1 December 2023

Rachel Reeves recently announced a range of financial services and retail banking policies if the Labour Party wins the next General Election, writes Alice Perry, Associate Director – UK Public Affairs.

Rachel Reeves, Jonathan Reynolds and Tulip Siddiq visited a banking hub with LINK and the Cash Action Group today, announcing a plan to open 350 banking hubs in the UK. Banking hubs are shared spaces where communities can access everyday personal and business banking services.

Access to cash has long been a campaign issue for consumer rights groups and is shaping up to be a mainstream political issue, connecting to broader themes of hope vs decline that will frame the debate during the General Election.

At Labour’s 2023 Annual Conference, delegates voted through a detailed policy outlining Labour’s aspirations should they come to power. The document included a commitment to protect vital in-person banking services, guarantee free access to cash and monitor the use and acceptance of cash, while supporting innovation in payment and banking systems. It also included a commitment to work with the Post Office on developing new products and services, such as banking hubs, that will help reinvigorate the high street.

These measures were strongly supported by Labour’s affiliated Trade Unions. The Trade Unions and Labour’s sister party The Co-operative Party regularly run campaigns on access to cash and financial inclusion. This topic is seen as a priority for their members.

I was a member of Labour’s National Policy Forum for over 10 years, the body formally responsible for policy development. Labour’s policy discussions around financial services tend to focus on retail FS and particularly policies connected to access to cash, financial inclusion and consumer protections. These are the issues that are seen as mattering most to voters and the Party’s social justice values. Bank branch closures, “cash machine deserts” and the general decline of the British high street are routinely raised with MPs and local Councillors. (In contrast, voters don’t tend to raise Solvency II or the Wholesale Markets Review with Labour on the doorstep).

The narrative of the decline of the high street came up regularly during canvassing and in public meetings when I was a Councillor and on Labour’s National Executive Committee. People would complain that banks and hardware shops were closing and being replaced with betting shops, payday lenders and boarded-up windows. This is a concern that resonates with voters across the country, and particularly in the so called “left behind” communities that voted to leave the EU. Many of these voters live in constituencies Labour needs to win back in order to secure a majority at the General Election.

Labour (and Reform) will be looking to connect with these voters’ concerns. Labour needs to persuade voters that they can reverse what they call the UK’s path of “managed decline”, regenerating high streets and communities. Labour’s banking hubs plan plays well with the kind of voters they are targeting in these marginal constituencies. It is worth noting that the policy announcement was covered widely in local and regional papers, highlighting what it means for their towns and communities, and giving an opportunity for some of Labour’s prospective parliamentary candidates to raise their profile as the General Election gets ever closer.

To find out more about Labour’s approach to policy development and understanding Keir Starmer’s Labour, please get in touch.

For our latest news and events, including upcoming events on financial inclusion, please sign-up to our newsletter.

24 November 2023

This is an excerpt from our full analysis of the Jeremy Hunt’s Autumn Statement. To learn more about the in-depth content our consultants provide for Cicero clients, get in touch at UKPublicAffairs@h-advisors.global.

After the King’s Speech brought forward questions about the longevity of Rishi Sunak’s premiership, Chancellor Jeremy Hunt had a final chance to set the agenda and take back the initiative this year. From first sights he’s succeeded in surprising with good news for most and was on form, delivering both the puns and the pounds in this year’s Autumn Statement.

General Election

No policy stood out more than the Chancellor’s pledge to cut National Insurance Contributions by 2 per centage points from 12 to 10. While a change to National Insurance had been mooted, most presumed either higher thresholds or a modest 1 percentage point cut, but the fiscal headroom provided by better tax receipts allowed Hunt to produce greater changes. It’ll be welcomed by Conservative MPs keen to cut the cost of Government on their constituents who have also seen their disposable incomes squeezed by inflation and interest rate rises to counter it. Eyebrows were raised when the Chancellor announced this measure would be secured and in place by January 2024 through emergency legislation, promoting speculation about a Spring 2024 election.

Tax giveaways or not?

While the reduction in National Contribution Payments was the rabbit out of the hat, there was a bigger package of cuts which saw 20bn worth of tax giveaways in this Autumn Statement. For Jeremy Hunt, this served two purposes. The first was to stop a faction of his own MPs from upending his Autumn Statement with an “alternative budget” and the other was to galvanise public support for his measures which make it difficult for Labour to attack them. How effectively these positions can be maintained remains to be seen but there is a risk that this giveaway could be overshadowed by the Government’s freeze on tax thresholds while inflation is still more than the Bank of England’s 2 per cent target.

Winter of discontent?

