Thanks for reading.
Can we build a fairer finance system? Or will the government’s planned reforms make things worse? Read on to find out.
Today’s Fair Comment is shorter than normal. And we’ll be taking a break for the rest of the summer to focus on completing the Fairness Index in time for its launch in September. See you in a few weeks!
Chief Executive Fairness Foundation
PS: if you haven’t yet done so, please sign up to get Fair Comment in your inbox every Monday.
Taking the opportunity to build a fairer financial system
The government is planning the most significant reforms to financial regulation in the UK in a generation, through the Financial Services and Markets Bill that was presented to Parliament on 22 July. This presents a huge opportunity to make the finance system fairer, but also brings risks that it will worsen inequality and instability.
Getting this right is critical, and a new coalition, Finance for our Future (of which we are a part) has been set up to press the case for a financial sector “ready to tackle our most urgent challenges, not repeat the mistakes of the past.”
The objectives of the legislation contain welcome commitments to build a financial sector that is Net Zero aligned and acts in the interests of communities and citizens, creating jobs, supporting businesses, and driving sustainable economic growth across the country. However, there is a risk that the reforms fail to focus on what really matters. In particular, the proposed statutory duty imposed on regulators to promote the ‘international competitiveness’ of the financial industry could lead to a disastrous re-run of the 2008 global financial crisis.
Finance for our Future is calling for the reforms to focus on four key priorities:
- Climate change and nature: by giving regulators a new statutory objective to align the financial system with the 1.5 degree goals in the Paris Agreement so that they can focus on what matters most for our future.
- Fair access for all: By giving regulators a responsibility, for the first time, to promote financial inclusion to help the millions of people who are excluded from essential financial services.
- Stability of the economy: By maintaining the independence of regulators to act in the public interest, and abandoning the dangerous proposal to force them to cheerlead for industry through an ‘international competitiveness’ objective.
- Accountability and transparency: By introducing requirements that give the public and civil society as big a say in how the financial sector works as industry lobbyists.
Many argue that the UK’s finance sector is too big, that the outsized power of the City of London makes Britain poorer, and that the lobbyists’ message that the interests of the finance sector are inseparable from the interests of the country should be viewed with more scepticism, especially by politicians of all stripes.
Today’s finance sector makes our society and economy less fair, whether by funding climate breakdown and financial speculation instead of supporting a green transition and productive enterprise (including small businesses), or by closing bank branches and shutting out the most vulnerable. The government’s proposed reforms could make things even worse. But they could also help to turn the ship round so that the finance system helps us to build a fairer society based around the four priorities outlined above. The next few months will be crucially important.
If you haven’t yet done so, please sign up to be emailed Fair Comment every Monday.
Please suggest anything we should include in (or change about) Fair Comment.