The Starmer Government and the Financial Services industry: partners in growth?
by Dave Eaton, Head of Financial Services Policy
27 August 2024
The central mission of the first Labour Government in 14 years is to achieve the highest sustained growth in the G7. Throughout its first few weeks, the new administration has signalled the financial services industry will be crucial in achieving its objectives.
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25 July 2024
The Government has today officially launched its flagship energy policy, Great British (GB) Energy, introducing the Great British Energy Bill to Parliament. The Government has also announced GB Energy’s first major partnership with the Crown Estate.
Speaking at its launch in Cheshire, the Prime Minister Keir Starmer said the agreement with the Crown Estate would “drive up to £60bn in investment into the sector”, while the Energy Security and Net Zero Secretary Ed Miliband said that “investing in clean power is the route to end the UK’s energy insecurity”.
Read our primer on GB Energy: “Decarbonising Great Britain”
Top-line summary of GB Energy
The launch of GB Energy is a pivotal moment in the early days of the Labour Government, as the Prime Minister Keir Starmer seeks to set out a credible plan to deliver the Government’s ambitious target to decarbonise the power sector by 2030.
The GB Energy Bill is the first piece of legislation from the King’s Speech to be introduced to Parliament and is at the heart of the new Government’s agenda, leading one of the Prime Minister’s five national missions.
The Bill confirms that GB Energy will “own, manage and operate” clean energy assets, akin to EDF in France or Orsted in Denmark, a source of initial confusion within industry. It will also play a central role de-risking and unlocking capital for the private sector.
Starmer and Miliband are keen for its speedy implementation and set out the next steps to place GB Energy on a delivery footing. Juergen Maier has been confirmed as the Chair and will now undertake a period of stakeholder engagement to inform its policy approach. An announcement on its location in Scotland is expected shortly.
The partnership with the Crown Estate was teased at the King’s Speech, with the Crown Estate Bill also being introduced to Parliament today. The Crown Estate which owns and manages the seabed, will co-invest in new technology and lease land to GB Energy to lead on preparatory work for the private sector, including coordinating grid connections, environmental surveys and planning. This is an attempt to speed up the delivery of offshore sites and provide industry with shovel-ready land for projects.
Three key takeaways on today’s energy policy announcement
- Crown Estate partnership could provide fiscal room for manoeuvre: Capitalised with an initial £8.3bn throughout its first Parliamentary term, the Chancellor’s fiscal rules have resulted in some of the initial ambition being scaled back for GB Energy. This has caused some scepticism within industry circles about whether it can establish itself as a serious player within one parliament. The Crown Estate Bill widens the Estate’s investment powers and gives it the power to borrow money to invest. While the longer-term ambition is for GB Energy to be a self-sustaining entity that can in time contribute to the public purse, this may allow for greater financial wiggle room in the short-term to kickstart the clean energy rollout.
- Selling GB Energy to the public: Decarbonising the power sector by 2030 will require a significant increase in the rate of renewable technology being deployed across the UK. While Miliband has so far shown a willingness to rubber stamp projects, an important part of the puzzle will also be to sell renewable energy to the public. The NIMBY movement is well-organised and has proved a thorn in the side of many projects up and down the country, as well as attracting criticism from backbench MPs in rural constituencies. GB Energy will be an important branding exercise for the Government, with union flags and images of the crown expected on new infrastructure, supporting the Government to rebadge GB Energy as a national, patriotic mission.
- The work starts here: Incoming Chair Juergen Maier and Miliband will have quite the in-tray with expectations that GB Energy will hit the ground running. They will need to announce the final location, start to recruit for key roles and establish an operating model. They will also need to undertake extensive industry engagement. There are also underappreciated aspects of the policy puzzle that need to be addressed to decarbonise the power network, including grid connections, greater whole-system planning and the rollout of grid infrastructure. Beyond having to establish a publicly owned energy company, the Department will also have to address important legacy issues including the next round of CfD auctions (AR6), the ongoing Review of the Electricity Markets Arrangements, discussions over Sizewell C, legal challenges over Rosebank and COP29.
