Rachel Reeves is delivering a clear message in the announcement of her Leeds Reforms for financial services and her second Mansion House speech, supported by the Government’s Financial Services Growth and Competitiveness Strategy. She wants higher economic growth in the financial services sector, believes that this is being held back by an unpredictable regulatory system that has a disproportionate attitude towards risk, and has set out reforms designed to change a culture of risk aversion that she describes as being “bad for business, bad for growth and bad for working people”.

There will be criticisms of some of the individual measures, but the tone of her remarks will be widely welcomed by much of the financial services industry. The observation that “no other globally competitive financial services hub imposes such relentless bureaucracy on its businesses, and nor should we” and the ambition “to make the UK the most attractive place to manage investments globally” is redolent of David Cameron’s rhetoric about the UK “winning the global race”. It is not necessarily what everyone would have expected from a Labour chancellor.

One aspect of this move away from a culture that is seen as being too risk averse is the encouragement for retail savers to invest in stocks and shares, rather than holding cash. There will be a high-profile advertising campaign to explain the benefits of investing, plus some regulatory changes, such as allowing ISAs to invest in Long Term Asset Funds. Cash ISAs have not been restricted, but this may yet happen.

The message as a whole should garner plenty of support from the industry, but perhaps with a couple of reservations. Firstly, can this change in culture be implemented and sustained? The Chancellor talks of the economy bearing too much risk in the lead-up to the Global Financial Crisis, only for the “pendulum” to now have swung too far in the opposite direction, with an “excessive focus… on stamping out risk entirely”. But what, for example, would happen in the event of some kind of scandal or crisis? Would the pendulum swing back again?

Second, for all the talk of competitiveness and the importance of financial services, this is a Chancellor who is likely to need more tax revenue in her autumn budget, and therefore, the financial services sector will have a nervous wait to see whether its businesses, employees or customers will be paying more tax as a consequence.

In the meantime, however, this is a set of proposals that will be welcomed.

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