The Treasury has hit back at suggestions its landmark package of City reform is a “damp squib” today, describing the criticism as “inconsistent” and claiming the reforms are moving as fast as they can.
In a letter to the influential Treasury Select Committee published this morning, City minister Bim Afolami claimed the government had made progress in pushing through the so-called Edinburgh Reforms and was “squarely focused” on delivering regulatory change to the City.
The package of measures, which included reforms to banks’ ring-fencing regime and a change in the remit of the City watchdogs, were touted as a ‘Big Bang’-style bonfire of EU rules by the government that would unlock the growth of financial services after Brexit.
However, the Treasury Select committee slammed the Treasury’s progress in a report in December and said ministers had misleadingly marked many of the changes as complete and failed to deliver others.
In a letter of response to the committee’s chair, Tory MP Harriet Baldwin, Afolami said today he disagreed with “a number of the report’s conclusions”, and described some as “inconsistent”.
“I particularly reject any suggestion that the reforms will not have a substantial impact on the UK economy and the competitiveness of the UK financial services sector, or that the reforms could be responsibly delivered any faster than they are progressing,” Afolami wrote.
“Delivering ambitious regulatory change is a multi-step process that requires careful work, including industry consultation,” he added.
In his letter to Baldwin, the City minister – who has been in the role since October – said the Treasury had also made progress since the committee’s criticism in December, including laying legislation for a Digital Securities Sandbox Regulations on December 18 and publishing a response to the digital pound consultation on January 25 this year.
The spat threatens to disrupt Tory efforts to woo the City as the Labour party mounts a charm offensive on the Square Mile and financial services.
Since 2020, the government and regulators have conducted a series of deepdives and consultations to try and streamline rules around financial services and boost the growth of the sector.
Among the biggest changes to be pushed through so far from the Edinburgh Reforms was a move to include growth and competitiveness within the objectives of the Financial Conduct Authority and Prudential Regulation Authority, triggered by fears that City firms were being hamstrung by regulation.
Ministers sent a progress update on the package last year and said 21 of the 31 reforms laid out last year had been completed.
However, Baldwin’s group said that six of the actions marked as “delivered” by the government are not yet complete, and a further six measures “should not be considered as reforms” as they include actions like publishing a document or welcoming a consultation.
A source close to the Treasury labelled the committee’s attack as “‘nonsense” at the time and said it had been among the parties trying to block the reforms.
“For the Treasury Select Committee to downplay this ambitious programme of reforms is a bit rich given they opposed many of them, said that the government was moving too far, too fast and have themselves contributed to the post-2008 culture of criticising risk takers and wealth creators in the financial services,” the person told City A.M.