Rachel Reeves vowed to “take the boot of regulation off the throat of businesses” as she unveils a bonfire of red tape to boost the economy in her keynote Mansion House speech.
The beleaguered chancellor has bet her future and her hopes of achieving elusive economic growth with a massive round of City deregulation.
It comes as Treasury sources say Ms Reeves wants to see more “risk taking” and move back to the pre-2008 model for financial services, before the banking collapse.
In his speech at the same event, however, the Bank of England governor Andrew Bailey stressed he could not “underestimate the challenges” involved in the global trade war triggered by Donald Trump‘s tariffs, saying the current shift in policy was the “most sudden and fundamental in the post-war era”.
In a stark warning, he added: “Increasing tariffs creates the risk of fragmenting the world economy, and thereby reducing activity.”
Ms Reeves’ speech came just hours after she had also announced the new “Leeds reforms” to the mortgage market in a bid to open up the opportunity of buying a house to more than 30,000 first time buyers.
The chancellor told the Yorkshire Post ahead of her speech that it is “ridiculous” so many are locked out of buying their own home and “forced to spend a fortune on rent”.
She compared the current generation with that of her parents in aspiration for buying a home.
She said: “A couple of generations ago, my mum and dad were primary school teachers. They own their own home in their 20s. How many primary school teachers today can get on the housing ladder? Really, really hard.”
The changes will see the minimum salary for a mortgage drop £5,000 to £30,000 for an individual and £50,000 for a couple. People will also be able to borrow up to 4.5 times their salary, as opposed to 3.5 before.
But in her Mansion House speech to the leading figures of financial services in the City of London, Ms Reeves made it clear that reducing mortgages red tape was part of a wider bonfire of regulations as she attempts to achieve the government’s number one mission of economic growth.
She said: “In too many areas, regulation still acts as a boot on the neck of businesses choking off the enterprise and innovation that is the lifeblood of growth.
“Regulators in other sectors must take up the call I make this evening not to bend to the temptation of excessive caution but to boldly regulate for growth in the service of prosperity across our country.”
She told her audience of bankers and investors: “We have been bold in regulating for growth in financial services and I have been clear on the benefits that that will drive with a ripple effect across all sectors of our economy putting pounds in the pockets of working people.”
She promised economic growth and more money in people’s pockets “through better deals on their mortgages, better returns on their savings more jobs paying good wages across our country.”
But the chancellor added: “As I look ahead it is clear that we must do more.”
The speech comes at a difficult time for the chancellor as she is under siege from colleagues in Labour to raise wealth taxes or stealth taxes by freezing income tax thresholds to pay for a black hole in her spending plans.
After being forced to spend an extra £1.25bn on winter fuel payments to pensioners and £5bn on disability benefits after two major U-turns, Ms Reeves is struggling for options.
However, she has been warned that she cannot tax the country out of debt.
In an interview with Bloomberg Richard Hughes, chair of the Office of Budget Responsibility (OBR), has warned that more taxes will lead to a debt spiral noting that “higher and higher levels of taxes are not good for growth”.
In her Mansion House speech, the chancellor also appeared to concede the last few weeks had been tough, after a U-turn over welfare tore a multi-billion pound hole in her sums and she cried in the House of Commons over a personal matter.
Given the events of the last few weeks, she joked: “I suspect many of you would sympathise if I had said ‘anything but chancellor’,” when asked by a child what job out of any she would choose.
“But I didn’t,” she added, saying she was proud to be in the role.
She insisted she remained committed to her fiscal rules, which experts warn that coupled with the state of the economy means she will likely have to raise taxes in the autumn, because “there is nothing progressive about a government that simply spends more and more each year on debt interest, instead of on the priorities of working people”.
She also said that Britain cannot meet its growth ambitions without a “fighting fit and thriving” finance sector, as she urged regulators to resist “excessive caution”.
This involves “rolling back regulation that has gone too far in seeking to eliminate risk”, with plans to cut red tape in the City and reform banking rules.
The UK is currently an outlier in forcing banks to separate their retail and investment banking activities.
She also warned that too many investments were currently presented “in a negative light, quick to warn people of the risks without giving proper weight to the benefits”.
Plans include potentially changing language to encourage more people, particularly women, to take the leap.
But she added “it is clear that we must do more” and that “in too many areas, regulation still acts as a boot on the neck of businesses, choking off the enterprise and innovation that is the lifeblood of growth”.