The other striking policy was “making work pay” by cracking down on long-term unemployment. Headline announcements around people losing benefits after 18 months if they don’t find work, and changing assessments to assume those with physical disabilities can work from home are controversial. They draw a stark line between the Conservatives and the Labour Party and is reminiscent of the debate during the austerity years. This won’t be helped by the Government’s spending on day-to-day items only rising by 1 for the next six years as public services are already struggling with demand and recruitment issues. Expect significant challenges from Labour on this as well as moderate Conservative MPs.

Notable by their absence

It’s worth looking back at previous Conservative governments to understand how different Rishi Sunak’s positions stand in real terms. Under previous Conservative governments there would have been more of a play towards showing increased spending into the NHS, educational issues, the environment, or even defence. Here though, we see perhaps Sunak’s Thatcherite tendencies towards supporting market measures and sound money ahead of spending pledges for departments with popular support. This could point to the Conservative Party keeping their powder dry on these issues until the Spring.

Is it enough?

Jeremy Hunt’s biggest issue isn’t how well some of these land but whether the public is listening. No rises in alcohol duty or fuel duty may be welcome to consumers but they’re not the same as a cut, the investment tax changes are felt in productivity and wages in years hence, and speeding up grid connections will still take the best part of a decade to filter through in energy bills. Hunt’s bet is that he’s at the helm as the economy is on the turn and that wage increases in the new fiscal year will shore up the base and win some workers back. Sunak had best hope it comes off.

The day after the Autumn Statement, H/Advisors Cicero hosted a webinar to discuss the financial and political outcomes of the Chancellor’s announcements. We heard from a panel featuring Nick Macpherson, Jim Pickard and Cicero’s Sonia Khan, and chaired by Senior Counsel, Rhoda Macdonald.

To receive a recording of the webinar, or to read more insights like our Autumn Statement analysis, get in touch or sign-up to our UK Public Affairs newsletter for regular updates.

6 November 2023

The next General Election could be over a year away, but the main political parties are already in campaign mode.

It is notable how the City’s perceptions of Keir Starmer’s party have shifted, with the focus now on Labour’s plans for Government and what role the City could play in delivering Labour’s vision.

Labour faces a challenge. It has a legacy of 13 years of sometimes contradictory policy ideas that all wings of the party have been pushing the leadership to adopt. The National Policy Forum final document is over 110 pages, outlining an ambitious agenda with more priorities than any government could deliver in one term. If Labour does win, they may not have the luxury of a sizable, or any, majority, so the crucial question would be: what do they prioritise?

The approach to financial services has a clear focus on consumer protection. Regulating buy-now-pay-later schemes is cited. Although the party’s views on crypto have softened, shadow cabinet ministers have referred to the crypto market as a “Ponzi scheme” and the party has not joined the Government in talking about making the UK a “global cryptoasset hub”.

The policies show enduring support for productive finance. With both parties seeking to jolt the UK out of its sluggish growth, Labour sees business investment as a key solution. Shadow Business Secretary Jonathan Reynolds has lauded the Solvency UK reforms as a “benefit of Brexit”. Labour has focused on incentivising pension fund investment into the real economy. Initiatives such as encouraging DC pensions to invest in tech start-ups – Long-term Investment For Technology and Science (LIFTS) – may well continue.

Labour sees the financial sector as crucial to the net zero transition. The party’s push for an uptick in covered green bonds, under their Green Prosperity Plan, is a response to Biden’s Inflation Reduction Act. The lack of fiscal headroom for mass subsidies or tax exemptions increases Labour’s reliance on the financial sector for the success of the net zero transition. Their commitment to embed ESG in firms’ regulatory requirements is a sign that Labour will take a different approach to the Government, who have deliberately slow-pedalled initiatives like the Green Taxonomy and Sustainability Disclosure Requirements.

Much of what will define the party’s relationship with the City will be what – for now – remains unsaid. Labour’s revenue-raising proposals are currently limited to a windfall tax on oil and gas companies and ending tax breaks for private equity, non-doms and private schools. But Labour may be forced to change tack. Last February, Starmer tabled an amendment to the Finance Bill to cancel the reduction in the banking surcharge, which would have seen banks pay taxes of over 30 per cent on their profits. Labour insists that they won’t raise taxes on the sector, but they will face pressure to do so from campaign groups and activists. This issue of taxation will be a litmus test for Labour’s support for financial services.

The Government’s reforms to the post-2009 settlement, particularly those that are seen as injecting risk back into the financial system (like the ringfencing reforms or the proposed new-look short selling regime) could be unpicked by a Labour Party uneasy at overruling regulators. With a Treasury led by Rachel Reeves, a former regulatory policymaker, Labour may defer more often to the Bank of England and FCA.

