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UK Treasury under fire for lack of progress on post-Brexit financial reforms

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The government has exaggerated progress on its plan to reinvigorate the City of London, the chair of the Commons Treasury select committee said, as she called on the ministers to speed up delivery of the so-called Edinburgh reforms.

But City minister Bim Afolami rejected the criticism of the pace of implementing the policies and vowed to do everything in his power to deliver them in full before the next general election.

Last December, ministers unveiled a 31-point plan to boost the UK’s financial services sector in the wake of Brexit, as part of an initiative initially billed as Big Bang II.

Harriett Baldwin, head of the Treasury select committee which scrutinises the expenditure and policy of the department, told the Financial Times the package of reforms had not proved as “major as had been presented” and that headway had been slow.

She made the comments ahead of the release on Friday of a report by the committee into the government’s progress on delivering the full suite of the Edinburgh reforms.

While the government has repealed controversial rules to cap bankers’ bonuses, the reforms have failed to stem an exodus of companies from the London Stock Exchange. Most recently, Tui, Europe’s largest tour operator was considering delisting in the latest blow to the UK market.

Baldwin, Conservative MP for West Worcestershire and a former economic secretary to the Treasury, said six of the “achievements” claimed by the government were for things that had not yet been completed.

Another six related to pledges such as launching consultations rather than implementing reforms.

“We gave them [the Treasury] slightly lower marks than perhaps the chancellor marked himself in [an assessment] in September,” Baldwin said, referring to the committee’s findings.

“The overall impression I think one gets . . . is there have been some measures that have been completed but quite a lot of them have not been legislated for or implemented yet.”

She added that she would advise new City minister Afolami “to be absolutely relentless in . . . completing the things that were set out”. 

Afolami in turn stressed his huge respect for Baldwin, adding: “What I would say is that . . . we’ve done 22 of the 31 things we have promised. All of these things take time to really come to fruition and, to be honest, I don’t apologise for that.”

The City minister and economic secretary to the Treasury said: “We’re not saying that all of these reforms are going to absolutely fix everything in one year, but that these provide a key foundation for the medium- and long-term success of the City of London.”

Asked if he expected to deliver the full package within the term of this government, which has to call an election by January 2025, Afolami said: “That’s what we’re working to do, we are absolutely trying to deliver these as quickly as we possibly can.” 

Baldwin said listings reform was an “important piece of work” amid continuing losses to London’s equities markets, a situation she described as “worrying”.

The government has taken action including overhauling prospectus regulation, consulting on scrapping short selling bans on government debt, and taking steps to repeal regulations on packaged retail and insurance based investment products, known as PRIIPS.

Baldwin called out proposals to reform the UK’s post-crisis personal accountability regime, saying the process was “slowing the progress and growth of the [financial] sector”. Regulators have launched a discussion paper on the topic while the government has issued a call for evidence.

Baldwin also called for clarity “one way or another” on what the government is planning to do with the ringfencing regime that forced the separation of large banks’ retail and trading arms after the financial crisis.

A call for evidence was launched in May and the government has promised a response in the first half of 2024.

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