Financial Services Reform

Mark Garnier Excerpts

Wednesday 16th July 2025 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

I am very grateful to the Minister for advance sight of her statement. There is much in these Leeds reforms—many of which were formerly known as the Edinburgh reforms—that can be welcomed, and some of the details were laid out by the Chancellor in her Mansion House speech last night.

The Conservatives will always support reforms to our financial sector that ensure that the City of London remains a global powerhouse, but the Chancellor’s rhetoric last night about growth and stability obscures the truth of this Government’s record of delivery. Inflation is now at 3.6%—the highest in the G7—and growth has all but stalled. Despite yesterday’s fanfare for reform, the reality is that having run short on other ideas, the Government are now forced to turn once again to the City of London for inspiration—a last throw of the dice, hoping that it will provide an engine for the growth that their policies are stifling.

Last night the Chancellor described her Government as a “beacon of stability”, but let us not forget the actual legacy that was handed over to her. We enjoyed near record levels of employment. Unemployment was at historic lows, and inflation was under control. That is the stable foundation on which this Government were handed the keys, yet they now preside over instability. The Office for Budget Responsibility, the OECD and the Bank of England have all sounded the alarm that our growth prospects have collapsed. The Government claim to be cutting red tape for industry, but let us remember that their plan to make work pay would in fact burden employers with over 70 new regulations, reminiscent of the 1970s.

The Chancellor’s talk of unleashing the power of the City comes even as her party threatens to smother businesses in paperwork and expense. When it comes to proposals for financial services, the Conservatives welcome much that gives the sector confidence and clarity, but warm words must be matched by careful delivery. On reforms to the Financial Ombudsman Service, there is agreement that it should return to its impartial roots as a fast and effective dispute resolution service, not a quasi-regulator, but so many business and consumers are awaiting clarity, so can the Minister confirm whether these changes will limit the FOS’s power to make backdated legal determinations, and what impact will the reforms have on ongoing legal proceedings, such as the crucial car finance case before the Supreme Court?

Streamlining the approach of the FCA and the PRA may remove unnecessary friction, but we must ensure that this does not become window dressing while critical challenges remain. The FCA and the PRA must accept that stability in the markets is not the only way to deliver growth. Both their objectives must be aligned and equally ambitious in their drive for reform.

The Chancellor trumpeted reforms to ISAs, including new rules for long-term asset funds, which we welcome if that broadens access to higher-return assets for ordinary savers, but there is still no certainty on the future of the cash ISA. Without clarity, the Government risk undermining their own ambition to promote home ownership and inclusive investment, which again was trumpeted by the Chancellor during her Mansion House speech last night.

On capital investment policy, we welcome MREL reform, which was a change I championed during the recent passage of the Bank Resolution (Recapitalisation) Act 2025. This will help challenger banks to compete and expand lending.

We cautiously welcome the Government’s review of ringfencing rules, but will they confirm that all options are being considered, including alignment with the US and the EU, which, as the Minister knows, never implemented ringfencing rules?

More broadly, the history of the last Labour Government reminds us that good intentions are never enough. The Financial Services and Markets Act 2000, introduced by the then Chancellor, along with the tripartite system, was well conceived but badly implemented, contributing to the events of the 2008 financial crisis. It falls to this Government now to demonstrate that they will not repeat those mistakes.

Finally, at Mansion House last night the Chancellor missed a crucial opportunity to be straight with the British people and rule out further tax rises. Will the Minister guarantee that working families and businesses will not face more tax increases? Will she rule out any further surprise raids on the British taxpayer?

Britain’s financial services sector has always thrived when reforms are clear. The test of these reforms will come when the full details emerge, but ultimately growth will come only when the Chancellor realises that hard-working people and businesses across the country are the real engines of economic growth.

[Emma Reynolds]

Well, half of that was all right, I suppose. I do want to start constructively and thank the hon. Member for his welcome for some of the reforms. I will answer some of his specific questions before I come to the wider points.

On the Financial Ombudsman Service, we have set out in great detail what we will do. As he will be aware, some of the changes require primary legislation. We are proposing an absolute time limit of 10 years, but with discretion for the FCA to give longer periods in the case of products with a longer lifetime. I cannot comment on the ongoing car finance issue, which as he knows is working its way through the courts.

The hon. Member talked about the regulators’ different objectives. We have been very clear with the regulators that we expect them to embed their secondary objective to facilitate economic growth and competitiveness while obviously complying with their other objectives. He will see that in the remit letters that the Chancellor sent to the regulators at the last Mansion House speech last November.

On ISAs, I welcome what the hon. Member said about long-term asset funds, which we think will unlock great opportunities for savers. We continue to consider reform to ISAs. We would like to ensure that more people have the opportunity and confidence to invest, which is why we hope that targeted support, which will be introduced by firms by the end of this tax year—we have worked at pace on this—will really shift the dial and give people that confidence to invest.

I think the hon. Member said he was in favour of what we are doing on MREL, and I know that he agreed with the Bank Resolution (Recapitalisation) Act, which we put through the House and is coming into force today. I thank him for his support on that.

On ringfencing, we have detailed which areas we will look at. I am happy to write to him further on that, but one area, for example, is sharing resources across the ringfenced and non-ringfenced parts of banks. We want to ensure that we strike the right balance between growth and stability.

I turn to the hon. Member’s points about economic stability. I will take no lessons from the Conservatives—I hate to say it. We had inflation at 11%, people paying extremely high mortgage rates and debt rising year after year. The only thing that was stable under their Government was wages, which were flatlining.