UK Financial Services

Kerry McCarthy Excerpts

Tuesday 1st September 2026 Westminster Hall

[Callum Anderson]

I confess I have not read the Conservative party’s full recommendations in this regard. The Government are clear that the Financial Ombudsman Service needs reform; it is not working for the sector, consumers or the UK’s international competitiveness. The Conservative party will put forward its recommendations, and the Government will make their considerations as part of the Financial Services and Markets Bill, which will be debated in the House of Commons Chamber in October. I recognise the downsides that the hon. Gentleman identified in his intervention, so I thank him for it.

The Minister already knows my views on retail capital. There is an excellent opportunity in the months ahead—certainly, in the run-up to the Budget in October—for the UK to establish a long-term retail investment strategy that is co-designed by industry, Government, civil society and regulators to be the best mechanism to realise the full potential of UK investors’ savings.

The second challenge that I want to turn to lies in how we manage artificial intelligence, which I became very familiar with when I was Parliamentary Private Secretary at the Department for Science, Innovation and Technology, and the broader digital revolution in financial services. Distributed ledger technology and tokenisation are having an ever-increasing influence on the international financial ecosystem. The UK should continue to act as a global leader and embrace that change now so that regulators, industry, investors and consumers alike can benefit from lower costs, widen access to capital, deliver a more efficient industry and enjoy the benefits of more productive investment.

At the same time, that requires us to fully build the infrastructure, regulatory framework and market confidence to allow innovators to scale safely and responsibly. I welcomed Chris Woolard’s first report as the UK’s wholesale digital markets champion. It marked an important step in delivering the Government’s wholesale financial markets digital strategy, but we now need to shift up a gear.

I would focus on two immediate priorities. First, the Government should publish a clear road map for DLT-enabled capital markets. UK financial markets—and global financial markets more broadly—need certainty about the sequence of reforms, the regulatory framework that the UK proposes to put forward and how new infrastructure will connect with the systems that are already in use by market participants. Second, we should use DIGIT—the digital gilt instrument—to build momentum across the market by setting a clear timetable for regular, benchmark-scale digital sovereign bond issuance so that we are properly mainstreaming UK Government debt in the financial market system.

On artificial intelligence, it is right that AI can transform productivity, investment management, fraud detection and customer service across the economy and society. But those opportunities also bring new and unfamiliar risks, from automated decision making that leads to unintended consequences to cyber-attacks by belligerent forces and operational disruption due to a greater dependence by industry on a small number of technology providers. With that in mind, I was proud to partner with Community trade union, which I should disclose that I am a member of, in May to launch its responsible AI charter for financial services; Zurich UK was its first signatory. The charter sets out practical principles for ensuring that AI is adopted responsibly, transparently and with people at the heart of its deployment. The Bank of England’s recent work makes it clear how quickly the risks that I just identified are growing. That is why we must maintain the urgent momentum on implementing the financial services AI adoption plan.

The third challenge facing the sector, which I want to address briefly, concerns the clean energy transition. I will not discuss the benefits or otherwise of which energy sources we may like to prioritise, but in my view, net zero cannot be delivered by public investment alone, however committed the Government are to that mission—and rightly so. Long-term, patient private capital also has a crucial role to play in supporting tomorrow’s energy infrastructure, from onshore and offshore wind and grid upgrades to next-generation nuclear power. In order for that capital to be committed effectively, I would welcome an annual published pipeline of investable clean energy projects so that firms and asset owners can plan and deploy investment at the scale and pace that our net zero commitments demand.

[Kerry McCarthy (Bristol East) (Lab)]

My hon. Friend will not be surprised to hear that I very much agree with the point that he just made. We have some excellent, innovative businesses in Bristol that came up through the Science Creates innovation hubs and attracted private capital. They are flourishing, but they need signals from the Government that we are sticking to our net zero agenda so that there will be a market for their products in due course. Does my hon. Friend agree that those signals are important?

[Callum Anderson]

I could not agree more with my hon. Friend. In this space and across many policy areas, what business and investors require and demand from us as policymakers—regardless of which party happens to be in power—is policy certainty. When we risk lurching in various directions, with various priorities and changing timelines, the only result is that investors withdraw or deploy their capital in other countries. Frankly, with regard to the clean energy transition, that will ensure that other countries, be they our competitors or our foes, will have a massive, global competitive advantage over us. I do not think it is a good idea for us to enable that.

Changing tack, the UK also faces the challenge of our constituents accessing affordable financial services and products. We need to honestly confront the barriers that still prevent too many of our constituents from opening a basic bank account, building even a very modest savings buffer for when times are hard, and accessing safe and affordable credit or securing the insurance that protects people from life’s shocks.

