12 December 2023

This is an excerpt from our full-length analysis on the Edinburgh Reforms. To find out more about our in-depth insight get in touch here.

As new City Minister Bim Afolami made his way up to Edinburgh last week to herald the anniversary of the reforms package from late 2022, the Government will no doubt be quietly happy with their progress. Of the 31 measures, we rate around half as green – denoting they are at or nearing completion.

And those that have seen significant progress are not simply the “low-hanging fruit”. The straightforward process of repealing regulations from the EU that are no longer felt to be appropriate – such as ELTIF and PRIIPS – is now in train. But significant new initiatives are also picking up momentum: the UK’s consolidated tape for the bond market alongside a new “Digital Securities Sandbox” are set to go live next year.

But there is still much to be done

Some reforms have been left in limbo following initial consultations, while others are unlikely to conclude fully before electioneering takes centre stage. Most of the reforms are uncontroversial – but that is not universally the case. Opposition to central bank digital currencies is picking up steam, with the Treasury Select Committee echoing their Lords’ equivalent in questioning their purpose. Meanwhile, work on pensions reforms could end up being superseded by the post-election review planned under a possible incoming Labour Government.

A General Election could disrupt reforms

But, as the UK political scene remains turbulent, speculation continues over the date of the next General Election. That decision will filter through to all policy areas.

Any legislation which has not passed into law will drop at the point of dissolution (6 weeks before a General Election). That does leave the risk that even those initiatives that have progressed well end up back at the drawing board for re-consideration under a new Government.

Regardless of which party takes office after the election, there will undoubtedly be delays as (presumably) new Ministers have to re-prioritise their in-trays and take another look at ongoing work to see where they can stamp their authority. Even initiatives with broad political consensus could remain in limbo for many months.

Labour starting to show dividing lines

While Labour has not signalled opposition to the Edinburgh Reforms as a whole, specific initiatives could face challenge or at least re-consideration. Shadow City Minister Tulip Siddiq made intriguing comments to the Financial Times last week, singling out ringfencing reform and changes to the Senior Managers and Certification Regime as areas that Labour may reconsider. Sustainability initiatives are more likely to see their time in the sun under a Labour administration, as the Tories’ interest has cooled.

The regulators are also expected to be relied on more heavily under a Labour Government, which would see regulatory independence as sacrosanct and won’t have the institutional knowledge of recent Ministers.

A lot will rest on the timing of the election. A Labour Government would be unlikely to use up limited parliamentary time unpicking reforms that have completed, but those that remain unlegislated are at risk of delay. If reforms fail to progress now, it could be some time before they come to fruition, if at all.

To speak to Tom about this analysis or any financial policy issue, email tom.harrison@h-advisors.global.

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