2008” by cutting back on the safeguards placed on banking in its wake, the SNP have warned.
It comes after Chancellor Jeremy Hunt announced what he called the “Edinburgh Reforms” - 30 changes he said will “turbocharge” growth, including by easing capital requirements for smaller lenders.
Hunt claimed the reforms would “seize on our Brexit freedoms to deliver an agile and homegrown regulatory regime that works in the interest of British people and our businesses”.
However, Labour warned of a regulatory “race to the bottom” as the changes introduce “more risk and potentially more financial instability”.
The SNP echoed this, accusing the Tories of giving “yet another boost to bankers whilst continuing to let down ordinary struggling households”.
The party said Hunt (below) was looking to remove rules that were introduced to protect savers and the taxpayer after the 2008 financial crash, including removing regulations that hold bosses personally and financially responsible for problems that occur on their watch as well as ring-fencing rules intended to protect everyday customers.
SNP MSP Kenneth Gibson said: "Removing banking regulations – designed to protect savers and the taxpayer – was never one of the many so-called benefits of Brexit the Tories promised us, nor was it plastered over the side of a bus.
“It risks repeating the catastrophe of the financial crash in 2008, which led to crippling Tory austerity for millions of households across Britain.
"It's abundantly clear the Tories cannot be trusted when it comes to the economy. It was just over two months ago that they plunged the UK into an economic crisis when they announced tax cuts for the super-rich – and then demanded the Scottish Government do likewise.
“Ordinary people were left to pick up the bill for the Tories’ economic incompetence then and it will be ordinary people left to pay the price again for this reckless ripping up of regulations.”
Hunt – who was brought in in the dying days of Liz Truss’s premiership to reassure markets amid the turmoil she had created – insisted he was mindful of the lessons of the 2008 crisis.
He said: “We have to make sure that we do not unlearn the lessons of 2008, but at the same time recognise that banks today have much stronger balance sheets, and we have a much stronger resolution system if things do go wrong.”
Prime Minister Rishi Sunak, who previously worked in investment banking, denied his government was acting recklessly by relaxing the rules.
“No, the UK has always had and always will have an incredibly respected and robust system of regulation for the financial services sector,” he told broadcasters during a visit to RAF Coningsby in Lincolnshire.
“But it’s also important to make sure the industry is competitive – there are a million people employed in financial services and they’re not just in London, in the city. They’re spread across the country, in Edinburgh, in Belfast, in Leeds, in Bournemouth.
“Today’s reforms will ensure the industry remains competitive, we can create more jobs, but of course this will always be a safe place where consumers will be protected.”
The raft of reforms comes after the City of London has seen trading with the EU impacted upon by Brexit, with Amsterdam overtaking London as Europe’s largest trading hub last year.
The Chancellor’s shake-up includes a commitment to make “substantial legislative progress” on repealing and replacing the Solvency II directive next year, which is hoped will unlock more than £100 billion of private investment.
He also promised to reform the UK prospectus regime to support stock market listings and capital raises, reforming rules on real estate investment trusts and reviewing provisions on investment research in the UK.
Tulip Siddiq (above), Labour's shadow city minister, said: "Introducing more risk and potentially more financial instability because you can't control your backbenchers is this Tory government all over. That this comes after the Tories crashed our economy is beyond misguided.
"Reforms such as ring-fencing and the Senior Managers Regime were introduced for good reason. The City doesn't want weak consolation prizes for being sold down the river in the Tories' Brexit deal, nor more empty promises on deregulation.
"Its competitiveness depends on high standards, not a race to the bottom.”
The Labour MP also warned that a watering down of the UK's commitments on green finance had been “hidden” in Hunt’s announcement.
"More confusion and change in the UK's net zero plans for the City is the opposite of what businesses are asking for, and risks undermining the City's confidence to invest in the jobs and industries of the future,” she added.
Fran Boait, executive director of the sustainable economy campaign group Positive Money, said: “Behind the spin, today’s announcements amount to wide-ranging deregulation that threatens to destabilise an increasingly fragile financial sector, with huge risks to the public and little benefit.
“Ring-fencing for banks was one of the few protections brought in after the 2008 crisis, so for the Government to be watering down these rules is extremely concerning.”