--- Later in debate ---

[Sir Jeremy Hunt (Godalming and Ash) (Con)]

It is a pleasure to speak under your chairmanship, Mr Twigg. I speak today as chairman of the all-party parliamentary group for financial markets and services. I refer hon. Members to my entry in the Register of Members’ Financial Interests, which states that I accept speaking engagements from financial services companies.

I thank the hon. Member for Buckingham and Bletchley (Callum Anderson) not just for securing this debate, but for an excellent opening speech. He has a background in the City—in the stock exchange and working for the City of London corporation—which is probably unusual in his party. I thank him for deploying his expertise, because it is incredibly important for UK financial services that the world sees that there are experts in financial services on both sides of the House. I particularly welcome his comments today.

I welcome the Economic Secretary to the Treasury back to her role, which she carried out previously with great distinction. She has always engaged extremely constructively when it comes to the interests of the City and financial services. I know that her return to that post was widely welcomed. It is also a pleasure to speak alongside my hon. Friend the Member for Wyre Forest (Mark Garnier)—an old friend—who himself has a background in the London stock exchange.

After the financial crisis in 2008, financial services had a pretty bad name. The Government had to put up around £1 trillion to support the sector. Chief executives of banks made very ill-judged decisions to continue paying themselves large bonuses at a time when the rest of the country was suffering, and the country suffered a longer and deeper recession at that time as a result of our exposure to the financial services sector, which was much greater than that of our peers. We learned many painful lessons in that period.

As well as the financial crisis, the sector had to deal with the loss of passporting rights post-Brexit. Despite those body blows, the sector employs 2.5 million people—more than at the time of Brexit—and two thirds of the jobs are outside London. It is worth around 11% of our national output. It generates more than £110 billion in tax revenues, which is more than any other single sector. Put another way, it funds more than half the cost of running the NHS.

Whatever one’s interest in financial services, from a fiscal perspective alone they simply cannot be ignored. The sector is also thriving today in very challenging circumstances. The City think-tank Z/Yen tracks the competitiveness of global financial service hubs. In 2020, London trailed New York. Now it has caught back up. It remains the world’s premier centre for foreign exchange and specialist insurance. It helps to make the UK the world’s second largest services exporter.

When I was Chancellor, I introduced the Edinburgh and Mansion House reforms to support this important sector. Regulations, including listing rules, were simplified and the mighty task of making our pension fund industry fit for purpose was started. To their credit, this Government have built on those reforms with the Leeds reforms, the Pension Schemes Act 2026 and the forthcoming Financial Services and Markets Bill, all of which are extremely welcome. But, as the hon. Member for Buckingham and Bletchley said, our competitors are not standing still.

With smart policies, our financial services sector could do even more for growth in the UK. Easy access to finance, alongside having the most respected universities in the world outside the United States, has helped to create, for example, the world’s third-largest tech ecosystem. In artificial intelligence, the UK has the potential to be the world’s next silicon valley. If we get there, easy access to finance will have played a major role in making that possible.

What needs to happen next? The first thing is to do no harm—in particular, to do no harm with additional taxes in October’s Budget that could potentially damage the sector. Uniquely, the UK already charges higher corporation tax to banks. Total bank taxes are about 45% here, compared with 32% in Dublin and 28% in New York. I totally understand the temptation—finances are extremely tight, and the banks have few friends—but international capital is mobile, and hiking taxes further will mean that the sector ultimately generates less tax revenue, not more, for the Chancellor.

Secondly, we need to make regulation in UK financial services more proportionate. Consumer protection really matters, but we cannot eliminate all risk, which is what our regulators sometimes appear to be trying to do. Compliance now costs the sector more than £39 billion a year—about 13% of operating costs. We should aim to at least halve that using the new international competitiveness and growth objectives, which the Financial Conduct Authority should apply to authorisation, supervision and enforcement decisions.

[Kerry McCarthy]

I too worked in the financial markets, although I think I have done a better job of hiding it in my 21 years in Parliament. I was more on the debt market side. In fact, I am so old that I was part of the salvage operation for Barings bank when it went under. That brings me to the right hon. Gentleman’s point about regulation. The management of Barings did not have a clue what its traders were doing, and the regulators certainly did not have a clue what Barings was doing. I strike a note of caution. I worked for an American investment bank, so I saw the Securities and Exchange Commission as well as the UK regime. Where do we strike the balance between ensuring that there is not another collapse of a bank and light-touch regulation?