Final week (July 15, 2025), the British Chancellor delivered the – Rachel Reeves Mansion Home 2025 speech – which is an annual occasion the place the Chancellor outlines the state of the economic system and what the federal government is doing. Mansion Home, London – is the official residence of London’s Lord Mayor and is positioned within the coronary heart of the Metropolis (monetary district). If you wish to see an echo chamber in motion then that is one place the place you can find one. All of the self-important characters from the monetary markets being duchessed by a sycophantic chancellor all within the one place. Perfection. Reeves was there to inform the ‘markets’ what that they had longed for during the last 15 years – that the so-called – Leeds Reforms – would see the regulatory and supervisory framework that was erected after the GFC largely deserted and that they may get again to comparatively unfettered ‘greed is nice’ operations once more. Perfection. Apparently, the Chancellor has been satisfied by the speculators that they maintain the pursuits of the British working class on the centre of their hearts and that they may do every little thing of their energy to advance these pursuits by means of their very own operations. And, women and gents – pigs may fly.
The Speech
The so-called ‘Leeds Reforms’ are a bundle of coverage modifications that can cut back the accountability of senior administration within the giant monetary firms and entice odd customers to change into sharemarket speculators.
A win-win for the monetary sector.
Apparently, Britain is being held again due to “pointless pink tape” which is crippling innovation within the monetary sector.
The Chancellor mentioned the Authorities can be “rolling again regulation that has gone too far in searching for to remove threat” and lowering “capital necessities to unlock extra productive capital”.
They’re additionally planning to cut back the certification necessities for senior monetary managers.
The Labour authorities additionally desires to water down the so-called ‘ringfencing guidelines’ that are defined on this article from the 2016 Financial institution of England Quarterly Bulletin (Fourth Quarter) – Ring-fencing: what’s it and the way will it have an effect on banks and their clients?.
These guidelines had been launched after the GFC to guard small-scale depositors from financial institution collapse and required banks to “separate core retail banking providers from their funding and worldwide banking actions”.
As a part of this alteration, the mechanisms that assist customers take care of complaints towards dangerous monetary company practices might be lowered and the compensation that badly-behaved banks should pay customers might be considerably lowered.
The warning codes connected to monetary market merchandise to indicate threat might be watered down.
Dwelling consumers will even be inspired to borrow big quantities comparatively to their incomes and the deposit hole might be considerably lowered.
So extra mortgage holders will default and lose their properties.
Furthermore, banks might be inspired to problem clients with constructive saving balances into shopping for shares (speculating).
The Chancellor claimed that:
We’ve got been daring in regulating for progress in monetary providers and I’ve been clear on the advantages that that can drive: with a ripple impact throughout all sectors of our economic system placing kilos within the pockets of working individuals; by means of higher offers on their mortgages; higher returns on their financial savings; extra jobs paying good wages throughout our nation.
Seen these pigs recently?
Someway, British Labour has satisfied itself that handing again the keys to the monetary markets will immediate the banks and speculators to spend money on all kinds of productive enterprises reasonably than wealth-shuffling bets on unproductive monetary merchandise, which is able to result in a growth in GDP and employment.
Maybe they need to have mirrored a bit on latest historical past.
Slightly reflection
It isn’t as if this kind of narrative is new.
Gordon Brown’s report and that of the Blair authorities of which he was a outstanding member, set the scene for the Tories to take over in 2010.
Labour’s strategy to monetary markets was nothing in need of disastrous and culminated within the collapse of the British banking system in 2008-09.
Individuals ought to always remember Brown’s character-defining – Speech – to the Confederation of British Business (CBI) on November 28, 2005, the place he laid out his strategy to the monetary markets:
The higher, and in my view the proper, fashionable mannequin of regulation – the danger based mostly strategy – relies on belief within the accountable firm, the engaged worker and the educated shopper, main authorities to focus its consideration the place it ought to: no inspection with out justification, no kind filling with out justification, and no info necessities with out justification, not only a mild contact however a restricted contact.
The brand new mannequin of regulation may be utilized not simply to regulation of atmosphere, well being and security and social requirements however is being utilized to different areas important to the success of British enterprise: to the regulation of economic providers and certainly to the administration of tax. And greater than that, we must always not solely apply the idea of threat to the enforcement of regulation, but in addition to the design and certainly to the choice as as to whether to manage in any respect.
These phrases – “not only a mild contact however a restricted contact” – needs to be etched on his gravestone.
Historical past reveals that the risk-based strategy badly failed and it was at all times going to fail.
I wrote extra about Brown’s try and reinvent himself after the catastrophe resulting in the GFC on this weblog put up – A former UK Chancellor makes an attempt to save lots of face and simply turns into confused (October 3, 2017).
This UK Guardian article (December 12, 2011) – Labour’s lax regulation of the Metropolis contributed to RBS collapse – watchdog – is an efficient reminder of the results of Brown’s failure as Chancellor.