To understand more about the Government’s energy priorities, read out Decarbonising Great Britain primer or get in touch with our team.
18 July 2024
King Charles III’s speech marks the beginning of the new Labour Government’s legislative priorities, featuring 40 bills, an unusually high number. This ambitious agenda reflects the Government’s determination to implement sweeping changes, but it also poses challenges for parliamentary scrutiny and timely implementation. Including the risk of legislative bottlenecks, not least with four bills remaining in draft form, which suggests they are unlikely to pass in this session.
But what does the volume of content in the King’s Speech tell us about this Government’s ambitions?
A clear vision
The programme reflects Labour’s five core missions: economic stability and growth; establishing the UK as a clean energy superpower; securing borders and tackling antisocial behaviour; breaking down barriers to opportunity; and health. Despite initial pushback, framing the legislative agenda around these missions sets a clear framework for Labour’s vision.
Priorities
Economic stability and growth are major priorities, with 15 of the 40 bills dedicated to this goal. Key bills include the Budget Responsibility Bill, which establishes independent assessment by the Office for Budget Responsibility (OBR); the National Wealth Fund Bill, creating a statutory basis for the National Wealth Fund; and the Planning and Infrastructure Bill, aimed at driving infrastructure development.
The exclusion of other flagship legislation, like extending voting rights to 16-year-olds, shows the Government’s focus on consolidating its agenda to deliver on main priorities.
There has been some flexibility to the mission centred approach with Bills introduced recognising a response to geopolitical tensions is needed. Additional legislation on national security, including the Cyber Security and Resilience Bill, has been announced in an effort to ensure stability and prioritise national security.
The programme also represents a continuation of areas the previous Government looked at, including regulation on Tobacco & Football Governance, while a change in tack on Employment and Planning regulation is clear.
Treasury back on top?
Approximately five of these 15 growth bills will sit with the Treasury, which takes on a larger share of legislation than had previously been anticipated given the inclusion of two unreported financial services bills; including the Pensions Schemes Bill and the Bank Resolution (Recapitalisation) Bill.
The remaining 10 sit across other Government departments including the rebranded Ministry of Housing, Communities and Local Government, the Department for Transport and the Ministry of Justice, an embodiment of Starmer’s ambition to embed his missions across Whitehall and promote cross-departmental collaboration.
Challenges
Certain bills are expected to spark debate, such as the Planning and Infrastructure Bill, likely to face opposition from the Liberal Democrats over greenbelt development, and the Border Security, Asylum, and Immigration Bill, which could face challenges from Reform UK benches. With a significant majority in the Commons, the Government is well-positioned to overcome opposition amendments. However, loyalty from backbenchers, especially newly elected Labour MPs with narrow majorities, will be crucial.
Next Steps
The first Bills could be introduced as early as tomorrow, with Second Reading scheduled after the King’s Speech debate concludes on 25 July. There is speculation that Friday 26 July might be declared an official sitting day to expedite progress before the summer recess.
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21 June 2024
On 31 May 2024, Sir Keir Starmer officially launched the Labour Party’s flagship energy policy, Great British (GB) Energy – a publicly-owned company that will support Labour’s ambition to deliver a clean energy system by 2030.
In the first of H/Advisors Cicero’s “Decarbonising Great Britain” series, this primer looks at what we know so far about GB Energy, how it will function and the rationale for its speedy implementation within the first 100 days of a new government.
For any questions on GB Energy or how H/Advisors Cicero can help you prepare for the new Government, reach out to Tom.Wilkins@h-advisors.global.
3 May 2024
The world of late seems on fire. Conflict around the world is increasing, people are polarised and markets are fragmenting. This was the underlying feeling at this year’s London Business School “World in Flux: Geopolitical Uncertainty and the Future of Business” conference.
