“The more-or-less explicit strategy for growth is deregulation of the City while reaping a so-called “defence dividend”… But who will the growth benefit? Certainly not the workers.”
In this week’s Red Weekly column, Labour Outlook’s Sam Browse responds to the Chancellor’s Mansion House speech earlier this month.
Earlier this month, Rachel Reeves delivered her Mansion House speech, a gathering of the British banking establishment hosted in the residence of the City of London’s Lord Mayor. The annual address is where the Chancellor sets out plans for the financial services sector and wider economy.
She was clear, saying 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 economic 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 for our whole country.”
Amongst the things she described as bending ‘to excessive caution’ included measures introduced after the 2008 financial crisis to ‘ringfence’ (i.e. protect) ordinary people’s money from the risky, speculative activities of banks.
In the speech, she also announced her intention to do away with the plans for a ‘green taxonomy’ – a categorisation of sustainable investment activities designed to make investment decisions transparent, prevent green-washing, and allow, for example, pension companies to invest, secure in the knowledge that they are not putting money into climate-damaging businesses.
The measures set out in the speech follow the previous Government’s commitment to growing the power and influence of the City of London under the rubric of encouraging growth and competitiveness – seemingly at any cost.
It was this culture of competitiveness that created the toxic financial products leading to the 2008 crisis. The 2008 collapse led to some limited and lacklustre reforms in 2019, countering some of the most irresponsible speculative activities of the banks. There followed a subsequent row back, exemplified by the Tories’ Financial Services and Markets Act 2023, which set a statutory duty on the regulator to encourage “growth and competitiveness” in the UK financial services sector. When the Act was introduced to Parliament, the Conservatives also resisted calls to include any similar statutory duty for regulators to promote green growth.
In the announcements earlier this month, Rachel Reeves has compounded the backsliding – stripping away reforms instituted after the 2008 crisis and ditching plans to support the regulation of green financial flows.
The continuity in approach stems from a shared belief that growing the financial services sector is integral to the wider growth of the UK economy. But the sector is already bloated; it’s one of the few that contributes positively to our balance of payments deficit – which itself devalues the pound and pushes up the price of imports.
The Ministerial position has been to “play to our strengths”, but it is in part the over-reliance on financial services at the expense of the real economy that has made us vulnerable to the price shocks we are experiencing – especially in food, 50% of which we import and for which prices have soared this week. Rather than further exaggerate the distortion by growing the sector, we need to diversify and develop the domestic economy, with investment in infrastructure, skills, supply chains (such as the domestic food system), and a joined-up industrial strategy. Part of building resilience also requires reversing the chronic underfunding of public services and social security, while boosting investment in measures to adapt our economy and infrastructure to climate change.
The Chancellor’s announcements – coupled with a spending review that implements further austerity, not least for disabled people, while ploughing billions more into military spending – put the Government on the opposite trajectory. The more-or-less explicit strategy for growth is deregulation of the City and planning laws while reaping a so-called “defence dividend” from investment in military infrastructure. It’s unlikely that this will work, but even if it does, who will the growth benefit? Certainly not the workers who continue to see their wages stagnate, the cost-of-living grow, and austerity in the delivery of public services.
Despite the speech, there is no need for defeatism. The last few months have shown us that these priorities can be disrupted. While they were able to force through some cuts, the rout of the Government over their substantive changes to disability benefits has punched a hole in their spending plans. To ensure their defeat, we must maintain the pressure. Despite the protests of the ultra-wealthy – which have already begun in earnest – it’s right, too, to use this opportunity to push for wealth taxes in the run-up to the Autumn budget.
And beyond attempting to force a fiscal redistribution in the immediate term, we must continue to fight to restructure the entire economy, rebalancing it away from the City of London towards productive investment designed to boost living standards and build real resilience to the climate, social, and economic shocks of the future. That means taking on the power and influence of the war mongers and the banking moguls – and fighting instead for socialist solutions addressed to ending poverty, and that service the needs of people, planet and peace.
- The Red Weekly Column will appear each Thursday on Labour Outlook from one of our regular socialist contributors.
- Sam Browse is an organiser for Arise Festival and a regular contributor to Labour Outlook. You can follow Sam on Twitter/X here.
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