The success of the City over the coming years may well rest with a new top team that sees the financial services as a key enabler of their policies.

Get in touch with us to talk about Labour’s approach to financial services or Labour engagement strategies or sign-up to our UK Public Affairs newsletter here.

This article was originally published in City AM.

Jeremy Hunt made much of the difficult decisions he faced in his first proper fiscal event as Chancellor of the Exchequer. Tax rises and spending cuts in equal proportion would, he argued, provide fairness. This is, in reality, an arbitrary choice that seeks to politically balance the calls from those that would prefer spending cuts and those that would prefer tax rises. There is no denying the overriding aim the Government today was to consolidates its fiscal position and reassure markets after the fallout from the previous Chancellor’s disastrous “mini-Budget” mere months ago.

Hunt may not have been Rishi Sunak’s personal choice for Chancellor however the tone struck between the two in recent days suggests that they have taken to heart that the Conservative Party needs to ‘unite or die’. That unity has to last across a supremely economically difficult period if it is to reap any political windfalls. Real household disposable income per person is set to fall 4.3% this year, and 2.3% the year after as inflation remains stubbornly above target. Unemployment is due to increase from 3.6% to 4.9% in 2024. Interest rates will likely continue to rise while the Bank of England seeks to reduce the inflation rate. In the meantime, the Conservatives will say that their policies are seeking to strike a balance between maintenance of public services, while not raising taxes to the point that it chokes off economic growth required to pay for them.

The political choice to introduce two new fiscal rules, that within five years debt has to fall as a proportion of GDP and public sector borrowing must be below 3% of GDP, shows a Chancellor that has his eyes both on restoration of national economic credibility in international capital markets but also political credibility in the eyes of an electorate burned by the short and tumultuous Truss premiership. They also represent an attempt to corner the Labour Party, following their economic playbook and challenging them not to make policy pledges that expand the size of state spending. This trap is extended further by government pledges to support capital projects such as the building of Sizewell C nuclear power station, continuation of HS2, and Northern Powerhouse Rail, as well as with R&D funding increasing while at the same time keeping development spending below the 0.7%. Taken together these could force the opposition into a debate on spending framed in Tory terms.

Tory backbenchers were muted throughout the Statement, and sombre in hearing the figures showing the real hardship that families and businesses up and down the country will face in the months ahead. There were a few exceptions though, throwing their weight behind the extra spending on the Health and Social Care budget, in education, in the maintenance of capital expenditure, and in continuing the pensions triple lock. Hunt and Sunak’s prioritisation of protection for pensioner budgets and projects in the Red Wall should be seen as a clear attempt to stymie the bleed of votes that has happened in recent months and shore up the same coalition that voted for the party in 2019 ahead of the next election.

Ahead of that election the blame game for the pain the country is feeling at present is well and truly under way. Hunt began his statement by blaming unprecedented global headwinds, before labelling the economic downturn a “recession made in Russia,” and citing the Office of Budget Responsibility as confirming that “global factors” are the “primary cause of current inflation.” The Labour Party’s response was that the problem was “made in Downing Street.”

Who voters blame for the decrease in their purchasing power and the diminished opportunities in their lives will ultimately decide the next election. Hunt and Sunak are looking to reap the benefits of prudence now and signs of growth later and hope to do so off the back of rebuilt economic credibility. “Britain is on the right track, don’t turn back” might well be something older political afficionados will recognise. The Labour Party, on the other hand, have already started to repeat the message: don’t forgive, don’t forget.

Click here to access the H/Advisors Cicero analysis in full.

With the Financial Services and Markets Bill set to return to Parliament in September, the H/Advisors Cicero Financial Services Practice is delighted to share a detailed overview analysing key provisions contained in this landmark piece of legislation. This analysis also details the likely timeline for reform and how the reforms will be implemented through the new regulatory architecture. This follows an overview note sent in July 2022 upon the Bill’s introduction to Parliament.

Enter your details below to access H/Advisors Cicero’s briefing:

Years in the making, the landmark Financial Services and Markets Bill was finally tabled this afternoon as the last piece of legislation under the Johnson Government.

The Bill repeals the financial services framework inherited from the EU, offering regulators vast new powers to reform EU rules, the ability to devise new regimes on issues including issues including stablecoins and Critical Third Parties, among others, while establishing a new secondary objective for regulators to promote “economic growth and international competitiveness”.

To help your organisation understand this significant Bill and its wide-ranging implications, the H/Advisors Cicero team have written this overview highlighting key proposal across the financial services sector and the likely timeline for the Bill being made law.

Enter your details below to access H/Advisors Cicero’s overview of the UK Financial Services and Markets Bill 2022: