UK Finance releases financial services manifesto; Industry uneasy over BoE’s ‘Basel 3.1’ delay

UK Finance, a banking trade association that represents over 300 UK financial services companies, has released its financial services manifesto, urging the next government to prioritise key policies to boost economic growth and improve the sector’s social impact.

Its key recommendations include enhancing personal savings allowances, incorporating financial education into school curriculums and establishing a task force to combat financial abuse. Additionally, proposals aim to support communities through measures targeting fraud prevention, infrastructure investment and net zero initiatives. 

To foster growth, the manifesto advocates for championing a “world-leading payments ecosystem”, issuing digital gilts to incentivise securities tokenisation and appointing a “government champion for competitiveness” to oversee regulatory impact assessments.

The manifesto also calls for the publication of detailed net zero investment roadmaps, expansion of the UK Infrastructure Bank’s mandate for net zero projects and making use of the Berne Financial Services Agreement as a blueprint for international agreements.

Commenting on the recommendations, UK Finance CEO David Postings said: “I hope that by outlining the policy agenda the sector would like to see taken forward post-election, and through working in partnership with government, we can help build a better society for all.”

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The Bank of England has postponed disclosing its critical policies on Basel 3.1 rules until after the UK’s general election on July 4, raising concern within the industry of potential disruption to the Prudential Regulation Authority’s compliance timeline, as banks are expected to begin complying with the rules by July of next year. 

As reported by The Banker’s sister publication Banking Risk and Regulation, delays to the BoE’s disclosure could also impact the UK’s plan to mirror the US’s compliance timeline, which could encourage regulatory arbitrage. 

The Labour party, tipped to win the election, has not disclosed its position on Basel 3.1 implementation but in a recent interview with BRR said it would support the banking industry by cutting red tape and promoting innovation.

Tulip Siddiq, Labour’s lead on financial services regulation, told BRR: “We will ensure that the UK’s regulatory framework strikes the right balance between consumer protection, competitiveness and financial stability. 

“That is how we will enhance our status as a world-leading financial centre, driving investment into new jobs and industries in the process.”

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While the Labour and Conservative parties have ruled out raising value added tax, income tax and national insurance contributions in the next parliament, both parties are reportedly planning to freeze income tax thresholds, potentially pulling millions of UK taxpayers into a higher tax band as their pay increases.

British think-tank the Institute for Fiscal Studies has warned that whichever party was in power after the election would struggle to meet existing budget requirements without either raising taxes or making cuts to public services. 

In an interview with the Financial Times, Paul Johnson, director of the IFS, said: “We’re getting so many promises not to do things, and so little focus on the scale of the challenge that whoever wins is going to have.”

Johnson pointed out that income tax, national insurance and VAT make up around two-thirds of the UK’s total tax revenue, leaving little wiggle room for the main political parties. He noted that the next government could still increase revenue by reducing tax relief on pensions, raising bank levies or making changes to capital gains tax regulations.

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The British Chambers of Commerce is urging the next UK government to prioritise negotiating an improved trading relationship with the EU, warning that Brexit-related costs are mounting for businesses.

“We urgently need to get a better trading relationship with our closest neighbour,” BCC director-general Shevaun Haviland told the Financial Times in an interview. 

Commenting on constant additions of new EU rules impacting exporters and suppliers, Haviland added: “We thought that after year one things would just get easier for people as they worked out what the problems were, but actually the changes just kept coming.”

Additionally, she advocated easing migration rules, stating, “Working with the EU to ensure that the movement of people for work is easier will absolutely benefit our businesses.”