The article was based mostly on the Report by Adair Turner (boss of the FSA) – The failure of the Royal Financial institution of Scotland: Monetary Providers Authority Board Report – launched in December 2011.
The Report was scathing concerning the efficiency of the RBS administration and the way they took benefit of the lax regulatory and supervisory atmosphere created by the Authorities to tackle an excessive amount of threat.
The Report concluded that:
The important thing prudential rules being utilized by the FSA, and by different regulatory authorities internationally, had been dangerously insufficient; this elevated the chance {that a} world monetary disaster would happen at a while …
The supervisory strategy entailed insufficient deal with the core prudential problems with capital, liquidity and asset high quality, and inadequate willingness to problem administration judgements and threat assessments.
In asking the query: “Why had been regulation and the supervisory strategy poor?”, the Report concluded that:
Key parts of the reply are that the FSA’s strategy mirrored extensively held however mistaken assumptions concerning the stability of economic techniques and responded to political pressures for a ‘mild contact’ regulatory regime …
the FSA’s determination to put low precedence on the supervision of liquidity, had been based mostly on assumptions concerning the helpful affect of economic sophistication and innovation, and concerning the inherently self-correcting of economic markets, which had been merely flawed …
The “mild contact” strategy rested on flawed assumptions similar to:
The faulty perception that monetary markets had been inherently secure, and that the Basel II capital adequacy regime would itself guarantee a sound
banking system …And the FSA operated throughout the context of frequent political calls for for it to keep away from imposing ‘pointless’ burdens which may undermine
the competitiveness of UK monetary corporations.
The evaluation of the deficiencies of the supervisory and regulatory apply on the time factors to the Labour authorities making an attempt to attain “desired regulatory outcomes extra by means of rules than by means of detailed guidelines”.
The Authorities claimed that the monetary market corporations “would enhance” their behaviour if the rules and enforcement was relaxed.
So the regulators positioned belief within the senior administration of the monetary corporations, a belief which was clearly not justified by what occurred.
There have been no “detailed overview and direct testing” performed.
The regulators had been instructed by authorities to simply accept “assurances from corporations’ senior administration and boards” that every one was properly.
There have been many different “deficiencies” in the best way the Authorities handled the monetary markets, which led to the GFC collapse.
The Report itemises the features of presidency that had been chargeable for this failure, however saves particular consideration for Gordon Brown:
A sustained political emphasis on the necessity for the FSA to be ‘mild contact’ in its strategy and conscious of London’s aggressive place. The then
Chancellor, Gordon Brown, on a number of events in 2005 and 2006, made it clear that there was a powerful public coverage deal with fostering
the ‘competitiveness’ of the UK monetary providers sector, and a perception that unnecessarily restrictive and intrusive regulation may impair that
competitiveness.
The Report referred to a “Treasury press launch dated 24 Could 2005, on the launch of the Higher Regulation Motion Plan”, the place Brown was quoted:
… the brand new mannequin we suggest is sort of totally different. In a threat based mostly strategy there isn’t any inspection with out justification, no kind filling with out justification, and no info necessities with out justification.
Not only a mild contact however a restricted contact.
Tony Blair made a giant factor about eliminating “heavy-handed” supervision of the monetary markets and its alleged damaging affect on “innovation and enterprise growth”.
The FSA responded claiming that it had dramatically lowered the employees overseeing the monetary markets.
The Report printed a letter from the FSA Chair in June 2005 to PM Blair, which assured Blair that the “FSA utilized to the supervision of its largest banks solely a fraction of the useful resource utilized by US regulators to banks of equal measurement and significance.”
You can nearly lower and paste the statements from the then Chancellor Brown into the Mansion Home speech by Rachel Reeves some 20 years later and the message can be the identical.
Brown was Chancellor between 1997 and 2007.
The next graph reveals the Capital Formation Expenditure by Non-public Enterprise as a per cent of GDP, beginning within the March-quarter 1997.
There was no considerable upsurge in Enterprise Capex throughout his interval of tenure.
Conclusion
British Labour has actually jumped the shark.
Reeves’ Leeds Reforms are only a replay of Brown’s mild contact and everyone knows (as above) how that panned out
Brown’s strategy didn’t lead to an enormous Capex growth however reasonably spawned the ‘greed is nice’ growth which crashed so badly in 2008 – because it at all times was going to.
Pretending that the objectives and pursuits of the senior managers within the monetary firms are by some means carefully aligned with the aspirations of the British working class is delusional.
The previous will at all times push their firms in direction of and past the danger frontier as a result of their very own prosperity is dependent upon it.
However at that frontier the danger of collapse is excessive and the kind of merchandise that these corporations dabble in do nothing a lot to advance the pursuits of the working class.
The senior managers additionally know – from what occurred in the course of the GFC – that nary certainly one of them might be prosecuted when their companies collapse and so they put out their arms for presidency help.
Considering they may self-regulate within the pursuits of all is a fantasy.
That’s sufficient for at the moment!
(c) Copyright 2025 William Mitchell. All Rights Reserved.