The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

Rachel Reeves' 2024 Mais Lecture may have focussed on economics, but it shared key philosophical themes with the Labour Party's high-level policy statement on financial services (FS) Financing Growth: Labour's plans for financial services (the Plan). The shared philosophical themes perhaps demonstrates Labour's hopes that its plan for the FS sector will support growth in the wider economy as well as helping "people reach their financial goals".

In her Mais Lecture, Rachel Reeves quoted the philosopher Bernard Williams, who wrote of the ‘first political question’ – ‘the securing of order, protection, safety, trust, and the conditions of cooperation'. The themes Williams was considering are at the heart of Labour's policies on economics and financial services and reveal a significant amount about what the FS sector might expect under a future Labour government. The first political question emphasises the importance of stability and cooperation (or partnerships) as conditions for wider success. Central to the Plan is a commitment to continuity of the current package of FS reforms. Whilst "reform" and "stability" do not immediately sound like the same thing, the point here is that Labour is not proposing a change of direction from that which the FS sector is already embarked upon. Consistency is the key as it allows the FS sector to plan effectively and is not overly disruptive to its functions of lending and service provision. The Labour party is also keen to foster trust and cooperation with businesses generally and specifically with FS firms, which is why it has embarked upon its widely publicised dialogue with the FS sector. The Plan hints at the importance of dialogue, which is central to trust, and from this the FS sector can infer that a future Labour government would actively continue, and probably extend, the existing dialogue and that the reforms under way following the Financial Services and markets Act 2023 will continue, largely in their current form.

A further feature of the Plan is how it ties back to the principles set out in Labour's Industrial Strategy, (the Industrial Strategy) which, among other things, has a strong focus on partnerships between public and private sectors, and the government's power to convene, to deliver economic growth, fostering the use of innovation and technologies, and targeted regulatory interventions, which can be cross-sectors as well as financial services specific. The FS sector can expect any future Labour government to encourage, facilitate and champion UK FS activities in these key areas:

• making the UK a global hub for green finance activity;
• strengthening engagement with international jurisdictions to increase exports of FS;
• embracing Fintech, and making the UK a global leader in AI in financial services, particularly building on Open Banking, which is identified in the Industrial Strategy as an exemplar of how data-sharing can drive innovation; and
• scaling regional hubs across the UK and unlocking the potential in co-operative and mutuals sector.

A key feature in the Plan is recognising the need to reinvigorate the UK's capital markets, in particular through reversing the trend of institutional investors moving away from UK equity investments. This challenge is well understood, and the current government is also actively pursuing reforms in this regard. The Plan commits to various reviews to identify the barriers to productive institutional investment, in particular:

• regulation-induced risk aversion; and
• lack of scale in pension funds; and
• to establish an opt-in scheme for defined contribution pension funds to invest in UK growth assets. 

Finally, in this area, the Plan identifies extending the time-horizon for the British Business Bank' business plan to enable longer-term investment and encourage initiatives to improve lending to SMEs. Accordingly, the FS sector can expect any new Labour government to issue a range of consultations and calls-for evidence to identify issues and possible solutions, and subsequently proposals for reforms in particular around encouraging institutional investors to invest in UK capital markets. This will offer the FS sector a significant opportunity to help shape future policies.

As one might expect from a Labour party, the plan contains a number of proposals to strengthen consumer protections including:

• driving the roll-out of banking hubs, and where required conferring powers on the FCA "to guarantee communities have access to face-to-face banking services";
• supporting the on-going reform of the advice and guidance boundary;
• creation of a national financial inclusion strategy, including a recognition that education and digital inclusion are key success factors for financial inclusion; and
• partnering with industry to develop mechanisms to improve people's financial resilience, for example through developing long-term mortgage and innovative savings arrangements.

Furthermore, in a tie-back to the Industrial Strategy, the Plan contains a number of proposals to strengthen the UK's position as a leader in the provision of sustainable finance. These proposals will serve the dual purpose of furthering Labour's clean energy strategy as well as supporting further innovations in sustainable finance. The Plan's focus here is largely to more vigorously pursue developments which are already in train, but there are additions designed to encourage the FS sector to help finance the pursuit of clean energy, such as:

exploring the possibility of allowing banks and insurers to issue covered bonds secured against green infrastructure; and

• improve the availability of sustainable finance-related data.

It is widely acknowledged that the FS sector is key in delivering clean energy, and the sector can expect greater focus on measures designed to support this ambition.

Finally, the plan is full of proposals to support and utilise technological innovation and fintech more generally, in particular:

• driving forward the next phases in Open Banking and Open Finance;
• supporting the work on a central bank digital currency;
• making the UK a global hub for securities tokenisation; and
• establishing a regulatory sandbox to test products designed to reach under-served communities.

The FS sector can expect any future Labour government to encourage technological innovation, both at a sector level and in a cross-sectoral fashion, and ensure that regulation, and the actions of regulatory authorities, should become drivers and enablers of innovation, and not barriers.

In relation to regulators more generally. the Plan notes that Labour supported the introduction of the secondary growth and competitiveness objective for the FCA and PRA and recognises the importance of UK competitiveness in financial services. The Plan identifies a number of measures designed to meet challenges which industry has previously identified as headwinds to competitiveness, including:

• better coordination between regulators;
• the creation of a Regulatory Innovation Office, which will promote innovation in regulated sectors and transparency of, regulators' performance; and
• simplification of the FCA rulebook.

Consequently, the FS sector might expect a Labour party to be receptive to ideas about how reform might further enable FS firms support the wider objectives set out above, but this will be qualified by ensuring that consumers are adequately protected. 

Overall, the Plan is high-level, and it is difficult to fully assess the possible impacts until there is more detail. However, the Plan is full of language designed to highlight that the Labour party will work in partnership with the financial services sector to meet challenges and make the most of the opportunities that exist in the post-Brexit world. In this way, the Labour party hopes that the FS sector will contribute to wider economic growth and will be an integral part of the missions set out in its Industrial Strategy.