The head of the Treasury - the UK's finance minister, Rachel Reeves, said today that she would "cut red tape" for banks and financial firms to help jump-start the slowing British economy and "informed risk-taking" when investing.
The government is trying to regain economic initiative after tumultuous weeks of costly turnarounds and the release of data showing that the British economy has been in recession for two consecutive months.
Reeves announced a plan to "relax" some of the regulations introduced after the 2008 global financial crisis, which was triggered by risky lending. This includes reforms to "ring-fencing" rules designed to separate retail banking and investment banking activities, as well as a review of the amount of capital banks must hold.
She said it was the broadest set of financial services reforms in more than a decade.
"We are fundamentally reforming the regulatory system, freeing businesses to take risks and drive growth," Reeves said.
Reeves will outline the changes in his annual speech to financial giants in London, the Treasury said, where he will stress that financial services are "at the heart of the government's mission for growth... with a 'domino effect' that will boost investment across all sectors of our economy and put pounds back into the pockets of working people."
The Treasury announced that Reeves would "welcome the immediate impact" on potential homebuyers of new Bank of England guidelines, which allow mortgage lenders to lend money up to 4,5 times buyers' income.
The centre-left Labour Party won a landslide victory in the July 2024 election, but has since struggled to deliver on its promise to boost economic growth.
Efforts to calm markets and demonstrate fiscal prudence have proven unpopular with voters. A decision to scrap winter heating subsidies for millions of pensioners' homes, announced shortly after the election, was overturned last month. Earlier this month, the government abandoned planned cuts to welfare benefits after opposition from its own Labour MPs.
These changes have cut the Treasury's future revenue by several billion pounds, increasing the likelihood of tax increases in the autumn. But the government has painted itself into a corner by ruling out increases in sales tax, or in employee income tax.
Questions about Reeves' future emerged this month when she broke down in tears in the House of Commons during the weekly Prime Minister's Questions session. The Treasury said she was not crying about her job but about "some personal issues".
The sight of Minister Reeves' tears immediately increased the price of government borrowing, but it decreased when Prime Minister Keir Starmer fully supported the work of his minister.
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