The Labour Party’s plan for London
Carlison Morris · February 2nd 2024 · read
Labour Party's City of London Proposals: Balancing Regulation and Support
The UK Labour Party's approach to the City of London can be characterized by a two-pronged approach: stronger regulation alongside increased support, aiming to ensure both a responsible and competitive financial sector. Here's a breakdown:
- Boosting financial crime oversight: Labour plans to create a new unit specifically focused on combatting financial crime within the City, tackling money laundering and illicit finance.
- Tougher corporate governance: Proposals include mandating gender balance on company boards, stricter executive pay regulations and increased worker representation in corporate decision-making.
- Environmental and social sustainability focus: Labour wants to push the City to prioritise ESG (Environmental, Social, and Governance) factors in financial decisions, promoting green finance and ethical investments.
- Consumer protection: Expanding regulations to protect consumers from mis-selling of financial products and unfair practices.
- Tax reform: Potential revisions to corporate and wealth taxes to ensure fairer contribution from the financial sector.
- Enhanced dialogue and partnership: Labour aims to build closer ties with the City, establishing regular communication channels and seeking input from industry leaders on policy development.
- Backing for pro-growth reforms: The party recognizes the City's importance to the UK economy and is open to reforms that enhance competitiveness, such as streamlining listing processes and attracting new high-growth businesses.
- Investing in skills and infrastructure: Proposals include boosting funding for financial education and upskilling initiatives, as well as supporting infrastructure development relevant to the sector.
- Promoting innovation and fintech: Labour wants to nurture a thriving fintech ecosystem within the City, encouraging collaboration and investment in cutting-edge financial technologies.
Overall, the Labour Party's approach for the City of London strikes a balance between addressing concerns about inequality and regulatory shortcomings while acknowledging the sector's economic significance which we welcome.
Reaction from our clients is broadly positive, although some within the City view the proposed policies as overly burdensome and potentially detrimental to competitiveness. Conversely, others argue that the proposed regulations don't go far enough to address issues like wealth inequality and environmental damage.
What’s not in the proposals is also interesting. The Shadow City Minister said in response that any changes to the tax treatment for carried interest were not “in scope” of the announcement. As we have previous commented any changes to the tax regime for carried interest would have a significant knock on effect for the Investment Fund Management industry.
We would also welcome further and clearer direction from the current or future government on the approach to regulation and taxation of Cryptographic assets and other related financial instruments in order to ensure that Britain remains competitive in this fast-developing area of the financial services sector.
From the perspective of our own sector, it would also be helpful if we could get more guidance from the Labour front bench on when the long overdue improvements to regulation of financial reporting and audit and assurance, in line with the reforms proposed by John Kingman in his report, will finally be implemented.