Against a chaotic backdrop, business leaders and key thinkers discussed where opportunities lie for firms navigating a complex international landscape. Attendees were privy to discussions that explored the far-reaching implications of the super-election year of 2024, an evolving energy landscape, and AI and its impact on global order.
Through this mix of unpredictable external factors, understanding the interplay and impact between geopolitics and business has never been a greater driver on influencing corporate strategies.
Why does a year of elections actually matter to business?
The first session of the conference centred around this super-election year, focusing on why the elections of 2024 were important and why businesses should care. Answering that question the consensus was that these elections, across Asia, Europe and in the United States, were important not for the sheer number of people voting, nor domestic policy issues, but for their potential to influence great power rivalry and resultant disruptions to global markets.
Elections in Europe, taking place in June, are a worry to businesses as current polling shows a high probability for far-right parties to make gains. While founded on the principle of an open market amongst member states, businesses are anticipating they may no longer be able to take this moderate, consensus-led approach for granted. These parties may clash as well with national politics, driving a wedge between EU and member states and slowing action on global issues. Further, and dependant on elections in the US, the composition of EU leadership could further distance the bloc from the United States through protectionism and other trade-focused restrictions.
Much of the global punditry is closely watching the US elections. The choice in candidates is between one who has settled into a “protectionism-lite” view on international trade and the other who teeters on the brink of a trade war with allies and non-allies. Either way, US policy of isolationism risks allowing adversarial states more room to manoeuvre and set terms in a variety of critical regions and markets.
This threatens established business links as the possibility of a new “power” moves in and sets new regulatory, cultural or other standards for companies.
Can AI be governed for good?
As AI remains in the headlines, this conference also took aim at the topic. Speakers discussed AI in the context of the need for global governance. AI is being, or soon will be, regulated by national governments or the EU. However, will there soon be need for global governance? For example, International Atomic Energy Agency (IAEA) model would bring together stakeholders to find solutions on how to limit the weaponisation of AI, such as those used to enhance disinformation efforts and disrupt elections in democratic states.
Further, a global governance mechanism is necessary to bring governments and businesses together. Currently, a handful of businesses operate the largest and most influential AI tools and the infrastructure they run on. These few businesses can leverage their technology to influence other businesses and governments and dictate terms of operation within various markets. A global governance mechanism would treat these firms as global actors, bringing them to the table, which gives them a voice and increases accountability toward others.
Have firms still got the energy?
Energy security came to the forefront in a big way after the Russian invasion of Ukraine, as the EU and UK scrambled to secure new energy supply lines. A key consideration for energy security efforts is where they align with the net zero transition. Both aims are mutually inclusive, in that steps to achieve one will secure the other.
Countries are rushing both to reduce their emissions and also their reliance on foreign sources of energy. Taking these steps bolsters a country’s ‘power’ on the global stage as it reduces reliance on other countries and the potential to be “bullied” or “blackmailed” into going against their own interests. In effect, it allows countries to equalise power at the negotiating table when looking to secure or strengthen market access for their industries.
What does this all mean for business?
How can businesses navigate the geopolitical landscape, mitigating risks and ultimately thrive amidst such turbulence? Having the right people, with the right intel to hand, matters now more than ever.
At H/Advisors Cicero, we equip businesses to navigate the complex geopolitical landscape with expertise and strategic insight. Our consultants provide valuable perspectives on international dynamics, helping companies make well-informed decisions in an increasingly fragmented world. We support with:
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Despite global uncertainties, we encourage businesses to view these challenges as opportunities for innovation and leadership. By collaborating with H/Advisors Cicero, businesses can influence policy, enhance economic stability, and set new standards in their industries. Through effective communication, businesses can also demonstrate their and leadership to both policymakers and the public.
