In a meeting with a group of cross-industry regulators last week, UK Chancellor of the Exchequer Rachel Reeves criticized the regulators for stifling economic growth, urging them to "tear down regulatory barriers" and adopt a pro-growth approach, as reported by Bloomberg.
Reeves emphasized the need for a "cultural shift from excessively focusing on risk to helping drive growth." Reeves faces mounting pressure following October's budget, which included controversial tax hikes that hurt Labour's popularity. Stagnant GDP, falling retail sales, and rising borrowing costs have intensified scrutiny of her economic policies.
Reeves put this philosophy into action earlier this week, when she intervened in a Supreme Court case to protect the UK's motor finance and banking sectors from potential turmoil. The case, set for April, will challenge an October Court of Appeal ruling that deemed "discretionary commissions" schemes, whereby finance brokers and dealers are incentivized to raise interest rates, to be unlawful. This decision has already led to significant compensation payouts and could cost lenders up to £44 billion.
Reeves expressed fear that the ruling could create "a perception that regulation in the UK is uncertain," potentially destabilizing the sector and hindering consumer access to loans. The Treasury has argued the case risks causing "considerable economic harm" and emphasized that any remedy should "avoid conferring a windfall" to claimants. Reeves stressed, "If lenders have broken the law, then consumers should receive compensation proportionate to the losses they have suffered," but she warned against “using a sledgehammer to crack a nut.”
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