With reports emerging last week that the newly-installed Truss Government was planning on pressing the pause button on the Energy Security Bill, much of the industry was taken aback. Almost a decade after the last Energy Bill was passed, and with the added focus on energy matters prompted by the recent spike in wholesale gas prices, the general consensus was that now was the time to legislate. Instead, the new Business and Energy Secretary, Jacob Rees-Mogg, has all but confirmed that the Bill will not be taken forward in its current form.
Is the energy industry right to be worried in this case?
Firstly, it is worth reflecting that, much as the Bill would have been needed both to future-proof the UK’s energy system from possible shocks and to ensure a smooth transition towards Net Zero, it was not a response to the current crisis. The Government’s plan to tackle soaring energy bills for both households and now businesses – only announced yesterday due to the national period of mourning – rightly takes precedent in the packed legislative calendar of this new administration. In addition, it would be counterintuitive to legislate to extend the Default Tariff Price Cap having effectively suspended it for two years as Liz Truss did at the start of the month.
Secondly, one of the medium-term levers the Government is exploring is decoupling the electricity price from the gas price in the ‘as available’ market – a move which would reduce price volatility for consumers. But this proposal is not part of the current Energy Bill as presented to Parliament, it forms part of the Department for Business, Energy and Industrial Strategy (BEIS)’s Review of Electricity Market Arrangements – commonly known as REMA. While the REMA consultation has a few more weeks yet to run (deadline is 10 October), a decision on decoupling could be taken in a relatively short space of time, and with Parliament only returning from Party Conference recess on 11 October there is ample time to put these arrangements in place shortly after MPs come back to Westminster.
However, these should not be reasons to junk the Bill in its entirety. Reports suggest that the Government will carve out some elements of the Bill and give them to other Departments, such as the Treasury or the Department for Levelling Up. This should worry industry. With the lack of a standalone Energy Department, breaking up the current Bill and handing parts of it over to other ministries risks pushing down the priority order some necessary changes, such as the creation of a Future Systems Operator, or the establishment of funding models for hydrogen production. If anything, the Bill could have acted as a catalyst to make the UK a world leader in some of the technologies of the future, such as carbon capture and storage, and hydrogen fuel cells. Instead, it looks like the UK will lose a possible competitive advantage over the rest of the world and this will be another missed opportunity for the country.
Additionally, even though Truss recommitted to the Net Zero target during her leadership campaign, her moves since should hardly fill the industry with confidence that this is at the top of her agenda. Rees-Mogg has voiced climate-sceptic opinions in the past, and Truss herself has now launched a review into how the UK can reach the target in an “efficient and sustainable” manner. Today’s announcement that the Government has lifted the moratorium on fracking imposed by the Johnson Government will do little to allay the fears of environmentalists – even if the chances of widespread shale gas exploration in the UK remain slim due to the opposition of local communities in the Midlands and the North West.
On the plus side, this review will be led by Chris Skidmore, who has long campaigned on environmental matters and urged the Conservative leadership candidates in the summer to recommit to the Net Zero target. Industry should engage with the process and make any concerns clear from the off.
Business leaders are rightly concerned about the drift which is beginning to happen with this new government. The UK Business Group Alliance for Net Zero has already written to the Prime Minister calling on her to build economic resilience through the delivery of the Net Zero target and by restoring nature but the pressure will need to be kept on in order to communicate the strength of feeling among the business community for decarbonisation and sustainability matters.
From a purely political perspective, junking the Bill offers an opportunity for Labour. By pausing this legislation, the Opposition can accuse the Government of repeating the mistakes of the past, and not taking a decisive step to improve the UK’s energy security – a line that the Labour leader, Keir Starmer, has already been using, especially with regards to nuclear power. Expect more of this line of attack when the party faithful gather in Liverpool from this weekend for Annual Conference.
Energy will remain high on the Government’s agenda, even though the flagship Energy Security Bill has now been paused. Industry needs to be ready to deal with the new landscape even if it makes for tougher work than the previous administration.
If you wish to discuss any of the issues mentioned in this article, please contact Dan in H/Advisors Cicero’s Energy practice on daniel.julian@h-advisors.global
